HALOZYME THERAPEUTICS INC, 10-K filed on 2/28/2017
Annual Report
Document and Entity Information (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Feb. 22, 2017
Jun. 30, 2016
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
HALOZYME THERAPEUTICS INC 
 
 
Entity Central Index Key
0001159036 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2016 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2016 
 
 
Document Fiscal Period Focus
FY 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
$ 1.1 
Entity Common Stock, Shares Outstanding
 
129,764,415 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Current assets:
 
 
Cash and cash equivalents
$ 66,764 
$ 43,292 
Marketable securities, available-for-sale
138,217 
65,047 
Accounts receivable, net
15,680 
32,410 
Inventories
14,623 
9,489 
Prepaid expenses and other assets
21,248 
21,534 
Total current assets
256,532 
171,772 
Property and equipment, net
4,264 
3,943 
Prepaid expenses and other assets
219 
5,574 
Restricted cash
500 
500 
Total Assets
261,515 
181,789 
Current liabilities:
 
 
Accounts payable
3,578 
4,499 
Accrued expenses
28,821 
26,792 
Deferred revenue, current portion
4,793 
9,304 
Current portion of long-term debt, net
17,393 
21,862 
Total current liabilities
54,585 
62,457 
Deferred revenue, net of current portion
39,825 
43,919 
Long-term debt, net
199,228 
27,971 
Other long-term liability
358 
4,443 
Commitments and contingencies (Note 9)
   
   
Stockholders' (deficit) equity:
 
 
Preferred stock — $0.001 par value; 20,000 shares authorized; no shares issued and outstanding
0 
0 
Common stock — $0.001 par value; 200,000 shares authorized; 129,502 and 128,152 shares issued and outstanding at December 31, 2016 and 2015, respectively
130 
128 
Additional paid-in capital
552,737 
525,628 
Accumulated other comprehensive loss
(6)
(99)
Accumulated deficit
(585,342)
(482,658)
Total stockholders' (deficit) equity
(32,481)
42,999 
Total liabilities and stockholders' equity
$ 261,515 
$ 181,789 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Statement of Financial Position [Abstract]
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares authorized
20,000 
20,000 
Preferred stock, shares issued
0 
0 
Preferred stock, shares outstanding
0 
0 
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
200,000 
200,000 
Common stock, shares issued
129,502 
128,152 
Common stock, shares outstanding
129,502 
128,152 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Revenues:
 
 
 
Product sales, net
$ 53,392 
$ 46,082 
$ 37,823 
Royalties
50,984 
30,975 
9,425 
Revenues under collaborative agreements
42,315 
58,000 
28,086 
Total revenues
146,691 
135,057 
75,334 
Operating expenses:
 
 
 
Cost of product sales
33,206 
29,245 
22,732 
Research and development
150,842 
93,236 
79,696 
Selling, general and administrative
45,853 
40,028 
35,942 
Total operating expenses
229,901 
162,509 
138,370 
Operating loss
(83,210)
(27,452)
(63,036)
Other income (expense)
 
 
 
Investment and other income, net
1,326 
422 
242 
Interest expense
(19,977)
(5,201)
(5,581)
Net loss before income taxes
(101,861)
(32,231)
(68,375)
Income tax expense
1,162 
0 
0 
Net loss
$ (103,023)
$ (32,231)
$ (68,375)
Basic and diluted net loss per share
$ (0.81)
$ (0.25)
$ (0.56)
Shares used in computing basic and diluted net loss per share
127,964 
126,704 
122,690 
Consolidated Statements of Comprehensive Loss Statement (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Net loss
$ (103,023)
$ (32,231)
$ (68,375)
Other comprehensive income (loss):
 
 
 
Unrealized gain (loss) marketable securities
93 
(58)
(58)
Total comprehensive loss
$ (102,930)
$ (32,289)
$ (68,433)
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Operating activities:
 
 
 
Net loss
$ (103,023)
$ (32,231)
$ (68,375)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Share-based compensation
25,585 
20,838 
15,274 
Depreciation and amortization
2,410 
1,677 
1,762 
Non-cash interest expense
2,896 
1,243 
2,025 
Paid-in-Kind Interest
13,184 
0 
0 
Amortization of premiums marketable securities, net
552 
879 
1,457 
Loss on disposal of equipment
8 
8 
233 
Deferral of unearned revenue
701 
4,379 
7,045 
Recognition of deferred revenue
(9,304)
(5,789)
(5,554)
Deferral of rent expense
0 
441 
92 
Recognition of deferred rent
(370)
(276)
(108)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
16,730 
(23,261)
(52)
Inventories
(5,134)
(3,083)
(236)
Prepaid expenses and other assets
5,626 
(15,774)
(265)
Accounts payable and accrued expenses
(244)
13,866 
(816)
Net cash used in operating activities
(50,383)
(37,083)
(47,518)
Investing activities:
 
 
 
Purchases of marketable securities
(155,412)
(71,482)
(88,884)
Proceeds from maturities of marketable securities
81,783 
79,730 
57,301 
Purchases of property and equipment
(3,137)
(2,360)
(1,368)
Net cash (used in) provided by investing activities
(76,766)
5,888 
(32,951)
Financing activities:
 
 
 
Proceeds from issuance of long-term debt, net
203,006 
0 
0 
Repayment of long-term debt
(54,250)
0 
0 
Proceeds from issuance of common stock under equity incentive plans, net
1,865 
13,098 
6,788 
Proceeds from issuance of common stock, net
0 
0 
107,713 
Net cash provided by financing activities
150,621 
13,098 
114,501 
Net increase (decrease) in cash and cash equivalents
23,472 
(18,097)
34,032 
Cash and cash equivalents at beginning of period
43,292 
61,389 
27,357 
Cash and cash equivalents at end of period
66,764 
43,292 
61,389 
Supplemental disclosure of cash flow information:
 
 
 
Interest Paid
3,886 
3,775 
3,460 
Income Taxes Paid
1,441 
0 
0 
Supplemental disclosure of noncash investing and financing activities:
 
 
 
Amounts accrued for purchases of property and equipment
$ 75 
$ 473 
$ 156 
Consolidated Statements of Stockholders' Equity (Deficit) (USD $)
In Thousands, except Share data
Total
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Stockholders' Equity, Total at Dec. 31, 2013
$ (19,990)
$ 115 
$ 361,930 
$ 17 
$ (382,052)
Shares at Dec. 31, 2013
 
114,534,000 
 
 
 
Share-based compensation expense
15,274 
 
15,274 
 
 
Issuance of common stock for cash, net, shares
 
8,846,000 
 
 
 
Issuance of common stock for cash, net
 
9 
107,704 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, shares
 
1,552,000 
 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net
6,788 
1 
6,787 
 
 
Issuance of restricted stock awards, shares
 
789,000 
 
 
 
Issuance of restricted stock awards
0 
1 
(1)
 
 
Other comprehensive income (loss)
(58)
 
 
(58)
 
Net loss
(68,375)
 
 
 
 
Stockholders' Equity, Total at Dec. 31, 2014
41,352 
126 
491,694 
(41)
(450,427)
Shares at Dec. 31, 2014
 
125,721,000 
 
 
 
Share-based compensation expense
20,838 
 
20,838 
 
 
Issuance of common stock for cash, net
107,713 
 
 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, shares
 
2,056,000 
 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net
13,098 
2 
13,096 
 
 
Issuance of restricted stock awards, shares
 
375,000 
 
 
 
Issuance of restricted stock awards
0 
0 
0 
 
 
Other comprehensive income (loss)
(58)
 
 
(58)
 
Net loss
(32,231)
 
 
 
 
Stockholders' Equity, Total at Dec. 31, 2015
42,999 
128 
525,628 
(99)
(482,658)
Shares at Dec. 31, 2015
 
128,152,000 
 
 
 
Share-based compensation expense
25,585 
 
25,585 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, shares
 
570,000 
 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net
1,948 
1 
1,947 
 
 
Issuance of restricted stock awards, shares
 
780,000 
 
 
 
Issuance of restricted stock awards
(83)
1 
(84)
 
 
Other comprehensive income (loss)
93 
 
 
93 
 
Adjustment to beginning retained earnings
0 
 
(339)
 
339 
Net loss
(103,023)
 
 
 
 
Stockholders' Equity, Total at Dec. 31, 2016
(32,481)
130 
552,737 
(6)
(585,342)
Shares at Dec. 31, 2016
 
129,502,000 
 
 
 
Stockholders' Equity, Total at Sep. 30, 2016
 
 
 
 
 
Adjustment to beginning retained earnings
0 
 
 
 
339 
Net loss
4,318 
 
 
 
 
Stockholders' Equity, Total at Dec. 31, 2016
$ (32,481)
 
 
 
$ (585,342)
Organization and Business
Organization and Business
Organization and Business
Halozyme Therapeutics, Inc. is a biotechnology company focused on developing and commercializing novel oncology therapies. We are seeking to translate our unique knowledge of the tumor microenvironment to create therapies that have the potential to improve cancer patient survival. Our research primarily focuses on human enzymes that alter the extracellular matrix and tumor microenvironment. The extracellular matrix is a complex matrix of proteins and carbohydrates surrounding the cell that provides structural support in tissues and orchestrates many important biological activities, including cell migration, signaling and survival. Over many years, we have developed unique technology and scientific expertise enabling us to pursue this target-rich environment for the development of therapies.
Our proprietary enzymes are used to facilitate the delivery of injected drugs and fluids, potentially enhancing the efficacy and the convenience of other drugs or can be used to alter tissue structures for potential clinical benefit. We exploit our technology and expertise using a two pillar strategy that we believe enables us to manage risk and cost by: (1) developing our own proprietary products in therapeutic areas with significant unmet medical needs, with a focus on oncology, and (2) licensing our technology to biopharmaceutical companies to collaboratively develop products that combine our technology with the collaborators’ proprietary compounds.
The majority of our approved product and product candidates are based on rHuPH20, our patented recombinant human hyaluronidase enzyme. rHuPH20 is the active ingredient in our first commercially approved product, Hylenex® recombinant, and it works by temporarily breaking down hyaluronan (or “HA”), a naturally occurring complex carbohydrate that is a major component of the extracellular matrix in tissues throughout the body such as skin and cartilage. We believe this temporary degradation creates an opportunistic window for the improved subcutaneous delivery of injectable biologics, such as monoclonal antibodies and other large therapeutic molecules, as well as small molecules and fluids. We refer to the application of rHuPH20 to facilitate the delivery of other drugs or fluids as our ENHANZE™ Technology. We license the ENHANZE Technology to form collaborations with biopharmaceutical companies that develop or market drugs requiring or benefiting from injection via the subcutaneous route of administration.
We currently have ENHANZE collaborations with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (“Roche”), Baxalta US Inc. and Baxalta GmbH (Baxalta Incorporated was acquired by Shire plc in June 2016) (“Baxalta”), Pfizer Inc. (“Pfizer”), Janssen Biotech, Inc. (“Janssen”), AbbVie, Inc. (“AbbVie”), and Eli Lilly and Company (“Lilly”). We receive royalties from two of these collaborations, including royalties from sales of one product approved in both the United States and outside the United States from the Baxalta collaboration and from sales of two products approved for marketing outside the United States from the Roche collaboration. Future potential revenues from the sales and/or royalties of our approved products, product candidates, and ENHANZE collaborations will depend on the ability of Halozyme and our collaborators to develop, manufacture, secure and maintain regulatory approvals for approved products and product candidates and commercialize product candidates.
Our proprietary development pipeline consists primarily of pre-clinical and clinical stage product candidates in oncology. Our lead oncology program is PEGPH20 (PEGylated recombinant human hyaluronidase), a molecular entity we are developing in combination with currently approved cancer therapies as a candidate for the systemic treatment of tumors that accumulate HA. We have demonstrated that when HA accumulates in a tumor, it can cause higher pressure in the tumor, reducing blood flow into the tumor and with that, reduced access of cancer therapies to the tumor. PEGPH20 has been demonstrated in animal models to work by temporarily degrading HA surrounding cancer cells resulting in reduced pressure and increased blood flow to the tumor thereby enabling increased amounts of anticancer treatments administered concomitantly gaining access to the tumor. Through our efforts and efforts of our partners and collaborators, we are currently in Phase 2 and Phase 3 clinical testing for PEGPH20 with ABRAXANE® (nab-paclitaxel) and gemcitabine in stage IV pancreatic ductal adenocarcinoma (“PDA”) (Studies 109-202 and 109-301), in Phase 1b clinical testing for PEGPH20 with KEYTRUDA® (pembrolizumab) in non-small cell lung cancer and gastric cancer (Study 107-101) and in Phase 1b/2 clinical testing for PEGPH20 with HALAVEN® (eribulin) in patients treated with up to two lines of prior therapy for HER2-negative metastatic breast cancer.
Except where specifically noted or the context otherwise requires, references to “Halozyme,” “the Company,” “we,” “our,” and “us” in these notes to consolidated financial statements refer to Halozyme Therapeutics, Inc. and its wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.’s wholly owned subsidiaries, Halozyme Holdings Ltd., Halozyme Royalty LLC and Halozyme Switzerland GmbH.
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Halozyme Therapeutics, Inc. and our wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.’s wholly owned subsidiaries, Halozyme Holdings Ltd., Halozyme Royalty LLC and Halozyme Switzerland GmbH. All intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.
Cash Equivalents and Marketable Securities
Cash equivalents consist of highly liquid investments, readily convertible to cash, that mature within ninety days or less from date of purchase. Our cash equivalents consist of money market funds.
Marketable securities are investments with original maturities of more than ninety days from the date of purchase that are specifically identified to fund current operations. Marketable securities are considered available-for-sale. These investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current balance sheet date which reflects management’s intention to use the proceeds from the sale of these investments to fund our operations, as necessary. Such available-for-sale investments are carried at fair value with unrealized gains and losses recorded in other comprehensive gain (loss) and included as a separate component of stockholders’ (deficit) equity. The cost of marketable securities is adjusted for amortization of premiums or accretion of discounts to maturity, and such amortization or accretion is included in investment and other income, net in the consolidated statements of operations. We use the specific identification method for calculating realized gains and losses on marketable securities sold. Realized gains and losses and declines in value judged to be other-than-temporary on marketable securities, if any, are included in investment and other income, net in the consolidated statements of operations.
Restricted Cash
Under the terms of the leases on our facilities, we are required to maintain letters of credit as security deposits during the terms of such leases. At December 31, 2016 and 2015, restricted cash of $0.5 million was pledged as collateral for the letters of credit.
Fair Value of Financial Instruments
The authoritative guidance for fair value measurements establishes a three tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Our financial instruments include cash equivalents, available-for-sale marketable securities, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses and long-term debt. Fair value estimates of these instruments are made at a specific point in time, based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. The carrying amount of cash equivalents, accounts receivable, prepaid expenses and other assets, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments. Further, based on the borrowing rates currently available for loans with similar terms, we believe the fair value of long-term debt approximates its carrying value.
Available-for-sale marketable securities consist of corporate debt securities, U.S. Treasury securities and commercial paper, and are measured at fair value using Level 1 and Level 2 inputs. Level 2 financial instruments are valued using market prices on less active markets and proprietary pricing valuation models with observable inputs, including interest rates, yield curves, maturity dates, issue dates, settlement dates, reported trades, broker-dealer quotes, issue spreads, benchmark securities or other market related data. We obtain the fair value of Level 2 investments from our investment manager, who obtains these fair values from a third-party pricing source. We validate the fair values of Level 2 financial instruments provided by our investment manager by comparing these fair values to a third-party pricing source.
The following table summarizes, by major security type, our cash equivalents and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):
 
 
December 31, 2016
 
December 31, 2015
 
 
Level 1
 
Level 2
 
Total estimated fair value
 
Level 1
 
Level 2
 
Total estimated fair value
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
60,916

 
$
—

 
$
60,916

 
$
38,595

 
$
—

 
$
38,595

 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale marketable
   securities:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
 
—

 
40,207

 
40,207

 
—

 
62,052

 
62,052

U.S. Treasury securities
 
94,010

 
—

 
94,010

 
—

 
—

 
—

Commercial paper
 
—

 
4,000

 
4,000

 
—

 
2,995

 
2,995

 
 
$
154,926

 
$
44,207

 
$
199,133

 
$
38,595

 
$
65,047

 
$
103,642


There were no transfers between Level 1 and Level 2 of the fair value hierarchy for the years ended December 31, 2016 and 2015. We have no instruments that are classified within Level 3 as of December 31, 2016 and 2015.
Concentrations of Credit Risk, Sources of Supply and Significant Customers
We are subject to credit risk from our portfolio of cash equivalents and marketable securities. These investments were made in accordance with our investment policy which specifies the categories, allocations, and ratings of securities we may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. We maintain our cash and cash equivalent balances with one major commercial bank and marketable securities with another financial institution. Deposits held with the financial institutions exceed the amount of insurance provided on such deposits. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and marketable securities to the extent recorded on the consolidated balance sheets.
We are also subject to credit risk from our accounts receivable related to our product sales and revenues under our license and collaborative agreements. We have license and collaborative agreements with pharmaceutical companies under which we receive payments for license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk formulation of rHuPH20. In addition, we sell Hylenex® recombinant in the United States to a limited number of established wholesale distributors in the pharmaceutical industry. Credit is extended based on an evaluation of the customer’s financial condition, and collateral is not required. Management monitors our exposure to accounts receivable by periodically evaluating the collectibility of the accounts receivable based on a variety of factors including the length of time the receivables are past due, the financial health of the customer and historical experience. Based upon the review of these factors, we recorded no allowance for doubtful accounts at December 31, 2016 and 2015. Approximately 81% of the accounts receivable balance at December 31, 2016 represents amounts due from Roche and Baxalta. Approximately 89% of the accounts receivable balance at December 31, 2015 represents amounts due from Roche and Lilly.
The following table indicates the percentage of total revenues in excess of 10% with any single customer:
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Roche
 
63%
 
42%
 
57%
Baxalta
 
12%
 
7%
 
3%
Lilly
 
6%
 
19%
 
—
AbbVie
 
4%
 
17%
 
—
Janssen
 
2%
 
1%
 
20%
We attribute revenues under collaborative agreements, including royalties, to the individual countries where the collaborator is headquartered. We attribute revenues from product sales to the individual countries to which the product is shipped. Worldwide revenues from external customers are summarized by geographic location in the following table (in thousands):
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
United States
 
$
52,292

 
$
77,149

 
$
31,397

Switzerland
 
93,067

 
57,136

 
42,791

All other foreign
 
1,332

 
772

 
1,146

Total revenues
 
$
146,691

 
$
135,057

 
$
75,334


As of December 31, 2016 and 2015, we had $0.1 million and $0.3 million, respectively, of research equipment in Germany.
We rely on two third-party manufacturers for the supply of bulk rHuPH20 for use in the manufacture of Hylenex recombinant and our other collaboration products and product candidates. Payments due to these suppliers represented 13% and 20% of the accounts payable balance at December 31, 2016 and 2015, respectively. We also rely on a third-party manufacturer for the fill and finish of Hylenex recombinant product under a contract. Payments due to this supplier represented 2% and 4% of the accounts payable balance at December 31, 2016 and 2015, respectively.
Accounts Receivable, Net
Accounts receivable is recorded at the invoiced amount and is non-interest bearing. Accounts receivable is recorded net of allowances for doubtful accounts, cash discounts for prompt payment, distribution fees and chargebacks. We recorded no allowance for doubtful accounts at December 31, 2016 and 2015 as the collectibility of accounts receivable was reasonably assured.
Inventories
Inventories are stated at lower of cost or market. Cost is determined on a first-in, first-out basis. Inventories are reviewed periodically for potential excess, dated or obsolete status. We evaluate the carrying value of inventories on a regular basis, taking into account such factors as historical and anticipated future sales compared to quantities on hand, the price we expect to obtain for products in their respective markets compared with historical cost and the remaining shelf life of goods on hand.
Prior to receiving marketing approval from the U.S. Food and Drug Administration (“FDA”) or comparable regulatory agencies in foreign countries, costs related to purchases of bulk rHuPH20 and raw materials and the manufacturing of the product candidates are recorded as research and development expense. All direct manufacturing costs incurred after receiving marketing approval are capitalized as inventory. Inventories used in clinical trials are expensed at the time the inventories are packaged for the clinical trials.
As of December 31, 2016 and 2015, inventories consisted of $2.3 million and $1.4 million of Hylenex recombinant inventory, respectively, and $12.3 million and $8.2 million of bulk rHuPH20, respectively, for use in the manufacture of Balxalta’s and Roche’s collaboration products.
Property and Equipment, Net
Property and equipment are recorded at cost, less accumulated depreciation and amortization. Equipment is depreciated using the straight-line method over their estimated useful lives of three years and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the lease term, whichever is shorter. Leased buildings under build-to-suit lease arrangements are capitalized and included in property and equipment when we are involved in the construction of the structural improvements or take construction risk prior to the commencement of the lease. Upon completion of the construction under the build-to-suit leases, we assess whether those arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If we continue to be the deemed owner, the facilities would be accounted for as financing leases.
Impairment of Long-Lived Assets
We account for long-lived assets in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable. For the years ended December 31, 2016 and 2015, there was no impairment of the value of long-lived assets.
Deferred Rent
Rent expense is recorded on a straight-line basis over the initial term of the lease. The difference between rent expense accrued and amounts paid under lease agreements is recorded as deferred rent and is included in accrued expenses and other long-term liabilities, as applicable, in the accompanying consolidated balance sheets.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity during the period from transactions and other events and circumstances from non-owner sources.
Revenue Recognition
We generate revenues from product sales and payments received under collaborative agreements. Collaborative agreement payments may include nonrefundable fees at the inception of the agreements, license fees, milestone and event-based payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk rHuPH20, and/or royalties on sales of products resulting from collaborative arrangements.
We recognize revenues in accordance with the authoritative guidance for revenue recognition. We recognize revenue when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectibility is reasonably assured.
Product Sales, Net
Hylenex Recombinant
We sell Hylenex recombinant in the U.S. to wholesale pharmaceutical distributors, who sell the product to hospitals and other end-user customers. Sales to wholesalers provide for selling prices that are fixed on the date of sale, although we offer discounts to certain group purchasing organizations (“GPOs”), hospitals and government programs. The wholesalers take title to the product, bear the risk of loss of ownership and have economic substance to the inventory. Further, we have no significant obligations for future performance to generate pull-through sales.
We have developed sufficient historical experience and data to reasonably estimate future returns and chargebacks of Hylenex recombinant. As a result, we recognize Hylenex recombinant product sales and related cost of product sales at the time title transfers to the wholesalers.
Upon recognition of revenue from product sales of Hylenex recombinant, we record certain sales reserves and allowances as a reduction to gross revenue. These reserves and allowances include:
•
Product Returns. We allow the wholesalers to return product that is damaged or received in error. In addition, we accept unused product to be returned beginning six months prior to and ending twelve months following product expiration. Our estimates for expected returns of expired products are based primarily on an ongoing analysis of historical return patterns.
•
Distribution Fees. The distribution fees, based on contractually determined rates, arise from contractual agreements we have with certain wholesalers for distribution services they provide with respect to Hylenex recombinant. These fees are generally a fixed percentage of the price of the product purchased by the wholesalers.
•
Prompt Payment Discounts. We offer cash discounts to certain wholesalers as an incentive to meet certain payment terms. We estimate prompt payment discounts based on contractual terms, historical utilization rates, as available, and our expectations regarding future utilization rates.    
•
Other Discounts and Fees. We provide discounts to end-user members of certain GPOs under collective purchasing contracts between us and the GPOs. We also provide discounts to certain hospitals, who are members of the GPOs, with which we do not have contracts. The end-user members purchase products from the wholesalers at a contracted discounted price, and the wholesalers then charge back to us the difference between the current retail price and the price the end-users paid for the product. We also incur GPO administrative service fees for these transactions. In addition, we provide predetermined discounts under certain government programs. Our estimate for these chargebacks and fees takes into consideration contractual terms, historical utilization rates, as available, and our expectations regarding future utilization rates.
Allowances for product returns and chargebacks are based on amounts owed or to be claimed on the related sales. We believe that our estimated product returns for Hylenex recombinant requires the use of judgment and is subject to change based on our experience and certain quantitative and qualitative factors. In order to develop a methodology to reliably estimate future returns and provide a basis for recognizing revenue on sales to wholesale distributors, we analyze many factors, including, without limitation: (1) actual Hylenex recombinant product return history, taking into account product expiration dating at the time of shipment, (2) re-order activities of the wholesalers as well as their customers and (3) levels of inventory in the wholesale channel. We have monitored actual return history on an individual product lot basis since product launch. We consider the dating of product at the time of shipment into the distribution channel and changes in the estimated levels of inventory within the distribution channel to estimate our exposure to returned product. We also consider historical chargebacks activity and current contract prices to estimate our exposure to returned product. Based on such data, we believe we have the information needed to reasonably estimate product returns and chargebacks.
We recognize product sales reserves and allowances as a reduction of product sales in the same period the related revenue is recognized. Because of the shelf life of Hylenex recombinant and our lengthy return period, there may be a significant period of time between when the product is shipped and when we issue credits on returned product. If actual product return results differ from our estimates, we will be required to make adjustments to these allowances in the future, which could have an effect on product sales revenue and earnings in the period of adjustments.
Bulk rHuPH20
Subsequent to receiving marketing approval from the FDA or comparable regulatory agencies in foreign countries, sales of bulk rHuPH20 for use in collaboration commercial products are recognized as product sales when the materials have met all the specifications required for the customer’s acceptance and title and risk of loss have transferred to the customer. Following the receipt of European marketing approvals of Roche’s Herceptin SC product in August 2013 and MabThera® SC product in March 2014 and Baxalta’s HYQVIA product in May 2013, revenue from the sales of bulk rHuPH20 for these collaboration products has been recognized as product sales.
Revenues under Collaborative Agreements
We have entered into license and collaboration agreements under which our collaborators obtained worldwide rights for the use of our proprietary rHuPH20 enzyme in the development and commercialization of their biologic compounds identified as targets. These agreements may also contain other elements. Pursuant to the terms of these agreements, collaborators could be required to make various payments to us for each target, including nonrefundable upfront license fees, exclusivity fees, payments based on achievement of specified milestones designated in the collaborative agreements, annual maintenance fees, reimbursements of research and development services, payments for supply of bulk rHuPH20 used by the collaborator and/or royalties on sales of products resulting from collaborative agreements.
In order to account for the multiple-element arrangements, we identify the deliverables included within the collaborative agreement and evaluate which deliverables represent units of accounting. We then determine the appropriate method of revenue recognition for each unit based on the nature and timing of the delivery process. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation. The deliverables under our collaborative agreements include (i) the license to our rHuPH20 technology, (ii) at the collaborator’s request, research and development services which are reimbursed at contractually determined rates, and (iii) at the collaborator’s request, supply of bulk rHuPH20 which is reimbursed at our cost plus a margin. A delivered item is considered a separate unit of accounting when the delivered item has value to the collaborator on a standalone basis based on the consideration of the relevant facts and circumstances for each arrangement. We base this determination on the collaborators’ ability to use the delivered items on their own without us supplying undelivered items, which we determine taking into consideration factors such as the research capabilities of the collaborator, the availability of research expertise in this field in the general marketplace, and the ability to procure the supply of bulk rHuPH20 from the marketplace.
Arrangement consideration is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (“VSOE”) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists, we use our best estimate of the selling price for the deliverable. The amount of allocable arrangement consideration is limited to amounts that are not contingent upon the delivery of additional items or meeting other specified performance conditions. The consideration received is allocated among the separate units of accounting and the applicable revenue recognition criteria are applied to each of the separate units. Changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement.
Nonrefundable upfront license fees are recognized upon delivery of the license if facts and circumstances dictate that the license has standalone value from the undelivered items, which generally include research and development services and the manufacture of bulk rHuPH20, the relative selling price allocation of the license is equal to or exceeds the upfront license fee, persuasive evidence of an arrangement exists, our price to the collaborator is fixed or determinable and collectibility is reasonably assured. Upfront license fees are deferred if facts and circumstances dictate that the license does not have standalone value. The determination of the length of the period over which to defer revenue is subject to judgment and estimation and can have an impact on the amount of revenue recognized in a given period.
When collaborators have rights to elect additional targets, the rights are assessed as to whether they represent deliverables at the inception of the arrangement. In assessing these contingent deliverables, we consider whether the right is a substantive option. We consider a right to be a substantive option if the election of the additional targets is not essential to the functionality of the other elements in the arrangement and if we are truly at risk of the right being exercised. If the right is determined to be a substantive option, we further consider whether the right is priced at a significant and incremental discount that should be accounted for as an element of the arrangement. If a right is determined to be a substantive option and is not priced at a significant and incremental discount, it is not treated as a deliverable in the arrangement and receives no allocation at the inception of the arrangement of the original arrangement consideration. The right is then accounted for when and if it is exercised.
Certain of our collaborative agreements provide for milestone payments upon achievement of development and regulatory events and/or specified sales volumes of commercialized products by the collaborator. We account for milestone payments in accordance with the provisions of ASU No. 2010-17, Revenue Recognition - Milestone Method (“Milestone Method of Accounting”). We recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following criteria:
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.
A milestone is defined as an event (i) that can only be achieved based in whole or in part on either the entity’s performance or on the occurrence of a specific outcome resulting from the entity’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved, and (iii) that would result in additional payments being due to the vendor.
Reimbursements of research and development services are recognized as revenue during the period in which the services are performed as long as there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the related receivable is reasonably assured. Revenue from the manufacture of bulk rHuPH20 is recognized when the materials have met all specifications required for the collaborator’s acceptance and title and risk of loss have transferred to the collaborator. We do not directly control when any collaborator will request research and development services or supply of bulk rHuPH20; therefore, we cannot predict when we will recognize revenues in connection with research and development services and supply of bulk rHuPH20.
Since we receive royalty reports 60 days after quarter end, royalty revenue from sales of collaboration products by our collaborators is recognized in the quarter following the quarter in which the corresponding sales occurred.
The collaborative agreements typically provide the collaborators the right to terminate such agreement in whole or on a product-by-product or target-by-target basis at any time upon 30 to 90 days prior written notice to us. There are no performance, cancellation, termination or refund provisions in any of our collaborative agreements that contain material financial consequences to us.
Refer to Note 4, “Collaborative Agreements,” for further discussion on our collaborative arrangements.
Cost of Product Sales
Cost of product sales consists primarily of raw materials, third-party manufacturing costs, fill and finish costs, freight costs, internal costs and manufacturing overhead associated with the production of Hylenex recombinant and bulk rHuPH20 for use in approved collaboration products. Cost of product sales also consists of the write-down of excess, dated and obsolete inventories and the write-off of inventories that do not meet certain product specifications, if any.
Prior to European marketing approvals of Roche’s collaboration products Herceptin SC in August 2013 and MabThera SC in March 2014 and Baxalta’s collaboration product HYQVIA in May 2013, all costs related to the manufacturing of bulk rHuPH20 for these collaboration products were charged to research and development expenses in the periods such costs were incurred. For the year ended December 31, 2014, cost of product sales of bulk rHuPH20 excluded $1.0 million in manufacturing costs, of which $0.9 million and $0.1 million were charged to research and development expenses in the years ended December 31, 2013 and 2012, respectively. There was no bulk rHuPH20 excluded from cost of product sales for the years ended December 31, 2016 and 2015.
Research and Development Expenses
Research and development expenses include salaries and benefits, facilities and other overhead expenses, external clinical trial expenses, research related manufacturing services, contract services and other outside expenses. Research and development expenses are charged to operating expenses as incurred when these expenditures relate to our research and development efforts and have no alternative future uses. After receiving approval from the FDA or comparable regulatory agencies in foreign countries for a product, costs related to purchases and manufacturing of bulk rHuPH20 for such product are capitalized as inventory. The manufacturing costs of bulk rHuPH20 for the collaboration products, Herceptin SC, MabThera SC and HYQVIA, incurred after the receipt of marketing approvals are capitalized as inventory.
We are obligated to make upfront payments upon execution of certain research and development agreements. Advance payments, including nonrefundable amounts, for goods or services that will be used or rendered for future research and development activities are deferred. Such amounts are recognized as expense as the related goods are delivered or the related services are performed or such time when we do not expect the goods to be delivered or services to be performed.
Milestone payments that we make in connection with in-licensed technology for a particular research and development project that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic value are expensed as research and development costs at the time the costs are incurred. We currently have no in-licensed technologies that have alternative future uses in research and development projects or otherwise.
Clinical Trial Expenses
Payments in connection with our clinical trials are often made under contracts with multiple contract research organizations that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee, unit price or on a time and materials basis. A portion of our obligation to make payments under these contracts depends on factors such as the successful enrollment or treatment of patients or the completion of other clinical trial milestones.
Expenses related to clinical trials are accrued based on our estimates and/or representations from service providers regarding work performed, including actual level of patient enrollment, completion of patient studies and progress of the clinical trials. Other incidental costs related to patient enrollment or treatment are accrued when reasonably certain. If the amounts we are obligated to pay under our clinical trial agreements are modified (for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), we adjust our accruals accordingly on a prospective basis. Revisions to our contractual payment obligations are charged to expense in the period in which the facts that give rise to the revision become reasonably certain. Historically, such revisions to our clinical trial expense accruals have not had a material impact on our consolidated results of operations or financial position.
Share-Based Compensation
We record compensation expense associated with stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and RSUs with performance conditions (“PRSUs”) in accordance with the authoritative guidance for stock-based compensation. The cost of employee services received in exchange for an award of an equity instrument is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period of the award. Share-based compensation expense for an award with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized and any previously recognized compensation expense is reversed. Forfeitures are recognized as a reduction of share-based compensation expense as they occur.
Income Taxes
We provide for income taxes using the liability method. Under this method, deferred income tax assets and liabilities are determined based on the differences between the financial statement carrying amounts of existing assets and liabilities at each year end and their respective tax bases and are measured using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Significant judgment is required by management to determine our provision for income taxes, our deferred tax assets and liabilities, and the valuation allowance to record against our net deferred tax assets, which are based on complex and evolving tax regulations throughout the world. Deferred tax assets and other tax benefits are recorded when it is more likely than not that the position will be sustained upon audit. While we have begun to utilize certain of our net operating losses, we have not yet established a track record of profitability. Accordingly, valuation allowances have been recorded to reduce our net deferred tax assets to zero until such time we can demonstrate an ability to realize them.
During the fourth quarter of 2016, we established a new Swiss subsidiary, Halozyme Switzerland GmbH (Halozyme Switzerland). Halozyme Switzerland is party to a tax ruling providing that the total Swiss income tax rate will not exceed 10% through December 2026.
Net Loss Per Share
Basic net loss per common share is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. Outstanding stock options, unvested RSAs, unvested RSUs and unvested PRSUs are considered common stock equivalents and are only included in the calculation of diluted earnings per common share when net income is reported and their effect is dilutive. Because of our net loss, outstanding common stock equivalents totaling approximately 13,761,123, 9,780,593 and 8,405,903 were excluded from the calculation of diluted net loss per common share for the years ended December 31, 2016, 2015 and 2014, respectively, because their effect was anti-dilutive.
Segment Information
We operate our business in one segment, which includes all activities related to the research, development and commercialization of our proprietary enzymes. This segment also includes revenues and expenses related to (i) research and development and bulk rHuPH20 manufacturing activities conducted under our collaborative agreements with third parties and (ii) product sales of Hylenex recombinant. The chief operating decision-maker reviews the operating results on an aggregate basis and manages the operations as a single operating segment. Our long-lived assets located in foreign countries had minimal book value as of December 31, 2016 and 2015.
Adoption and Pending Adoption of Recent Accounting Pronouncements
The following table provides a brief description of recently issued accounting standards, those adopted in the current year and those not yet adopted:
Standard
 
Description
 
Effective Date
 
Effect on the Financial
Statements or Other Significant Matters
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.
 
The new guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount.
 
Adopted on January 1, 2016.
 
There was no material impact on our consolidated financial statements and related disclosures.
 
 
 
 
 
 
 
Standard
 
Description
 
Effective Date
 
Effect on the Financial
Statements or Other Significant Matters
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes.
 
The new guidance requires companies to classify all deferred tax assets and liabilities as non-current on the balance sheet instead of separating deferred taxes into current and non-current amounts.
 
Adopted on January 1, 2016.
 
There was no material impact on our consolidated financial statements and related disclosures.
 
 
 
 
 
 
 
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation.
 
The new guidance changes certain aspects of accounting for share-based payments to employees and involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Specifically, the new guidance requires that all income tax effects of share-based awards be recognized as income tax expense or benefit in the reporting period in which they occur. Additionally, the new guidance amends existing guidance to allow forfeitures of share-based awards to be recognized as they occur.
 
Adopted on January 1, 2016.
 
The cumulative effect of adoption was a decrease of $0.3 million to both additional paid-in capital and accumulated deficit.
 
 
 
 
 
 
 
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements — Going Concern.
 
The new guidance requires, in connection with preparing financial statements for each annual and interim reporting period, an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable).
 
December 31, 2016.
 
There was no material impact on our consolidated financial statements and related disclosures in the current period. In an annual or interim reporting period where conditions or events exist that raise substantial double about our ability to continue as a going concern, applicable disclosure will be provided.
 
 
 
 
 
 
 
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 is not expected to have a material impact on our consolidated financial position or results of operations.
 
 
 
 
 
 
 
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 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 financial statements at this time.

 
 
 
 
 
 
 
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. Early adoption is permitted.
 
We are currently evaluating the effect that the updated standard will have on our consolidated statement of cash flows.
 
 
 
 
 
 
 
Standard
 
Description
 
Effective Date
 
Effect on the Financial
Statements or Other Significant Matters
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 as 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 the 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.
Marketable Securities (Notes)
Marketable Securities Disclosure
Marketable Securities
Available-for-sale marketable securities consisted of the following (in thousands):
 
 
December 31, 2016
Description
 
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

 
 
December 31, 2015
Description
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Corporate debt securities
 
$
62,151

 
$
—

 
$
(99
)
 
$
62,052

Commercial paper
 
2,995

 
—

 
—

 
2,995

 
 
$
65,146

 
$
—

 
$
(99
)
 
$
65,047


As of December 31, 2016, $132.2 million of our available-for-sale marketable securities were scheduled to mature within the next twelve months. There were $81.8 million of available-for-sale securities that matured during the year ended December 31, 2016. There were no realized gains or losses for the years ended December 31, 2016, 2015 and 2014. As of December 31, 2016, 11 available-for-sale marketable securities were in a gross unrealized loss position, all of which had been in such position for less than twelve months. Based on our review of these marketable securities, we believe we had no other-than-temporary impairments on these securities as of December 31, 2016 because we do not intend to sell these securities and it is not more-likely-than-not that we will be required to sell these securities before the recovery of their amortized cost basis.
Collaborative Agreements
Collaborative Agreements
Collaborative Agreements
Roche Collaboration
In December 2006, we and Roche entered into a collaboration and license agreement, under which Roche obtained a worldwide license to develop and commercialize product combinations of rHuPH20 and up to thirteen Roche target compounds (the “Roche Collaboration”). Roche initially had the exclusive right to apply rHuPH20 to three pre-defined Roche biologic targets with the option to develop and commercialize rHuPH20 with ten additional targets. Roche had the right to exercise this option to identify additional targets for ten years. As of the ten year anniversary in December 2016, Roche has elected a total of eight targets, two of which are exclusive.
In August 2013, Roche received European marketing approval for its collaboration product, Herceptin SC, for the treatment of patients with HER2-positive breast cancer and launched Herceptin SC in the European Union (“EU”) in September 2013. In March 2014, Roche received European marketing approval for its collaboration product, MabThera SC, for the treatment of patients with common forms of non-Hodgkin lymphoma (“NHL”). In June 2014, Roche launched MabThera SC in the EU. In May 2016, Roche announced that the EMA approved Mabthera SC to treat patients with chronic lymphocytic leukemia. In November 2016, the FDA accepted Genentech’s (a member of the Roche Group) Biologics License Application (“BLA”) for a subcutaneous formulation of rituximab for CLL and NHL. This is a co-formulation with rHuPH20, which is approved and marketed under the MabThera SC brand in countries outside the U.S.
Roche assumes all development, manufacturing, clinical, regulatory, sales and marketing costs under the Roche Collaboration, while we are responsible for the supply of bulk rHuPH20. We are entitled to receive reimbursements for providing research and development services and supplying bulk rHuPH20 to Roche at its request.
Under the terms of the Roche Collaboration, Roche pays us a royalty on each product commercialized under the agreement consisting of a mid-single digit percent of the net sales of such product. Unless terminated earlier in accordance with its terms, the Roche Collaboration continues in effect until the expiration of Roche’s obligation to pay royalties. Roche has the obligation to pay royalties to us with respect to each product commercialized in each country, during the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the Roche Collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. In the event such valid claims expire, the royalty rate is reduced for the remaining royalty term.
Payments received from Roche, excluding royalties and reimbursements for providing research and development services and supplying bulk rHuPH20, since inception of the collaboration agreement are as follows (in thousands):
 
As of
December 31, 2016
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


Due to our continuing involvement obligations (for example, support activities associated with rHuPH20), revenues from the upfront payment, exclusive designation fees, annual license maintenance fees and sales-based milestone payments were deferred and are being amortized over the remaining term of the Roche Collaboration.
For the years ended December 31, 2016, 2015 and 2014, we recognized approximately $3.3 million, $3.3 million, and $3.0 million, respectively, of Roche deferred revenues, excluding reimbursements for providing research and development services and supplying bulk rHuPH20, as revenues under collaborative agreements. Total Roche deferred revenues, excluding deferred revenues related to reimbursements for providing research and development services and supplying bulk rHuPH20, were approximately $35.7 million and $39.0 million as of December 31, 2016 and 2015, respectively.
Baxalta Collaboration
In September 2007, we and Baxalta entered into a collaboration and license agreement, under which Baxalta obtained a worldwide, exclusive license to develop and commercialize HYQVIA, a combination of Baxalta’s current product GAMMAGARD LIQUID™ and our patented rHuPH20 enzyme (the “Baxalta Collaboration”). In May 2013, the European Commission granted Baxalta marketing authorization in all EU Member States for the use of HYQVIA (solution for subcutaneous use), a combination of GAMMAGARD LIQUID and rHuPH20 in dual vial units, as replacement therapy for adult patients with primary and secondary immunodeficiencies. Baxalta launched HYQVIA in the EU in July 2013. In September 2014, the FDA approved HYQVIA for treatment of adult patients with primary immunodeficiency. In October 2014, Baxalta announced the launch and first shipments of HYQVIA in the U.S.
The Baxalta Collaboration is applicable to both kit and formulation combinations. Baxalta assumes all development, manufacturing, clinical, regulatory, sales and marketing costs under the Baxalta Collaboration, while we are responsible for the supply of bulk rHuPH20. We perform research and development activities and supply bulk rHuPH20 at the request of Baxalta, and are reimbursed by Baxalta under the terms of the Baxalta Collaboration. In addition, Baxalta has certain product development and commercialization obligations in major markets identified in the Baxalta Collaboration.
Under the terms of the Baxalta Collaboration, Baxalta pays us a royalty consisting of a mid-single digit percent of the net sales of HYQVIA. Unless terminated earlier in accordance with its terms, the Baxalta Collaboration continues in effect until the expiration of Baxalta’s obligation to pay royalties to us. Baxalta has the obligation to pay royalties to us, with respect to each product commercialized in each country, during the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the Baxalta Collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. In the event such valid claims expire, the royalty rate is reduced for the remaining royalty term.
Payments received from Baxalta, excluding royalties and reimbursements for providing research and development services and supplying bulk rHuPH20, since inception of the collaboration agreement are as follows (in thousands):
 
As of
December 31, 2016
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


Due to our continuing involvement obligations (for example, support activities associated with rHuPH20 enzyme), the upfront license fee and sales-based milestone payments were deferred and are being recognized over the term of the Baxalta Collaboration.
For each of the years ended December 31, 2016, 2015 and 2014, we recognized approximately $0.8 million of Baxalta deferred revenues as revenues under collaborative agreements. Total Baxalta deferred revenues were approximately $8.2 million and $9.0 million as of December 31, 2016 and 2015, respectively.
Other Collaborations
In December 2015, we and Lilly entered into a collaboration and license agreement, under which Lilly has the worldwide license to develop and commercialize products combining our patented rHuPH20 enzyme with Lilly proprietary biologics directed at up to five targets (the “Lilly Collaboration”). Targets, once selected, will be on an exclusive, global basis. As of December 31, 2016, Lilly has elected two specified exclusive targets and one specified semi-exclusive target. Lilly has the right to elect up to two additional targets for additional fees. The upfront license payment may be followed by event-based payments subject to Lilly’s achievement of specified development, regulatory and sales-based milestones. In addition, Lilly will pay royalties to us if products under the collaboration are commercialized. Unless terminated earlier in accordance with its terms, the Lilly Collaboration continues in effect until the later of: (i) expiration of the last to expire of the valid claims of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers a product developed under the collaboration, and (ii) expiration of the last to expire royalty term for a product developed under the collaboration. The royalty term of a product developed under the Lilly Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. In the event such valid claims expire, the royalty rate is reduced for the remaining royalty term. Lilly may terminate the agreement prior to expiration for any reason in its entirety upon 60 days prior written notice to us. Upon any such termination, the license granted to Lilly (in total or with respect to the terminated target, as applicable) will terminate provided, however, that in the event of expiration of the agreement, the licenses granted will become perpetual, non-exclusive and fully paid.
In June 2015, we and AbbVie entered into a collaboration and license agreement, under which AbbVie has the worldwide license to develop and commercialize products combining our patented rHuPH20 enzyme with AbbVie proprietary biologics directed at up to nine targets (the “AbbVie Collaboration”). Targets, once selected, will be on an exclusive, global basis. As of December 31, 2016, AbbVie has elected one specified exclusive target, TNF alpha. AbbVie has the right to elect up to eight additional targets for additional fees. The upfront license payment may be followed by event-based payments subject to AbbVie’s achievement of specified development, regulatory and sales-based milestones. In addition, AbbVie will pay tiered royalties to us if products under the collaboration are commercialized. Unless terminated earlier in accordance with its terms, the AbbVie Collaboration continues in effect until the later of: (i) expiration of the last to expire of the valid claims of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers a product developed under the collaboration, and (ii) expiration of the last to expire royalty term for a product developed under the collaboration. The royalty term of a product developed under the AbbVie Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. In the event such valid claims expire, the royalty rate is reduced for the remaining royalty term. AbbVie may terminate the agreement prior to expiration for any reason in its entirety or on a target-by-target basis upon 90 days prior written notice to us. Upon any such termination, the license granted to AbbVie (in total or with respect to the terminated target, as applicable) will terminate provided, however, that in the event of expiration of the agreement, the licenses granted will become perpetual, non-exclusive and fully paid.
In December 2014, we and Janssen entered into a collaboration and license agreement, under which Janssen has the worldwide license to develop and commercialize products combining our patented rHuPH20 enzyme with Janssen proprietary biologics directed at up to five targets (the “Janssen Collaboration”). Targets, once selected, will be on an exclusive, global basis. As of December 31, 2016, Janssen has elected one specified exclusive target, CD38. Janssen has the right to elect four additional targets in the future upon payment of additional fees. In addition, Janssen will pay royalties to us if products under the collaboration are commercialized. Unless terminated earlier in accordance with its terms, the Janssen Collaboration continues in effect until the later of (i) expiration of the last to expire of the valid claims of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers a product developed under the collaboration, and (ii) expiration of the last to expire royalty term for a product developed under the collaboration. The royalty term of a product developed under the Janssen Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. In the event such valid claims expire, the royalty rate is reduced for the remaining royalty term. Janssen may terminate the agreement prior to expiration for any reason in its entirety or on a product-by-product basis upon 90 days prior written notice to us. Upon any such termination, the license granted to Janssen (in total or with respect to the terminated target, as applicable) will terminate provided, however, that in the event of expiration of the agreement, the licenses granted will become perpetual, non-exclusive and fully paid.
In December 2012, we and Pfizer entered into a collaboration and license agreement, under which Pfizer has the worldwide license to develop and commercialize products combining our patented rHuPH20 enzyme with Pfizer proprietary biologics directed at up to six targets (the “Pfizer Collaboration”). Targets may be selected on an exclusive or non-exclusive basis. As of December 31, 2016, Pfizer has elected five specified exclusive targets. In December 2016, Pfizer returned one of its elected targets. Pfizer has the right to elect two additional targets in the future upon payment of additional fees. In addition, Pfizer will pay royalties to us if products under the collaboration are commercialized. Unless terminated earlier in accordance with its terms, the Pfizer Collaboration continues in effect until the later of (i) expiration of the last to expire of the valid claims of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers a product developed under the collaboration, and (ii) expiration of the last to expire royalty term for a product developed under the collaboration. The royalty term of a product developed under the Pfizer Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. Royalties are subject to adjustment as set forth in the agreement. Pfizer may terminate the agreement prior to expiration for any reason in its entirety or on a target-by-target basis upon 30 days prior written notice to us. Upon any such termination, the license granted to Pfizer (in total or with respect to the terminated target, as applicable) will terminate, provided, however, that in the event of expiration of the agreement, the licenses granted will become perpetual, non-exclusive and fully paid.
Payments received from other collaborators for upfront license fees, license fees for the election of additional targets, maintenance fees and event-based payments since inception of the collaboration agreements are as follows (in thousands):
 
As of
December 31, 2016
Lilly
$
33,000

AbbVie
29,000

Janssen
15,250

Pfizer
16,500

Total payments received
$
93,750


At the inception of the Pfizer, Janssen, AbbVie and Lilly arrangements, we identified the deliverables in each arrangement to include the license, research and development services and supply of bulk rHuPH20. We have determined that the license, research and development services and supply of bulk rHuPH20 individually represent separate units of accounting, because each deliverable has standalone value. We determined that the rights to elect additional targets in the future upon the payment of additional license fees are substantive options that are not priced at a significant and incremental discount. Therefore, we determined for each collaboration that the rights to elect additional targets are not deliverables at the inception of the arrangement. The estimated selling prices for the units of accounting we identified were determined based on market conditions, the terms of comparable collaborative arrangements for similar technology in the pharmaceutical and biotech industry and entity-specific factors such as the terms of our previous collaborative agreements, our pricing practices and pricing objectives. The arrangement consideration was allocated to the deliverables based on the relative selling price method and the nature of the research and development services to be performed for the collaborator.
The amount allocable to the delivered unit or units of accounting is limited to the amount that is not contingent upon the delivery of additional items or meeting other specified performance conditions (non-contingent amount). As such, we excluded from the allocable arrangement consideration the event-based payments, milestone payments, annual exclusivity fees and royalties regardless of the probability of receipt. Based on the results of our analysis, we allocated the $12.5 million license fees from Pfizer, the $15.3 million license fee from Janssen, the $23.0 million upfront license fee from AbbVie and the $33.0 million license fees from Lilly to the license fee deliverable under each of the arrangements. We determined that the upfront payments were earned upon the granting of the worldwide, exclusive right to our technology to the collaborators in these arrangements. As a result, we recognized the $12.5 million license fees under the Pfizer Collaboration, the $15.3 million license fee under the Janssen Collaboration, the $23.0 million upfront license fee under the AbbVie Collaboration and the $33.0 million license fees under the Lilly Collaboration as revenues under collaborative agreements in the period when such license fees were earned. We recognized revenue related to event-based payments or milestone payments under these collaborations of $6.0 million, $1.0 million and zero for the years ended December 31, 2016, 2015 and 2014, respectively.
The collaborators are each solely responsible for the development, manufacturing and marketing of any products resulting from their respective collaborations. We are entitled to receive payments for research and development services and supply of bulk rHuPH20 if requested by any collaborator. We recognize amounts allocated to research and development services as revenues under collaborative agreements as the related services are performed. We recognize amounts allocated to the sales of bulk rHuPH20 as revenues under collaborative agreements or product sales, as appropriate, when such bulk rHuPH20 has met all required specifications by the collaborators and the related title and risk of loss and damages have passed to the collaborators. We cannot predict the timing of delivery of research and development services and bulk rHuPH20 as they are at the collaborators’ requests.
Pursuant to the terms of our collaboration agreements with Roche and Pfizer, certain future payments meet the definition of a milestone in accordance with the Milestone Method of Accounting. We are entitled to receive additional milestone payments under our collaboration agreements with Roche and Pfizer for the successful development of the elected targets in the aggregate of up to $62.5 million upon achievement of specified clinical development milestone events and up to $12.0 million upon achievement of specified regulatory milestone events in connection with specified regulatory filings and receipt of marketing approvals.
Certain Balance Sheet Items
Certain Balance Sheet Items
Certain Balance Sheet Items
Accounts receivable, net consisted of the following (in thousands):
 
 
December 31,
2016
 
December 31,
2015
Accounts receivable from revenues under collaborative agreements
 
$
6,151

 
$
25,939

Accounts receivable from product sales to collaborators
 
7,854

 
4,996

Accounts receivable from other product sales
 
2,234

 
2,442

Total accounts receivable
 
16,239

 
33,377

Allowance for distribution fees and discounts
 
(559
)
 
(967
)
Total accounts receivable, net
 
$
15,680

 
$
32,410


Inventories consisted of the following (in thousands):
 
 
December 31,
2016
 
December 31,
2015
Raw materials
 
$
761

 
$
677

Work-in-process
 
12,850

 
8,481

Finished goods
 
1,012

 
331

Total inventories
 
$
14,623

 
$
9,489


Prepaid expenses and other assets consisted of the following (in thousands):
 
 
December 31,
2016
 
December 31,
2015
Prepaid manufacturing expenses
 
$
9,663

 
$
16,155

Prepaid research and development expenses
 
8,613

 
9,225

Other prepaid expenses
 
1,661

 
1,198

Other assets
 
1,530

 
530

Total prepaid expenses and other assets
 
21,467

 
27,108

Less long-term portion
 
219

 
5,574

Total prepaid expenses and other assets, current
 
$
21,248

 
$
21,534


Prepaid manufacturing expenses include slot reservation fees and other amounts paid to contract manufacturing organizations. Such amounts are reclassified to work-in-process inventory once the manufacturing process has commenced.

Property and equipment, net consisted of the following (in thousands):
 
 
December 31,
2016
 
December 31,
2015
Research equipment
 
$
10,479

 
$
9,666

Computer and office equipment
 
3,373

 
2,570

Leasehold improvements
 
2,331

 
2,025

Subtotal
 
16,183

 
14,261

Accumulated depreciation and amortization
 
(11,919
)
 
(10,318
)
Property and equipment, net
 
$
4,264

 
$
3,943


Depreciation and amortization expense was approximately $2.4 million, $1.7 million and $1.8 million for the years ended December 31, 2016, 2015 and 2014, respectively.
Accrued expenses consisted of the following (in thousands):
 
 
December 31,
2016
 
December 31,
2015
Accrued compensation and payroll taxes
 
$
11,539

 
$
8,636

Accrued outsourced research and development expenses
 
9,522

 
8,617

Accrued outsourced manufacturing expenses
 
3,225

 
6,205

Other accrued expenses
 
4,552

 
4,118

Total accrued expenses
 
28,838

 
27,576

Less long-term accrued outsourced research and development expenses
 
17

 
784

     Total accrued expenses, current
 
$
28,821

 
$
26,792


Long-term accrued outsourced research and development is included in other long-term liabilities in the consolidated balance sheets.
Deferred revenue consisted of the following (in thousands):
 
 
December 31,
2016
 
December 31,
2015
Collaborative agreements
 
 
 
 
License fees and event-based payments:
 
 
 
 
Roche
 
$
35,709

 
$
39,038

Other
 
8,209

 
9,724

 
 
43,918

 
48,762

Reimbursement for research and development services
 
700

 
4,461

Total deferred revenue
 
44,618

 
53,223

Less current portion
 
4,793

 
9,304

Deferred revenue, net of current portion
 
$
39,825

 
$
43,919

Long-Term Debt, Net
Long-term Debt, Net
Long-Term Debt, Net
Royalty-backed Loan
In January 2016, through our wholly-owned subsidiary Halozyme Royalty LLC (“Halozyme Royalty”), we received a $150 million loan (the “Royalty-backed Loan”) pursuant to a credit agreement (the “Credit Agreement”) with BioPharma Credit Investments IV Sub, LP and Athyrium Opportunities II Acquisition LP (the “Royalty-backed Lenders”). Under the terms of the Credit Agreement, Halozyme Therapeutics, Inc. transferred to Halozyme Royalty the right to receive royalty payments from the commercial sales of ENHANZE products owed under the Roche Collaboration and Baxalta Collaboration (“Collaboration Agreements”). The royalty payments from the Collaboration Agreements will be used to repay the principal and interest on the loan (the “Royalty Payments”).  The Royalty-backed loan bears interest at a per annum rate of 8.75% plus the three-month LIBOR rate. The three-month LIBOR rate is subject to a floor of 0.7% and a cap of 1.5%. The interest rate as of December 31, 2016 was 9.71%.
The Credit Agreement provides that none of the Royalty Payments are required to be applied to the Royalty-backed Loan prior to January 1, 2017, 50% of the Royalty Payments are required to be applied to the Royalty-backed Loan between January 1, 2017 and January 1, 2018 and thereafter all Royalty Payments must be applied to the Royalty-backed Loan. However, the amounts available to repay the Royalty-backed Loan are subject to caps of $13.75 million per quarter in 2017, $18.75 million per quarter in 2018, $21.25 million per quarter in 2019 and $22.5 million per quarter in 2020 and thereafter. Amounts available to repay the Royalty-backed Loan will be applied first, to pay interest and second, to repay principal on the Royalty-backed Loan. Any accrued interest that is not paid on any applicable quarterly payment date, as defined, will be capitalized and added to the principal balance of the Royalty-backed Loan on such date. Halozyme Royalty will be entitled to receive and distribute to Halozyme any Royalty Payments that are not required to be applied to the Royalty-backed Loan or which are in excess of the foregoing caps.
Because the repayment of the term loan is contingent upon the level of Royalty Payments received, the repayment term may be shortened or extended depending on the actual level of Royalty Payments. The final maturity date of the Royalty-backed Loan will be the earlier of (i) the date when principal and interest is paid in full, (ii) the termination of Halozyme Royalty’s right to receive royalties under the Collaboration Agreements, and (iii) December 31, 2050. Currently, we estimate that the loan will be repaid in the first quarter of 2020. This estimate could be adversely affected and the repayment period could be extended if future royalty amounts are less than currently expected. Under the terms of the Credit Agreement, at any time after January 1, 2019, Halozyme Royalty may, subject to certain limitations, prepay the outstanding principal of the Royalty-backed Loan in whole or in part, at a price equal to 105% of the outstanding principal on the Royalty-backed Loan, plus accrued but unpaid interest. The Royalty-backed Loan constitutes an obligation of Halozyme Royalty, and is non-recourse to Halozyme. Halozyme Royalty retains its right to the Royalty Payments following repayment of the loan.
As of December 31, 2016, we were in compliance with all material covenants under the Credit Agreement and there was no material adverse change in our business, operations or financial condition.
During the year ended December 31, 2016, accrued interest in the amount of $13.2 million was capitalized and added to the principal balance of the Royalty-backed Loan. In addition, we recorded related accrued interest on the debt of $0.7 million as of December 31, 2016.
In connection with the Royalty-backed Loan, we paid the Royalty-backed Lenders a fee of $1.5 million and incurred additional debt issuance costs totaling $0.4 million, which includes expenses that we paid on behalf of the Royalty-backed Lenders and expenses incurred directly by us. Debt issuance costs and the lender fee have been netted against the debt as of December 31, 2016, and are being amortized over the estimated term of the debt using the effective interest method. For the year ended December 31, 2016, the Company recognized interest expense, including amortization of the debt discount, related to the Royalty-backed Loan of $14.5 million. The assumptions used in determining the expected repayment term of the debt and amortization period of the issuance costs requires that we make estimates that could impact the short- and long-term classification of these costs, as well as the period over which these costs will be amortized. The outstanding balance of the Royalty-backed Loan as of December 31, 2016 was $161.8 million, inclusive of payment-in-kind interest expense of $13.2 million and net of unamortized debt discount of $1.4 million.
Oxford and SVB Loan and Security Agreement
In December 2013, we entered into an Amended and Restated Loan and Security Agreement (the “Original Loan Agreement”) with Oxford Finance LLC (“Oxford”) and Silicon Valley Bank (“SVB”) (collectively, the “Lenders”), amending and restating in its entirety our previous loan agreement with the Lenders, dated December 2012. The Original Loan Agreement was scheduled to mature on January 1, 2018 and provided for an additional $20 million principal, bringing the total loan balance to $50 million. The proceeds were used for working capital and general business requirements.
In January 2015, we entered into a second amendment to the Original Loan Agreement with the Lenders, amending and restating the loan repayment schedules of the Original Loan Agreement. The amended and restated term loan repayment schedule provided for interest only payments through January 2016, followed by consecutive equal monthly payments of principal and interest in arrears starting in February 2016 and continuing through the previously established maturity date of January 2018. Consistent with our previous loan, the amended Original Loan Agreement provided for a 7.55% interest rate and a final interest payment equal to 8.5% of the original principal amount, or $4.25 million, which was due when the loan became due or upon the prepayment of the facility.
In June 2016, we entered into a new Loan and Security Agreement (the “New Loan Agreement”) with the Lenders, providing a senior secured loan facility of up to an aggregate principal amount of $70.0 million, comprising a $55.0 million draw in June 2016 and an additional $15.0 million tranche, which we have the option to draw during the second quarter of 2017. The initial proceeds carry an interest rate of 8.25% and were partially used to pay the outstanding principal and final payment owed on the amended Original Loan Agreement. The remaining proceeds, including any drawdown of the additional $15.0 million, are to be used for working capital and general business requirements. The remaining $15.0 million tranche is subject to an annual interest rate equal to the prime rate as reported in The Wall Street Journal on the draw-down date plus 4.75%. The repayment schedule provides for interest only payments for the first 18 months, followed by consecutive equal monthly payments of principal and interest in arrears through the maturity date of January 1, 2021. The New Loan Agreement provides for a final payment equal to 5.5% of the initial $55.0 million principal amount and, if we exercise our option to draw an additional $15.0 million in 2017, 7.25% of the principal amount of the second draw. The final payment is due when the New Loan Agreement becomes due or upon the prepayment of the facility. We have the option to prepay the outstanding balance of the New Loan Agreement in full, subject to a prepayment fee of 2% in the first year and 1% in the second year of the New Loan Agreement.
In connection with the New Loan Agreement, the debt offering costs have been recorded as a debt discount in our condensed consolidated balance sheets which, together with the final payment and fixed interest rate payments, are being amortized and recorded as interest expense throughout the life of the loan using the effective interest rate method.
The New Loan Agreement is secured by substantially all of the assets of the Company and our subsidiary, Halozyme, Inc., except that the collateral does not include any equity interests in Halozyme, Inc., any of our intellectual property (including all licensing, collaboration and similar agreements relating thereto), and certain other excluded assets. The New Loan Agreement contains customary representations, warranties and covenants by us, which covenants limit our ability to convey, sell, lease, transfer, assign or otherwise dispose of certain of our assets; engage in any business other than the businesses currently engaged in by us or reasonably related thereto; liquidate or dissolve; make certain management changes; undergo certain change of control events; create, incur, assume, or be liable with respect to certain indebtedness; grant certain liens; pay dividends and make certain other restricted payments; make certain investments; make payments on any subordinated debt; enter into transactions with any of our affiliates outside of the ordinary course of business or permit our subsidiaries to do the same; and make any voluntary prepayment of or modify certain terms of the Royalty-backed Loan. In addition, subject to certain exceptions, we are required to maintain with SVB our primary deposit accounts, securities accounts and commodities, and to do the same for our subsidiary, Halozyme, Inc.
The New Loan Agreement also contains customary indemnification obligations and customary events of default, including, among other things, our failure to fulfill certain of our obligations under the New Loan Agreement and the occurrence of a material adverse change which is defined as a material adverse change in our business, operations, or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan, a material impairment in the perfection or priority of the Lender’s lien in the collateral or in the value of such collateral or the occurrence of an event of default under the Royalty-backed Loan. In the event of default by us under the New Loan Agreement, the Lenders would be entitled to exercise their remedies thereunder, including the right to accelerate the debt, upon which we may be required to repay all amounts then outstanding under the New Loan Agreement, which could harm our financial condition.
 As of December 31, 2016, we were in compliance with all material covenants under the New Loan Agreement and there was no material adverse change in our business, operations or financial condition.
Future maturities and interest payments of long-term debt as of December 31, 2016, are as follows (in thousands):
2017
 
$
37,338

2018
 
94,406

2019
 
105,758

2020
 
24,103

2021
 
4,755

Total minimum payments
 
266,360

Less amount representing interest
 
(45,208
)
Gross balance of long-term debt
 
221,152

Less unamortized debt discount
 
(4,531
)
Present value of long-term debt
 
216,621

Less current portion of long-term debt
 
(17,393
)
Long-term debt, less current portion and unamortized debt discount
 
$
199,228


Interest expense, including amortization of the debt discount, related to long-term debt for the years ended December 31, 2016, 2015 and 2014 was approximately $20.0 million, $5.2 million and $5.6 million, respectively. Accrued interest, which is included in accrued expenses and other long-term liabilities, was $1.1 million and $3.2 million as of December 31, 2016 and December 31, 2015, respectively.
Stockholders' Equity
Stockholders' Equity
Stockholders’ Equity
During 2016, we issued an aggregate of 413,248 shares of common stock, in connection with the exercises of stock options for cash in the aggregate amount of approximately $2.8 million. In addition, we issued 780,066 shares of common stock, net of RSAs canceled, in connection with the grants of RSAs. The RSA holders surrendered 8,388 RSAs to pay for minimum withholding taxes totaling approximately $0.9 million. We issued 134,944 shares of common stock upon vesting of RSUs. The RSU holders surrendered 83,335 RSUs to pay for minimum withholding taxes totaling approximately $0.8 million. We issued 21,775 shares of common stock upon vesting of PRSUs. The PRSU holders surrendered 8,262 PRSUs to pay for minimum withholding taxes totaling approximately $0.1 million.
During 2015, we issued an aggregate of 1,926,368 shares of common stock in connection with the exercises of stock options for cash in the aggregate amount of approximately $14.4 million. In addition, we issued 375,019 shares of common stock, net of RSAs canceled, in connection with the grants of RSAs and 82,069 shares of common stock upon vesting of RSUs. The RSU holders surrendered 52,019 RSUs to pay for minimum withholding taxes totaling approximately $0.7 million. We issued 47,454 shares of common stock upon vesting of PRSUs. The PRSU holders surrendered 35,926 PRSUs to pay for minimum withholding taxes totaling approximately $0.6 million.
In February 2014, we completed an underwritten public offering and issued 8,846,153 shares of common stock, including 1,153,846 shares sold pursuant to the full exercise of an over-allotment option granted to the underwriter. All of the shares were offered at a public offering price of $13.00 per share, generating approximately $107.7 million in net proceeds.
Equity Incentive Plans
Equity Incentive Plans
Equity Incentive Plans
We currently grant stock options, restricted stock awards and restricted stock units under the Amended and Restated 2011 Stock Plan (“2011 Stock Plan”), which was approved by the stockholders on May 6, 2016 and provides for the grant of up to 44.2 million shares of common stock to selected employees, consultants and non-employee members of our Board of Directors as stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance awards. The 2011 Stock Plan was approved by the stockholders. Awards are subject to terms and conditions established by the Compensation Committee of our Board of Directors. During the year ended December 31, 2016, we granted share-based awards under the 2011 Stock Plan. At December 31, 2016, 12,458,020 shares were subject to outstanding awards and 9,001,562 shares were available for future grants of share-based awards.
Total share-based compensation expense related to share-based awards was comprised of the following (in thousands):
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Research and development
 
$
11,470

 
$
9,795

 
$
7,939

Selling, general and administrative
 
14,115

 
11,043

 
7,335

Share-based compensation expense
 
$
25,585

 
$
20,838

 
$
15,274


Share-based compensation expense by type of share-based award (in thousands):
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Stock options
 
$
16,544

 
$
11,145

 
$
7,884

RSAs, RSUs and PRSUs
 
9,041

 
9,693

 
7,390

 
 
$
25,585

 
$
20,838

 
$
15,274


Total unrecognized estimated compensation expense by type of award and the weighted average remaining requisite service period over which such expense is expected to be recognized (in thousands, unless otherwise noted):
 
 
December 31, 2016
 
 
Unrecognized
Expense
 
Remaining
Weighted Average
Recognition Period
(years)
Stock options
 
$
42,592

 
2.8
RSAs
 
$
8,857

 
2.3
RSUs
 
$
8,442

 
2.6

Cash flows resulting from tax deductions in excess of the cumulative compensation cost recognized for options exercised (excess tax benefits) are classified as cash inflows provided by financing activities and cash outflows used in operating activities. Due to our net loss position, no tax benefits have been recognized in the consolidated statements of cash flows.
Stock Options. Options granted under the Plans must have an exercise price equal to at least 100% of the fair market value of our common stock on the date of grant. The options generally have a maximum contractual term of ten years and vest at the rate of one-fourth of the shares on the first anniversary of the date of grant and 1/48 of the shares monthly thereafter. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plans).
A summary of our stock option award activity as of and for the years ended December 31, 2016, 2015 and 2014 is as follows: 

 
Shares
Underlying
Stock Options

Weighted
Average Exercise
Price per Share

Weighted
Average
Remaining
Contractual
Term (years)
 
Aggregate
Intrinsic
Value
Outstanding at January 1, 2014
 
6,700,915

 
$7.11
 
 
 
 
Granted
 
2,271,143

 
$13.02
 
 
 
 
Exercised
 
(1,432,206
)
 
$5.43
 
 
 
 
Canceled/forfeited
 
(1,185,960
)
 
$9.39
 
 
 
 
Outstanding at December 31, 2014
 
6,353,892

 
$9.18
 
 
 
 
Granted
 
3,973,604

 
$16.26
 
 
 
 
Exercised
 
(1,926,368
)
 
$7.49
 
 
 
 
Canceled/forfeited
 
(407,936
)
 
$10.64
 
 
 
 
Outstanding at December 31, 2015
 
7,993,192

 
$13.03
 
 
 
 
Granted
 
4,466,306

 
$9.03
 
 
 
 
Exercised
 
(413,248
)
 
$6.88
 
 
 
 
Canceled/forfeited
 
(955,054
)
 
$12.42
 
 
 
 
Outstanding at December 31, 2016
 
11,091,196

 
$11.70
 
7.8
 

$9.4
 million
Vested and expected to vest at December 31, 2016
 
11,091,196

 
$11.70
 
7.8
 

$9.4
 million
Exercisable at December 31, 2016
 
4,230,638

 
$11.77
 
6.2
 

$4.7
 million

The weighted average grant date fair values of options granted during the years ended December 31, 2016, 2015 and 2014 were $5.36 per share, $9.60 per share and $8.13 per share, respectively. The total intrinsic value of options exercised during the years ended December 31, 2016, 2015 and 2014 was approximately $1.4 million, $16.2 million and $8.1 million, respectively. Cash received from stock option exercises for the years ended December 31, 2016, 2015 and 2014 was approximately $2.8 million, $14.4 million and $7.8 million, respectively.
The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model (“Black-Scholes model”) that uses the assumptions noted in the following table. Expected volatility is based on historical volatility of our common stock. The expected term of options granted is based on analyses of historical employee termination rates and option exercises. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The dividend yield assumption is based on the expectation of no future dividend payments by us. Assumptions used in the Black-Scholes model were as follows:
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Expected volatility
 
67.5-71.9%


66.2-67.4%


66.6-71.8%

Average expected term (in years)
 
5.4


5.6


5.7

Risk-free interest rate
 
1.00-1.90%


1.34-1.92%


1.73-2.04%

Expected dividend yield
 
0
%

0
%

0
%

Restricted Stock Awards. RSAs are grants that entitle the holder to acquire shares of our common stock at zero. The shares covered by a RSA cannot be sold, pledged, or otherwise disposed of until the award vests and any unvested shares may be reacquired by us for the original purchase price following the awardee’s termination of service. The RSAs will generally vest at the rate of one-fourth of the shares on each anniversary of the date of grant. Annual grants of RSAs to the Board of Directors typically vest in approximately one year.
The following table summarizes our RSA activity during the years ended December 31, 2016, 2015 and 2014:

 
Number of
Shares

Weighted
Average
Grant Date
Fair Value
Unvested at January 1, 2014
 
632,871

 
$8.23
Granted
 
1,055,122

 
$11.15
Vested
 
(263,765
)
 
$8.33
Forfeited
 
(265,777
)
 
$10.86
Unvested at December 31, 2014
 
1,158,451

 
$10.26
Granted
 
515,695

 
$15.00
Vested
 
(721,990
)
 
$10.11
Forfeited
 
(140,676
)
 
$11.84
Unvested at December 31, 2015
 
811,480

 
$13.13
Granted
 
968,652

 
$8.41
Vested
 
(296,831
)
 
$12.76
Forfeited
 
(180,198
)
 
$10.33
Unvested at December 31, 2016
 
1,303,103

 
$10.09

The estimated fair value of the RSAs was based on the closing market value of our common stock on the date of grant. The total grant date fair value of RSAs vested during the years ended December 31, 2016, 2015 and 2014 was approximately $3.8 million, $7.3 million and $2.2 million, respectively. The fair value of RSAs vested during the years ended December 31, 2016, 2015 and 2014, was approximately $2.5 million, $13.9 million and $3.0 million, respectively.
Restricted Stock Units. A RSU is a promise by us to issue a share of our common stock upon vesting of the unit. The RSUs will generally vest at the rate of one-fourth of the shares on each anniversary of the date of grant.
The following table summarizes our RSU activity during the years ended December 31, 2016, 2015 and 2014:

 
Number of
Shares

Weighted
Average
Grant Date
Fair Value

Weighted
Average
Remaining
Contractual
Term (yrs)
 
Aggregate
Intrinsic
Value
Unvested at January 1, 2014
 
736,355

 
$9.06
 
 
 
 
Granted
 
305,535

 
$13.71
 
 
 
 
Vested
 
(194,368
)
 
$9.12
 
 
 
 
Forfeited
 
(385,200
)
 
$8.84
 
 
 
 
Outstanding at December 31, 2014
 
462,322

 
$11.12
 
 
 
 
Granted
 
422,492

 
$14.75
 
 
 
 
Vested
 
(134,088
)
 
$10.93
 
 
 
 
Forfeited
 
(84,512
)
 
$10.86
 
 
 
 
Outstanding at December 31, 2015
 
666,214

 
$13.49
 
 
 
 
Granted
 
796,582

 
$8.17
 
 
 
 
Vested
 
(218,279
)
 
$12.74
 
 
 
 
Forfeited
 
(77,948
)
 
$10.99
 
 
 
 
Outstanding at December 31, 2016
 
1,166,569

 
$10.16
 
1.4
 

$11.5
 million

The estimated fair value of the RSUs was based on the closing market value of our common stock on the date of grant. The total grant date fair value of RSUs vested during the years ended December 31, 2016, 2015 and 2014 was approximately $2.8 million, $1.5 million and $1.8 million, respectively. The fair value of RSUs vested during the years ended December 31, 2016, 2015 and 2014 was approximately $2.1 million, $1.8 million and $2.6 million, respectively.
Performance Restricted Stock Units. A PRSU is a promise by us to issue a share of our common stock upon achievement of a specific performance condition.
The following table summarizes our PRSU activity during the years ended December 31, 2016, 2015 and 2014:
 
 
Number of
Shares
 
Weighted
Average
Grant Date
Fair Value
 
Weighted
Average
Remaining
Contractual
Term (yrs)
 
Aggregate
Intrinsic
Value
Outstanding at January 1, 2014
 
—

 
$
—

 
 
 
 
Granted
 
540,742

 
$
8.91

 
 
 
 
Vested
 
—

 
$
—

 
 
 
 
Forfeited
 
(109,504
)
 
$
8.91

 
 
 
 
Outstanding at December 31, 2014
 
431,238

 
$
8.91

 
 
 
 
Granted
 
118,209

 
$
11.19

 
 
 
 
Vested
 
(83,380
)
 
$
9.48

 
 
 
 
Forfeited
 
(156,360
)
 
$
9.21

 
 
 
 
Outstanding at December 31, 2015
 
309,707

 
$
9.48

 
 
 
 
Granted
 
—

 
$
—

 
 
 
 
Vested
 
(30,037
)
 
$
9.49

 
 
 
 
Forfeited
 
(79,415
)
 
$
9.44

 
 
 
 
Outstanding at December 31, 2016
 
200,255

 
$
9.49

 
0.3
 

$2.0
 million

The estimated fair value of the PRSUs was based on the closing market value of our common stock on the date of grant. The total grant date fair value and intrinsic value of PRSUs vested during the years ended December 31, 2016, 2015 and 2014 was approximately $0.3 million, $0.8 million and $1.4 million, respectively.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Operating Leases
Our administrative offices and research facilities are located in San Diego, California. We lease an aggregate of approximately 76,000 square feet of office and research space in four buildings. The leases commenced in June 2011 and November 2013 and continue through January 2018. The leases are subject to approximately 2.5% to 3.0% annual increases throughout the terms of the leases. We also pay a pro rata share of operating costs, insurance costs, utilities and real property taxes. We received incentives under the leases, including tenant improvement allowances and reduced or free rent, for which the unamortized deferred rent balances associated with these incentives was $0.4 million and $0.8 million as of December 31, 2016 and 2015, respectively.
In November 2015, we opened a satellite office in South San Francisco, California. We lease approximately 10,000 square feet of office space. The lease commenced in November 2015 and continues through January 2021. The lease is subject to approximately 3.0% annual increases throughout the term of the lease. We also pay a pro rata share of operating costs, insurance costs, utilities and real property taxes. We received incentives under the lease, including tenant improvement allowances and reduced or free rent, for which the unamortized deferred rent balances associated with these incentives was $0.4 million as of December 31, 2016 and 2015.
Additionally, we lease certain office equipment under operating leases. Total rent expense was approximately $2.2 million, $1.9 million and $1.9 million for the years ended December 31, 2016, 2015 and 2014, respectively.
Approximate annual future minimum operating lease payments as of December 31, 2016 are as follows (in thousands): 
Year:
 
Operating
Leases
2017
 
$
2,622

2018
 
522

2019
 
425

2020
 
426

2021
 
36

Total minimum lease payments
 
$
4,031


Other Commitments
In March 2010, we entered into a second Commercial Supply Agreement with Avid (the “Avid Commercial Supply Agreement”). Under the terms of the Avid Commercial Supply Agreement, we are committed to certain minimum annual purchases of bulk rHuPH20 equal to three quarters of forecasted supply. In addition, Avid has the right to manufacture and supply a certain percentage of bulk rHuPH20 that will be used in the collaboration products. At December 31, 2016, we had a $13.0 million minimum purchase obligation in connection with this agreement.
In June 2011, we entered into a services agreement with Patheon for the technology transfer and manufacture of Hylenex recombinant. At December 31, 2016, we had a $0.7 million minimum purchase obligation in connection with this agreement.
In 2013 and 2014, we entered into service agreements with two third party manufacturers for the manufacturing of PEGPH20. At December 31, 2016, we had a $1.6 million and a $5.4 million minimum purchase obligation in connection with each of these agreements. 
Contingencies
We have entered into an in-licensing agreement with a research organization, which is cancelable at our option with 90 days written notice. Under the terms of this agreement, we have received license to know-how and technology claimed, in certain patents or patent applications. We are required to pay fees, milestones and/or royalties on future sales of products employing the technology or falling under claims of a patent, and some of the agreements require minimum royalty payments. We continually reassess the value of the license agreement. If the in-licensed and research candidate is successfully developed, we may be required to pay milestone payments of approximately $8.0 million over the life of this agreement in addition to royalties on sales of the affected products. Due to the uncertainties of the development process, the timing and probability of the remaining milestone and royalty payments cannot be accurately estimated.
Legal Contingencies
From time to time, we may be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of our business. Any of these claims could subject us to costly legal expenses and, while we generally believe that we have adequate insurance to cover many different types of liabilities, our insurance carriers may deny coverage or our policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on our consolidated results of operations and financial position. Additionally, any such claims, whether or not successful, could damage our reputation and business. We currently are not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our consolidated results of operations or financial position.
Income Taxes
Income Taxes
Income Taxes
Total income (loss) before income taxes summarized by region were as follows (in thousands):
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
United States
 
$
6,384

 
$
11,724

 
$
(30,885
)
Foreign
 
(108,245
)
 
(43,955
)
 
(37,490
)
Net loss before income taxes
 
$
(101,861
)
 
$
(32,231
)
 
$
(68,375
)

Significant components of our net deferred tax assets/(liabilities) were as follows (in thousands).
 
 
December 31,

 
2016

2015
Deferred tax assets:
 



Net operating loss carryforwards
 
$
103,296

 
$
104,505

Deferred revenue
 
15,354

 
16,344

Research and development and orphan drug credits
 
73,701

 
54,846

Share-based compensation
 
8,844

 
6,286

Other, net
 
2,515

 
906


 
203,710

 
182,887

Valuation allowance for deferred tax assets
 
(203,370
)
 
(182,507
)
Deferred tax assets, net of valuation
 
340

 
380

Deferred tax liabilities:
 
 
 
 
Depreciation
 
(340
)
 
(380
)
Total deferred tax liabilities
 
(340
)
 
(380
)
Net deferred tax asset (liability)
 
$
—

 
$
—


A valuation allowance of $203.4 million and $182.5 million has been established to offset the net deferred tax assets as of December 31, 2016 and 2015, respectively, as realization of such assets is uncertain.
Income tax expense was comprised of the following components (in thousands):
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Current federal
 
$
1,145

 
$
—

 
$
—

Current state
 
17

 
—

 
—

 
 
$
1,162

 
$
—

 
$
—


The provision for income taxes on earnings subject to income taxes differs from the statutory federal income tax rate due to the following (in thousands):
 
 
Year Ended December 31,

 
2016

2015

2014
Federal income tax benefit at 34%
 
$
(34,633
)
 
$
(10,959
)
 
$
(23,247
)
State income tax benefit, net of federal income tax impact
 
(653
)
 
5,524

 
(1,761
)
Increase in valuation allowance
 
11,252

 
4,045

 
16,998

Foreign income subject to tax at other than federal statutory rate
 
36,803

 
14,945

 
12,747

Shared-based compensation
 
3,735

 
(4,990
)
 
(529
)
Non-deductible expenses and other
 
698

 
6,457

 
1,069

Research and development credits, net
 
(1,084
)
 
(3,861
)
 
(5,277
)
Orphan drug credits, net of federal add back
 
(14,956
)
 
(11,161
)
 
—


 
$
1,162

 
$
—

 
$
—


At December 31, 2016, our unrecognized tax benefit was $12.8 million. Of this amount, $0.2 million would affect the effective tax rate and $12.6 million would affect the effective tax rate in the event the valuation allowance was removed. Of the unrecognized tax benefits, we do not expect any significant changes to occur in the next 12 months. Interest and/or penalties related to uncertain income tax positions are recognized by us as a component of income tax expense. For the years ended December 31, 2016, 2015 and 2014, we recognized no interest or penalties.
The following table summarizes the activity related to our unrecognized tax benefits (in thousands):
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Gross unrecognized tax benefits at beginning of period
 
$
4,898

 
$
—

 
$
—

Increases in tax positions for prior years
 
5,615

 
—

 
—

Decreases in tax positions for prior years
 
(4,898
)
 
—

 
—

Increases in tax positions for current year
 
7,184

 
4,898

 
—

Gross unrecognized tax benefits at end of period
 
$
12,799

 
$
4,898

 
$
—


At December 31, 2016, we had federal, California and other state tax net operating loss carryforwards of approximately $268.7 million, $249.8 million and $30.0 million, respectively.
The following table shows key expiration dates of the federal and California net operating loss carryforwards (in thousands):
 
 
 
 
Expires in:
 
 
Net Operating Loss
 
2017
 
2021 and beyond
 
2028 and beyond
Federal
 
$
268,703

 
$
—

 
$
268,703

 
$
—

California
 
$
249,783

 
$
10,434

 
$
—

 
$
239,349


At December 31, 2016, we had federal and California research and development tax credit carryforwards of approximately $28.0 million and $16.1 million, respectively. The federal research and development tax credits will begin to expire in 2024 unless previously utilized. The California research and development tax credits will carryforward indefinitely until utilized. Additionally, we had Orphan Drug Credit carryforwards of $43.8 million which will begin to expire in 2035.
Pursuant to Internal Revenue Code Section 382, the annual use of the net operating loss carryforwards and research and development tax credits could be limited by any greater than 50% ownership change during any three year testing period. As a result of any such ownership change, portions of our net operating loss carryforwards and research and development tax credits are subject to annual limitations. We completed an updated Section 382 analysis regarding the limitation of the net operating losses and research and development credits as of June 30, 2014. Based upon the analysis, we determined that ownership changes occurred in prior years. However, the annual limitations on net operating loss and research and development tax credit carryforwards will not have a material impact on the future utilization of such carryforwards.
We do not provide for U.S. income taxes on the undistributed earnings of our foreign subsidiaries as it is our intention to utilize those earnings in the foreign operations for an indefinite period of time. At December 31, 2016 and 2015, there were no undistributed earnings in foreign subsidiaries.
We are subject to taxation in the U.S. and in various state and foreign jurisdictions. Our tax years for 1998 and forward are subject to examination by the U.S. and California tax authorities due to the carryforward of unutilized net operating losses and research and development credits.
Employee Savings Plan
Employee Savings Plan
Employee Savings Plan
We have an employee savings plan pursuant to Section 401(k) of the Internal Revenue Code. All employees are eligible to participate, provided they meet the requirements of the plan. We are not required to make matching contributions under the plan. However, we voluntarily contributed to the plan approximately $1.0 million, $0.7 million and $0.7 million for the years ended December 31, 2016, 2015 and 2014, respectively.
Restructuring Expense (Notes)
Restructuring and Related Activities Disclosure [Text Block]
Restructuring Expense
In November 2014, we completed a corporate reorganization to focus our resources on advancing our PEGPH20 oncology proprietary program and ENHANZE collaborations. This reorganization resulted in a reduction in the workforce of approximately 13%, primarily in research and development.
We recorded approximately $1.2 million of severance pay and benefits expense in connection with the reorganization, of which $1.1 million and $0.1 million was included in research and development expense and selling, general and administrative expense, respectively, in the consolidated statement of operations for the year ended December 31, 2014. No other restructuring charges were incurred.
Summary of Unaudited Quarterly Financial Information
Summary of Unaudited Quarterly Financial Information
Summary of Unaudited Quarterly Financial Information
The following is a summary of our unaudited quarterly results for the years ended December 31, 2016 and 2015 (in thousands):
 
 
Quarter Ended
2016 (Unaudited):
 
March 31,
 
June 30,
 
September 30,
 
December 31,
Total revenues
 
$
42,499

 
$
33,336

 
$
31,853

 
$
39,003

Gross profit on product sales
 
$
5,178

 
$
5,391

 
$
4,197

 
$
5,420

Total operating expenses
 
$
58,668

 
$
55,059

 
$
54,596

 
$
61,578

Net loss
 
$
(19,816
)
 
$
(26,875
)
 
$
(28,946
)
 
$
(27,386
)
Net loss per share, basic and diluted
 
$
(0.16
)
 
$
(0.21
)
 
$
(0.23
)
 
$
(0.21
)
Shares used in computing basic and diluted net loss per share
 
127,615

 
127,958

 
128,154

 
128,185

 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
2015 (Unaudited):
 
March 31,
 
June 30,
 
September 30,
 
December 31,
Total revenues(1) (2)
 
$
18,666

 
$
43,384

 
$
20,780

 
$
52,227

Gross profit on product sales
 
$
3,366

 
$
4,198

 
$
4,121

 
$
5,152

Total operating expenses
 
$
32,577

 
$
39,153

 
$
44,017

 
$
46,762

Net income (loss)
 
$
(15,108
)
 
$
3,019

 
$
(24,460
)
 
$
4,318

Net income (loss) per share:
 
 
 
 
 
 
 
 
Basic
 
$
(0.12
)
 
$
0.02

 
$
(0.19
)
 
$
0.03

Diluted
 
$
(0.12
)
 
$
0.02

 
$
(0.19
)
 
$
0.03

Shares used in computing net income (loss) per share:
 
 
 
 
 
 
 
 
Basic
 
125,299

 
126,144

 
126,921

 
127,197

Diluted
 
125,299

 
134,507

 
126,921

 
129,248

_______________
(1)
Revenues for the quarter ended June 30, 2015 included $23.0 million in revenue under collaborative agreements from the AbbVie Collaboration.
(2)
Revenues for the quarter ended December 31, 2015 included $25.0 million in revenue under collaborative agreements from the Lilly Collaboration.
Schedule II Valuation and Qualifying Accounts (Notes)
Schedule of Valuation and Qualifying Accounts Disclosure [Text Block]
Valuation and Qualifying Accounts
(in thousands)
 
 
Balance at Beginning of Period
 
Additions
 
Deductions
 
Balance at End of Period
For the year ended December 31, 2016
 
 
 
 
 
 
 
 
Accounts receivable allowances (1)
 
$
967

 
$
4,795

 
$
(5,203
)
 
$
559

For the year ended December 31, 2015
 
 
 
 
 
 
 
 
Accounts receivable allowances (1)
 
$
611

 
$
4,150

 
$
(3,794
)
 
$
967

For the year ended December 31, 2014
 
 
 
 
 
 
 
 
Accounts receivable allowances (1)
 
$
610

 
$
4,520

 
$
(4,519
)
 
$
611

_______________
(1)
Allowances are for chargebacks, prompt payment discounts and distribution fees related to Hylenex recombinant product sales.
Summary of Significant Accounting Policies (Policies)
Basis of Presentation 
Basis of Presentation
The consolidated financial statements include the accounts of Halozyme Therapeutics, Inc. and our wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.’s wholly owned subsidiaries, Halozyme Holdings Ltd., Halozyme Royalty LLC and Halozyme Switzerland GmbH. All intercompany accounts and transactions have been eliminated.
Use of Estimates 
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.
Cash Equivalents 
Cash Equivalents and Marketable Securities
Cash equivalents consist of highly liquid investments, readily convertible to cash, that mature within ninety days or less from date of purchase. Our cash equivalents consist of money market funds.
Marketable Securities 
Marketable securities are investments with original maturities of more than ninety days from the date of purchase that are specifically identified to fund current operations. Marketable securities are considered available-for-sale. These investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current balance sheet date which reflects management’s intention to use the proceeds from the sale of these investments to fund our operations, as necessary. Such available-for-sale investments are carried at fair value with unrealized gains and losses recorded in other comprehensive gain (loss) and included as a separate component of stockholders’ (deficit) equity. The cost of marketable securities is adjusted for amortization of premiums or accretion of discounts to maturity, and such amortization or accretion is included in investment and other income, net in the consolidated statements of operations. We use the specific identification method for calculating realized gains and losses on marketable securities sold. Realized gains and losses and declines in value judged to be other-than-temporary on marketable securities, if any, are included in investment and other income, net in the consolidated statements of operations.
Restricted Cash 
Restricted Cash
Under the terms of the leases on our facilities, we are required to maintain letters of credit as security deposits during the terms of such leases. At December 31, 2016 and 2015, restricted cash of $0.5 million was pledged as collateral for the letters of credit.
Fair Value of Financial Instruments 
Fair Value of Financial Instruments
The authoritative guidance for fair value measurements establishes a three tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Our financial instruments include cash equivalents, available-for-sale marketable securities, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses and long-term debt. Fair value estimates of these instruments are made at a specific point in time, based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. The carrying amount of cash equivalents, accounts receivable, prepaid expenses and other assets, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments. Further, based on the borrowing rates currently available for loans with similar terms, we believe the fair value of long-term debt approximates its carrying value.
Available-for-sale marketable securities consist of corporate debt securities, U.S. Treasury securities and commercial paper, and are measured at fair value using Level 1 and Level 2 inputs. Level 2 financial instruments are valued using market prices on less active markets and proprietary pricing valuation models with observable inputs, including interest rates, yield curves, maturity dates, issue dates, settlement dates, reported trades, broker-dealer quotes, issue spreads, benchmark securities or other market related data. We obtain the fair value of Level 2 investments from our investment manager, who obtains these fair values from a third-party pricing source. We validate the fair values of Level 2 financial instruments provided by our investment manager by comparing these fair values to a third-party pricing source.
Concentrations of Credit Risk, Sources of Supply and Significant Customers 
Concentrations of Credit Risk, Sources of Supply and Significant Customers
We are subject to credit risk from our portfolio of cash equivalents and marketable securities. These investments were made in accordance with our investment policy which specifies the categories, allocations, and ratings of securities we may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. We maintain our cash and cash equivalent balances with one major commercial bank and marketable securities with another financial institution. Deposits held with the financial institutions exceed the amount of insurance provided on such deposits. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and marketable securities to the extent recorded on the consolidated balance sheets.
We are also subject to credit risk from our accounts receivable related to our product sales and revenues under our license and collaborative agreements. We have license and collaborative agreements with pharmaceutical companies under which we receive payments for license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk formulation of rHuPH20. In addition, we sell Hylenex® recombinant in the United States to a limited number of established wholesale distributors in the pharmaceutical industry. Credit is extended based on an evaluation of the customer’s financial condition, and collateral is not required. Management monitors our exposure to accounts receivable by periodically evaluating the collectibility of the accounts receivable based on a variety of factors including the length of time the receivables are past due, the financial health of the customer and historical experience.
Accounts Receivable 
Accounts Receivable, Net
Accounts receivable is recorded at the invoiced amount and is non-interest bearing. Accounts receivable is recorded net of allowances for doubtful accounts, cash discounts for prompt payment, distribution fees and chargebacks.
Inventories 
Inventories
Inventories are stated at lower of cost or market. Cost is determined on a first-in, first-out basis. Inventories are reviewed periodically for potential excess, dated or obsolete status. We evaluate the carrying value of inventories on a regular basis, taking into account such factors as historical and anticipated future sales compared to quantities on hand, the price we expect to obtain for products in their respective markets compared with historical cost and the remaining shelf life of goods on hand.
Prior to receiving marketing approval from the U.S. Food and Drug Administration (“FDA”) or comparable regulatory agencies in foreign countries, costs related to purchases of bulk rHuPH20 and raw materials and the manufacturing of the product candidates are recorded as research and development expense. All direct manufacturing costs incurred after receiving marketing approval are capitalized as inventory. Inventories used in clinical trials are expensed at the time the inventories are packaged for the clinical trials.
Property and Equipment, Net 
Property and Equipment, Net
Property and equipment are recorded at cost, less accumulated depreciation and amortization. Equipment is depreciated using the straight-line method over their estimated useful lives of three years and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the lease term, whichever is shorter. Leased buildings under build-to-suit lease arrangements are capitalized and included in property and equipment when we are involved in the construction of the structural improvements or take construction risk prior to the commencement of the lease. Upon completion of the construction under the build-to-suit leases, we assess whether those arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If we continue to be the deemed owner, the facilities would be accounted for as financing leases.
Impairment of Long-Lived Assets 
Impairment of Long-Lived Assets
We account for long-lived assets in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable.
Deferred Rent 
Deferred Rent
Rent expense is recorded on a straight-line basis over the initial term of the lease. The difference between rent expense accrued and amounts paid under lease agreements is recorded as deferred rent and is included in accrued expenses and other long-term liabilities, as applicable, in the accompanying consolidated balance sheets.
Comprehensive Income/Loss 
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity during the period from transactions and other events and circumstances from non-owner sources.
Revenue Recognition 
Revenue Recognition
We generate revenues from product sales and payments received under collaborative agreements. Collaborative agreement payments may include nonrefundable fees at the inception of the agreements, license fees, milestone and event-based payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk rHuPH20, and/or royalties on sales of products resulting from collaborative arrangements.
We recognize revenues in accordance with the authoritative guidance for revenue recognition. We recognize revenue when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectibility is reasonably assured.
Product Sales, Net
Hylenex Recombinant
We sell Hylenex recombinant in the U.S. to wholesale pharmaceutical distributors, who sell the product to hospitals and other end-user customers. Sales to wholesalers provide for selling prices that are fixed on the date of sale, although we offer discounts to certain group purchasing organizations (“GPOs”), hospitals and government programs. The wholesalers take title to the product, bear the risk of loss of ownership and have economic substance to the inventory. Further, we have no significant obligations for future performance to generate pull-through sales.
We have developed sufficient historical experience and data to reasonably estimate future returns and chargebacks of Hylenex recombinant. As a result, we recognize Hylenex recombinant product sales and related cost of product sales at the time title transfers to the wholesalers.
Upon recognition of revenue from product sales of Hylenex recombinant, we record certain sales reserves and allowances as a reduction to gross revenue. These reserves and allowances include:
•
Product Returns. We allow the wholesalers to return product that is damaged or received in error. In addition, we accept unused product to be returned beginning six months prior to and ending twelve months following product expiration. Our estimates for expected returns of expired products are based primarily on an ongoing analysis of historical return patterns.
•
Distribution Fees. The distribution fees, based on contractually determined rates, arise from contractual agreements we have with certain wholesalers for distribution services they provide with respect to Hylenex recombinant. These fees are generally a fixed percentage of the price of the product purchased by the wholesalers.
•
Prompt Payment Discounts. We offer cash discounts to certain wholesalers as an incentive to meet certain payment terms. We estimate prompt payment discounts based on contractual terms, historical utilization rates, as available, and our expectations regarding future utilization rates.    
•
Other Discounts and Fees. We provide discounts to end-user members of certain GPOs under collective purchasing contracts between us and the GPOs. We also provide discounts to certain hospitals, who are members of the GPOs, with which we do not have contracts. The end-user members purchase products from the wholesalers at a contracted discounted price, and the wholesalers then charge back to us the difference between the current retail price and the price the end-users paid for the product. We also incur GPO administrative service fees for these transactions. In addition, we provide predetermined discounts under certain government programs. Our estimate for these chargebacks and fees takes into consideration contractual terms, historical utilization rates, as available, and our expectations regarding future utilization rates.
Allowances for product returns and chargebacks are based on amounts owed or to be claimed on the related sales. We believe that our estimated product returns for Hylenex recombinant requires the use of judgment and is subject to change based on our experience and certain quantitative and qualitative factors. In order to develop a methodology to reliably estimate future returns and provide a basis for recognizing revenue on sales to wholesale distributors, we analyze many factors, including, without limitation: (1) actual Hylenex recombinant product return history, taking into account product expiration dating at the time of shipment, (2) re-order activities of the wholesalers as well as their customers and (3) levels of inventory in the wholesale channel. We have monitored actual return history on an individual product lot basis since product launch. We consider the dating of product at the time of shipment into the distribution channel and changes in the estimated levels of inventory within the distribution channel to estimate our exposure to returned product. We also consider historical chargebacks activity and current contract prices to estimate our exposure to returned product. Based on such data, we believe we have the information needed to reasonably estimate product returns and chargebacks.
We recognize product sales reserves and allowances as a reduction of product sales in the same period the related revenue is recognized. Because of the shelf life of Hylenex recombinant and our lengthy return period, there may be a significant period of time between when the product is shipped and when we issue credits on returned product. If actual product return results differ from our estimates, we will be required to make adjustments to these allowances in the future, which could have an effect on product sales revenue and earnings in the period of adjustments.
Bulk rHuPH20
Subsequent to receiving marketing approval from the FDA or comparable regulatory agencies in foreign countries, sales of bulk rHuPH20 for use in collaboration commercial products are recognized as product sales when the materials have met all the specifications required for the customer’s acceptance and title and risk of loss have transferred to the customer. Following the receipt of European marketing approvals of Roche’s Herceptin SC product in August 2013 and MabThera® SC product in March 2014 and Baxalta’s HYQVIA product in May 2013, revenue from the sales of bulk rHuPH20 for these collaboration products has been recognized as product sales.
Revenues under Collaborative Agreements
We have entered into license and collaboration agreements under which our collaborators obtained worldwide rights for the use of our proprietary rHuPH20 enzyme in the development and commercialization of their biologic compounds identified as targets. These agreements may also contain other elements. Pursuant to the terms of these agreements, collaborators could be required to make various payments to us for each target, including nonrefundable upfront license fees, exclusivity fees, payments based on achievement of specified milestones designated in the collaborative agreements, annual maintenance fees, reimbursements of research and development services, payments for supply of bulk rHuPH20 used by the collaborator and/or royalties on sales of products resulting from collaborative agreements.
In order to account for the multiple-element arrangements, we identify the deliverables included within the collaborative agreement and evaluate which deliverables represent units of accounting. We then determine the appropriate method of revenue recognition for each unit based on the nature and timing of the delivery process. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation. The deliverables under our collaborative agreements include (i) the license to our rHuPH20 technology, (ii) at the collaborator’s request, research and development services which are reimbursed at contractually determined rates, and (iii) at the collaborator’s request, supply of bulk rHuPH20 which is reimbursed at our cost plus a margin. A delivered item is considered a separate unit of accounting when the delivered item has value to the collaborator on a standalone basis based on the consideration of the relevant facts and circumstances for each arrangement. We base this determination on the collaborators’ ability to use the delivered items on their own without us supplying undelivered items, which we determine taking into consideration factors such as the research capabilities of the collaborator, the availability of research expertise in this field in the general marketplace, and the ability to procure the supply of bulk rHuPH20 from the marketplace.
Arrangement consideration is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (“VSOE”) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists, we use our best estimate of the selling price for the deliverable. The amount of allocable arrangement consideration is limited to amounts that are not contingent upon the delivery of additional items or meeting other specified performance conditions. The consideration received is allocated among the separate units of accounting and the applicable revenue recognition criteria are applied to each of the separate units. Changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement.
Nonrefundable upfront license fees are recognized upon delivery of the license if facts and circumstances dictate that the license has standalone value from the undelivered items, which generally include research and development services and the manufacture of bulk rHuPH20, the relative selling price allocation of the license is equal to or exceeds the upfront license fee, persuasive evidence of an arrangement exists, our price to the collaborator is fixed or determinable and collectibility is reasonably assured. Upfront license fees are deferred if facts and circumstances dictate that the license does not have standalone value. The determination of the length of the period over which to defer revenue is subject to judgment and estimation and can have an impact on the amount of revenue recognized in a given period.
When collaborators have rights to elect additional targets, the rights are assessed as to whether they represent deliverables at the inception of the arrangement. In assessing these contingent deliverables, we consider whether the right is a substantive option. We consider a right to be a substantive option if the election of the additional targets is not essential to the functionality of the other elements in the arrangement and if we are truly at risk of the right being exercised. If the right is determined to be a substantive option, we further consider whether the right is priced at a significant and incremental discount that should be accounted for as an element of the arrangement. If a right is determined to be a substantive option and is not priced at a significant and incremental discount, it is not treated as a deliverable in the arrangement and receives no allocation at the inception of the arrangement of the original arrangement consideration. The right is then accounted for when and if it is exercised.
Certain of our collaborative agreements provide for milestone payments upon achievement of development and regulatory events and/or specified sales volumes of commercialized products by the collaborator. We account for milestone payments in accordance with the provisions of ASU No. 2010-17, Revenue Recognition - Milestone Method (“Milestone Method of Accounting”). We recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following criteria:
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.
A milestone is defined as an event (i) that can only be achieved based in whole or in part on either the entity’s performance or on the occurrence of a specific outcome resulting from the entity’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved, and (iii) that would result in additional payments being due to the vendor.
Reimbursements of research and development services are recognized as revenue during the period in which the services are performed as long as there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the related receivable is reasonably assured. Revenue from the manufacture of bulk rHuPH20 is recognized when the materials have met all specifications required for the collaborator’s acceptance and title and risk of loss have transferred to the collaborator. We do not directly control when any collaborator will request research and development services or supply of bulk rHuPH20; therefore, we cannot predict when we will recognize revenues in connection with research and development services and supply of bulk rHuPH20.
Since we receive royalty reports 60 days after quarter end, royalty revenue from sales of collaboration products by our collaborators is recognized in the quarter following the quarter in which the corresponding sales occurred.
The collaborative agreements typically provide the collaborators the right to terminate such agreement in whole or on a product-by-product or target-by-target basis at any time upon 30 to 90 days prior written notice to us. There are no performance, cancellation, termination or refund provisions in any of our collaborative agreements that contain material financial consequences to us.
Cost of Product Sales 
Cost of Product Sales
Cost of product sales consists primarily of raw materials, third-party manufacturing costs, fill and finish costs, freight costs, internal costs and manufacturing overhead associated with the production of Hylenex recombinant and bulk rHuPH20 for use in approved collaboration products. Cost of product sales also consists of the write-down of excess, dated and obsolete inventories and the write-off of inventories that do not meet certain product specifications, if any.
Research and Development Expense 
Research and Development Expenses
Research and development expenses include salaries and benefits, facilities and other overhead expenses, external clinical trial expenses, research related manufacturing services, contract services and other outside expenses. Research and development expenses are charged to operating expenses as incurred when these expenditures relate to our research and development efforts and have no alternative future uses. After receiving approval from the FDA or comparable regulatory agencies in foreign countries for a product, costs related to purchases and manufacturing of bulk rHuPH20 for such product are capitalized as inventory. The manufacturing costs of bulk rHuPH20 for the collaboration products, Herceptin SC, MabThera SC and HYQVIA, incurred after the receipt of marketing approvals are capitalized as inventory.
We are obligated to make upfront payments upon execution of certain research and development agreements. Advance payments, including nonrefundable amounts, for goods or services that will be used or rendered for future research and development activities are deferred. Such amounts are recognized as expense as the related goods are delivered or the related services are performed or such time when we do not expect the goods to be delivered or services to be performed.
Milestone payments that we make in connection with in-licensed technology for a particular research and development project that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic value are expensed as research and development costs at the time the costs are incurred.
Clinical Trial Expenses 
Clinical Trial Expenses
Payments in connection with our clinical trials are often made under contracts with multiple contract research organizations that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee, unit price or on a time and materials basis. A portion of our obligation to make payments under these contracts depends on factors such as the successful enrollment or treatment of patients or the completion of other clinical trial milestones.
Expenses related to clinical trials are accrued based on our estimates and/or representations from service providers regarding work performed, including actual level of patient enrollment, completion of patient studies and progress of the clinical trials. Other incidental costs related to patient enrollment or treatment are accrued when reasonably certain. If the amounts we are obligated to pay under our clinical trial agreements are modified (for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), we adjust our accruals accordingly on a prospective basis. Revisions to our contractual payment obligations are charged to expense in the period in which the facts that give rise to the revision become reasonably certain. Historically, such revisions to our clinical trial expense accruals have not had a material impact on our consolidated results of operations or financial position.
Share-Based Payments 
Share-Based Compensation
We record compensation expense associated with stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and RSUs with performance conditions (“PRSUs”) in accordance with the authoritative guidance for stock-based compensation. The cost of employee services received in exchange for an award of an equity instrument is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period of the award. Share-based compensation expense for an award with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized and any previously recognized compensation expense is reversed. Forfeitures are recognized as a reduction of share-based compensation expense as they occur.
Income Taxes 
Income Taxes
We provide for income taxes using the liability method. Under this method, deferred income tax assets and liabilities are determined based on the differences between the financial statement carrying amounts of existing assets and liabilities at each year end and their respective tax bases and are measured using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Significant judgment is required by management to determine our provision for income taxes, our deferred tax assets and liabilities, and the valuation allowance to record against our net deferred tax assets, which are based on complex and evolving tax regulations throughout the world. Deferred tax assets and other tax benefits are recorded when it is more likely than not that the position will be sustained upon audit.
Net Loss Per Share 
Net Loss Per Share
Basic net loss per common share is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. Outstanding stock options, unvested RSAs, unvested RSUs and unvested PRSUs are considered common stock equivalents and are only included in the calculation of diluted earnings per common share when net income is reported and their effect is dilutive.
Segment Information 
Segment Information
We operate our business in one segment, which includes all activities related to the research, development and commercialization of our proprietary enzymes. This segment also includes revenues and expenses related to (i) research and development and bulk rHuPH20 manufacturing activities conducted under our collaborative agreements with third parties and (ii) product sales of Hylenex recombinant. The chief operating decision-maker reviews the operating results on an aggregate basis and manages the operations as a single operating segment.
Adoption of Recent Accounting Pronouncements 
Adoption and Pending Adoption of Recent Accounting Pronouncements
The following table provides a brief description of recently issued accounting standards, those adopted in the current year and those not yet adopted:
Standard
 
Description
 
Effective Date
 
Effect on the Financial
Statements or Other Significant Matters
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.
 
The new guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount.
 
Adopted on January 1, 2016.
 
There was no material impact on our consolidated financial statements and related disclosures.
 
 
 
 
 
 
 
Standard
 
Description
 
Effective Date
 
Effect on the Financial
Statements or Other Significant Matters
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes.
 
The new guidance requires companies to classify all deferred tax assets and liabilities as non-current on the balance sheet instead of separating deferred taxes into current and non-current amounts.
 
Adopted on January 1, 2016.
 
There was no material impact on our consolidated financial statements and related disclosures.
 
 
 
 
 
 
 
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation.
 
The new guidance changes certain aspects of accounting for share-based payments to employees and involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Specifically, the new guidance requires that all income tax effects of share-based awards be recognized as income tax expense or benefit in the reporting period in which they occur. Additionally, the new guidance amends existing guidance to allow forfeitures of share-based awards to be recognized as they occur.
 
Adopted on January 1, 2016.
 
The cumulative effect of adoption was a decrease of $0.3 million to both additional paid-in capital and accumulated deficit.
 
 
 
 
 
 
 
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements — Going Concern.
 
The new guidance requires, in connection with preparing financial statements for each annual and interim reporting period, an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable).
 
December 31, 2016.
 
There was no material impact on our consolidated financial statements and related disclosures in the current period. In an annual or interim reporting period where conditions or events exist that raise substantial double about our ability to continue as a going concern, applicable disclosure will be provided.
 
 
 
 
 
 
 
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 is not expected to have a material impact on our consolidated financial position or results of operations.
 
 
 
 
 
 
 
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 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 financial statements at this time.

 
 
 
 
 
 
 
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. Early adoption is permitted.
 
We are currently evaluating the effect that the updated standard will have on our consolidated statement of cash flows.
 
 
 
 
 
 
 
Standard
 
Description
 
Effective Date
 
Effect on the Financial
Statements or Other Significant Matters
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 as 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 the 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.
Summary of Significant Accounting Policies Fair Value of Financial Instruments (Tables)
Fair Value, Assets Measured on Recurring Basis [Table Text Block]
The following table summarizes, by major security type, our cash equivalents and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):
 
 
December 31, 2016
 
December 31, 2015
 
 
Level 1
 
Level 2
 
Total estimated fair value
 
Level 1
 
Level 2
 
Total estimated fair value
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
60,916

 
$
—

 
$
60,916

 
$
38,595

 
$
—

 
$
38,595

 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale marketable
   securities:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
 
—

 
40,207

 
40,207

 
—

 
62,052

 
62,052

U.S. Treasury securities
 
94,010

 
—

 
94,010

 
—

 
—

 
—

Commercial paper
 
—

 
4,000

 
4,000

 
—

 
2,995

 
2,995

 
 
$
154,926

 
$
44,207

 
$
199,133

 
$
38,595

 
$
65,047

 
$
103,642

Summary of Significant Accounting Policies Concentrations of Credit Risk (Tables)
Schedules of Concentration of Risk, by Risk Factor [Table Text Block]
The following table indicates the percentage of total revenues in excess of 10% with any single customer:
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Roche
 
63%
 
42%
 
57%
Baxalta
 
12%
 
7%
 
3%
Lilly
 
6%
 
19%
 
—
AbbVie
 
4%
 
17%
 
—
Janssen
 
2%
 
1%
 
20%
We attribute revenues under collaborative agreements, including royalties, to the individual countries where the collaborator is headquartered. We attribute revenues from product sales to the individual countries to which the product is shipped. Worldwide revenues from external customers are summarized by geographic location in the following table (in thousands):
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
United States
 
$
52,292

 
$
77,149

 
$
31,397

Switzerland
 
93,067

 
57,136

 
42,791

All other foreign
 
1,332

 
772

 
1,146

Total revenues
 
$
146,691

 
$
135,057

 
$
75,334

Marketable Securities (Tables)
Marketable Securities [Table Text Block]
Available-for-sale marketable securities consisted of the following (in thousands):
 
 
December 31, 2016
Description
 
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

 
 
December 31, 2015
Description
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Corporate debt securities
 
$
62,151

 
$
—

 
$
(99
)
 
$
62,052

Commercial paper
 
2,995

 
—

 
—

 
2,995

 
 
$
65,146

 
$
—

 
$
(99
)
 
$
65,047

Collaborative Agreements Collaborative Agreements (Tables)
Revenue Recognition, Multiple-deliverable Arrangements [Table Text Block] 
Payments received from Roche, excluding royalties and reimbursements for providing research and development services and supplying bulk rHuPH20, since inception of the collaboration agreement are as follows (in thousands):
 
As of
December 31, 2016
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

Revenue Recognition, Multiple-deliverable Arrangements [Table Text Block] 
Payments received from Baxalta, excluding royalties and reimbursements for providing research and development services and supplying bulk rHuPH20, since inception of the collaboration agreement are as follows (in thousands):
 
As of
December 31, 2016
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

Revenue Recognition, Multiple-deliverable Arrangements [Table Text Block] 
Payments received from other collaborators for upfront license fees, license fees for the election of additional targets, maintenance fees and event-based payments since inception of the collaboration agreements are as follows (in thousands):
 
As of
December 31, 2016
Lilly
$
33,000

AbbVie
29,000

Janssen
15,250

Pfizer
16,500

Total payments received
$
93,750

Certain Balance Sheet Items (Tables)
Summary of Accounts Receivable, Net 
Accounts receivable, net consisted of the following (in thousands):
 
 
December 31,
2016
 
December 31,
2015
Accounts receivable from revenues under collaborative agreements
 
$
6,151

 
$
25,939

Accounts receivable from product sales to collaborators
 
7,854

 
4,996

Accounts receivable from other product sales
 
2,234

 
2,442

Total accounts receivable
 
16,239

 
33,377

Allowance for distribution fees and discounts
 
(559
)
 
(967
)
Total accounts receivable, net
 
$
15,680

 
$
32,410

Summary of Inventories 
Inventories consisted of the following (in thousands):
 
 
December 31,
2016
 
December 31,
2015
Raw materials
 
$
761

 
$
677

Work-in-process
 
12,850

 
8,481

Finished goods
 
1,012

 
331

Total inventories
 
$
14,623

 
$
9,489

Prepaid Expenses and Other Assets, Current 
Prepaid expenses and other assets consisted of the following (in thousands):
 
 
December 31,
2016
 
December 31,
2015
Prepaid manufacturing expenses
 
$
9,663

 
$
16,155

Prepaid research and development expenses
 
8,613

 
9,225

Other prepaid expenses
 
1,661

 
1,198

Other assets
 
1,530

 
530

Total prepaid expenses and other assets
 
21,467

 
27,108

Less long-term portion
 
219

 
5,574

Total prepaid expenses and other assets, current
 
$
21,248

 
$
21,534

Summary of Property and Equipment, Net 
Property and equipment, net consisted of the following (in thousands):
 
 
December 31,
2016
 
December 31,
2015
Research equipment
 
$
10,479

 
$
9,666

Computer and office equipment
 
3,373

 
2,570

Leasehold improvements
 
2,331

 
2,025

Subtotal
 
16,183

 
14,261

Accumulated depreciation and amortization
 
(11,919
)
 
(10,318
)
Property and equipment, net
 
$
4,264

 
$
3,943


Schedule of Accrued Expenses 
Accrued expenses consisted of the following (in thousands):
 
 
December 31,
2016
 
December 31,
2015
Accrued compensation and payroll taxes
 
$
11,539

 
$
8,636

Accrued outsourced research and development expenses
 
9,522

 
8,617

Accrued outsourced manufacturing expenses
 
3,225

 
6,205

Other accrued expenses
 
4,552

 
4,118

Total accrued expenses
 
28,838

 
27,576

Less long-term accrued outsourced research and development expenses
 
17

 
784

     Total accrued expenses, current
 
$
28,821

 
$
26,792

Summary of Deferred Revenue 
Deferred revenue consisted of the following (in thousands):
 
 
December 31,
2016
 
December 31,
2015
Collaborative agreements
 
 
 
 
License fees and event-based payments:
 
 
 
 
Roche
 
$
35,709

 
$
39,038

Other
 
8,209

 
9,724

 
 
43,918

 
48,762

Reimbursement for research and development services
 
700

 
4,461

Total deferred revenue
 
44,618

 
53,223

Less current portion
 
4,793

 
9,304

Deferred revenue, net of current portion
 
$
39,825

 
$
43,919

Long-Term Debt, Net (Tables)
Schedule of future maturities and interest payments
Future maturities and interest payments of long-term debt as of December 31, 2016, are as follows (in thousands):
2017
 
$
37,338

2018
 
94,406

2019
 
105,758

2020
 
24,103

2021
 
4,755

Total minimum payments
 
266,360

Less amount representing interest
 
(45,208
)
Gross balance of long-term debt
 
221,152

Less unamortized debt discount
 
(4,531
)
Present value of long-term debt
 
216,621

Less current portion of long-term debt
 
(17,393
)
Long-term debt, less current portion and unamortized debt discount
 
$
199,228

Equity Incentive Plans (Tables)
Share-based compensation expense allocation 
Total share-based compensation expense related to share-based awards was comprised of the following (in thousands):
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Research and development
 
$
11,470

 
$
9,795

 
$
7,939

Selling, general and administrative
 
14,115

 
11,043

 
7,335

Share-based compensation expense
 
$
25,585

 
$
20,838

 
$
15,274


Share-based compensation expense by type of share-based award (in thousands):
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Stock options
 
$
16,544

 
$
11,145

 
$
7,884

RSAs, RSUs and PRSUs
 
9,041

 
9,693

 
7,390

 
 
$
25,585

 
$
20,838

 
$
15,274

Total unrecognized estimated share-based compensation expense 
Total unrecognized estimated compensation expense by type of award and the weighted average remaining requisite service period over which such expense is expected to be recognized (in thousands, unless otherwise noted):
 
 
December 31, 2016
 
 
Unrecognized
Expense
 
Remaining
Weighted Average
Recognition Period
(years)
Stock options
 
$
42,592

 
2.8
RSAs
 
$
8,857

 
2.3
RSUs
 
$
8,442

 
2.6
Summary of stock option award activity 
A summary of our stock option award activity as of and for the years ended December 31, 2016, 2015 and 2014 is as follows: 

 
Shares
Underlying
Stock Options

Weighted
Average Exercise
Price per Share

Weighted
Average
Remaining
Contractual
Term (years)
 
Aggregate
Intrinsic
Value
Outstanding at January 1, 2014
 
6,700,915

 
$7.11
 
 
 
 
Granted
 
2,271,143

 
$13.02
 
 
 
 
Exercised
 
(1,432,206
)
 
$5.43
 
 
 
 
Canceled/forfeited
 
(1,185,960
)
 
$9.39
 
 
 
 
Outstanding at December 31, 2014
 
6,353,892

 
$9.18
 
 
 
 
Granted
 
3,973,604

 
$16.26
 
 
 
 
Exercised
 
(1,926,368
)
 
$7.49
 
 
 
 
Canceled/forfeited
 
(407,936
)
 
$10.64
 
 
 
 
Outstanding at December 31, 2015
 
7,993,192

 
$13.03
 
 
 
 
Granted
 
4,466,306

 
$9.03
 
 
 
 
Exercised
 
(413,248
)
 
$6.88
 
 
 
 
Canceled/forfeited
 
(955,054
)
 
$12.42
 
 
 
 
Outstanding at December 31, 2016
 
11,091,196

 
$11.70
 
7.8
 

$9.4
 million
Vested and expected to vest at December 31, 2016
 
11,091,196

 
$11.70
 
7.8
 

$9.4
 million
Exercisable at December 31, 2016
 
4,230,638

 
$11.77
 
6.2
 

$4.7
 million
Stock options valuation assumptions used in black-scholes model 
Assumptions used in the Black-Scholes model were as follows:
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Expected volatility
 
67.5-71.9%


66.2-67.4%


66.6-71.8%

Average expected term (in years)
 
5.4


5.6


5.7

Risk-free interest rate
 
1.00-1.90%


1.34-1.92%


1.73-2.04%

Expected dividend yield
 
0
%

0
%

0
%
Summary of restricted stock award activity 
The following table summarizes our RSA activity during the years ended December 31, 2016, 2015 and 2014:

 
Number of
Shares

Weighted
Average
Grant Date
Fair Value
Unvested at January 1, 2014
 
632,871

 
$8.23
Granted
 
1,055,122

 
$11.15
Vested
 
(263,765
)
 
$8.33
Forfeited
 
(265,777
)
 
$10.86
Unvested at December 31, 2014
 
1,158,451

 
$10.26
Granted
 
515,695

 
$15.00
Vested
 
(721,990
)
 
$10.11
Forfeited
 
(140,676
)
 
$11.84
Unvested at December 31, 2015
 
811,480

 
$13.13
Granted
 
968,652

 
$8.41
Vested
 
(296,831
)
 
$12.76
Forfeited
 
(180,198
)
 
$10.33
Unvested at December 31, 2016
 
1,303,103

 
$10.09
Summary of restricted stock unit activity 
The following table summarizes our RSU activity during the years ended December 31, 2016, 2015 and 2014:

 
Number of
Shares

Weighted
Average
Grant Date
Fair Value

Weighted
Average
Remaining
Contractual
Term (yrs)
 
Aggregate
Intrinsic
Value
Unvested at January 1, 2014
 
736,355

 
$9.06
 
 
 
 
Granted
 
305,535

 
$13.71
 
 
 
 
Vested
 
(194,368
)
 
$9.12
 
 
 
 
Forfeited
 
(385,200
)
 
$8.84
 
 
 
 
Outstanding at December 31, 2014
 
462,322

 
$11.12
 
 
 
 
Granted
 
422,492

 
$14.75
 
 
 
 
Vested
 
(134,088
)
 
$10.93
 
 
 
 
Forfeited
 
(84,512
)
 
$10.86
 
 
 
 
Outstanding at December 31, 2015
 
666,214

 
$13.49
 
 
 
 
Granted
 
796,582

 
$8.17
 
 
 
 
Vested
 
(218,279
)
 
$12.74
 
 
 
 
Forfeited
 
(77,948
)
 
$10.99
 
 
 
 
Outstanding at December 31, 2016
 
1,166,569

 
$10.16
 
1.4
 

$11.5
 million
Summary of performance-based unit activity 
The following table summarizes our PRSU activity during the years ended December 31, 2016, 2015 and 2014:
 
 
Number of
Shares
 
Weighted
Average
Grant Date
Fair Value
 
Weighted
Average
Remaining
Contractual
Term (yrs)
 
Aggregate
Intrinsic
Value
Outstanding at January 1, 2014
 
—

 
$
—

 
 
 
 
Granted
 
540,742

 
$
8.91

 
 
 
 
Vested
 
—

 
$
—

 
 
 
 
Forfeited
 
(109,504
)
 
$
8.91

 
 
 
 
Outstanding at December 31, 2014
 
431,238

 
$
8.91

 
 
 
 
Granted
 
118,209

 
$
11.19

 
 
 
 
Vested
 
(83,380
)
 
$
9.48

 
 
 
 
Forfeited
 
(156,360
)
 
$
9.21

 
 
 
 
Outstanding at December 31, 2015
 
309,707

 
$
9.48

 
 
 
 
Granted
 
—

 
$
—

 
 
 
 
Vested
 
(30,037
)
 
$
9.49

 
 
 
 
Forfeited
 
(79,415
)
 
$
9.44

 
 
 
 
Outstanding at December 31, 2016
 
200,255

 
$
9.49

 
0.3
 

$2.0
 million
Commitments and Contingencies (Tables)
Schedule of future minimum rental payments for operating leases
Approximate annual future minimum operating lease payments as of December 31, 2016 are as follows (in thousands): 
Year:
 
Operating
Leases
2017
 
$
2,622

2018
 
522

2019
 
425

2020
 
426

2021
 
36

Total minimum lease payments
 
$
4,031

Income Taxes (Tables)
Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block] 
Total income (loss) before income taxes summarized by region were as follows (in thousands):
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
United States
 
$
6,384

 
$
11,724

 
$
(30,885
)
Foreign
 
(108,245
)
 
(43,955
)
 
(37,490
)
Net loss before income taxes
 
$
(101,861
)
 
$
(32,231
)
 
$
(68,375
)
Components of net deferred tax assets 
Significant components of our net deferred tax assets/(liabilities) were as follows (in thousands).
 
 
December 31,

 
2016

2015
Deferred tax assets:
 



Net operating loss carryforwards
 
$
103,296

 
$
104,505

Deferred revenue
 
15,354

 
16,344

Research and development and orphan drug credits
 
73,701

 
54,846

Share-based compensation
 
8,844

 
6,286

Other, net
 
2,515

 
906


 
203,710

 
182,887

Valuation allowance for deferred tax assets
 
(203,370
)
 
(182,507
)
Deferred tax assets, net of valuation
 
340

 
380

Deferred tax liabilities:
 
 
 
 
Depreciation
 
(340
)
 
(380
)
Total deferred tax liabilities
 
(340
)
 
(380
)
Net deferred tax asset (liability)
 
$
—

 
$
—

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block] 
Income tax expense was comprised of the following components (in thousands):
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Current federal
 
$
1,145

 
$
—

 
$
—

Current state
 
17

 
—

 
—

 
 
$
1,162

 
$
—

 
$
—

Schedule of income tax reconciliation 
The provision for income taxes on earnings subject to income taxes differs from the statutory federal income tax rate due to the following (in thousands):
 
 
Year Ended December 31,

 
2016

2015

2014
Federal income tax benefit at 34%
 
$
(34,633
)
 
$
(10,959
)
 
$
(23,247
)
State income tax benefit, net of federal income tax impact
 
(653
)
 
5,524

 
(1,761
)
Increase in valuation allowance
 
11,252

 
4,045

 
16,998

Foreign income subject to tax at other than federal statutory rate
 
36,803

 
14,945

 
12,747

Shared-based compensation
 
3,735

 
(4,990
)
 
(529
)
Non-deductible expenses and other
 
698

 
6,457

 
1,069

Research and development credits, net
 
(1,084
)
 
(3,861
)
 
(5,277
)
Orphan drug credits, net of federal add back
 
(14,956
)
 
(11,161
)
 
—


 
$
1,162

 
$
—

 
$
—

Summary of Positions for which Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Table Text Block] 
The following table summarizes the activity related to our unrecognized tax benefits (in thousands):
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Gross unrecognized tax benefits at beginning of period
 
$
4,898

 
$
—

 
$
—

Increases in tax positions for prior years
 
5,615

 
—

 
—

Decreases in tax positions for prior years
 
(4,898
)
 
—

 
—

Increases in tax positions for current year
 
7,184

 
4,898

 
—

Gross unrecognized tax benefits at end of period
 
$
12,799

 
$
4,898

 
$
—

Summary of Operating Loss Carryforwards [Table Text Block] 
The following table shows key expiration dates of the federal and California net operating loss carryforwards (in thousands):
 
 
 
 
Expires in:
 
 
Net Operating Loss
 
2017
 
2021 and beyond
 
2028 and beyond
Federal
 
$
268,703

 
$
—

 
$
268,703

 
$
—

California
 
$
249,783

 
$
10,434

 
$
—

 
$
239,349

Summary of Unaudited Quarterly Financial Information (Tables)
Schedule of quarterly financial information
The following is a summary of our unaudited quarterly results for the years ended December 31, 2016 and 2015 (in thousands):
 
 
Quarter Ended
2016 (Unaudited):
 
March 31,
 
June 30,
 
September 30,
 
December 31,
Total revenues
 
$
42,499

 
$
33,336

 
$
31,853

 
$
39,003

Gross profit on product sales
 
$
5,178

 
$
5,391

 
$
4,197

 
$
5,420

Total operating expenses
 
$
58,668

 
$
55,059

 
$
54,596

 
$
61,578

Net loss
 
$
(19,816
)
 
$
(26,875
)
 
$
(28,946
)
 
$
(27,386
)
Net loss per share, basic and diluted
 
$
(0.16
)
 
$
(0.21
)
 
$
(0.23
)
 
$
(0.21
)
Shares used in computing basic and diluted net loss per share
 
127,615

 
127,958

 
128,154

 
128,185

 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
2015 (Unaudited):
 
March 31,
 
June 30,
 
September 30,
 
December 31,
Total revenues(1) (2)
 
$
18,666

 
$
43,384

 
$
20,780

 
$
52,227

Gross profit on product sales
 
$
3,366

 
$
4,198

 
$
4,121

 
$
5,152

Total operating expenses
 
$
32,577

 
$
39,153

 
$
44,017

 
$
46,762

Net income (loss)
 
$
(15,108
)
 
$
3,019

 
$
(24,460
)
 
$
4,318

Net income (loss) per share:
 
 
 
 
 
 
 
 
Basic
 
$
(0.12
)
 
$
0.02

 
$
(0.19
)
 
$
0.03

Diluted
 
$
(0.12
)
 
$
0.02

 
$
(0.19
)
 
$
0.03

Shares used in computing net income (loss) per share:
 
 
 
 
 
 
 
 
Basic
 
125,299

 
126,144

 
126,921

 
127,197

Diluted
 
125,299

 
134,507

 
126,921

 
129,248

_______________
(1)
Revenues for the quarter ended June 30, 2015 included $23.0 million in revenue under collaborative agreements from the AbbVie Collaboration.
(2)
Revenues for the quarter ended December 31, 2015 included $25.0 million in revenue under collaborative agreements from the Lilly Collaboration.
Summary of Significant Accounting Policies Restricted Cash (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Restricted Cash [Abstract]
 
 
Restricted cash
$ 500 
$ 500 
Summary of Significant Accounting Policies Fair Value of Financial Instruments (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale Securities
$ 138,217 
$ 65,047 
Investments, Fair Value Disclosure
199,133 
103,642 
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount
0 
0 
Level 1
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Investments, Fair Value Disclosure
154,926 
38,595 
Level 2
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Investments, Fair Value Disclosure
44,207 
65,047 
Level 3
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Investments, Fair Value Disclosure
0 
0 
Cash Equivalents
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Cash and Cash Equivalents, Fair Value Disclosure
60,916 
38,595 
Cash Equivalents |
Level 1
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Cash and Cash Equivalents, Fair Value Disclosure
60,916 
38,595 
Corporate Debt Securities
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale Securities
40,207 
62,052 
Corporate Debt Securities |
Level 2
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale Securities
40,207 
62,052 
US Treasury Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale Securities
94,010 
0 
US Treasury Securities [Member] |
Level 1
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale Securities
94,010 
0 
Commercial Paper [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale Securities
4,000 
2,995 
Commercial Paper [Member] |
Level 2
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale Securities
$ 4,000 
$ 2,995 
Summary of Significant Accounting Policies Concentrations of Credit Risk, Sources of Supply and Significant Customers (Details) (USD $)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Concentration Risk [Line Items]
 
 
 
Allowance for doubtful accounts
$ 0 
$ 0 
 
Geographic Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Revenue, net
146,691,000 
135,057,000 
75,334,000 
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
10.00% 
 
 
Bulk formulation [Member] |
Accounts Payable |
Supplier Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
13.00% 
20.00% 
 
Number of manufacturers for supply of bulk rHuPH20
2 
 
 
Fill and Finish [Member] |
Accounts Payable |
Supplier Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
2.00% 
4.00% 
 
United States |
Geographic Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Revenue, net
52,292,000 
77,149,000 
31,397,000 
Switzerland |
Geographic Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Revenue, net
93,067,000 
57,136,000 
42,791,000 
All other foreign |
Geographic Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Revenue, net
1,332,000 
772,000 
1,146,000 
Germany
 
 
 
Concentration Risk [Line Items]
 
 
 
Long-Lived assets in foreign countries
$ 100,000 
$ 300,000 
 
Roche and Baxalta [Member] |
Accounts Receivable |
Customer Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
81.00% 
 
 
Roche and Lilly [Member] |
Accounts Receivable |
Customer Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
 
89.00% 
 
Roche [Member] |
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
63.00% 
42.00% 
57.00% 
Baxalta [Member] |
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
12.00% 
7.00% 
3.00% 
Lilly [Member] |
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
6.00% 
19.00% 
0.00% 
AbbVie [Member] |
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
4.00% 
17.00% 
0.00% 
Janssen [Member] |
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
2.00% 
1.00% 
20.00% 
Summary of Significant Accounting Policies Inventories (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Hylenex recombinant
 
 
Inventory, net of reserves
$ 2.3 
$ 1.4 
bulk rHuPH20 [Member]
 
 
Inventory, net of reserves
$ 12.3 
$ 8.2 
Summary of Significant Accounting Policies Revenue Recognition (Details)
12 Months Ended
Dec. 31, 2016
Revenue from External Customer [Line Items]
 
Collaboration agreements, period for termination
90 days 
Minimum [Member]
 
Revenue from External Customer [Line Items]
 
Collaboration agreements, period for termination
30 days 
Maximum [Member]
 
Revenue from External Customer [Line Items]
 
Collaboration agreements, period for termination
90 days 
Period prior to expiration [Member]
 
Revenue from External Customer [Line Items]
 
Period to accept returned unused product
6 months 
Period after expiration [Member]
 
Revenue from External Customer [Line Items]
 
Period to accept returned unused product
12 months 
Summary of Significant Accounting Policies Cost of Product Sales (Details) (USD $)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
bulk rHuPH20 [Member]
Dec. 31, 2012
bulk rHuPH20 [Member]
Product Information [Line Items]
 
 
 
 
 
Manufacturing costs previously recorded as research and development
$ 0 
$ 0 
$ 1,000,000 
 
 
Prior periods manufacturing costs previously recorded as research and development
 
 
 
$ 900,000 
$ 100,000 
Summary of Significant Accounting Policies Research and Development (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Research and Development Arrangement, Contract to Perform for Others [Line Items]
 
 
 
Research and development
$ 150,842 
$ 93,236 
$ 79,696 
In-license technologies [Member]
 
 
 
Research and Development Arrangement, Contract to Perform for Others [Line Items]
 
 
 
Research and development
$ 0 
 
 
Summary of Significant Accounting Policies Net Loss Per Share (Details)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Accounting Policies [Abstract]
 
 
 
Antidilutive securities excluded from the calculation of diluted net loss per common share
13,761,123 
9,780,593 
8,405,903 
Summary of Significant Accounting Policies (Details Textual) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Segment
Dec. 31, 2015
Accounting Policies [Abstract]
 
 
Allowance for doubtful accounts
$ 0 
$ 0 
Estimated useful life of equipment
3 years 
 
Impairment of long lived assets
0 
 
Net deferred tax assets
$ 0 
$ 0 
Number of operating segments
1 
 
Summary of Significant Accounting Policies Adoption of Recent Accounting Pronouncements (Details) (Accounting standards update 2016-09 [Member], USD $)
In Millions, unless otherwise specified
Dec. 31, 2016
Accounting standards update 2016-09 [Member]
 
New Accounting Pronouncement, Early Adoption [Line Items]
 
Cumulative Effect of New Accounting Principle in Period of Adoption
$ 0.3 
Summary of Significant Accounting Policies Pending Adoption of Recent Accounting Pronouncements (Details) (USD $)
12 Months Ended
Dec. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
Revenue, amortization of license payments
$ 4,100,000 
Deferred revenue
$ 43,900,000 
Marketable Securities (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
$ 138,223 
$ 65,146 
Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax
25 
0 
Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax
(31)
(99)
Available-for-sale marketable securities
138,217 
65,047 
Corporate Debt Securities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
40,221 
62,151 
Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax
1 
0 
Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax
(15)
(99)
Available-for-sale marketable securities
40,207 
62,052 
US Treasury Securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
94,002 
 
Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax
24 
 
Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax
(16)
 
Available-for-sale marketable securities
94,010 
 
Commercial Paper [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
4,000 
2,995 
Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax
0 
0 
Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax
0 
0 
Available-for-sale marketable securities
$ 4,000 
$ 2,995 
Marketable Securities Textuals (Details) (USD $)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Marketable Securities [Abstract]
 
 
 
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Fair Value
$ 132,200,000 
 
 
Proceeds from maturities of marketable securities
81,783,000 
79,730,000 
57,301,000 
Realized gain or loss
0 
0 
0 
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year
11 
 
 
Other than Temporary Impairment Losses, Investments
$ 0 
 
 
Collaborative Agreements (Details) (USD $)
12 Months Ended
Dec. 31, 2016
Compound
Dec. 31, 2015
Dec. 31, 2014
Collaborative Agreements (Textual) [Abstract]
 
 
 
Time period to provide notice to terminate agreement
90 days 
 
 
Additional Maximum Proceeds Receivable from License and Collaborative Agreements Upon Achievement of Clinical Development Milestones
$ 62,500,000 
 
 
Additional Maximum Proceeds Receivable From Achievement of Regulatory Milestones
12,000,000 
 
 
Roche [Member]
 
 
 
Collaborative Agreements [Line Items]
 
 
 
Deferred revenue relating to upfront payment license fees, sales-based payments, and annual maintenance fees
35,700,000 
39,000,000 
 
Baxalta [Member]
 
 
 
Collaborative Agreements [Line Items]
 
 
 
Deferred revenue relating to upfront payment license fees, sales-based payments, and annual maintenance fees
8,200,000 
9,000,000 
 
Roche [Member]
 
 
 
Collaborative Agreements [Line Items]
 
 
 
Nonrefundable upfront license fee payment
20,000,000 
 
 
Deferred revenue, revenue recognized
3,300,000 
3,300,000 
3,000,000 
Collaborative Agreements (Textual) [Abstract]
 
 
 
Number of product combinations licensed to develop
13 
 
 
Number of exclusive right targets
3 
 
 
Collaborative agreement target selection period
10 years 
 
 
Number of targets elected
8 
 
 
Number of targets elected, additional exclusive targets
2 
 
 
Number of additional target, optional
10 
 
 
Royalty receivable, duration
10 years 
 
 
Baxalta [Member]
 
 
 
Collaborative Agreements [Line Items]
 
 
 
Nonrefundable upfront license fee payment
10,000,000 
 
 
Deferred revenue, revenue recognized
800,000 
800,000 
800,000 
Collaborative Agreements (Textual) [Abstract]
 
 
 
Royalty receivable, duration
10 years 
 
 
Lilly [Member]
 
 
 
Collaborative Agreements [Line Items]
 
 
 
Nonrefundable upfront license fee payment
33,000,000 
 
 
Collaborative Agreements (Textual) [Abstract]
 
 
 
Number of product combinations licensed to develop
5 
 
 
Number of targets elected, additional exclusive targets
2 
 
 
Number of targets elected, additional semi-exclusive targets
1 
 
 
Number of additional target, optional
2 
 
 
Royalty receivable, duration
10 years 
 
 
Time period to provide notice to terminate agreement
60 days 
 
 
AbbVie [Member]
 
 
 
Collaborative Agreements [Line Items]
 
 
 
Nonrefundable upfront license fee payment
23,000,000 
 
 
Collaborative Agreements (Textual) [Abstract]
 
 
 
Number of product combinations licensed to develop
9 
 
 
Number of targets elected, additional exclusive targets
1 
 
 
Number of additional target, optional
8 
 
 
Royalty receivable, duration
10 years 
 
 
Time period to provide notice to terminate agreement
90 days 
 
 
Janssen [Member]
 
 
 
Collaborative Agreements [Line Items]
 
 
 
Nonrefundable upfront license fee payment
15,300,000 
 
 
Collaborative Agreements (Textual) [Abstract]
 
 
 
Number of product combinations licensed to develop
5 
 
 
Number of targets elected
1 
 
 
Number of additional target, optional
4 
 
 
Royalty receivable, duration
10 years 
 
 
Time period to provide notice to terminate agreement
90 days 
 
 
Pfizer
 
 
 
Collaborative Agreements [Line Items]
 
 
 
Nonrefundable upfront license fee payment
12,500,000 
 
 
Collaborative Agreements (Textual) [Abstract]
 
 
 
Number of product combinations licensed to develop
6 
 
 
Number of targets elected
5 
 
 
Number of returned targets
1 
 
 
Number of additional target, optional
2 
 
 
Royalty receivable, duration
10 years 
 
 
Time period to provide notice to terminate agreement
30 days 
 
 
Pfizer and Janssen
 
 
 
Collaborative Agreements [Line Items]
 
 
 
Milestone payments recognized as revenues
$ 6,000,000 
$ 1,000,000 
$ 0 
Collaborative Agreements Collaborative Agreements Tables (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Roche [Member]
 
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
 
Nonrefundable Upfront License Fee Payment Received Under Collaborative Agreement
$ 20,000 
Amount Received For Additional Exclusive Targets And Annual License Maintenance Fees Under Collaborative Agreement
23,000 
Clinical Development Milestone Payments Received Under Collaborative Agreement
13,000 
Regulatory Milestone Payments Received Under Collaborative Agreement
8,000 
Amount received for sales-based payment
15,000 
Proceeds from Partner of License and Collaborative Agreement
79,000 
Baxalta [Member]
 
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
 
Nonrefundable Upfront License Fee Payment Received Under Collaborative Agreement
10,000 
Regulatory Milestone Payments Received Under Collaborative Agreement
3,000 
Amount received for sales-based payment
4,000 
Proceeds from Partner of License and Collaborative Agreement
17,000 
Lilly [Member]
 
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
 
Nonrefundable Upfront License Fee Payment Received Under Collaborative Agreement
33,000 
Proceeds from Partner of License and Collaborative Agreement
33,000 
AbbVie [Member]
 
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
 
Nonrefundable Upfront License Fee Payment Received Under Collaborative Agreement
23,000 
Proceeds from Partner of License and Collaborative Agreement
29,000 
Janssen [Member]
 
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
 
Nonrefundable Upfront License Fee Payment Received Under Collaborative Agreement
15,300 
Proceeds from Partner of License and Collaborative Agreement
15,250 
Pfizer
 
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
 
Nonrefundable Upfront License Fee Payment Received Under Collaborative Agreement
12,500 
Proceeds from Partner of License and Collaborative Agreement
16,500 
Other collaborators [Member]
 
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
 
Proceeds from Partner of License and Collaborative Agreement
$ 93,750 
Certain Balance Sheet Items Accounts Receivable (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Accounts Receivable, Net [Abstract]
 
 
Accounts receivable from revenues under collaborative agreements
$ 6,151 
$ 25,939 
Accounts receivable from product sales to collaborators
7,854 
4,996 
Accounts receivable from other product sales
2,234 
2,442 
Accounts receivable, gross
16,239 
33,377 
Allowance for distribution fees and discounts
(559)
(967)
Accounts receivable, net
$ 15,680 
$ 32,410 
Certain Balance Sheet Items Inventories (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Summary of Inventories
 
 
Raw materials
$ 761 
$ 677 
Work-in-process
12,850 
8,481 
Finished goods
1,012 
331 
Inventories
$ 14,623 
$ 9,489 
Certain Balance Sheet Items Prepaid Expenses and Other Assets (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Prepaid Expenses and Other Assets Disclosure [Abstract]
 
 
Prepaid manufacturing expense
$ 9,663 
$ 16,155 
Prepaid research and development expenses
8,613 
9,225 
Other prepaid expense
1,661 
1,198 
Other assets
1,530 
530 
Prepaid expenses and other assets
21,467 
27,108 
Less long-term portion
219 
5,574 
Prepaid expenses and other assets
$ 21,248 
$ 21,534 
Certain Balance Sheet Items Property and Equipment, Net (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Summary of property and equipment
 
 
Property and equipment, gross
$ 16,183 
$ 14,261 
Accumulated depreciation and amortization
(11,919)
(10,318)
Property and equipment, net
4,264 
3,943 
Research equipment
 
 
Summary of property and equipment
 
 
Property and equipment, gross
10,479 
9,666 
Computer and office equipment
 
 
Summary of property and equipment
 
 
Property and equipment, gross
3,373 
2,570 
Leasehold improvements
 
 
Summary of property and equipment
 
 
Property and equipment, gross
$ 2,331 
$ 2,025 
Certain Balance Sheet Items Property and Equipment, Net (Textual) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Property and Equipment, Net (Textual) [Abstract]
 
 
 
Depreciation and amortization
$ 2,410 
$ 1,677 
$ 1,762 
Certain Balance Sheet Items Accrued Expenses (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Accrued Liabilities [Abstract]
 
 
Accrued compensation and payroll taxes
$ 11,539 
$ 8,636 
Accrued outsourced research and development expenses
9,522 
8,617 
Accrued outsourced manufacturing expenses
3,225 
6,205 
Other accrued expenses
4,552 
4,118 
Total accrued expenses
28,838 
27,576 
Less long-term accrued outsourced research and development expenses
17 
784 
Total accrued expenses, current
$ 28,821 
$ 26,792 
Certain Balance Sheet Items Deferred Revenue (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Deferred Revenue
 
 
Deferred revenue
$ 43,900 
 
Deferred revenue, current portion
4,793 
9,304 
Deferred revenue, net of current portion
39,825 
43,919 
Roche [Member]
 
 
Deferred Revenue
 
 
Deferred revenue
35,709 
39,038 
Other collaborators [Member]
 
 
Deferred Revenue
 
 
Deferred revenue
8,209 
9,724 
Other collaborative agreements [Member]
 
 
Deferred Revenue
 
 
Deferred revenue
44,618 
53,223 
In-license technologies [Member]
 
 
Deferred Revenue
 
 
Deferred revenue
43,918 
48,762 
Research and Development Arrangement [Member]
 
 
Deferred Revenue
 
 
Deferred revenue
$ 700 
$ 4,461 
Long-Term Debt, Net (Details Textual) (USD $)
12 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2016
Royalty-backed Loan [Member]
Dec. 31, 2013
Secured Debt [Member]
Dec. 31, 2016
Secured Debt [Member]
Dec. 31, 2016
Senior Loans [Member]
Dec. 31, 2016
Minimum [Member]
Royalty-backed Loan [Member]
Dec. 31, 2016
Minimum [Member]
Senior Loans [Member]
Dec. 31, 2016
Maximum [Member]
Royalty-backed Loan [Member]
Dec. 31, 2016
Maximum [Member]
Senior Loans [Member]
Dec. 31, 2016
2016 [Member]
Royalty-backed Loan [Member]
Dec. 31, 2016
2017 [Member]
Royalty-backed Loan [Member]
Dec. 31, 2016
2018 and thereafter [Member]
Royalty-backed Loan [Member]
Dec. 31, 2016
2017 Quarterly Maximum Payment [Member]
Royalty-backed Loan [Member]
Dec. 31, 2016
2018 Quarterly Maximum Payment [Member]
Royalty-backed Loan [Member]
Dec. 31, 2016
2019 Quarterly Maximum Payment [Member]
Royalty-backed Loan [Member]
Dec. 31, 2016
2020 Quarterly Maximum Payment [Member]
Royalty-backed Loan [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Face amount of term loan facility
 
 
 
$ 150,000,000 
 
$ 50,000,000 
$ 70,000,000 
 
 
 
 
 
 
 
 
 
 
 
Fixed interest rate on term loan
 
 
 
8.75% 
 
7.55% 
8.25% 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Description of Variable Rate Basis
 
 
 
plus the three-month LIBOR 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Basis Spread on Variable Rate
 
 
 
 
 
 
 
0.70% 
 
1.50% 
 
 
 
 
 
 
 
 
Debt, Interest Rate
 
 
 
9.71% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Royalty payments to be applied to debt instrument
 
 
 
 
 
 
 
 
 
 
 
0.00% 
50.00% 
100.00% 
 
 
 
 
Debt Instrument, Periodic Payment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13,750,000 
18,750,000 
21,250,000 
22,500,000 
Debt Instrument, Maturity Date, Description
 
 
 
final maturity date of the Royalty-backed Loan will be the earlier of (i) the date when principal and interest is paid in full, (ii) the termination of Halozyme Royalty’s right to receive royalties under the Collaboration Agreements, and (iii) December 31, 2050 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of pre payment fee on term loan
 
 
 
105.00% 
 
 
 
 
1.00% 
 
2.00% 
 
 
 
 
 
 
 
Debt Instrument, Covenant Compliance
 
 
 
in compliance 
 
in compliance 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Costs Capitalized
 
 
 
13,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Increase, Accrued Interest
 
 
 
700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Fee Amount
 
 
 
1,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Issuance Costs, Gross
 
 
 
400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
20,000,000 
5,200,000 
5,600,000 
14,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured Debt
 
 
 
161,800,000 
 
 
55,000,000 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Unamortized Discount
4,531,000 
 
 
1,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument increase
 
 
 
 
20,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maturity date of term loan facility
 
 
 
Dec. 31, 2050 
 
Jan. 01, 2018 
Jan. 01, 2021 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Payment Terms
 
 
 
 
 
interest only payments through January 2016 
interest only payments for the first 18 months 
 
 
 
 
 
 
 
 
 
 
 
Final payment as percent of original principal
 
 
 
 
 
8.50% 
5.50% 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Periodic Payment Terms, Balloon Payment to be Paid
 
 
 
 
 
4,250,000 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Issuance Date
 
 
 
Jan. 26, 2016 
 
 
Jun. 07, 2016 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Unused Borrowing Capacity, Amount
 
 
 
 
 
 
15,000,000 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Unused Borrowing Capacity, Description
 
 
 
 
 
 
prime rate as reported in The Wall Street Journal on the draw-down date plus 4.75% 
 
 
 
 
 
 
 
 
 
 
 
Final payment as percent of additional draw
 
 
 
 
 
 
7.25% 
 
 
 
 
 
 
 
 
 
 
 
Other Accrued Liabilities, Noncurrent
$ 1,100,000 
$ 3,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-Term Debt, Net (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Debt Disclosure [Abstract]
 
 
2017
$ 37,338 
 
2018
94,406 
 
2019
105,758 
 
2020
24,103 
 
2021
4,755 
 
Total minimum payments
266,360 
 
Less amount representing interest
(45,208)
 
Gross balance of long-term debt
221,152 
 
Less unamortized debt discount
(4,531)
 
Present value of long-term debt
216,621 
 
Less current portion of long-term debt
(17,393)
(21,862)
Long-term debt, less current portion and unamortized debt discount
$ 199,228 
 
Stockholders' Equity (Details) (USD $)
0 Months Ended 12 Months Ended
Feb. 4, 2014
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Stockholders' Equity (Textual) [Abstract]
 
 
 
 
Aggregate shares issued for exercise of options
 
413,248 
1,926,368 
1,432,206 
Underwritten public offering and issued shares
8,846,153 
 
 
 
Shares sold pursuant to the full exercise of an over-allotment option granted to the underwriter
1,153,846 
 
 
 
Sale of Stock, Price Per Share
$ 13.00 
 
 
 
Net proceeds from common stock issued
$ 107,700,000 
$ 0 
$ 0 
$ 107,713,000 
Employee Stock Option [Member]
 
 
 
 
Stockholders' Equity (Textual) [Abstract]
 
 
 
 
Aggregate shares issued for exercise of options
 
413,248 
1,926,368 
 
Net proceeds from stock options exercised
 
2,800,000 
14,400,000 
 
Restricted Stock Awards
 
 
 
 
Stockholders' Equity (Textual) [Abstract]
 
 
 
 
Shares issued related to restricted stock awards, net of forfeitures
 
780,066 
375,019 
 
Shares paid for tax withholding for share based compensation
 
8,388 
 
 
Adjustments related to tax withholding for share-based compensation
 
900,000 
 
 
Restricted Stock Units (RSUs)
 
 
 
 
Stockholders' Equity (Textual) [Abstract]
 
 
 
 
Shares paid for tax withholding for share based compensation
 
83,335 
52,019 
 
Shares issued related to restricted stock units net of shares for tax withholdings
 
134,944 
82,069 
 
Adjustments related to tax withholding for share-based compensation
 
800,000 
700,000 
 
Performance Restricted Stock Units
 
 
 
 
Stockholders' Equity (Textual) [Abstract]
 
 
 
 
Shares issued related to restricted stock awards, net of forfeitures
 
21,775 
47,454 
 
Shares paid for tax withholding for share based compensation
 
8,262 
35,926 
 
Adjustments related to tax withholding for share-based compensation
 
$ 100,000 
$ 600,000 
 
Equity Incentive Plans Share-based compensation expense (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
Share based compensation expense recognized
$ 25,585 
$ 20,838 
$ 15,274 
Employee Stock Option [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
Share based compensation expense recognized
16,544 
11,145 
7,884 
RSU, RSA, and PRSU awards [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
Share based compensation expense recognized
9,041 
9,693 
7,390 
Research and Development Expense [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
Share based compensation expense recognized
11,470 
9,795 
7,939 
Selling, General and Administrative Expenses [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
Share based compensation expense recognized
$ 14,115 
$ 11,043 
$ 7,335 
Equity Incentive Plans Remaining share-based compensation expense (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Employee Stock Option [Member]
 
Share-based Compensation
 
Unrecognized compensation costs related to non-vested stock option awards
$ 42,592 
Period over which the unrecognized compensation costs will be recognized
2 years 10 months 
Restricted Stock Awards
 
Share-based Compensation
 
Unrecognized share based compensation costs
8,857 
Period over which the unrecognized compensation costs will be recognized
2 years 4 months 
Restricted Stock Units (RSUs)
 
Share-based Compensation
 
Unrecognized share based compensation costs
$ 8,442 
Period over which the unrecognized compensation costs will be recognized
2 years 7 months 
Equity Incentive Plans (Details) Options (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Options, Outstanding [Roll Forward]
 
 
 
Outstanding, Number, At Beginning
7,993,192 
6,353,892 
6,700,915 
Granted
4,466,306 
3,973,604 
2,271,143 
Exercised
(413,248)
(1,926,368)
(1,432,206)
Cancelled/forfeited
(955,054)
(407,936)
(1,185,960)
Outstanding, Number, At End
11,091,196 
7,993,192 
6,353,892 
Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
 
 
 
Options, outstanding, weighted average exercise price, at beginning
$ 13.03 
$ 9.18 
$ 7.11 
Options, grants in period, weighted average exercise price
$ 9.03 
$ 16.26 
$ 13.02 
Options, exercises in period, weighted average exercise price
$ 6.88 
$ 7.49 
$ 5.43 
Options, forfeitures and expirations in period, weighted average exercise price
$ 12.42 
$ 10.64 
$ 9.39 
Options, outstanding, weighted average exercise price, at end
$ 11.70 
$ 13.03 
$ 9.18 
Options, Vested and Expected to Vest [Abstract]
 
 
 
Options, outstanding, weighted average remaining contractual term
7 years 9 months 
 
 
Options, outstanding, intrinsic value
$ 9.4 
 
 
Options, vested and expected to vest, outstanding, number
11,091,196 
 
 
Options, vested and expected to vest, outstanding, weighted average exercise price
$ 11.70 
 
 
Options, vested and expected to vest, outstanding, weighted average remaining contractual term
7 years 9 months 
 
 
Options, vested and expected to vest, outstanding, aggregate intrinsic value
9.4 
 
 
Options, vested and expected to vest, exercisable, number
4,230,638 
 
 
Options, vested and expected to vest, exercisable, weighted average exercise price
$ 11.77 
 
 
Options, vested and expected to vest, exercisable, weighted average remaining contractual term
6 years 2 months 
 
 
Options, vested and expected to vest, exercisable, aggregate intrinsic value
4.7 
 
 
Options, Additional Disclosures [Abstract]
 
 
 
Exercise price as a percent of fair value
100.00% 
 
 
Options, outstanding, initial contractual term
10 years 
 
 
Weighted average grant-date fair values
$ 5.36 
$ 9.60 
$ 8.13 
Intrinsic value
1.4 
16.2 
8.1 
Cash received from stock option exercises
$ 2.8 
$ 14.4 
$ 7.8 
Cliff Vesting, First Anniversary [Member]
 
 
 
Options, Additional Disclosures [Abstract]
 
 
 
Percent of shares to vest
25.00% 
 
 
Monthly Vesting, after One Year [Member]
 
 
 
Options, Additional Disclosures [Abstract]
 
 
 
Percent of shares to vest
2.08% 
 
 
Equity Incentive Plans (Details) Black-Scholes Assumptions
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Share-based Compensation
 
 
 
Average expected term
5 years 5 months 
5 years 7 months 
5 years 8 months 
Risk free interest rate, minimum
1.00% 
1.34% 
1.73% 
Risk free interest rate, maximum
1.90% 
1.92% 
2.04% 
Expected dividend rate
0.00% 
0.00% 
0.00% 
Minimum [Member]
 
 
 
Share-based Compensation
 
 
 
Expected volatility rate
67.50% 
66.20% 
66.60% 
Maximum [Member]
 
 
 
Share-based Compensation
 
 
 
Expected volatility rate
71.90% 
67.40% 
71.80% 
Equity Incentive Plans (Details) Restricted Stock Awards (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Equity Instruments Other than Options, Additional Disclosures [Abstract]
 
 
 
Restricted stock award holder exercise price
$ 0 
 
 
Restricted Stock Awards
 
 
 
Share-based Compensation - restricted stock awards
 
 
 
Outstanding, Number, At Beginning
811,480 
1,158,451 
632,871 
Granted
968,652 
515,695 
1,055,122 
Vested
(296,831)
(721,990)
(263,765)
Forfeited
(180,198)
(140,676)
(265,777)
Outstanding, Number, At End
1,303,103 
811,480 
1,158,451 
Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
 
 
 
Nonvested, weighted average grant date fair value, at beginning
$ 13.13 
$ 10.26 
$ 8.23 
Granted, weighted average grant date fair value
$ 8.41 
$ 15.00 
$ 11.15 
Vested, weighted average grant date fair value
$ 12.76 
$ 10.11 
$ 8.33 
Forfeitures, weighted average grant date fair value
$ 10.33 
$ 11.84 
$ 10.86 
Nonvested, weighted average grant date fair value, at end
$ 10.09 
$ 13.13 
$ 10.26 
Equity Instruments Other than Options, Additional Disclosures [Abstract]
 
 
 
Vested in Period, Fair Value
$ 3.8 
$ 7.3 
$ 2.2 
Vested in Period, Intrinsic Value
$ 2.5 
$ 13.9 
$ 3.0 
Percentage Vesting [Member] |
Restricted Stock Awards
 
 
 
Equity Instruments Other than Options, Additional Disclosures [Abstract]
 
 
 
Percent of shares to vest
25.00% 
 
 
Equity Incentive Plans (Details) Restricted Stock Units (Restricted Stock Units (RSUs), USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Share-based Compensation - restricted stock units
 
 
 
Outstanding, Number, At Beginning
666,214 
462,322 
736,355 
Granted
796,582 
422,492 
305,535 
Vested
(218,279)
(134,088)
(194,368)
Forfeited
(77,948)
(84,512)
(385,200)
Outstanding, Number, At End
1,166,569 
666,214 
462,322 
Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
 
 
 
Nonvested, weighted average grant date fair value, at beginning
$ 13.49 
$ 11.12 
$ 9.06 
Granted, weighted average grant date fair value
$ 8.17 
$ 14.75 
$ 13.71 
Vested, weighted average grant date fair value
$ 12.74 
$ 10.93 
$ 9.12 
Forfeitures, weighted average grant date fair value
$ 10.99 
$ 10.86 
$ 8.84 
Nonvested, weighted average grant date fair value, at end
$ 10.16 
$ 13.49 
$ 11.12 
Unvested, weighted average remaining contractual terms
1 year 5 months 
 
 
Unvested, aggregate intrinsic value
$ 11.5 
 
 
Equity Instruments Other than Options, Additional Disclosures [Abstract]
 
 
 
Vested in Period, Fair Value
2.8 
1.5 
1.8 
Vested in Period, Intrinsic Value
$ 2.1 
$ 1.8 
$ 2.6 
Percentage Vesting [Member]
 
 
 
Equity Instruments Other than Options, Additional Disclosures [Abstract]
 
 
 
Percent of shares to vest
25.00% 
 
 
Equity Incentive Plans Performance stock units (Details) (Performance Restricted Stock Units, USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Performance Restricted Stock Units
 
 
 
Share-based Compensation - performance restricted stock units
 
 
 
Outstanding, number, at beginning
309,707 
431,238 
0 
Granted
0 
118,209 
540,742 
Vested
(30,037)
(83,380)
0 
Forfeited
(79,415)
(156,360)
(109,504)
Outstanding, number, at end
200,255 
309,707 
431,238 
Nonvested, weighted average grant date fair value, at beginning
$ 9.48 
$ 8.91 
$ 0.00 
Granted, weighted average grant date fair value
$ 0.00 
$ 11.19 
$ 8.91 
Vested, weighted average grant date fair value
$ 9.49 
$ 9.48 
$ 0.00 
Forfeitures, weighted average grant date fair value
$ 9.44 
$ 9.21 
$ 8.91 
Nonvested, weighted average grant date fair value, at end
$ 9.49 
$ 9.48 
$ 8.91 
Unvested, weighted average remaining contractual terms
4 months 
 
 
Aggregate intrinsic value, outstanding
$ 2.0 
 
 
Equity Instruments Other than Options, Additional Disclosures [Abstract]
 
 
 
Vested in Period, Fair Value
0.3 
0.8 
 
Vested in Period, Intrinsic Value
 
 
$ 1.4 
Equity Incentive Plans (Details - Textuals) (USD $)
12 Months Ended
Dec. 31, 2016
Share-based Compensation
 
Shares reserved for future issuance
9,001,562 
Tax Benefit from Compensation Expense
$ 0 
Future dividend payments expected for dividend yield assumption
$ 0 
Outstanding awards [Member]
 
Share-based Compensation
 
Options outstanding, number
12,458,020 
Amended and Restated 2011 Stock Plan [Member]
 
Share-based Compensation
 
Number of shares authorized
44,200,000 
Commitments and Contingencies Operating Lease - Textual (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Operating Leased Assets [Line Items]
 
 
 
Total rent expense
$ 2.2 
$ 1.9 
$ 1.9 
Office and Research Facility [Member]
 
 
 
Operating Leased Assets [Line Items]
 
 
 
Aggregate leased office and research space (in square feet)
76,000 
 
 
Number of buildings
4 
 
 
Lease expiration date
Jan. 31, 2018 
 
 
Deferred rent credit
0.4 
0.8 
 
Office and Research Facility [Member] |
Minimum [Member]
 
 
 
Operating Leased Assets [Line Items]
 
 
 
Percent of annual increase in base rent
2.50% 
 
 
Office and Research Facility [Member] |
Maximum [Member]
 
 
 
Operating Leased Assets [Line Items]
 
 
 
Percent of annual increase in base rent
3.00% 
 
 
Satellite office [Member]
 
 
 
Operating Leased Assets [Line Items]
 
 
 
Aggregate leased office and research space (in square feet)
10,000 
 
 
Lease expiration date
Jan. 31, 2021 
 
 
Percent of annual increase in base rent
3.00% 
 
 
Deferred rent credit
$ 0.4 
 
 
Commitments and Contingencies Operating Lease (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
 
2017
$ 2,622 
2018
522 
2019
425 
2020
426 
2021
36 
Total minimum lease payments
$ 4,031 
Commitments and Contingencies Other Commitments - Textual (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2016
Avid Commercial Supply Agreement [Member]
 
Unrecorded Unconditional Purchase Obligation [Line Items]
 
Minimum purchase obligation
$ 13.0 
Patheon [Member]
 
Unrecorded Unconditional Purchase Obligation [Line Items]
 
Minimum purchase obligation
0.7 
Third Party Manufacturer Agreement [Member]
 
Unrecorded Unconditional Purchase Obligation [Line Items]
 
Minimum purchase obligation
5.4 
Purchase Commitment [Member] |
Third Party Manufacturer Agreement [Member]
 
Unrecorded Unconditional Purchase Obligation [Line Items]
 
Minimum purchase obligation
$ 1.6 
Commitments and Contingencies Contingencies (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
 
Time period to provide notice to terminate agreement
90 days 
Contingent milestone payment
$ 8.0 
Income Taxes Net loss by region (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Income Tax Disclosure [Abstract]
 
 
 
Income (Loss) from Continuing Operations before Income Taxes, Domestic
$ 6,384 
$ 11,724 
$ (30,885)
Income (Loss) from Continuing Operations before Income Taxes, Foreign
(108,245)
(43,955)
(37,490)
Net loss before income taxes
$ (101,861)
$ (32,231)
$ (68,375)
Income Taxes Components of net deferred tax assets (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Deferred tax assets
 
 
Net operating loss carryforwards
$ 103,296 
$ 104,505 
Deferred revenue
15,354 
16,344 
Research and development credits
73,701 
54,846 
Share-based compensation
8,844 
6,286 
Other, net
2,515 
906 
Total deferred tax assets
203,710 
182,887 
Valuation allowance for deferred tax assets
203,370 
182,507 
Deferred tax assets, net of valuation
340 
380 
Deferred tax liabilities
 
 
Depreciation
(340)
(380)
Net deferred tax liabilities
(340)
(380)
Net deferred tax assets
$ 0 
$ 0 
Income Taxes Income tax (benefit) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Income Tax Disclosure [Abstract]
 
 
 
Current Federal Tax Expense (Benefit)
$ 1,145 
$ 0 
$ 0 
Current State and Local Tax Expense (Benefit)
17 
0 
0 
Income Tax Expense (Benefit)
$ 1,162 
$ 0 
$ 0 
Income Taxes Schedule of income tax reconciliation (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Income Tax Provision, Income Tax Reconciliation [Abstract]
 
 
 
Federal income tax rate
34.00% 
34.00% 
34.00% 
Federal income tax at 34%
$ (34,633)
$ (10,959)
$ (23,247)
State income tax, net of federal benefit
(653)
5,524 
(1,761)
Increase in valuation allowance
11,252 
4,045 
16,998 
Foreign income subject to tax at other than Federal statutory rate
36,803 
14,945 
12,747 
Share-based compensation
3,735 
(4,990)
(529)
Tax effect on non-deductible expenses and other
698 
6,457 
1,069 
Research and development credits
(1,084)
(3,861)
(5,277)
Orphan drug credits, net of federal add back
(14,956)
(11,161)
0 
Provision for income taxes
$ 1,162 
$ 0 
$ 0 
Income Taxes Unrecognized tax benefit (Details) (USD $)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Income Tax Disclosure [Abstract]
 
 
 
Unrecognized Tax Benefits, beginning of period
$ 4,898,000 
$ 0 
$ 0 
Unrecognized Tax Benefits, Increase Resulting from Prior Period Tax Positions
5,615,000 
0 
0 
Unrecognized Tax Benefits, Decrease Resulting from Prior Period Tax Positions
(4,898,000)
0 
0 
Unrecognized Tax Benefits, Increase Resulting from Current Period Tax Positions
7,184,000 
4,898,000 
0 
Unrecognized Tax Benefits, end of period
12,799,000 
4,898,000 
0 
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued [Abstract]
 
 
 
Unrecognized Tax Benefits that Would Impact Effective Tax Rate
200,000 
 
 
Unrecognized Tax Benefits that Would Impact Effective Tax Rate, no valuation allowance
12,600,000 
 
 
Income tax interest and penalty
$ 0 
$ 0 
$ 0 
Income Taxes Operating Loss Carryforward Expiration Dates (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Federal [Member]
 
Operating Loss Carryforwards [Line Items]
 
Operating Loss Carryforwards
$ 268,700 
State and Local Jurisdiction [Member]
 
Operating Loss Carryforwards [Line Items]
 
Operating Loss Carryforwards
249,800 
State and Local Jurisdiction [Member] |
2017 expiration [Member]
 
Operating Loss Carryforwards [Line Items]
 
Operating Loss Carryforwards
10,434 
State and Local Jurisdiction [Member] |
2028 and beyond expiration [Member]
 
Operating Loss Carryforwards [Line Items]
 
Operating Loss Carryforwards
239,349 
Other state tax [Member]
 
Operating Loss Carryforwards [Line Items]
 
Operating Loss Carryforwards
$ 30,000 
Income Taxes Tax - Textuals (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2016
Federal [Member]
Research Tax Credit Carryforward [Member]
Dec. 31, 2016
Federal [Member]
Orphan Drug credit carryforwards
Dec. 31, 2016
State and Local Jurisdiction [Member]
Research Tax Credit Carryforward [Member]
Tax Credit Carryforward [Line Items]
 
 
 
 
 
Tax credit carryforwards
 
 
$ 28.0 
$ 43.8 
$ 16.1 
Tax credit carry forward, begin to expire
 
 
Dec. 31, 2024 
Dec. 31, 2035 
Dec. 31, 2024 
Undistributed Earnings of Foreign Subsidiaries
$ 0 
$ 0 
 
 
 
Employee Savings Plan (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Employee Savings Plan [Abstract]
 
 
 
Voluntary contribution by employer to the ESP
$ 1.0 
$ 0.7 
$ 0.7 
Restructuring Expense (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Restructuring Cost and Reserve [Line Items]
 
Restructuring and Related Cost, Number of Positions Eliminated, Period Percent
13.00% 
Severance Costs
$ 1.2 
Other Restructuring Costs
0 
Research and Development Expense [Member]
 
Restructuring Cost and Reserve [Line Items]
 
Severance Costs
1.1 
Selling, General and Administrative Expenses [Member]
 
Restructuring Cost and Reserve [Line Items]
 
Severance Costs
$ 0.1 
Summary of Unaudited Quarterly Financial Information (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Quarterly Financial Information Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$ 52,227 1
$ 20,780 
$ 43,384 2
$ 18,666 
$ 39,003 
$ 31,853 
$ 33,336 
$ 42,499 
$ 146,691 
$ 135,057 
$ 75,334 
Gross profit on product sales
5,152 
4,121 
4,198 
3,366 
5,420 
4,197 
5,391 
5,178 
 
 
 
Total operating expenses
46,762 
44,017 
39,153 
32,577 
61,578 
54,596 
55,059 
58,668 
229,901 
162,509 
138,370 
Net loss
$ 4,318 
$ (24,460)
$ 3,019 
$ (15,108)
$ (27,386)
$ (28,946)
$ (26,875)
$ (19,816)
$ (103,023)
$ (32,231)
$ (68,375)
Earnings Per Share, Basic
$ 0.03 
$ (0.19)
$ 0.02 
$ (0.12)
 
 
 
 
 
 
 
Earnings Per Share, Diluted
$ 0.03 
$ (0.19)
$ 0.02 
$ (0.12)
 
 
 
 
 
 
 
Weighted Average Number of Shares Outstanding, Basic
127,197 
126,921 
126,144 
125,299 
 
 
 
 
 
 
 
Weighted Average Number of Shares Outstanding, Diluted
129,248 
126,921 
134,507 
125,299 
 
 
 
 
 
 
 
Net loss per share, basic and diluted
 
 
 
 
$ (0.21)
$ (0.23)
$ (0.21)
$ (0.16)
$ (0.81)
$ (0.25)
$ (0.56)
Shares used in computing basic and diluted net loss per share
 
 
 
 
128,185 
128,154 
127,958 
127,615 
127,964 
126,704 
122,690 
Summary of Unaudited Quarterly Financial Information (Details Textual) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Jun. 30, 2015
AbbVie [Member]
Dec. 31, 2015
Lilly [Member]
Collaborative Agreements [Line Items]
 
 
Revenue under collaborative agreements
$ 23.0 
$ 25.0 
Schedule II Valuation and Qualifying Accounts (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Valuation and Qualifying Accounts Disclosure [Line Items]
 
 
 
Accounts receivable allowances, beginning balance
$ 967 1
$ 611 1
$ 610 1
Valuation Allowances and Reserves, Additions
4,795 1
4,150 1
4,520 1
Valuation Allowances and Reserves, Deductions
(5,203)1
(3,794)1
(4,519)1
Accounts receivable allowances, ending balance
$ 559 1
$ 967 1
$ 611 1