ACORDA THERAPEUTICS INC, 10-Q filed on 8/7/2019
Quarterly Report
v3.19.2
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2019
Jul. 31, 2019
Document And Entity Information [Abstract]    
Entity Registrant Name ACORDA THERAPEUTICS INC  
Entity Central Index Key 0001008848  
Document Type 10-Q  
Document Period End Date Jun. 30, 2019  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Current Reporting Status Yes  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q2  
Trading Symbol ACOR  
Entity Common Stock, Shares Outstanding   48,108,022
Entity File Number 001-31938  
Entity Tax Identification Number 133831168  
Entity Address, Address Line One 420 Saw Mill River Road  
Entity Address, City or Town Ardsley  
Entity Address, State or Province New York  
Entity Address, Postal Zip Code 10502  
City Area Code 914  
Local Phone Number 347-4300  
v3.19.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 147,648 $ 293,564
Restricted cash 192 532
Short term investments 149,242 151,989
Trade accounts receivable, net of allowances of $1,206 and $2,681, as of June 30, 2019 and December 31, 2018, respectively 21,010 23,430
Prepaid expenses 9,850 19,384
Inventory, net 28,086 29,014
Other current assets 2,342 10,194
Total current assets 358,370 528,107
Property and equipment, net of accumulated depreciation 113,455 60,519
Goodwill 281,467 282,059
Intangible assets, net of accumulated amortization 418,000 428,570
Right of use assets 25,876  
Other assets 294 411
Total assets 1,197,462 1,299,666
Current liabilities:    
Accounts payable 26,724 48,859
Accrued expenses and other current liabilities 44,594 76,882
Current portion of acquired contingent consideration 4,993 4,914
Current portion of lease liabilities 7,644  
Current portion of loans payable 612 616
Current portion of liability related to sale of future royalties 9,384 8,985
Total current liabilities 93,951 140,256
Convertible senior notes (due 2021) 323,780 318,670
Non-current portion of acquired contingent consideration 157,544 163,086
Non-current portion of lease liabilities 25,766  
Non-current portion of loans payable 25,237 24,470
Deferred tax liability 3,069 7,483
Non-current portion of liability related to sale of future royalties 18,491 21,731
Other non-current liabilities 4,787 11,987
Commitments and contingencies
Stockholders’ equity:    
Preferred stock, $0.001 par value. Authorized 20,000,000 shares at June 30, 2019 and December 31, 2018; no shares issued as of June 30, 2019 and December 31, 2018, respectively
Common stock, $0.001 par value. Authorized 80,000,000 shares at June 30, 2019 and December 31, 2018; issued 47,534,910 and 47,508,505 shares, including those held in treasury, as of June 30, 2019 and December 31, 2018, respectively 48 48
Treasury stock at cost (29,304 shares at June 30, 2019 and 87,737 shares at December 31, 2018) (638) (2,133)
Additional paid-in capital 1,011,744 1,005,105
Accumulated deficit (468,934) (393,843)
Accumulated other comprehensive income 2,617 2,806
Total stockholders’ equity 544,837 611,983
Total liabilities and stockholders’ equity $ 1,197,462 $ 1,299,666
v3.19.2
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Statement Of Financial Position [Abstract]    
Trade accounts receivable, allowances (in dollars) $ 1,206 $ 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 47,534,910 47,508,505
Treasury stock, shares 29,304 87,737
v3.19.2
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Revenues:        
Total net revenues $ 50,053 $ 153,302 $ 94,190 $ 259,467
Costs and expenses:        
Cost of sales 9,397 30,378 18,196 51,012
Research and development 18,959 25,910 34,987 56,470
Selling, general and administrative 50,195 44,263 102,921 91,864
Amortization of intangible assets 7,691 716 10,255 1,432
Changes in fair value of acquired contingent consideration (12,800) (7,000) (5,400) (800)
Total operating expenses 73,442 94,267 160,959 199,978
Operating (loss) income (23,389) 59,035 (66,769) 59,489
Other (expense) income, net:        
Interest and amortization of debt discount expense (5,378) (5,414) (11,801) (10,911)
Interest income 1,498 910 2,994 1,236
Realized loss on foreign currency transactions (3) (2) (16) (7)
Other income   24   24
Total other expense, net (3,883) (4,482) (8,823) (9,658)
(Loss) income before taxes (27,272) 54,553 (75,592) 49,831
Benefit from (Provision for) income taxes (214) (8,356) 501 (11,833)
Net (loss) income $ (27,486) $ 46,197 $ (75,091) $ 37,998
Net (loss) income per share—basic $ (0.58) $ 0.99 $ (1.58) $ 0.82
Net (loss) income per share—diluted $ (0.58) $ 0.98 $ (1.58) $ 0.81
Weighted average common shares outstanding used in computing net (loss) income per share—basic 47,486 46,799 47,480 46,546
Weighted average common shares outstanding used in computing net (loss) income per share—diluted 47,486 47,201 47,480 46,974
Net Product Revenues        
Revenues:        
Total net revenues $ 47,191 $ 150,412 $ 88,525 $ 253,415
Royalty Revenues        
Revenues:        
Total net revenues $ 2,862 $ 2,890 $ 5,665 $ 6,052
v3.19.2
Consolidated Statements of Comprehensive (Loss) Income - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]        
Net (loss) income $ (27,486) $ 46,197 $ (75,091) $ 37,998
Other comprehensive income (loss), net of tax:        
Foreign currency translation adjustment 1,128 (4,529) (481) (1,982)
Unrealized income (loss) on available for sale debt securities 114 15 292 (77)
Other comprehensive income (loss), net of tax 1,242 (4,514) (189) (2,059)
Comprehensive (loss) income $ (26,244) $ 41,683 $ (75,280) $ 35,939
v3.19.2
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 37,998          
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        
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        
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 $ (75,091)          
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        
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 (3,503) 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        
v3.19.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended 12 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Dec. 31, 2018
Cash flows from operating activities:      
Net (loss) income $ (75,091) $ 37,998  
Adjustments to reconcile (net loss) income to net cash (used in) provided by operating activities:      
Share-based compensation expense 8,201 11,112  
Amortization of net premiums and discounts on investments (1,001) (78)  
Amortization of debt discount and debt issuance costs 8,497 7,973  
Depreciation and amortization expense 14,878 6,648  
Change in acquired contingent consideration obligation (5,400) (800)  
Non-cash royalty revenue (4,985) (5,326)  
Deferred tax (benefit) provision (3,551) 12,633  
Changes in assets and liabilities:      
Decrease in accounts receivable 2,420 17,042  
Decrease (increase) in prepaid expenses and other current assets 17,383 (1,640)  
Decrease in inventory 929 16,355  
Decrease in other assets   17  
Decrease in accounts payable, accrued expenses and other current liabilities (54,583) (17,036)  
(Decrease) increase in other non-current liabilities (84) 61  
Net cash (used in) provided by operating activities (92,387) 84,959  
Cash flows from investing activities:      
Purchases of property and equipment (57,270) (10,793)  
Purchases of intangible assets   (162)  
Purchases of investments (107,899) (148,371)  
Proceeds from maturities of investments 111,942    
Net cash used in investing activities (53,227) (159,326)  
Cash flows from financing activities:      
Proceeds from issuance of common stock and option exercises 24 12,727  
Purchase of treasury stock (91) (1,587)  
Repayment of loans payable (614) (656)  
Net cash (used in) provided by financing activities (681) 10,484  
Effect of exchange rate changes on cash, cash equivalents and restricted cash 40 (84)  
Net decrease in cash, cash equivalents and restricted cash (146,255) (63,967)  
Cash, cash equivalents and restricted cash at beginning of period 294,351 308,039 $ 308,039
Cash, cash equivalents and restricted cash at end of period 148,096 244,072 $ 294,351
Supplemental disclosure:      
Cash paid for interest 3,037 3,045  
Cash paid for taxes $ 1,025 $ 13,554  
v3.19.2
Organization and Business Activities
6 Months Ended
Jun. 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 six-month periods ended June 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.

v3.19.2
Summary of Significant Accounting Policies
6 Months Ended
Jun. 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:

 

Six-month period ended June 30, 2019

 

 

Six-month period ended June 30, 2018

 

(In thousands)

Beginning of period

 

 

End of period

 

 

Beginning of period

 

 

End of period

 

Cash and cash equivalents

$

293,564

 

 

$

147,648

 

 

$

307,068

 

 

$

243,345

 

Restricted cash

 

532

 

 

 

192

 

 

 

410

 

 

 

221

 

Restricted cash included in Other assets

 

255

 

 

 

256

 

 

 

561

 

 

 

506

 

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

$

294,351

 

 

$

148,096

 

 

$

308,039

 

 

$

244,072

 

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)

 

June 30, 2019

 

 

December 31, 2018

 

Raw materials

 

$

680

 

 

$

 

Work-in-progress

 

 

10,147

 

 

 

 

Finished goods

 

 

17,259

 

 

 

29,014

 

Total

 

$

28,086

 

 

$

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 six-month periods ended June 30, 2019 and from the sales of Ampyra in the U.S. for the three and six-month periods ended June 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. The Company utilized the income approach in the goodwill assessment process. The determination of the fair value of the reporting unit and assets and liabilities within 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. Changes in these assumptions and resulting valuations or further declines in our stock price could result in future goodwill impairment charges. Management will continue to monitor any

changes in circumstances for indicators of impairment. After completing our impairment assessment during the second quarter of 2019, we concluded that the carrying value of the Company did not exceed its estimated fair value as of June 30, 2019 and therefore, the goodwill was not impaired.

Due to the impairment assessment trigger for the Company’s goodwill during the second quarter of 2019, we concluded that this factor could be a potential indicator of impairment with respect to our long-lived assets and we performed an impairment analysis. The Company compared 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 long lived assets. The cash flow estimation period was based on the long-lived assets’ 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.

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 there were no subsequent events that required disclosure in these financial statements.

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 11 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 on its consolidated financial statements.

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

 

(In thousands)

 

 

 

 

Balance at December 31, 2018

 

$

282,059

 

Foreign currency translation adjustment

 

 

(592

)

Balance at June 30, 2019

 

$

281,467

 

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. 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.

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.

v3.19.2
Revenues
6 Months Ended
Jun. 30, 2019
Revenue From Contract With Customer [Abstract]  
Revenues

(3) Revenues

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 revenues 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 June 30, 2019.

The following table disaggregates our revenue by major source:

 

(In thousands)

Three-month period ended June 30, 2019

 

 

Three-month period ended June 30, 2018

 

 

Six-month period ended June 30, 2019

 

 

Six-month period ended June 30, 2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net product revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ampyra

$

44,183

 

 

$

150,265

 

 

$

84,250

 

 

$

253,084

 

Inbrija

 

3,008

 

 

 

 

 

 

4,275

 

 

 

 

Other

 

 

 

 

147

 

 

 

 

 

 

331

 

Total net product revenues

 

47,191

 

 

 

150,412

 

 

 

88,525

 

 

 

253,415

 

Royalty revenues

 

2,862

 

 

 

2,890

 

 

 

5,665

 

 

 

6,052

 

Total net revenues

$

50,053

 

 

$

153,302

 

 

$

94,190

 

 

$

259,467

 

 

v3.19.2
Share-based Compensation
6 Months Ended
Jun. 30, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Share-based Compensation

(4) Share-based Compensation

During the three‑month periods ended June 30, 2019 and 2018, the Company recognized share-based compensation expense of $4.5 million and $5.2 million, respectively. During the six-month periods ended June 30, 2019 and 2018, the Company recognized share-based compensation expense of $8.2 and $11.1 million, respectively. Activity in options and restricted stock during the six-month period ended June 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 June 30, 2019 and 2018 were approximately $4.71 and $14.32, respectively. The weighted average fair value per share of options granted to employees for the six-month periods ended June 30, 2019 and 2018 were approximately $6.64 and $12.84, respectively.

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

 

 

 

For the three-month period ended June 30,

 

 

For the six-month period ended June 30,

 

(In thousands)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Research and development expense

 

$

783

 

 

$

1,519

 

 

$

1,483

 

 

$

3,225

 

Selling, general and administrative expense

 

 

3,544

 

 

 

3,725

 

 

 

6,361

 

 

 

7,887

 

Cost of Sales

 

 

207

 

 

 

 

 

 

357

 

 

 

 

Total

 

$

4,534

 

 

$

5,244

 

 

$

8,201

 

 

$

11,112

 

 

A summary of share-based compensation activity for the six-month period ended June 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

 

 

615

 

 

 

12.46

 

 

 

 

 

 

 

 

 

Cancelled

 

 

(384

)

 

 

23.83

 

 

 

 

 

 

 

 

 

Exercised

 

 

(2

)

 

 

16.00

 

 

 

 

 

 

 

 

 

Balance at June 30, 2019

 

 

8,424

 

 

$

28.82

 

 

 

5.1

 

 

$

15,237

 

Vested and expected to vest at

    June 30, 2019

 

 

8,386

 

 

$

28.88

 

 

 

5.1

 

 

$

14,871

 

Vested and exercisable at

    June 30, 2019

 

 

7,075

 

 

$

30.40

 

 

 

4.4

 

 

$

 

 

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

 

 

(91

)

Forfeited

 

 

(40

)

Nonvested at June 30, 2019

 

 

728

 

 

Unrecognized compensation cost for unvested stock options, restricted stock awards and performance stock units as of June 30, 2019 totaled $20.7 million and is expected to be recognized over a weighted average period of approximately 2.2 years.

During the three‑month period ended June 30, 2019, the Company repurchased 3,503 shares of common stock at an average price of $11.14 per share or approximately $39 thousand. During the six‑month period ended June 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 in the three-month period ended June 30, 2019. 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 six-month period ended June 30, 2019.

v3.19.2
(Loss) Income Per Share
6 Months Ended
Jun. 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 per share for the three and six-month periods ended June 30, 2019 and 2018:

 

(In thousands, except per share data)

 

Three-month period ended June 30, 2019

 

 

Three-month period ended June 30, 2018

 

 

Six-month period ended June 30, 2019

 

 

Six-month period ended June 30, 2018

 

Basic and diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(27,486

)

 

$

46,197

 

 

$

(75,091

)

 

$

37,998

 

Weighted average common shares outstanding used in

   computing net (loss) income per share—basic

 

 

47,486

 

 

 

46,799

 

 

 

47,480

 

 

 

46,546

 

Plus: net effect of dilutive stock options and restricted

   common shares

 

 

 

 

 

402

 

 

 

 

 

 

428

 

Weighted average common shares outstanding used in

   computing net (loss) income per share—diluted

 

 

47,486

 

 

 

47,201

 

 

 

47,480

 

 

 

46,974

 

Net (loss) income per share—basic

 

$

(0.58

)

 

$

0.99

 

 

$

(1.58

)

 

$

0.82

 

Net (loss) income per share—diluted

 

$

(0.58

)

 

$

0.98

 

 

$

(1.58

)

 

$

0.81

 

 

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 June 30, 2019

 

 

Three-month period ended June 30, 2018

 

 

Six-month period ended June 30, 2019

 

 

Six-month period ended June 30, 2018

 

Denominator

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options and restricted common shares

 

 

9,050

 

 

 

7,356

 

 

 

9,050

 

 

 

7,660

 

 

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 six-month periods ended June 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 six-month periods ended June 30, 2019 and 2018.

v3.19.2
Income Taxes
6 Months Ended
Jun. 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 June 30, 2019 and 2018, the Company recorded a provision of $(0.2) million and $(8.4) million for income taxes, respectively. The effective income tax rates for the Company for the three-month periods ended June 30, 2019 and 2018 were (0.8%) and (15.3%), respectively. The variance in the effective tax rates for the three-month period ended June 30, 2019 as compared to the three-month period ended June 30, 2018 was due primarily to differences in pre-tax book income between the periods, 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 six-month periods ended June 30, 2019 and 2018, the Company recorded a benefit of $0.5 million and a provision of $(11.8) million for income taxes, respectively. The effective income tax rates for the Company for the six-month periods ended June 30, 2019 and 2018 were 0.7% and (23.9%), respectively. The variance in the effective tax rates for the six-month period ended June 30, 2019 as compared to the six-month period ended June 30, 2018 was due primarily to differences in pre-tax book income between the periods, 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.

v3.19.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements

(7) 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 June 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. 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 six-month periods ended June 30, 2019. The estimated fair values of all of our financial instruments approximate their carrying values at June 30, 2019, except for the fair value of the Company’s convertible senior notes, which was approximately $292.4 million as of June 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

 

June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Assets Carried at Fair Value:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

14,751

 

 

$

 

 

$

 

Commercial paper

 

 

 

 

 

51,967

 

 

 

 

Corporate bonds

 

 

 

 

 

79,766

 

 

 

 

U.S. government securities

 

 

 

 

 

17,509

 

 

 

 

Liabilities Carried at Fair Value:

 

 

 

 

 

 

 

 

 

 

 

 

Acquired contingent consideration

 

 

 

 

 

 

 

 

162,537

 

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 June 30, 2019

 

 

Three-month period ended June 30, 2018

 

 

Six-month period ended June 30, 2019

 

 

Six-month period ended June 30, 2018

 

Acquired contingent consideration:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

175,400

 

 

$

119,200

 

 

$

168,000

 

 

$

113,000

 

Fair value change to contingent consideration

   included in the statement of operations

 

 

(12,800

)

 

 

(7,000

)

 

 

(5,400

)

 

 

(800

)

Royalty payments

 

 

(63

)

 

 

 

 

 

(63

)

 

 

 

Balance, end of period

 

$

162,537

 

 

$

112,200

 

 

$

162,537

 

 

$

112,200

 

 

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 and our ARCUS program for acute treatment of migraine. 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 and our ARCUS program for acute treatment of migraine, (ii) probabilities of success, and (iii) discount periods and rate. The probability of success ranged from 26.3% to 100.0% with milestone payment outcomes ranging from $0 to $59 million in the aggregate for Inbrija and our ARCUS program for acute treatment of migraine. The valuation is performed quarterly. Changes in the fair value of the contingent consideration are included in the statement of operations. For the three and six-month periods ended June 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 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 ARCUS program for acute treatment of migraine and estimated discount rates, the estimated fair value could be significantly higher or lower than the fair value determined.

v3.19.2
Investments
6 Months Ended
Jun. 30, 2019
Investments Debt And Equity Securities [Abstract]  
Investments

(8) 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 June 30, 2019 and December 31, 2018, respectively:

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

Estimated

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

(In thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Paper

 

$

51,907

 

 

$

60

 

 

$

 

 

$

51,967

 

Corporate Bonds

 

 

79,667

 

 

 

104

 

 

 

(5

)

 

 

79,766

 

U.S. government securities

 

 

17,501

 

 

 

8

 

 

 

 

 

 

17,509

 

Total Short-term investments

 

$

149,075

 

 

$

172

 

 

$

(5

)

 

$

149,242

 

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 $14.8 million and $9.6 million as of June 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 $149.2 million and $152.0 million as of June 30, 2019 and December 31, 2018, respectively. The aggregate fair value of short-term investments in an unrealized loss position amounted to approximately $5.9 million as of June 30, 2019. Short-term investments at June 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 June 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 June 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 losses on available-for-sale investments during the six-month period ended June 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

 

 

292

 

Amounts reclassified from accumulated other comprehensive income

 

 

 

Net current period other comprehensive income

 

 

292

 

Balance at June 30, 2019

 

$

167

 

 

v3.19.2
Liability Related to Sale of Future Royalties
6 Months Ended
Jun. 30, 2019
Deferred Revenue Disclosure [Abstract]  
Liability Related to Sale of Future Royalties

(9) Liability Related to Sale of Future Royalties

As of October 1, 2017, the Company completed a royalty purchase agreement with HealthCare Royalty Partners, or HCRP (“Royalty Agreement”). In exchange for the payment of $40 million to the Company, HCRP obtained the right to receive Fampyra royalties payable by Biogen under the License and Collaboration Agreement between the Company and Biogen, up to an agreed upon threshold of royalties. When this threshold is met, if ever, the Fampyra royalties will revert back to the Company and the Company will continue to receive the Fampyra royalties from Biogen until the revenue stream ends. The transaction does not include potential future milestones to be paid.

The Company maintained the rights under the license and collaboration agreement with Biogen, therefore, the Royalty Agreement has been accounted for as a liability that will be amortized using the effective interest method over the life of the arrangement, in accordance with the relevant accounting guidance. The Company recorded the receipt of the $40 million payment from HCRP and established a corresponding liability in the amount of $40 million, net of transaction costs of approximately $2.2 million. The net liability is classified between the current and non-current portion of liability related to the sale of future royalties in the consolidated balance sheets based on the recognition of the interest and principal payments to be received by HCRP in the next 12 months from the financial statement reporting date. The total net royalties to be paid, less the net proceeds received will be recorded to interest expense using the effective interest method over the life of the Royalty Agreement. The Company will estimate the payments to be made to HCRP over the term of the Agreement based on forecasted royalties and will calculate the interest rate required to discount such payments back to the liability balance. Over the course of the Royalty Agreement, the actual interest rate will be affected by the amount and timing of net royalty revenue recognized and changes in forecasted revenue. On a quarterly basis, the Company will reassess the effective interest rate and adjust the rate prospectively as necessary.

   The following table shows the activity within the liability account for June 30, 2019 and December 31, 2018, respectively:

 

(In thousands)

 

June 30, 2019

 

 

December 31, 2018

 

Liability related to sale of future royalties - beginning balance

 

$

30,716

 

 

$

35,788

 

Deferred transaction costs recognized

 

 

341

 

 

 

784

 

Non-cash royalty revenue payable to HCRP

 

 

(4,985

)

 

 

(10,291

)

Non-cash interest expense recognized

 

 

1,803

 

 

 

4,435

 

Liability related to sale of future royalties - ending balance

 

$

27,875

 

 

$

30,716

 

 

 

 

 

 

 

 

 

 

 

v3.19.2
Convertible Senior Notes
6 Months Ended
Jun. 30, 2019
Debt Disclosure [Abstract]  
Convertible Senior Notes

(10) Convertible Senior Notes

On June 17, 2014, the Company issued $345 million aggregate principal amount of 1.75% Convertible Senior Notes due 2021 (the Notes) in an underwritten public offering. The net proceeds from the offering were $337.5 million after deducting the Underwriter’s discount and offering expenses paid by the Company.

The Notes are convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, under certain circumstances as outlined in the indenture, based on an initial conversion rate, subject to adjustment, of 23.4968 shares per $1,000 principal amount of Notes (representing an initial conversion price of approximately $42.56 per share).

The Company may redeem for cash all or part of the Notes, at the Company’s option, after June 20, 2017, under certain circumstances as outlined in the indenture.

The Company pays 1.75% interest per annum on the principal amount of the Notes, payable semiannually in arrears in cash on June 15 and December 15 of each year. The Notes will mature on June 15, 2021.

If the Company undergoes a “fundamental change” (as defined in the Indenture), subject to certain conditions, holders may require the Company to repurchase for cash all or part of their Notes in principal amounts of $1,000 or an integral multiple thereof. The Indenture contains customary terms and covenants and events of default. If an event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding Notes by notice to the Company and the Trustee, may declare 100% of the principal of and accrued and unpaid interest, if any, on all the Notes to be due and payable. Upon such a declaration of acceleration, such principal and accrued and unpaid interest, if any, will be due and payable immediately. Upon the occurrence of certain events of bankruptcy, insolvency or reorganization involving the Company, 100% of the principal and accrued and unpaid interest, if any, on all of the Notes will become due and payable automatically. Notwithstanding the foregoing, the Indenture provides that, to the extent the Company elects and for up to 270 days, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right to receive additional interest on the Notes.

The Notes will be senior unsecured obligations and will rank equally with all of the Company’s existing and future senior debt and senior to any of the Company’s subordinated debt. The Notes will be structurally subordinated to all existing or future indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries and will be effectively subordinated to the Company’s existing or future secured indebtedness to the extent of the value of the collateral. The Indenture does not limit the amount of debt that the Company or its subsidiaries may incur.

In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Notes as a whole. The equity component is not re-measured as long as it continues to meet the conditions for equity classification.

The outstanding note balance as of June 30, 2019 and December 31, 2018 consisted of the following: