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1. | The consideration is commensurate with either the entity’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone; |
2. | The consideration relates solely to past performance; and |
3. | The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. |
Standard | Description | Effective Date | Effect on the Financial Statements or Other Significant Matters | |||
In July 2015, the FASB issued ASU 2015-11, Inventory: Simplifying the Measurement of Inventory. | The new guidance requires that for entities that measure inventory using the first-in, first-out method, inventory should be measured at the lower of cost or net realizable value. Topic 330, Inventory, currently requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximate normal profit margin. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. | January 1, 2017. | The adoption did not have a material impact on our condensed consolidated financial position or results of operations. | |||
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash. | Current U.S. GAAP either is unclear or does not include specific guidance on the eight cash flow classification issues included in ASU 2016-15. The new guidance is an improvement to U.S. GAAP and is intended to reduce the current and potential future diversity in practice. ASU 2016-18 provides additional classification guidance for restricted cash, which requires that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. | January 1, 2018. We have elected to early adopt as of January1, 2017. | Cash and cash equivalents at the beginning-of-period and end-of-period total amounts in the Condensed Consolidated Statements of Cash Flows have been adjusted to include $0.5 million of restricted cash for each of the periods presented. | |||
Standard | Description | Effective Date | Effect on the Financial Statements or Other Significant Matters | |||
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall; Recognition and Measurement of Financial Assets and Financial Liabilities. | The new guidance supersedes the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and requires equity securities to be measured at fair value with changes in the fair value recognized through net income. The new guidance requires public business entities that are required to disclose fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using the exit price notion consistent with Topic 820, Fair Value Measurement. | January 1, 2018. | We currently do not hold equity securities, and we are evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. | |||
Standard | Description | Effective Date | Effect on the Financial Statements or Other Significant Matters | |||
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). In March, April, May and December 2016, the FASB issued additional guidance related to Topic 606. | The new standard will supersede nearly all existing revenue recognition guidance. Under Topic 606, an entity is required to recognize revenue upon transfer of promised goods or services to customers in an amount that reflects the expected consideration to be received in exchange for those goods or services. Topic 606 defines a five-step process in order to achieve this core principle, which may require the use of judgment and estimates, and also requires expanded qualitative and quantitative disclosures relating to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and estimates used. The new standard also defines accounting for certain costs related to origination and fulfillment of contracts with customers, including whether such costs should be capitalized. The new standard permits adoption either by using (i) a full retrospective approach for all periods presented in the period of adoption or (ii) a modified retrospective approach where the new standard is applied in the financial statements starting with the year of adoption. Under both approaches, cumulative impact of the adoption is reflected as an adjustment to retained earnings (accumulated deficit) as of the earliest date presented in accordance with the new standard. | January 1, 2018. Early adoption is permitted. | We plan to implement the new guidance on January 1, 2018. We currently plan to adopt using the modified retrospective approach; however, a final decision regarding the adoption method has not been finalized at this time. We are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. However, we anticipate an impact to the timing of recognition of payments related to certain of our license and collaboration agreements (1) and the timing of recognition of our sales-based royalties.(2) We anticipate that this standard will have a material impact on our consolidated financial statements. Additional areas of impact may be identified as we continue our evaluation. We cannot reasonably estimate additional quantitative information related to the impact of the new standard on our consolidated financial statements at this time. | |||
In February 2016, the FASB issued ASU 2016-02, Leases. | The new guidance requires lessees to recognize assets and liabilities for most leases and provides enhanced disclosures. | January 1, 2019. Early adoption is permitted. | We are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. However, we anticipate recognition of additional assets and corresponding liabilities related to our leases on our consolidated balance sheet. |
(1) | Under the new standard, we are required to assess whether licenses granted under our collaboration and license agreements are distinct from other performance obligations and functional when granted. We expect that license-related amounts, including upfront payments, exclusive designation fees, annual license maintenance fees and sales-based milestones will be recognized, generally, when earned. Currently, these amounts related to certain of our license and collaboration agreements are being amortized over the term of the collaboration agreement. For example, during the year ended December 31, 2016, we recognized revenue from amortization of license payments of $4.1 million, and total deferred revenue related to license payments under collaboration agreements as of December 31, 2016 was $43.9 million. While we have not completed our evaluation at this time, we anticipate a potential reduction or elimination of our associated deferred revenue balances upon adoption of Topic 606. |
(2) | Under the new standard, we expect sales-based royalties will be recognized in the quarter they are earned based on estimates, with true-up to actual results following in the subsequent quarter. Sales-based royalty revenue earned under our collaboration and license agreements is presently recognized when the royalty reports are made available. Upon adoption of Topic 606, we will evaluate and reduce our accumulated deficit and increase our accounts receivable, net, by the amount earned but not yet reported in our consolidated balance sheet at the time of adoption. We are establishing a process to estimate sales-based royalty revenues in the quarter in which the sales occur. |
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March 31, 2017 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Corporate debt securities | $ | 33,158 | $ | — | $ | (18 | ) | $ | 33,140 | |||||||
U.S. Treasury securities | 70,002 | 1 | (29 | ) | 69,974 | |||||||||||
Commercial paper | 30,683 | — | — | 30,683 | ||||||||||||
$ | 133,843 | $ | 1 | $ | (47 | ) | $ | 133,797 |
December 31, 2016 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Corporate debt securities | $ | 40,221 | $ | 1 | $ | (15 | ) | $ | 40,207 | |||||||
U.S. Treasury securities | 94,002 | 24 | (16 | ) | 94,010 | |||||||||||
Commercial paper | $ | 4,000 | $ | — | $ | — | $ | 4,000 | ||||||||
$ | 138,223 | $ | 25 | $ | (31 | ) | $ | 138,217 |
March 31, 2017 | December 31, 2016 | |||||||||||||||||||||||
Level 1 | Level 2 | Total estimated fair value | Level 1 | Level 2 | Total estimated fair value | |||||||||||||||||||
Cash equivalents: | ||||||||||||||||||||||||
Money market funds | $ | 34,814 | $ | — | $ | 34,814 | $ | 60,916 | $ | — | $ | 60,916 | ||||||||||||
Commercial paper | 4,000 | 4,000 | — | — | — | |||||||||||||||||||
Available-for-sale marketable securities: | ||||||||||||||||||||||||
Corporate debt securities | — | 33,140 | 33,140 | — | 40,207 | 40,207 | ||||||||||||||||||
U.S. Treasury securities | 69,974 | — | 69,974 | 94,010 | — | 94,010 | ||||||||||||||||||
Commercial paper | — | 30,683 | 30,683 | — | 4,000 | 4,000 | ||||||||||||||||||
$ | 104,788 | $ | 67,823 | $ | 172,611 | $ | 154,926 | $ | 44,207 | $ | 199,133 |
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As of March 31, 2017 | |||
Upfront license fee payment for the application of rHuPH20 to the initial exclusive targets | $ | 20,000 | |
Election of additional exclusive targets and annual license maintenance fees for the right to designate the remaining targets as exclusive targets | 23,000 | ||
Clinical development milestone payments | 13,000 | ||
Regulatory milestone payments | 8,000 | ||
Sales-based milestone payments | 15,000 | ||
Total payments received | $ | 79,000 |
As of March 31, 2017 | |||
Upfront license fee payment for the application of rHuPH20 to the initial exclusive target | $ | 10,000 | |
Regulatory milestone payments | 3,000 | ||
Sales-based milestone payments | 4,000 | ||
Total payments received | $ | 17,000 |
As of March 31, 2017 | |||
Lilly | $ | 33,000 | |
AbbVie | 29,000 | ||
Janssen | 15,250 | ||
Pfizer | 16,500 | ||
Total payments received | $ | 93,750 |
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March 31, 2017 | December 31, 2016 | |||||||
Accounts receivable from product sales to collaborators | $ | 8,023 | $ | 7,854 | ||||
Accounts receivable from other product sales | 2,090 | 2,234 | ||||||
Accounts receivable from revenues under collaborative agreements | 2,921 | 6,151 | ||||||
Subtotal | 13,034 | 16,239 | ||||||
Allowance for distribution fees and discounts | (582 | ) | (559 | ) | ||||
Total accounts receivable, net | $ | 12,452 | $ | 15,680 |
March 31, 2017 | December 31, 2016 | |||||||
Raw materials | $ | 868 | $ | 761 | ||||
Work-in-process | 12,885 | 12,850 | ||||||
Finished goods | 537 | 1,012 | ||||||
Total inventories | $ | 14,290 | $ | 14,623 |
March 31, 2017 | December 31, 2016 | |||||||
Prepaid manufacturing expenses | $ | 6,327 | $ | 9,663 | ||||
Prepaid research and development expenses | 8,345 | 8,613 | ||||||
Other prepaid expenses | 1,525 | 1,661 | ||||||
Other assets | 602 | 1,530 | ||||||
Total prepaid expenses and other assets | 16,799 | 21,467 | ||||||
Less long-term portion | 172 | 219 | ||||||
Total prepaid expenses and other assets, current | $ | 16,627 | $ | 21,248 |
March 31, 2017 | December 31, 2016 | |||||||
Research equipment | $ | 10,483 | $ | 10,479 | ||||
Computer and office equipment | 3,395 | 3,373 | ||||||
Leasehold improvements | 2,345 | 2,331 | ||||||
Subtotal | 16,223 | 16,183 | ||||||
Accumulated depreciation and amortization | (12,482 | ) | (11,919 | ) | ||||
Property and equipment, net | $ | 3,741 | $ | 4,264 |
March 31, 2017 | December 31, 2016 | |||||||
Accrued outsourced research and development expenses | $ | 11,970 | $ | 9,522 | ||||
Accrued compensation and payroll taxes | 5,045 | 11,539 | ||||||
Accrued outsourced manufacturing expenses | 3,670 | 3,225 | ||||||
Other accrued expenses | 4,276 | 4,552 | ||||||
Total accrued expenses | 24,961 | 28,838 | ||||||
Less long-term portion | 26 | 17 | ||||||
Total accrued expenses, current | $ | 24,935 | $ | 28,821 |
March 31, 2017 | December 31, 2016 | |||||||
Collaborative agreements | ||||||||
License fees and event-based payments: | ||||||||
Roche | $ | 34,877 | $ | 35,709 | ||||
Other | 8,018 | 8,209 | ||||||
42,895 | 43,918 | |||||||
Reimbursement for research and development services | — | 700 | ||||||
Total deferred revenue | 42,895 | 44,618 | ||||||
Less current portion | 4,093 | 4,793 | ||||||
Deferred revenue, net of current portion | $ | 38,802 | $ | 39,825 |
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1. | The consideration is commensurate with either the entity’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone; |
2. | The consideration relates solely to past performance; and |
3. | The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. |
Standard | Description | Effective Date | Effect on the Financial Statements or Other Significant Matters | |||
In July 2015, the FASB issued ASU 2015-11, Inventory: Simplifying the Measurement of Inventory. | The new guidance requires that for entities that measure inventory using the first-in, first-out method, inventory should be measured at the lower of cost or net realizable value. Topic 330, Inventory, currently requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximate normal profit margin. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. | January 1, 2017. | The adoption did not have a material impact on our condensed consolidated financial position or results of operations. | |||
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash. | Current U.S. GAAP either is unclear or does not include specific guidance on the eight cash flow classification issues included in ASU 2016-15. The new guidance is an improvement to U.S. GAAP and is intended to reduce the current and potential future diversity in practice. ASU 2016-18 provides additional classification guidance for restricted cash, which requires that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. | January 1, 2018. We have elected to early adopt as of January1, 2017. | Cash and cash equivalents at the beginning-of-period and end-of-period total amounts in the Condensed Consolidated Statements of Cash Flows have been adjusted to include $0.5 million of restricted cash for each of the periods presented. | |||
Standard | Description | Effective Date | Effect on the Financial Statements or Other Significant Matters | |||
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall; Recognition and Measurement of Financial Assets and Financial Liabilities. | The new guidance supersedes the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and requires equity securities to be measured at fair value with changes in the fair value recognized through net income. The new guidance requires public business entities that are required to disclose fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using the exit price notion consistent with Topic 820, Fair Value Measurement. | January 1, 2018. | We currently do not hold equity securities, and we are evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. | |||
Standard | Description | Effective Date | Effect on the Financial Statements or Other Significant Matters | |||
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). In March, April, May and December 2016, the FASB issued additional guidance related to Topic 606. | The new standard will supersede nearly all existing revenue recognition guidance. Under Topic 606, an entity is required to recognize revenue upon transfer of promised goods or services to customers in an amount that reflects the expected consideration to be received in exchange for those goods or services. Topic 606 defines a five-step process in order to achieve this core principle, which may require the use of judgment and estimates, and also requires expanded qualitative and quantitative disclosures relating to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and estimates used. The new standard also defines accounting for certain costs related to origination and fulfillment of contracts with customers, including whether such costs should be capitalized. The new standard permits adoption either by using (i) a full retrospective approach for all periods presented in the period of adoption or (ii) a modified retrospective approach where the new standard is applied in the financial statements starting with the year of adoption. Under both approaches, cumulative impact of the adoption is reflected as an adjustment to retained earnings (accumulated deficit) as of the earliest date presented in accordance with the new standard. | January 1, 2018. Early adoption is permitted. | We plan to implement the new guidance on January 1, 2018. We currently plan to adopt using the modified retrospective approach; however, a final decision regarding the adoption method has not been finalized at this time. We are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. However, we anticipate an impact to the timing of recognition of payments related to certain of our license and collaboration agreements (1) and the timing of recognition of our sales-based royalties.(2) We anticipate that this standard will have a material impact on our consolidated financial statements. Additional areas of impact may be identified as we continue our evaluation. We cannot reasonably estimate additional quantitative information related to the impact of the new standard on our consolidated financial statements at this time. | |||
In February 2016, the FASB issued ASU 2016-02, Leases. | The new guidance requires lessees to recognize assets and liabilities for most leases and provides enhanced disclosures. | January 1, 2019. Early adoption is permitted. | We are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. However, we anticipate recognition of additional assets and corresponding liabilities related to our leases on our consolidated balance sheet. |
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March 31, 2017 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Corporate debt securities | $ | 33,158 | $ | — | $ | (18 | ) | $ | 33,140 | |||||||
U.S. Treasury securities | 70,002 | 1 | (29 | ) | 69,974 | |||||||||||
Commercial paper | 30,683 | — | — | 30,683 | ||||||||||||
$ | 133,843 | $ | 1 | $ | (47 | ) | $ | 133,797 |
December 31, 2016 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Corporate debt securities | $ | 40,221 | $ | 1 | $ | (15 | ) | $ | 40,207 | |||||||
U.S. Treasury securities | 94,002 | 24 | (16 | ) | 94,010 | |||||||||||
Commercial paper | $ | 4,000 | $ | — | $ | — | $ | 4,000 | ||||||||
$ | 138,223 | $ | 25 | $ | (31 | ) | $ | 138,217 |
March 31, 2017 | December 31, 2016 | |||||||||||||||||||||||
Level 1 | Level 2 | Total estimated fair value | Level 1 | Level 2 | Total estimated fair value | |||||||||||||||||||
Cash equivalents: | ||||||||||||||||||||||||
Money market funds | $ | 34,814 | $ | — | $ | 34,814 | $ | 60,916 | $ | — | $ | 60,916 | ||||||||||||
Commercial paper | 4,000 | 4,000 | — | — | — | |||||||||||||||||||
Available-for-sale marketable securities: | ||||||||||||||||||||||||
Corporate debt securities | — | 33,140 | 33,140 | — | 40,207 | 40,207 | ||||||||||||||||||
U.S. Treasury securities | 69,974 | — | 69,974 | 94,010 | — | 94,010 | ||||||||||||||||||
Commercial paper | — | 30,683 | 30,683 | — | 4,000 | 4,000 | ||||||||||||||||||
$ | 104,788 | $ | 67,823 | $ | 172,611 | $ | 154,926 | $ | 44,207 | $ | 199,133 |
|
As of March 31, 2017 | |||
Upfront license fee payment for the application of rHuPH20 to the initial exclusive targets | $ | 20,000 | |
Election of additional exclusive targets and annual license maintenance fees for the right to designate the remaining targets as exclusive targets | 23,000 | ||
Clinical development milestone payments | 13,000 | ||
Regulatory milestone payments | 8,000 | ||
Sales-based milestone payments | 15,000 | ||
Total payments received | $ | 79,000 |
As of March 31, 2017 | |||
Upfront license fee payment for the application of rHuPH20 to the initial exclusive target | $ | 10,000 | |
Regulatory milestone payments | 3,000 | ||
Sales-based milestone payments | 4,000 | ||
Total payments received | $ | 17,000 |
As of March 31, 2017 | |||
Lilly | $ | 33,000 | |
AbbVie | 29,000 | ||
Janssen | 15,250 | ||
Pfizer | 16,500 | ||
Total payments received | $ | 93,750 |
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March 31, 2017 | December 31, 2016 | |||||||
Accounts receivable from product sales to collaborators | $ | 8,023 | $ | 7,854 | ||||
Accounts receivable from other product sales | 2,090 | 2,234 | ||||||
Accounts receivable from revenues under collaborative agreements | 2,921 | 6,151 | ||||||
Subtotal | 13,034 | 16,239 | ||||||
Allowance for distribution fees and discounts | (582 | ) | (559 | ) | ||||
Total accounts receivable, net | $ | 12,452 | $ | 15,680 |
March 31, 2017 | December 31, 2016 | |||||||
Raw materials | $ | 868 | $ | 761 | ||||
Work-in-process | 12,885 | 12,850 | ||||||
Finished goods | 537 | 1,012 | ||||||
Total inventories | $ | 14,290 | $ | 14,623 |
March 31, 2017 | December 31, 2016 | |||||||
Prepaid manufacturing expenses | $ | 6,327 | $ | 9,663 | ||||
Prepaid research and development expenses | 8,345 | 8,613 | ||||||
Other prepaid expenses | 1,525 | 1,661 | ||||||
Other assets | 602 | 1,530 | ||||||
Total prepaid expenses and other assets | 16,799 | 21,467 | ||||||
Less long-term portion | 172 | 219 | ||||||
Total prepaid expenses and other assets, current | $ | 16,627 | $ | 21,248 |
March 31, 2017 | December 31, 2016 | |||||||
Research equipment | $ | 10,483 | $ | 10,479 | ||||
Computer and office equipment | 3,395 | 3,373 | ||||||
Leasehold improvements | 2,345 | 2,331 | ||||||
Subtotal | 16,223 | 16,183 | ||||||
Accumulated depreciation and amortization | (12,482 | ) | (11,919 | ) | ||||
Property and equipment, net | $ | 3,741 | $ | 4,264 |
March 31, 2017 | December 31, 2016 | |||||||
Accrued outsourced research and development expenses | $ | 11,970 | $ | 9,522 | ||||
Accrued compensation and payroll taxes | 5,045 | 11,539 | ||||||
Accrued outsourced manufacturing expenses | 3,670 | 3,225 | ||||||
Other accrued expenses | 4,276 | 4,552 | ||||||
Total accrued expenses | 24,961 | 28,838 | ||||||
Less long-term portion | 26 | 17 | ||||||
Total accrued expenses, current | $ | 24,935 | $ | 28,821 |
March 31, 2017 | December 31, 2016 | |||||||
Collaborative agreements | ||||||||
License fees and event-based payments: | ||||||||
Roche | $ | 34,877 | $ | 35,709 | ||||
Other | 8,018 | 8,209 | ||||||
42,895 | 43,918 | |||||||
Reimbursement for research and development services | — | 700 | ||||||
Total deferred revenue | 42,895 | 44,618 | ||||||
Less current portion | 4,093 | 4,793 | ||||||
Deferred revenue, net of current portion | $ | 38,802 | $ | 39,825 |
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