ACORDA THERAPEUTICS INC, 10-Q filed on 11/7/2019
Quarterly Report
v3.19.3
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2019
Oct. 31, 2019
Cover [Abstract]    
Entity Registrant Name ACORDA THERAPEUTICS INC  
Entity Central Index Key 0001008848  
Document Type 10-Q  
Document Period End Date Sep. 30, 2019  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Document Quarterly Report true  
Document Transition Report false  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q3  
Trading Symbol ACOR  
Title of 12(b) Security Common Stock $0.001 par value  
Security Exchange Name NASDAQ  
Entity Common Stock, Shares Outstanding   48,030,198
Entity File Number 001-31938  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 13-3831168  
Entity Address, Address Line One 420 Saw Mill River Road  
Entity Address, City or Town Ardsley  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 10502  
City Area Code 914  
Local Phone Number 347-4300  
v3.19.3
Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 119,521 $ 293,564
Restricted cash 387 532
Short term investments 133,636 151,989
Trade accounts receivable, net of allowances of $886 and $2,681, as of September 30, 2019 and December 31, 2018, respectively 17,553 23,430
Prepaid expenses 11,839 19,384
Inventory, net 27,396 29,014
Other current assets 4,005 10,194
Total current assets 314,337 528,107
Property and equipment, net of accumulated depreciation 130,585 60,519
Goodwill 0 282,059
Intangible assets, net of accumulated amortization 410,023 428,570
Right of use assets 24,675  
Other assets 293 411
Total assets 879,913 1,299,666
Current liabilities:    
Accounts payable 26,777 48,859
Accrued expenses and other current liabilities 43,235 76,882
Current portion of acquired contingent consideration 3,887 4,914
Current portion of lease liabilities 7,696  
Current portion of loans payable 587 616
Current portion of liability related to sale of future royalties 9,811 8,985
Total current liabilities 91,993 140,256
Convertible senior notes (due 2021) 326,381 318,670
Non-current portion of acquired contingent consideration 107,313 163,086
Non-current portion of lease liabilities 24,393  
Non-current portion of loans payable 24,518 24,470
Deferred tax liability 2,804 7,483
Non-current portion of liability related to sale of future royalties 16,437 21,731
Other non-current liabilities 4,732 11,987
Commitments and contingencies
Stockholders’ equity:    
Preferred stock, $0.001 par value. Authorized 20,000,000 shares at September 30, 2019 and December 31, 2018; no shares issued as of September 30, 2019 and December 31, 2018, respectively
Common stock, $0.001 par value. Authorized 80,000,000 shares at September 30, 2019 and December 31, 2018; issued 47,539,910 and 47,508,505 shares, including those held in treasury, as of September 30, 2019 and December 31, 2018, respectively 48 48
Treasury stock at cost (29,304 shares at September 30, 2019 and 87,737 shares at December 31, 2018) (638) (2,133)
Additional paid-in capital 1,015,037 1,005,105
Accumulated deficit (732,469) (393,843)
Accumulated other comprehensive (loss) income (636) 2,806
Total stockholders’ equity 281,342 611,983
Total liabilities and stockholders’ equity $ 879,913 $ 1,299,666
v3.19.3
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Statement Of Financial Position [Abstract]    
Trade accounts receivable, allowances (in dollars) $ 886 $ 2,681
Preferred stock, par value (in dollars per share) $ 0.001 $ 0.001
Preferred stock, Authorized shares 20,000,000 20,000,000
Preferred stock, issued shares 0 0
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Common stock, Authorized shares 80,000,000 80,000,000
Common stock, issued shares 47,539,910 47,508,505
Treasury stock, shares 29,304 87,737
v3.19.3
Consolidated Statements of Operations - USD ($)
shares in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Revenues:        
Total net revenues $ 47,722,000 $ 142,814,000 $ 141,911,000 $ 402,281,000
Costs and expenses:        
Cost of sales 7,986,000 25,152,000 26,183,000 76,164,000
Research and development 16,073,000 22,855,000 51,060,000 79,325,000
Selling, general and administrative 48,702,000 43,571,000 151,622,000 135,435,000
Goodwill impairment 277,561,000   277,561,000  
Amortization of intangible assets 7,692,000 239,000 17,945,000 1,670,000
Changes in fair value of acquired contingent consideration (50,942,000) 22,700,000 (56,342,000) 21,900,000
Total operating expenses 307,072,000 114,517,000 468,029,000 314,494,000
Operating (loss) income (259,350,000) 28,297,000 (326,118,000) 87,787,000
Other (expense) income, net:        
Interest and amortization of debt discount expense (4,500,000) (5,415,000) (16,302,000) (16,326,000)
Interest income 333,000 1,176,000 3,327,000 2,412,000
Realized loss on foreign currency transactions (1,000) (1,000) (17,000) (8,000)
Other income       24,000
Total other expense, net (4,168,000) (4,240,000) (12,992,000) (13,898,000)
(Loss) income before taxes (263,518,000) 24,057,000 (339,110,000) 73,889,000
Benefit from (Provision for) income taxes (17,000) (37,968,000) 484,000 (49,802,000)
Net (loss) income $ (263,535,000) $ (13,911,000) $ (338,626,000) $ 24,087,000
Net (loss) income per share—basic $ (5.55) $ (0.29) $ (7.13) $ 0.51
Net (loss) income per share—diluted $ (5.55) $ (0.29) $ (7.13) $ 0.51
Weighted average common shares outstanding used in computing net (loss) income per share—basic 47,511 47,184 47,491 46,840
Weighted average common shares outstanding used in computing net (loss) income per share—diluted 47,511 47,184 47,491 47,251
Net Product Revenues        
Revenues:        
Total net revenues $ 44,800,000 $ 139,973,000 $ 133,325,000 $ 393,388,000
Royalty Revenues        
Revenues:        
Total net revenues $ 2,922,000 $ 2,841,000 $ 8,586,000 $ 8,893,000
v3.19.3
Consolidated Statements of Comprehensive (Loss) Income - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]        
Net (loss) income $ (263,535) $ (13,911) $ (338,626) $ 24,087
Other comprehensive (loss) income, net of tax:        
Foreign currency translation adjustment (3,190) (721) (3,671) (2,703)
Unrealized (loss) income on available for sale debt securities (63) 35 229 (42)
Other comprehensive loss, net of tax (3,253) (686) (3,442) (2,745)
Comprehensive (loss) income $ (266,788) $ (14,597) $ (342,068) $ 21,342
v3.19.3
Consolidated Statements of Changes in Stockholders' Equity - USD ($)
$ in Thousands
Total
Common stock
Treasury stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
Balance at Dec. 31, 2017 $ 519,987 $ 46 $ (389) $ 968,580 $ (455,108) $ 6,858
Balance (in shares) at Dec. 31, 2017   46,441,000        
Increase (Decrease) in Stockholders' Equity            
Adjustment to accumulated deficit (pursuant to adoption of ASU 2014-09) 27,582       27,582  
Compensation expense for issuance of stock options to employees 4,095     4,095    
Compensation expense for issuance of restricted stock to employees 1,840     1,840    
Compensation expense for issuance of restricted stock to employees (in shares)   100,000        
Exercise of stock options 3,367 $ 1   3,366    
Exercise of stock options (in shares)   137,000        
Purchase of Treasury Stock (1,202)   (1,202)      
Purchase of Treasury Stock ,Shares   47,000        
Other comprehensive (loss) income, net of tax 2,455         2,455
Net (loss) income (8,199)       (8,199)  
Balance at Mar. 31, 2018 549,925 $ 47 (1,591) 977,881 (435,725) 9,313
Balance (in shares) at Mar. 31, 2018   46,725,000        
Balance at Dec. 31, 2017 519,987 $ 46 (389) 968,580 (455,108) 6,858
Balance (in shares) at Dec. 31, 2017   46,441,000        
Increase (Decrease) in Stockholders' Equity            
Net (loss) income 24,087          
Balance at Sep. 30, 2018 598,625 $ 47 (1,976) 999,880 (403,439) 4,113
Balance (in shares) at Sep. 30, 2018   47,310,000        
Balance at Mar. 31, 2018 549,925 $ 47 (1,591) 977,881 (435,725) 9,313
Balance (in shares) at Mar. 31, 2018   46,725,000        
Increase (Decrease) in Stockholders' Equity            
Compensation expense for issuance of stock options to employees 3,797     3,797    
Compensation expense for issuance of restricted stock to employees 1,457     1,457    
Compensation expense for issuance of restricted stock to employees (in shares)   16,000        
Exercise of stock options 10,157     10,157    
Exercise of stock options (in shares)   458,000        
Purchase of Treasury Stock (385)   (385)      
Purchase of Treasury Stock ,Shares   24,000        
Other comprehensive (loss) income, net of tax (4,514)         (4,514)
Net (loss) income 46,197       46,197  
Balance at Jun. 30, 2018 606,634 $ 47 (1,976) 993,292 (389,528) 4,799
Balance (in shares) at Jun. 30, 2018   47,223,000        
Increase (Decrease) in Stockholders' Equity            
Compensation expense for issuance of stock options to employees 3,866     3,866    
Compensation expense for issuance of restricted stock to employees 1,269     1,269    
Compensation expense for issuance of restricted stock to employees (in shares)   5,000        
Exercise of stock options 1,454     1,454    
Exercise of stock options (in shares)   82,000        
Other comprehensive (loss) income, net of tax (686)         (686)
Net (loss) income (13,911)       (13,911)  
Balance at Sep. 30, 2018 598,625 $ 47 (1,976) 999,880 (403,439) 4,113
Balance (in shares) at Sep. 30, 2018   47,310,000        
Balance at Dec. 31, 2018 611,983 $ 48 (2,133) 1,005,105 (393,843) 2,806
Balance (in shares) at Dec. 31, 2018   47,508,000        
Increase (Decrease) in Stockholders' Equity            
Compensation expense for issuance of stock options to employees 2,745     2,745    
Compensation expense for issuance of restricted stock to employees 922     922    
Compensation expense for issuance of restricted stock to employees (in shares)   49,000        
Exercise of stock options 24     24    
Exercise of stock options (in shares)   2,000        
Purchase of Treasury Stock (52)   (52)      
Purchase of Treasury Stock ,Shares   4,000        
Other comprehensive (loss) income, net of tax (1,431)         (1,431)
Net (loss) income (47,605)       (47,605)  
Balance at Mar. 31, 2019 566,586 $ 48 (2,185) 1,008,796 (441,448) 1,375
Balance (in shares) at Mar. 31, 2019   47,563,000        
Balance at Dec. 31, 2018 $ 611,983 $ 48 (2,133) 1,005,105 (393,843) 2,806
Balance (in shares) at Dec. 31, 2018   47,508,000        
Increase (Decrease) in Stockholders' Equity            
Exercise of stock options (in shares) 2,000          
Purchase of Treasury Stock $ (91)          
Purchase of Treasury Stock ,Shares (7,360)          
Net (loss) income $ (338,626)          
Balance at Sep. 30, 2019 281,342 $ 48 (638) 1,015,037 (732,469) (636)
Balance (in shares) at Sep. 30, 2019   47,540,000        
Balance at Mar. 31, 2019 566,586 $ 48 (2,185) 1,008,796 (441,448) 1,375
Balance (in shares) at Mar. 31, 2019   47,563,000        
Increase (Decrease) in Stockholders' Equity            
Compensation expense for issuance of stock options to employees 3,180     3,180    
Compensation expense for issuance of restricted stock to employees 1,354     1,354    
Compensation expense for issuance of restricted stock to employees (in shares)   34,000        
Adjustments to Treasury Stock     1,586 (1,586)    
Adjustments to Treasury Stock, Shares   (65,000)        
Purchase of Treasury Stock (39)   (39)      
Purchase of Treasury Stock ,Shares   3,000        
Other comprehensive (loss) income, net of tax 1,242         1,242
Net (loss) income (27,486)       (27,486)  
Balance at Jun. 30, 2019 544,837 $ 48 (638) 1,011,744 (468,934) 2,617
Balance (in shares) at Jun. 30, 2019   47,535,000        
Increase (Decrease) in Stockholders' Equity            
Compensation expense for issuance of stock options to employees 2,057     2,057    
Compensation expense for issuance of restricted stock to employees $ 1,236     1,236    
Compensation expense for issuance of restricted stock to employees (in shares)   5,000        
Purchase of Treasury Stock ,Shares 0          
Other comprehensive (loss) income, net of tax $ (3,253)         (3,253)
Net (loss) income (263,535)       (263,535)  
Balance at Sep. 30, 2019 $ 281,342 $ 48 $ (638) $ 1,015,037 $ (732,469) $ (636)
Balance (in shares) at Sep. 30, 2019   47,540,000        
v3.19.3
Consolidated Statements of Cash Flows - USD ($)
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2019
Sep. 30, 2019
Sep. 30, 2018
Dec. 31, 2018
Cash flows from operating activities:        
Net (loss) income   $ (338,626,000) $ 24,087,000  
Adjustments to reconcile (net loss) income to net cash (used in) provided by operating activities:        
Share-based compensation expense   11,494,000 16,246,000  
Amortization of net premiums and discounts on investments   (1,325,000) (807,000)  
Amortization of debt discount and debt issuance costs   12,202,000 11,917,000  
Depreciation and amortization expense   24,697,000 9,118,000  
Goodwill impairment $ 277,561,000 277,561,000    
Change in acquired contingent consideration obligation   (56,342,000) 21,900,000  
Non-cash royalty revenue   (7,556,000) (7,826,000)  
Deferred tax (benefit) provision   (3,667,000) 42,565,000  
Changes in assets and liabilities:        
Decrease in accounts receivable   5,877,000 29,942,000  
Decrease (increase) in prepaid expenses and other current assets   13,725,000 (5,319,000)  
Decrease in inventory   1,619,000 26,701,000  
Decrease in other assets     25,000  
Decrease in accounts payable, accrued expenses and other current liabilities   (56,141,000) (5,508,000)  
(Decrease) increase in other non-current liabilities   (256,000) 90,000  
Net cash (used in) provided by operating activities   (116,738,000) 163,131,000  
Cash flows from investing activities:        
Purchases of property and equipment   (76,414,000) (22,548,000)  
Purchases of intangible assets     (375,000)  
Purchases of investments   (171,431,000) (191,652,000)  
Proceeds from maturities of investments   191,342,000 52,539,000  
Net cash used in investing activities   (56,503,000) (162,036,000)  
Cash flows from financing activities:        
Proceeds from issuance of common stock and option exercises   24,000 14,978,000  
Purchase of treasury stock   (91,000) (1,587,000)  
Repayment of loans payable   (614,000) (656,000)  
Net cash (used in) provided by financing activities   (681,000) 12,735,000  
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (265,000) (238,000)  
Net (decrease) increase in cash, cash equivalents and restricted cash   (174,187,000) 13,592,000  
Cash, cash equivalents and restricted cash at beginning of period   294,351,000 308,039,000 $ 308,039,000
Cash, cash equivalents and restricted cash at end of period $ 120,164,000 120,164,000 321,631,000 $ 294,351,000
Supplemental disclosure:        
Cash paid for interest   3,037,000 3,045,000  
Cash paid for taxes   $ 2,562,000 $ 16,665,000  
v3.19.3
Organization and Business Activities
9 Months Ended
Sep. 30, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Organization and Business Activities

(1) Organization and Business Activities

Acorda Therapeutics, Inc. (“Acorda” or the “Company”) is a biopharmaceutical company focused on developing therapies that restore function and improve the lives of people with neurological disorders.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information, Accounting Standards Codification (ASC) Topic 270-10 and with the instructions to Form 10-Q. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, all adjustments considered necessary for a fair presentation have been included in the interim periods presented and all adjustments are of a normal recurring nature. The Company has evaluated subsequent events through the date of this filing. Operating results for the three and nine-month periods ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. When used in these notes, the terms “Acorda” or “the Company” mean Acorda Therapeutics, Inc. The December 31, 2018 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. You should read these unaudited interim condensed consolidated financial statements in conjunction with the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K, for the year ended December 31, 2018.

Certain reclassifications were made to prior period amounts in the consolidated financial statements to conform to the current year presentation.

v3.19.3
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

(2) Summary of Significant Accounting Policies

Our significant accounting policies are detailed in our Annual Report on Form 10-K for the year ended December 31, 2018. Effective January 1, 2019, the Company adopted ASU 2016-02, “Leases” (Topic 842), ASU 2018-05, “Income Taxes” (Topic 740), ASU 2018-09, “Codification Improvements” and ASU 2018-02, “Income Statement—Reporting Comprehensive Income” (Topic 220). Effective April 1, 2019, the Company adopted ASU 2017-04, “Intangibles – Goodwill and Other” (Topic 350). Other than the adoption of the new accounting guidance, our significant accounting policies have not changed materially from December 31, 2018.

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same amounts shown in the statement of cash flows:

 

Nine-month period ended September 30, 2019

 

 

Nine-month period ended September 30, 2018

 

(In thousands)

Beginning of period

 

 

End of period

 

 

Beginning of period

 

 

End of period

 

Cash and cash equivalents

$

293,564

 

 

$

119,521

 

 

$

307,068

 

 

$

321,011

 

Restricted cash

 

532

 

 

 

387

 

 

 

410

 

 

 

365

 

Restricted cash included in Other assets

 

255

 

 

 

256

 

 

 

561

 

 

 

255

 

Total Cash, cash equivalents and restricted cash per statement of cash flows

$

294,351

 

 

$

120,164

 

 

$

308,039

 

 

$

321,631

 

Amounts included in restricted cash represent those amounts required to be set aside to cover the Company’s self-funded employee health insurance. Restricted cash included in other assets on the statement of financial position relates to cash collateralized standby letters of credit in connection with obligations under facility leases, which is included with other assets in the consolidated balance sheet due to the long-term nature of the letters of credit.

Inventory

The major classes of inventory were as follows:

(In thousands)

 

September 30, 2019

 

 

December 31, 2018

 

Raw materials

 

$

996

 

 

$

 

Work-in-progress

 

 

15,561

 

 

 

 

Finished goods

 

 

10,839

 

 

 

29,014

 

Total

 

$

27,396

 

 

$

29,014

 

The Company reviews inventory, including inventory purchase commitments, for slow moving or obsolete amounts based on expected product sales volume and provides reserves against the carrying amount of inventory as appropriate.

Foreign Currency Translation

The functional currency of operations outside the United States of America is deemed to be the currency of the local country, unless otherwise determined that the United States dollar would serve as a more appropriate functional currency given the economic operations of the entity. Accordingly, the assets and liabilities of the Company’s foreign subsidiary, Biotie, are translated into United States dollars using the period-end exchange rate; income and expense items are translated using the average exchange rate during the period; and equity transactions are translated at historical rates. Cumulative translation adjustments are reflected as a separate component of equity. Foreign currency transaction losses and gains are recognized in the period incurred and are reported as other (expense) income, net in the statement of operations.

Segment and Geographic Information

The Company is managed and operated as one business which is focused on developing therapies that restore function and improve the lives of people with neurological disorders. The entire business is managed by a single management team that reports to the Chief Executive Officer. The Company does not operate separate lines of business with respect to any of its products or product candidates and the Company does not prepare discrete financial information with respect to separate products or product candidates or by location. Accordingly, the Company views its business as one reportable operating segment. Net product revenues reported are derived from the sales of Inbrija in the U.S. for the three and nine-month periods ended September 30, 2019 and from the sales of Ampyra in the U.S. for the three and nine-month periods ended September 30, 2019 and 2018.

Goodwill

Goodwill represents the amount of consideration paid in excess of the fair value of net assets acquired in a business combination accounted for using the acquisition method of accounting. Goodwill is not amortized and is subject to impairment testing on an annual basis or when a triggering event occurs that may indicate the carrying value of the goodwill is impaired. We perform our impairment testing at the reporting level where we have determined that we have a single reporting unit and operating segment. The impairment test for goodwill uses an approach which compares the estimated fair value of the reporting unit including goodwill to its carrying value. If the carrying value of the reporting unit exceeds the estimated fair value of the reporting unit, an impairment loss is recognized in an amount equal to the excess of the carrying value over the estimated fair value.

During the second quarter of 2019, we experienced a significant decline in our stock price that reduced the market capitalization below the carrying value of the Company. This circumstance required the Company to perform a quantitative assessment to assess the value of the goodwill for impairment. The Company performed an assessment of the goodwill and concluded that there was no impairment. During the third quarter of 2019, we experienced a further significant decline in our stock price that reduced the market capitalization below the carrying value of the Company. The Company performed a quantitative assessment of the goodwill and concluded that there was an impairment to the goodwill. The Company utilized the income approach in the goodwill assessment process. The determination of the fair value of the reporting unit requires us to make significant estimates and assumptions. This valuation approach considers a number of factors that include, but are not limited to, prospective financial information, growth rates, terminal value, and discount rates and require us to make certain assumptions and estimates. When performing our income approach, we incorporate the use of projected financial

information and a discount rate that are developed based on certain assumptions. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. The Company then corroborates the reasonableness of the total fair value of the reporting unit by reconciling the aggregate fair value of the reporting unit to the Company’s total market capitalization adjusted to include an estimated control premium. The estimated control premium is derived from reviewing observable transactions involving the purchase of controlling interests in comparable companies. The market capitalization is calculated using the relevant shares outstanding and the closing stock price at the test date. After completing our impairment assessment during the third quarter of 2019, we concluded that the carrying value of the Company exceeded its estimated fair value as of September 30, 2019 and therefore, the goodwill was fully impaired. The Company recorded an impairment charge of $277.6 million for the three and nine-month periods ended September 30, 2019 in the statement of operations.

Impairment of Long-Lived Assets

The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful lives of its long-lived assets, including identifiable intangible assets subject to amortization and property plant and equipment, may warrant revision or that the carrying value of the assets may be impaired. Factors the Company considers important that could trigger an impairment review include significant changes in the use of any assets, changes in historical trends in operating performance, changes in projected operating performance, stock price, loss of a major customer and significant negative economic trends. The decline in the trading price of the Company's common stock during the quarter ended September 30, 2019, and related decrease in the Company's market capitalization, was determined to be a triggering event in connection with the Company's review of the recoverability of its long-lived assets for the three-month period ended September 30, 2019. The Company performed a recoverability test during the third quarter of fiscal 2019 using the undiscounted cash flows, which are the sum of the future undiscounted cash flows expected to be derived from the direct use of the long-lived assets to the carrying value of the long-lived assets. Estimates of future cash flows were based on the Company’s own assumptions about its own use of the long-lived assets. The cash flow estimation period was based on the long-lived assets’ estimated remaining useful life to the Company. After performing the recoverability test, the Company determined that the undiscounted cash flows exceeded the carrying value and the long-lived assets were not impaired. Changes in these assumptions and resulting valuations or further declines in our stock price could result in future long-lived asset impairment charges. Management will continue to monitor any changes in circumstances for indicators of impairment. Any write‑downs are treated as permanent reductions in the carrying amount of the assets.

Subsequent Events

Subsequent events are defined as those events or transactions that occur after the balance sheet date, but before the financial statements are filed with the Securities and Exchange Commission. The Company completed an evaluation of the impact of any subsequent events through the date these financial statements were issued, and determined the following subsequent event that required disclosure in these financial statements.

On October 23, 2019, we announced a corporate restructuring to reduce costs and focus our resources on the commercial launch of Inbrija, which is our key strategic priority for the remainder of 2019. As part of the restructuring, we are reducing headcount by approximately 25% through a reduction in force. The majority of the reduction took place in the fourth quarter of 2019 immediately after the announcement, and the remainder will be completed by the first quarter of 2020.

Accounting Pronouncements Adopted

In February 2016, the FASB issued ASU 2016-02, “Leases” Topic 842, which amends the guidance in former ASC Topic 840, Leases. The new standard increases transparency and comparability most significantly by requiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases longer than 12 months. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. For lessees, leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

The Company adopted the new lease guidance effective January 1, 2019 using the modified retrospective transition approach, applying the new standard to all of its leases existing at the date of initial application which is the effective date of adoption. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. We elected the package of practical expedients which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any

expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change our previously reported consolidated statements of operations and did not result in a cumulative catch-up adjustment to opening equity. See Note 12 for further information.

In August 2018, the Securities Exchange Commission (“SEC”) adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The Company adopted the rule in the three-month period ended March 31, 2019 and included its first presentation of changes in stockholders’ equity in its Form 10-Q for the three-month period ended March 31, 2019.

In February 2018, the FASB issued ASU 2018-02, “Income Statement—Reporting Comprehensive Income” (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). This new standard provides entities with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The reclassification is the difference between the amount previously recorded in other comprehensive income at the historical U.S. federal tax rate that remains in accumulated other comprehensive loss at the time the Act was effective and the amount that would have been recorded using the newly enacted rate. This guidance became effective in Q1 2019; however, the Company did not elect to make the optional reclassification.

In July 2018, the FASB issued ASU 2018-09, “Codification Improvements.” The ASU’s amendments clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2018-09 are not expected to have a significant effect on current accounting practices. Some of the amendments in this update do not require transition guidance and will be effective upon issuance of this update. However, many of the amendments in this update do have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities. The ASU became effective in Q1 2019. The ASU did not have a significant impact on its consolidated financial statements. 

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other” (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). This new standard simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. ASU 2017-04 allows for prospective application and is effective for fiscal years beginning after December 15, 2019, and interim periods therein with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted this guidance on April 1, 2019. The ASU did not have an impact upon adoption on its consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequently amended by ASU 2019-04 and ASU 2019-05 which introduces a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. This new standard amends the current guidance on the impairment of financial instruments. The ASU adds to U.S. GAAP an impairment model known as current expected credit loss (CECL) model that is based on expected losses rather than incurred losses. Under the new guidance, an entity will recognize as an allowance its estimate of expected credit losses. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements and will adopt the guidance when effective.

In August 2018, the FASB issued ASU 2018-13 “Fair Value Measurement (Topic 820): “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” The amendment in this ASU eliminate, add and modify certain disclosure requirements for fair value measurements as part of its disclosure framework project. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public business entities will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The ASU is effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The ASU clarifies certain aspects of ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” which was issued in April 2015. Specifically, the ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).” The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

In November 2018, the FASB issued ASU 2018-18, Collaborative arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606. ASU 2018-18 clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer and precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

v3.19.3
Revenue
9 Months Ended
Sep. 30, 2019
Revenue From Contract With Customer [Abstract]  
Revenue

(3) Revenue

In accordance with ASC 606, the Company recognizes revenue when the customer obtains control of a promised good or service, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the good or service. ASC 606 outlines a five-step process for recognizing revenue from contracts with customers: i) identify the contract with the customer, ii) identify the performance obligations in the contract, iii) determine the transaction price, iv) allocate the transaction price to the separate performance obligations in the contract, and v) recognize revenue associated with the performance obligations as they are satisfied. 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. Once a contract is determined to be within the scope of ASC 606, the Company determines the performance obligations that are distinct. The Company recognizes as revenue the amount of the transaction price that is allocated to each respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company's performance obligations are transferred to customers at a point in time, typically upon receipt of the product by the customer.

ASC 606 requires entities to record a contract asset when a performance obligation has been satisfied or partially satisfied, but the amount of consideration has not yet been received because the receipt of the consideration is conditioned on something other than the passage of time. ASC 606 also requires an entity to present a revenue contract as a contract liability in instances when a customer pays consideration, or an entity has a right to an amount of consideration that is unconditional (e.g. receivable), before the entity transfers a good or service to the customer. We did not have any contract assets or any contract liabilities as of September 30, 2019 and 2018.

The following table disaggregates our revenue by major source:

 

(In thousands)

Three-month period ended September 30, 2019

 

 

Three-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2019

 

 

Nine-month period ended September 30, 2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net product revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ampyra

$

37,647

 

 

$

137,815

 

 

$

122,383

 

 

$

390,900

 

Inbrija

 

4,889

 

 

 

 

 

 

9,164

 

 

 

 

Other

 

2,264

 

 

 

2,158

 

 

 

1,778

 

 

 

2,488

 

Total net product revenues

 

44,800

 

 

 

139,973

 

 

 

133,325

 

 

 

393,388

 

Royalty revenues

 

2,922

 

 

 

2,841

 

 

 

8,586

 

 

 

8,893

 

Total net revenues

$

47,722

 

 

$

142,814

 

 

$

141,911

 

 

$

402,281

 

 

v3.19.3
Share-based Compensation
9 Months Ended
Sep. 30, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Share-based Compensation

(4) Share-based Compensation

During the three‑month periods ended September 30, 2019 and 2018, the Company recognized share-based compensation expense of $3.3 million and $5.1 million, respectively. During the nine-month periods ended September 30,

2019 and 2018, the Company recognized share-based compensation expense of $11.5 and $16.2 million, respectively. Activity in options and restricted stock during the nine-month period ended September 30, 2019 and related balances outstanding as of that date are reflected below. The weighted average fair value per share of options granted to employees for the three-month periods ended September 30, 2019 and 2018 were approximately $2.69 and $12.39, respectively. The weighted average fair value per share of options granted to employees for the nine-month periods ended September 30, 2019 and 2018 were approximately $6.49 and $12.81, respectively.

The following table summarizes share-based compensation expense included within the consolidated statements of operations:

 

 

 

For the three-month period ended September 30,

 

 

For the nine-month period ended September 30,

 

(In thousands)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Research and development expense

 

$

719

 

 

$

1,112

 

 

$

2,203

 

 

$

4,336

 

Selling, general and administrative expense

 

 

2,424

 

 

 

4,023

 

 

 

8,785

 

 

 

11,910

 

Cost of Sales

 

 

149

 

 

 

 

 

 

505

 

 

 

 

Total

 

$

3,292

 

 

$

5,135

 

 

$

11,493

 

 

$

16,246

 

 

A summary of share-based compensation activity for the nine-month period ended September 30, 2019 is presented below:

Stock Option Activity

 

 

 

Number of

Shares

(In thousands)

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term

 

 

Intrinsic

Value

(In thousands)

 

Balance at January 1, 2019

 

 

8,194

 

 

$

29.81

 

 

 

 

 

 

 

 

 

Granted

 

 

640

 

 

 

12.16

 

 

 

 

 

 

 

 

 

Cancelled

 

 

(494

)

 

 

24.83

 

 

 

 

 

 

 

 

 

Exercised

 

 

(2

)

 

 

16.00

 

 

 

 

 

 

 

 

 

Balance at September 30, 2019

 

 

8,339

 

 

$

28.76

 

 

 

4.8

 

 

$

 

Vested and expected to vest at

    September 30, 2019

 

 

8,316

 

 

$

28.79

 

 

 

4.8

 

 

$

 

Vested and exercisable at

    September 30, 2019

 

 

7,165

 

 

$

30.23

 

 

 

4.2

 

 

$

 

 

Restricted Stock and Performance Stock Unit Activity

 

(In thousands)

 

 

 

 

Restricted Stock and Performance Stock Units

 

Number of Shares

 

Nonvested at January 1, 2019

 

 

231

 

Granted

 

 

628

 

Vested

 

 

(96

)

Forfeited

 

 

(52

)

Nonvested at September 30, 2019

 

 

711

 

 

Unrecognized compensation cost for unvested stock options, restricted stock awards and performance stock units as of September 30, 2019 totaled $17.1 million and is expected to be recognized over a weighted average period of approximately 2.1 years.

During the three‑month period ended September 30, 2019, the Company did not make any repurchases of shares. During the nine‑month period ended September 30, 2019, the Company repurchased 7,360 shares of common stock at an average price of $12.31 per share or approximately $91 thousand. The share repurchase consists primarily of common stock tendered to cover tax liabilities in connection with the vesting of restricted stock awards and common stock withheld to cover

tax liabilities in connection with the settlement of vested restricted stock units in the nine-month period ended September 30, 2019.

v3.19.3
(Loss) Income Per Share
9 Months Ended
Sep. 30, 2019
Earnings Per Share [Abstract]  
(Loss) Income Per Share

(5) (Loss) Income Per Share

The following table sets forth the computation of basic and diluted (loss) income per share for the three and nine-month periods ended September 30, 2019 and 2018:

 

(In thousands, except per share data)

 

Three-month period ended September 30, 2019

 

 

Three-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2019

 

 

Nine-month period ended September 30, 2018

 

Basic and diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(263,535

)

 

$

(13,911

)

 

$

(338,626

)

 

$

24,087

 

Weighted average common shares outstanding used in

   computing net (loss) income per share—basic

 

 

47,511

 

 

 

47,184

 

 

 

47,491

 

 

 

46,840

 

Plus: net effect of dilutive stock options and restricted

   common shares

 

 

 

 

 

 

 

 

 

 

 

411

 

Weighted average common shares outstanding used in

   computing net (loss) income per share—diluted

 

 

47,511

 

 

 

47,184

 

 

 

47,491

 

 

 

47,251

 

Net (loss) income per share—basic

 

$

(5.55

)

 

$

(0.29

)

 

$

(7.13

)

 

$

0.51

 

Net (loss) income per share—diluted

 

$

(5.55

)

 

$

(0.29

)

 

$

(7.13

)

 

$

0.51

 

 

Securities that could potentially be dilutive are excluded from the computation of diluted loss per share when a loss from continuing operations exists or when the exercise price exceeds the average closing price of the Company’s common stock during the period, because their inclusion would result in an anti-dilutive effect on per share amounts.

The following amounts were not included in the calculation of net loss per diluted share because their effects were anti-dilutive:

 

(In thousands)

 

Three-month period ended September 30, 2019

 

 

Three-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2019

 

 

Nine-month period ended September 30, 2018

 

Denominator

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options and restricted common shares

 

 

8,995

 

 

 

8,825

 

 

 

8,995

 

 

 

7,262

 

 

Performance share units are excluded from the calculation of net loss per diluted share as the performance criteria has not been met for the three and nine-month periods ended September 30, 2019. Additionally, the impact of the convertible senior notes was determined to be anti-dilutive and excluded from the calculation of net loss per diluted share for the three and nine-month periods ended September 30, 2019 and 2018.

v3.19.3
Income Taxes
9 Months Ended
Sep. 30, 2019
Income Tax Disclosure [Abstract]  
Income Taxes

(6) Income Taxes

The Company’s effective income tax rate differs from the U.S. statutory rate principally due to state taxes, jurisdictions with pretax losses for which no tax benefit can be recognized, changes in the valuation allowance and the effects of share based compensation which are recorded discretely in the quarters in which they occur.

For the three-month periods ended September 30, 2019 and 2018, the Company recorded a provision of $0.02 million and $38.0 million for income taxes, respectively. The effective income tax rates for the Company for the three-month periods ended September 30, 2019 and 2018 were 0% and 157.8%, respectively. The variance in the effective tax rates for the three-month period ended September 30, 2019 as compared to the three-month period ended September 30, 2018 was due primarily to differences in pre-tax book loss between the periods, goodwill impairment for which no tax benefit is recognized, the valuation allowance recorded on deferred tax assets for which no tax benefit can be recognized, state taxes, and the reduction in the research & development tax credit.

For the nine-month periods ended September 30, 2019 and 2018, the Company recorded a benefit of $0.5 million and a provision of $49.8 million for income taxes, respectively. The effective income tax rates for the Company for the nine-month

periods ended September 30, 2019 and 2018 were 0.14% and 67.4%, respectively. The variance in the effective tax rates for the nine-month period ended September 30, 2019 as compared to the nine-month period ended September 30, 2018 was due primarily to differences in pre-tax book (loss) income between the periods, goodwill impairment for which no tax benefit is recognized, the valuation allowance recorded on deferred tax assets for which no tax benefit can be recognized, state taxes, and the reduction in the research & development tax credit.

The Company continues to evaluate the realizability of its deferred tax assets on a quarterly basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits and the regulatory approval of products currently under development. Any changes to the valuation allowance or deferred tax assets and liabilities in the future would impact the Company's income taxes.

The Internal Revenue Service commenced its examination of the Company’s wholly-owned subsidiary, Biotie Therapies, Inc.’s, U.S. income tax return for the short period ended December 31, 2016 in the third quarter of 2018. The audit has been substantially completed, and the IRS has proposed an adjustment that we do not believe would have a material impact on the tax provision.

The New York State Department of Tax commenced an examination of the Company’s income tax returns for the years 2014-2016 in the third quarter of 2018. There have been no proposed adjustments at this stage of the examination.

v3.19.3
Goodwill
9 Months Ended
Sep. 30, 2019
Goodwill [Abstract]  
Goodwill

(7) Goodwill

The following table represents a summary of activities in goodwill from December 31, 2018 through September 30, 2019:

 

(In thousands)

 

 

 

 

Balance at December 31, 2018

 

$

282,059

 

Impairment

 

 

(277,561

)

Foreign currency translation adjustment

 

 

(4,498

)

Balance at September 30, 2019

 

$

 

 

At September 30, 2019 and December 31, 2018, the Company had $0.0 million and $282.1 million of goodwill, respectively. In connection with the Company's review of the recoverability of its goodwill for the three month period ended September 30, 2019, the Company determined that a triggering event occurred due to the decline in the trading price of the Company's common stock at and around the end of the third quarter of 2019 and related decrease in the Company's market capitalization. Given this circumstance, the Company performed a quantitative goodwill impairment test. Based on the results of its impairment test, the Company recorded an impairment charge of $277.6 million which was the carrying amount of its goodwill immediately before the charge. Refer to Note 2 for the discussion of the impairment charge.

v3.19.3
Fair Value Measurements
9 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements

(8) Fair Value Measurements

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates, exchange rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability. The Company’s Level 1 assets consist of investments in a Treasury money market fund and U.S. government securities. The Company’s level 2 assets consist of investments in corporate bonds, commercial paper and U.S. government securities which are categorized as short-term investments for investments with original maturities between three months and one year. The Company’s Level 3 liabilities represent acquired contingent consideration related to the acquisition of Civitas and are valued using a probability weighted discounted cash flow valuation approach. No changes in valuation techniques occurred during the three or nine-month periods ended September 30, 2019. The estimated fair values of all of our financial instruments approximate their carrying values at September 30, 2019, except for the fair value of the Company’s convertible senior notes, which was approximately $264.3 million as of September 30, 2019. The Company estimates the fair value of its notes utilizing market quotations for the debt (Level 2).

 

(In thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Assets Carried at Fair Value:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

28,899

 

 

$

 

 

$

 

U.S. government securities

 

 

2,500

 

 

 

13,246

 

 

 

 

Commercial paper

 

 

 

 

 

49,054

 

 

 

 

Corporate bonds

 

 

 

 

 

71,336

 

 

 

 

Liabilities Carried at Fair Value:

 

 

 

 

 

 

 

 

 

 

 

 

Acquired contingent consideration

 

 

 

 

 

 

 

 

111,200

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

Assets Carried at Fair Value:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

9,586

 

 

$

 

 

$

 

Commercial paper

 

 

 

 

 

47,108

 

 

 

 

Corporate bonds

 

 

 

 

 

104,881

 

 

 

 

Liabilities Carried at Fair Value:

 

 

 

 

 

 

 

 

 

 

 

 

Acquired contingent consideration

 

 

 

 

 

 

 

 

168,000

 

 

The following table presents additional information about liabilities measured at fair value on a recurring basis and for which the Company utilizes Level 3 inputs to determine fair value.

Acquired contingent consideration

 

(In thousands)

 

Three-month period ended September 30, 2019

 

 

Three-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2019

 

 

Nine-month period ended September 30, 2018

 

Acquired contingent consideration:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

162,537

 

 

$

112,200

 

 

$

168,000

 

 

$

113,000

 

Fair value change to contingent consideration

   included in the statement of operations

 

 

(50,942

)

 

 

22,700

 

 

 

(56,342

)

 

 

21,900

 

Royalty payments

 

 

(395

)

 

 

 

 

 

(458

)

 

 

 

Balance, end of period

 

$

111,200

 

 

$

134,900

 

 

$

111,200

 

 

$

134,900

 

 

The Company estimates the fair value of its acquired contingent consideration using a probability weighted discounted cash flow valuation approach based on estimated future sales expected from Inbrija (levodopa inhalation powder), an FDA approved drug for the treatment of OFF periods in Parkinson’s disease. Using this approach, expected probability adjusted future cash flows are calculated over the expected life of the agreement and discounted to estimate the current value of the

liability at the period end date. Some of the more significant assumptions made in the valuation include (i) the estimated revenue forecasts for Inbrija, (ii) probabilities of success, and (iii) discount periods and rate. Milestone payments ranged from $1.0 million to $59.0 million for Inbrija. The valuation is performed quarterly and changes in the fair value of the contingent consideration are included in the statement of operations. For the three and nine-month periods ended September 30, 2019 and 2018, changes in the fair value of the acquired contingent consideration were primarily due to the re-calculation of cash flows for the passage of time and updates to certain other estimated assumptions. The Company has deferred consideration of further investment in the ARCUS program for acute treatment of migraine pending additional progress with the Inbrija launch.

The acquired contingent consideration is classified as a Level 3 liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market. If different assumptions were used for the various inputs to the valuation approach, including but not limited to, assumptions involving probability adjusted sales estimates for Inbrija and the estimated discount rates, the estimated fair value could be significantly higher or lower than the fair value determined.

v3.19.3
Investments
9 Months Ended
Sep. 30, 2019
Investments Debt And Equity Securities [Abstract]  
Investments

(9) Investments

The Company has determined that all of its investments are classified as available-for-sale. Available-for-sale debt securities are carried at fair value with interest on these investments included in interest income and are recorded based on quoted market prices. Available-for-sale investments consisted of the following at September 30, 2019 and December 31, 2018, respectively:

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

Estimated

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

(In thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Paper

 

$

49,041

 

 

$

24

 

 

$

(11

)

 

$

49,054

 

Corporate Bonds

 

 

71,241

 

 

 

104

 

 

 

(9

)

 

 

71,336

 

U.S. government securities

 

 

13,250

 

 

 

 

 

 

(4

)

 

 

13,246

 

Total Short-term investments

 

$

133,532

 

 

$

128

 

 

$

(24

)

 

$

133,636

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Paper

 

$

47,149

 

 

$

 

 

$

(41

)

 

$

47,108

 

Corporate Bonds

 

 

104,965

 

 

 

6

 

 

 

(90

)

 

 

104,881

 

Total Short-term investments

 

$

152,114

 

 

$

6

 

 

$

(131

)

 

$

151,989

 

 

Short-term investments with maturities of three months or less from date of purchase have been classified as cash equivalents, and amounted to approximately $31.4 million and $9.6 million as of September 30, 2019 and December 31, 2018, respectively. Short-term investments have original maturities of greater than 3 months but less than 1 year and amounted to approximately $133.6 million and $152.0 million as of September 30, 2019 and December 31, 2018, respectively. The aggregate fair value of short-term investments in an unrealized loss position amounted to approximately $48.7 million as of September 30, 2019. Short-term investments at September 30, 2019 primarily consisted of high-grade commercial paper, corporate bonds and U.S. government securities. Long-term investments have original maturities of greater than 1 year. There were no investments classified as long-term at September 30, 2019 or December 31, 2018. The Company has determined that there were no other-than-temporary declines in the fair values of its investments as of September 30, 2019 as the Company does not intend to sell its investments and it is not more likely than not that the Company will be required to sell its investments prior to the recovery of its amortized cost basis.

Unrealized holding gains and losses, which relate to debt instruments, are reported within accumulated other comprehensive income (AOCI) in the statements of comprehensive income. The changes in AOCI associated with the unrealized holding gains on available-for-sale investments during the nine-month period ended September 30, 2019, were as follows (in thousands):

 

(In thousands)

 

Net Unrealized Gains (Losses) on Marketable Securities

 

Balance at December 31, 2018

 

$

(125

)

Other comprehensive income before reclassifications

 

 

229

 

Amounts reclassified from accumulated other comprehensive income

 

 

 

Net current period other comprehensive income

 

 

229

 

Balance at September 30, 2019