UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number:
(Exact Name of Registrant as Specified in Its Charter)
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(State of Incorporation) |
(I.R.S. Employer Identification No.) |
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(Address of Principal Executive Offices) |
(Zip Code) |
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(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
Trading Symbol |
Name of Each Exchange on Which Registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Total shares of common stock outstanding as of the close of business on October 23, 2019:
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Class |
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Number of Shares Outstanding |
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Common Stock, $0.0001 par value |
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ACADIA PHARMACEUTICALS INC.
FORM 10-Q
TABLE OF CONTENTS
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PAGE NO. |
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Item 1. |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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23 |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 6. |
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57 |
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58 |
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i
PART I. FINANCIAL INFORMATION
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ITEM 1. |
FINANCIAL STATEMENTS |
ACADIA PHARMACEUTICALS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
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September 30, 2019 |
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December 31, 2018 |
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(unaudited) |
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Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Investment securities, available-for-sale |
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Accounts receivable, net |
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Interest and other receivables |
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Inventory |
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Prepaid expenses |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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— |
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Intangible assets, net |
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Restricted cash |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Total current liabilities |
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Operating lease liabilities |
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— |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 9) |
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Stockholders’ equity: |
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Preferred stock, $ and December 31, 2018; December 31, 2018 |
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Common stock, $ and December 31, 2018; outstanding at September 30, 2019 and December 31, 2018, respectively |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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Accumulated other comprehensive gain (loss) |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
ACADIA PHARMACEUTICALS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2019 |
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2018 |
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2019 |
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2018 |
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Revenues |
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Product sales, net |
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$ |
94,586 |
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$ |
58,305 |
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$ |
240,750 |
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$ |
164,236 |
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Total revenues |
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Operating expenses |
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Cost of product sales |
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License fees and royalties |
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Research and development |
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Selling, general and administrative |
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Total operating expenses |
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Loss from operations |
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Interest income, net |
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Other income (expense) |
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( |
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Loss before income taxes |
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( |
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( |
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Income tax (benefit) expense |
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Net loss |
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$ |
( |
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$ |
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$ |
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$ |
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Net loss per common share, basic and diluted |
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$ |
( |
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$ |
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$ |
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$ |
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Weighted average common shares outstanding, basic and diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
ACADIA PHARMACEUTICALS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2019 |
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2018 |
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2019 |
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2018 |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive loss: |
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Unrealized (loss) gain on investment securities |
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Foreign currency translation adjustments |
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— |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
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$ |
( |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
ACADIA PHARMACEUTICALS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
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Nine Months Ended September 30, |
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2019 |
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2018 |
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Cash flows from operating activities |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation |
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Amortization of premiums and accretion of discounts on investment securities |
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Amortization of intangible assets |
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(Gain) loss on strategic investment |
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Depreciation |
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Loss on disposal of assets |
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— |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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Interest and other receivables |
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Inventory |
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Prepaid expenses |
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( |
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Operating lease right-of-use assets |
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— |
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Other assets |
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Accounts payable |
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Accrued liabilities |
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( |
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Operating lease liabilities |
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( |
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— |
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Long-term liabilities |
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Net cash used in operating activities |
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Cash flows from investing activities |
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Purchases of investment securities |
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Maturities of investment securities |
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Purchases of strategic investments |
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— |
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Proceeds from sale of property and equipment |
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— |
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Purchases of property and equipment |
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( |
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Net cash provided by investing activities |
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Cash flows from financing activities |
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Proceeds from issuance of common stock, net of issuance costs |
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Net cash provided by financing activities |
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Effect of exchange rate changes on cash |
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Net increase (decrease) in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash |
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Beginning of period |
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End of period |
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$ |
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$ |
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Supplemental disclosure of noncash information: |
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Property and equipment purchases in accounts payable and accrued liabilities |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ACADIA PHARMACEUTICALS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2019 |
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2018 |
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2019 |
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2018 |
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Total stockholders’ equity, beginning balances |
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$ |
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$ |
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$ |
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$ |
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Common stock: |
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Beginning balance |
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Issuance of common stock in public offering, net of issuance costs |
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— |
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— |
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Ending balance |
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Additional paid-in capital: |
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Beginning balance |
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Issuance of common stock in public offering, net of issuance costs |
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— |
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— |
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Issuance of common stock from exercise of stock options |
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Issuance of common stock pursuant to employee stock purchase plan |
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— |
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— |
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Stock-based compensation |
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Ending balance |
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Accumulated deficit: |
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Beginning balance |
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( |
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( |
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( |
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( |
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Net loss |
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( |
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( |
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( |
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( |
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Ending balance |
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( |
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( |
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( |
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( |
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Other comprehensive income (loss): |
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Beginning balance |
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( |
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( |
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( |
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Other comprehensive (loss) income |
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( |
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Ending balance |
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Total stockholders’ equity, ending balances |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
ACADIA PHARMACEUTICALS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Business
ACADIA Pharmaceuticals Inc. (the “Company”), based in San Diego, California, is a biopharmaceutical company focused on the development and commercialization of innovative medicines to address unmet medical needs in central nervous system disorders. The Company was originally incorporated in Vermont in 1993 as Receptor Technologies, Inc. and reincorporated in Delaware in 1997.
In April 2016, the U.S. Food and Drug Administration (“FDA”) approved the Company’s first drug, NUPLAZID® (pimavanserin), for the treatment of hallucinations and delusions associated with Parkinson’s disease psychosis (“PD Psychosis”). NUPLAZID became available for prescription in the United States in May 2016.
2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company should be read in conjunction with the audited financial statements and notes thereto as of and for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K (“Annual Report”) filed with the Securities and Exchange Commission (the “SEC”). The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair statement of the financial position, results of operations, cash flows, and stockholders’ equity for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the statement of cash flows that sum to the total of the same such amounts shown in the statement of cash flows (in thousands):
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Nine Months Ended September 30, 2019 |
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Nine Months Ended September 30, 2018 |
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Beginning of period |
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End of period |
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Beginning of period |
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End of period |
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Cash and cash equivalents |
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$ |
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$ |
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$ |
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$ |
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Restricted cash |
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Total cash, cash equivalents and restricted cash shown in the statement of cash flows |
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$ |
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$ |
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$ |
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$ |
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Accounts Receivable
Accounts receivable are recorded net of customer allowances for distribution fees, prompt payment discounts, chargebacks, and doubtful accounts. Allowances for distribution fees, prompt payment discounts and chargebacks are based on contractual terms. The Company estimates the allowance for doubtful accounts based on existing contractual payment terms, actual payment patterns of its customers and individual customer circumstances. At September 30, 2019, the Company determined that an allowance for doubtful accounts was not required.
License Fees and Royalties
The Company expenses amounts paid to acquire licenses associated with products under development when the ultimate recoverability of the amounts paid is uncertain and the technology has no alternative future use when acquired. Acquisitions of technology licenses are charged to expense or capitalized based upon management’s assessment regarding the ultimate recoverability of the amounts paid and the potential for alternative future use. The Company has determined that technological feasibility for its product candidates is reached when the requisite regulatory approvals are obtained to make the product available for sale.
6
In connection with the FDA approval of NUPLAZID in April 2016, the Company made a one-time milestone payment of $
Royalties incurred in connection with the Company’s license agreement with the Ipsen Group, as disclosed in Note 9, Commitments and Contingencies, are expensed to license fees and royalties as revenue from product sales is recognized.
Revenue Recognition
The Company recognizes revenue when its customer obtains control of the product, in an amount that reflects the consideration which the Company expects to receive in exchange for that product. To determine revenue recognition for arrangements that the Company determines are within the scope of Accounting Standards Codification 606, Revenue from Contracts with Customers (Topic 606), the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods promised within each contract, determines those that are performance obligations, and assesses whether each promised good is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Revenue for the Company’s product sales has not been adjusted for the effects of a financing component as the Company expects, at contract inception, that the period between when the Company transfers control of the product and when the Company receives payment will be one year or less.
Product Sales, Net
The Company’s net product sales consist of U.S. sales of NUPLAZID. NUPLAZID was approved by the FDA in April 2016 and the Company commenced shipments of NUPLAZID to specialty pharmacies (“SPs”) and specialty distributors (“SDs”) in late May 2016. SPs dispense product to a patient based on the fulfillment of a prescription and SDs sell product to government facilities, long-term care pharmacies, or in-patient hospital pharmacies. Product shipping and handling costs are included in cost of product sales.
The Company recognizes revenue from product sales at the net sales price (the “transaction price”) which includes estimates of variable consideration for which reserves are established and reflects each of these as either a reduction to the related account receivable or as an accrued liability, depending on how the amount payable is settled. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which the Company is entitled based on the terms of the contract. The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from estimates, the Company may need to adjust its estimates, which would affect net revenue in the period of adjustment. The following are the Company’s significant categories of sales discounts and allowances:
Distribution Fees: Distribution fees include distribution service fees paid to the SPs and SDs based on a contractually fixed percentage of the wholesale acquisition cost (“WAC”), fees for data, and prompt payment discounts. Distribution fees are recorded as an offset to revenue based on contractual terms at the time revenue from the sale is recognized.
Rebates: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program and the Medicare Part D prescription drug benefit. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements with, or statutory requirements pertaining to, Medicaid and Medicare benefit providers. The allowance for rebates is based on statutory discount rates and expected utilization. The Company’s estimates for expected utilization of rebates is based on historical data received from the SPs and SDs since product launch. Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for prior quarters’ unpaid rebates.
7
Chargebacks: Chargebacks are discounts and fees that relate to contracts with government and other entities purchasing from the SDs at a discounted price. The SDs charge back to the Company the difference between the price initially paid by the SDs and the discounted price paid to the SDs by these entities. The Company also incurs group purchasing organization fees for transactions through certain purchasing organizations. The Company estimates sales with these entities and accrues for anticipated chargebacks and organization fees, based on the applicable contractual terms.
Co-Payment Assistance: The Company offers co-payment assistance to commercially insured patients meeting certain eligibility requirements. Co-payment assistance is accrued for based on actual program participation and estimates of program redemption using data provided by third-party administrators.
Product Returns: Consistent with industry practice, the Company offers the SPs and SDs limited product return rights for damages, shipment errors, and expiring product; provided that the return is within a specified period around the product expiration date as set forth in the applicable individual distribution agreement. The Company does not allow product returns for product that has been dispensed to a patient. As the Company receives inventory reports from the SPs and SDs and has the ability to control the amount of product that is sold to the SPs and SDs, it is able to make a reasonable estimate of future potential product returns based on this on-hand channel inventory data and sell-through data obtained from the SPs and SDs. In arriving at its estimate for product returns, the Company also considers historical product returns, the underlying product demand, and industry data specific to the specialty pharmaceutical distribution industry.
Leases
As described further in Note 10, Recent Accounting Pronouncements, the Company adopted Topic 842 as of January 1, 2019. The Company determines if an arrangement includes a lease at inception. Operating leases are included in operating lease right-of-use assets, accrued liabilities, and operating lease liabilities on the Company’s Condensed Consolidated Balance Sheet. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the net present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date. The Company’s leases may include options to extend or terminate the lease which are included in the lease term when it is reasonably certain that it will exercise any such options. Lease expense is recognized on a straight-line basis over the expected lease term. The Company has elected not to apply the recognition requirements of Topic 842 for short-term leases.
3. Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and common stock equivalents outstanding for the period determined using the treasury stock method. For purposes of this calculation, stock options, employee stock purchase plan rights, restricted stock units, and warrants are considered to be common stock equivalents but are not included in the calculations of diluted net loss per share for the periods presented as their effect would be anti-dilutive. The Company incurred net losses for all periods presented and there were no reconciling items for potentially dilutive securities. More specifically, at September 30, 2019 and 2018, stock options, employee stock purchase plan rights, restricted stock units, and warrants totaling approximately
4. Stock-Based Compensation
The following table summarizes the total stock-based compensation expense included in the Company’s statements of operations for the periods presented (in thousands):
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2019 |
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2018 |
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2019 |
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2018 |
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Cost of product sales |
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$ |
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|
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$ |
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$ |
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$ |
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Research and development |
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Selling, general and administrative |
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$ |
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$ |
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$ |
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$ |
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8
5. Balance Sheet Details
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September 30, 2019 |
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December 31, 2018 |
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Raw material |
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$ |
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$ |
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Work in process |
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Finished goods |
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$ |
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$ |
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Accrued liabilities consisted of the following (in thousands):
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September 30, 2019 |
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December 31, 2018 |
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Accrued compensation and benefits |
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$ |
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Accrued research and development services |
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Accrued consulting and professional fees |
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Accrued sales allowances |
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Current portion of lease liabilities |
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— |
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Accrued royalties |
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Other |
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$ |
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$ |
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6. Investments
The carrying value and amortized cost of the Company’s investments, summarized by major security type, consisted of the following (in thousands):
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|
September 30, 2019 |
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Amortized Cost |
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Unrealized Gains |
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Unrealized Losses |
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Estimated Fair Value |
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Corporate debt securities |
|
$ |
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$ |
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$ |
( |
) |
|
$ |
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Commercial paper |
|
|
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( |
) |
|
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$ |
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$ |
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$ |
( |
) |
|
$ |
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