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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

The accompanying consolidated financial statements include the accounts of Antares Pharma, Inc. and its two wholly-owned foreign subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s most significant accounting estimates relate to revenue recognition, inventory valuation, and the valuation of equity instruments used in stock-based compensation. Actual results could differ from these estimates.

Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2016-02 Leases (“Topic 842”) and related amendments effective January 1, 2019, electing the package of practical expedients and applying the transition provisions as of the effective date. Reporting periods beginning on or after January 1, 2019 are presented under Topic 842, while prior period amounts, as reported under previous GAAP, were not adjusted. As of December 31, 2018, the Company had non-cancellable operating leases for its corporate headquarters facility in Ewing, New Jersey, and its office, research and development facility in Plymouth, Minnesota, a suburb of Minneapolis, which were not previously required to be recorded on the balance sheet. As a result of the adoption of Topic 842, the Company recognized approximately $1.0 million in right-of-use assets and lease liabilities in connection with its existing operating leases. The adoption of Topic 842 on January 1, 2019 did not have a significant impact on the Company’s consolidated results of operations or cash flows.

On January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), and all related amendments (“ASC 606”), applying the modified retrospective transition method to all contracts that were not completed as of the date of adoption. ASC 606 superseded the previous revenue recognition requirements in Topic 605 Revenue Recognition (“ASC 605”) and requires entities to recognize revenues when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The cumulative effect of the adoption of the new standard was not material to the Company’s consolidated financial statements. Results for reporting periods beginning on or after January 1, 2018 are presented under ASC 606, while prior period amounts, as reported under ASC 605, were not adjusted. In accordance with ASC 605, revenue was previously recognized when all of the following criteria were met: persuasive evidence of the arrangement exists; delivery has occurred with no remaining performance obligations; the fee is fixed or determinable; and collectability is reasonably assured.

Recent Accounting Pronouncements Not Yet Adopted as December 31, 2019

In 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables, and requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The original effective date for ASU 2016-13 was for annual and interim periods beginning after December 15, 2019.

However, in October 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses, Derivatives and Hedging, and Leases: Effective Dates, which deferred the effective date of ASU 2016-13 for certain entities, including those that are eligible to be smaller reporting companies. A company’s determination about whether it is eligible for the deferral is a one-time assessment as of November 15, 2019 based on its most recent determination of its small reporting company eligibility as of the last business day of the most recently completed second quarter. Based on this determination, the Company qualifies as a smaller reporting entity and is therefore eligible for the deferral of adoption of ASU 2016-13, resulting in a new effective date of January 1, 2023. The Company has historically had minimal credit losses on financial instruments and is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements.

In 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software: Accounting for Implementation Costs Incurred in Cloud Computing Arrangement that is a Service Contract, providing new guidance on a customer's accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor (i.e., a service contract). Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. This standard will be effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those fiscal years. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and 606. The guidance clarifies that certain transactions between collaborative arrangement participants should be accounted for under the ASC 606 revenue guidance, adds unit of account guidance to the collaborative arrangement guidance to align with the revenue standard, and clarifies presentation guidance for transactions with a collaborative arrangement participant that is not accounted for under the revenue standard. The guidance is effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual reporting periods. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

Foreign Currency Translation

The majority of the foreign subsidiaries’ revenues are denominated in U.S. dollars, and any required funding of the subsidiaries is provided by the U.S. parent. Nearly all operating expenses of the foreign subsidiaries are denominated in Swiss Francs. Additionally, bank accounts held by foreign subsidiaries are denominated in Swiss Francs, there is a low volume of intercompany transactions and there is not an extensive interrelationship between the operations of the subsidiaries and the parent company. As such, the Company has determined that the Swiss Franc is the functional currency for its foreign subsidiaries. The reporting currency for the Company is the United States Dollar (“USD”). The financial statements of the Company’s foreign subsidiaries are translated into USD for consolidation purposes. All assets and liabilities are translated using period-end exchange rates and statements of operations items are translated using average exchange rates for the period. The resulting translation adjustments are recorded as a separate component of stockholders’ equity, comprising all of the accumulated other comprehensive income (loss). Sales to certain customers and purchases from certain vendors by the U.S. parent are in currencies other than the USD and are subject to foreign currency exchange rate fluctuations. Foreign currency transaction gains and losses are included in other income (expense) in the consolidated statements of operations.

Cash and Cash Equivalents

Cash and cash equivalents consist of demand deposits at commercial banks and highly liquid investments in money market funds with maturities of three months or less. Cash equivalents are remeasured and reported at fair value each reporting period, in accordance with ASC Topic 820, Fair Value Measurements (“ASC 820”) based on quoted market prices, which is a Level 1 input within the three-level valuation hierarchy for disclosure of fair value measurements, and totaled $11,153 and $20,569 as of December 31, 2019 and 2018, respectively.

Investments

From time to time, the Company also invests in U.S. Treasury bills and government agency notes that are classified as held-to-maturity because of the Company’s intent and ability to hold the securities to maturity. Investments with maturities of one year or less are classified as short-term. The investment securities are carried at their amortized cost and fair value is determined by quoted market prices for identical or similar securities. At December 31, 2019, the Company’s short-term investments had a carrying value of $22,520, which approximated fair value. The Company held no investments as of December 31, 2018.

Accounts Receivable

Trade accounts receivable represents amounts billed to customers and are stated at the amount the Company expects to collect. The Company considers the following factors when determining the collectability of specific customer accounts: customer creditworthiness, past transaction history with the customer and changes in customer payment terms. At December 31, 2019, the Company’s trade accounts receivable balance was due primarily from Teva, AMAG and distributors. Each of these customers has historically paid timely and demonstrated creditworthiness. Accordingly, the Company believes the risk of accounts being uncollectible is minimal and had no significant allowances for doubtful accounts established as of December 31, 2019 or 2018. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances may be required. The Company had no material write-offs to bad debt expense in 2019, 2018 or 2017.

Royalties receivable from partners are included in accounts receivable and are typically payable to the Company within 45 to 60 days after the end of each quarter and or annual period in which they were earned.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. Certain components of the Company’s products are provided by a limited number of vendors, and the Company’s production and assembly operations are outsourced to third-party suppliers where substantially all of the Company’s inventory is located. Disruption of supply from key vendors or third-party suppliers may have a material adverse impact on the Company’s operations.

Inventory consisted of the following:

	December 31,		December 31,
	2019		2018
Raw material	$	325	$	26
Work in process		8,390		7,622
Finished goods		7,285		3,702
	$	16,000	$	11,350

The Company provides reserves for potentially excess, dated or obsolete inventories based on estimates of forecasted product demand and the likelihood of consumption in the normal course of business, considering the expiration dates of the inventories on hand, planned production volumes and lead times required for restocking of customer inventories. Although every effort is made to ensure that forecasts and assessments are reasonable, changes to these assumptions are possible. In such cases, estimates may prove inaccurate and result in an understatement or overstatement of the reserves required to fairly state such inventories. The Company’s reserve for excess, dated or obsolete inventory was $464 and $847 at December 31, 2019 and 2018, respectively. In 2019, the Company wrote off inventory of $708 and increased the reserve for excess, dated or obsolete inventory by $325. In 2018, the Company wrote off $255 of inventory and increased the reserve for excess, dated or obsolete inventory by $592.

Contract Assets

Contract assets are recognized when control of goods or services has transferred to the customer, and corresponding revenue is recognized on an over time basis but is not yet billable to the customer in accordance with the terms of the contract. Costs that have been incurred in connection with development services provided to partners for which the associated revenue has not yet been recognized are also recorded as contract assets, and totaled $1,534 and $204 as of December 31, 2019 and 2018, respectively. As of December 31, 2018, contract assets also included a $5,000 installment in connection with the sale and transfer of assets to Ferring as discussed in Note 9, which was received during the year ended December 31, 2019.

Equipment, Molds, Furniture, and Fixtures

Equipment, molds, furniture, and fixtures are stated at cost and are depreciated using the straight-line method over their estimated useful lives ranging from three to ten years. The Company’s equipment, molds, furniture and fixtures consisted of the following:

	December 31,			December 31,
	2019			2018
Furniture, fixtures and office equipment	$	2,480		$	2,331
Production molds and equipment		20,749			19,678
Molds and tooling in process		1,512			456
Construction in process		989			—
Less: accumulated depreciation		(9,769	)		(7,570	)
	$	15,961		$	14,895

Depreciation expense was $2,205, $2,125 and $1,536 for the years ended December 31, 2019, 2018 and 2017, respectively.

Leases

The Company recognizes right-of-use (“ROU”) assets and lease liabilities when it obtains the right to control an asset under a leasing arrangement with an initial term greater than twelve months. The Company evaluates the nature of each lease at the inception of an arrangement to determine whether it is an operating or financing lease and recognizes the right-of-use asset and lease liabilities based on the present value of future minimum lease payments over the expected lease term. The Company’s leases do not generally contain an implicit interest rate and therefore the Company uses the incremental borrowing rate it would expect to pay to borrow on a similar collateralized basis over a similar term in order to determine the present value of its lease payments. Certain of the Company’s lease arrangements contain renewal options that have not been included in the determination of the lease term, as they are not reasonably certain of exercise. For contracts that contain lease and non-lease components, the Company accounts for both components as a single lease component. Variable lease payments are expensed as incurred.

Intangible assets

The Company capitalizes external legal costs and filing fees associated with obtaining patent rights for approved commercial and partnered products when there are projected future cash flows associated with the patent. These capitalized patent costs are amortized on a straight-line basis over the shorter of the life of the patent or the estimated useful life of the patent, which typically ranges from five to fifteen years beginning on the earlier of the date the patent is issued or the first commercial sale of product utilizing such patent rights. The Company periodically reviews capitalized patent costs to identify any amounts to be charged to expense for patents that are no longer being pursued or for which there are no future revenues or cash flows anticipated.

The Company capitalizes external legal patent defense costs and costs for pursuing patent infringements when it determines that a successful outcome is probable and will lead to an increase in the value of the patent. The capitalized costs are amortized over the remaining life of the related patent. If changes in the anticipated outcome were to occur that reduce the likelihood of a successful outcome of the entire action to less than probable, the capitalized costs would be charged to expense in the period in which the change is determined.

The gross carrying amount and accumulated amortization of patents was $3,661 and $3,183, respectively at December 31, 2019, and $3,794 and $2,963, respectively, at December 31, 2018. Patent amortization expense for the years ended December 31, 2019, 2018 and 2017 was $352, $599 and $568, respectively, and is recorded in selling, general and administrative expenses in the consolidated statements of operations. The Company’s estimated aggregate patent amortization expense for the next five years is $95, $89, $83, $68 and $49 in 2020, 2021, 2022, 2023 and 2024, respectively.

Impairment of Long-Lived Assets and Intangibles

Long-lived assets and intangibles, including patent rights, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset or asset group. This analysis can be very subjective; however, the Company utilizes the expected future undiscounted cash flows from signed license and distribution agreements and other contracts with customers to substantiate the recoverability of its long-lived assets. If the sum of the undiscounted cash flows is less than the carrying value of the asset, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Goodwill

Goodwill is evaluated for impairment annually at December 31, or more frequently if an event occurs or circumstances change that indicate that the carrying value may not be recoverable. In performing the annual impairment test, the Company compares the fair value of the reporting unit to the carrying amount and would recognize an impairment charge to goodwill for the amount by which the carrying amount exceeds the reporting unit’s fair value.

At December 31, 2019 and 2018, the Company had goodwill with a carrying value of $1,095, attributable to its single reporting unit. Based on the results of its evaluations, the Company determined that goodwill was not impaired, and no impairment losses were recognized in the years ended December 31, 2019, 2018, and 2017, respectively.

Revenue Recognition

The Company generates revenue from proprietary and partnered product sales, license and development activities and royalty arrangements. Revenue is recognized when or as the Company transfers control of the promised goods or services to its customers at the transaction price, which is the amount that reflects the consideration to which it expects to be entitled to in exchange for those goods or services.

At inception of each contract, the Company identifies the goods and services that have been promised to the customer and each of those that represent a distinct performance obligation, determines the transaction price including any variable consideration, allocates the transaction price to the distinct performance obligations and determines whether control transfers to the customer at a point in time or over time. Variable consideration is included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company reassess its reserves for variable consideration at each reporting date and makes adjustments, if necessary, which may affect revenue and earnings in periods in which any such changes become known.

The Company has elected to recognize the cost for freight and shipping activities as fulfilment cost. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of underlying goods are transferred to the customer. The related shipping and freight charges incurred by the Company are included in cost of revenue.

Proprietary Product Sales

The Company sells its proprietary products OTREXUP^® and XYOSTED^® primarily to wholesale and specialty distributors. Revenue is recognized when control has transferred to the customer, which is typically upon delivery, at the net selling price, which reflects the variable consideration for which reserves and sales allowances are established for estimated returns, wholesale distribution fees, prompt payment discounts, government rebates and chargebacks, plan rebate arrangements and patient discount and support programs described below.

The determination of certain of these reserves and sales allowances require management to make a number of judgements and estimates to reflect the Company’s best estimate of the transaction price and the amount of consideration to which it believes it is ultimately entitled to receive. The expected value is determined based on unit sales data, contractual terms with customers and third-party payers, historical and expected utilization rates, any new or anticipated changes in programs or regulations that would impact the amount of the actual rebates, customer purchasing patterns, product expiration dates and levels of inventory in the distribution channel. Reserves for prompt payment discounts are recorded as a reduction in accounts receivable. Reserves for returns, distributor fees, rebates and customer co-pay support programs are included within current liabilities in our consolidated balance sheets.

Wholesaler Distribution Fees. Distribution fees are paid to certain wholesalers based on contractually determined rates and units purchased. Since the fee paid to the customer is not for a distinct good or service, the consideration is recognized as a reduction of the transaction price of the goods delivered in accordance with ASC 606. The Company accrues the estimated fee due at the time of sale based on the contracted price and adjusts the accrual at each reporting period, if necessary, to reflect actual experience.

Prompt Pay Discounts. The Company offers cash discounts to its customers, generally 2% of the sales price, as an incentive for prompt payment. Based on historical experience, customers take advantage of this discount and accordingly the Company accrues 100% of the cash discounts offered by reducing accounts receivable and recognizing the discount as a reduction of revenue in the same period the related sales are made. The accrual is reviewed at each reporting period and adjusted if actual experience differs from estimates.

Chargebacks. The Company provides discounts primarily to authorized users of the Federal Supply Schedule (“FSS”) of the General Services Administration under an FSS contract negotiated by the Department of Veterans Affairs and various organizations under Medicaid contracts and regulations. These entities purchase products from the wholesale distributors at a discounted price, and the wholesale distributors then charge back to the Company the difference between the current wholesale acquisition cost and the price the entity paid for the product. The Company will estimate and accrue chargebacks based on estimated wholesaler inventory levels, current contract prices and historical chargeback activity. Chargebacks are recognized as a reduction of revenue in the same period the related revenue is recognized.

Rebates. The Company participates in certain plan rebate programs, which provide discounted prescriptions to qualified insured patients. Under these rebate programs, the Company will pay a rebate to the third-party administrator of the program, generally two to three months after the quarter in which prescriptions subject to the rebate are filled. The Company estimates and accrues for these rebates based on current contract prices, historical and estimated future percentages of product sold to qualified patients. Rebates are recognized as a reduction of revenue in the same period the related revenue is recognized.

Patient Discount Programs. The Company also offers discount cards, co-pay coupons and free trial programs to off-set the cost of prescriptions to patients. The Company estimates the total amount that will be redeemed or utilized based on historical redemption experience and on levels of inventory in the distribution and retail channels and recognizes the discount as a reduction of revenue in the same period the related revenue is recognized.

Product Returns. Consistent with industry practice, the Company generally offers wholesalers and specialty distributors a limited right to return products, generally within six months prior to and 12 months following the product’s expiration date. The Company’s propriety products generally have expiration dates ranging from 24 to 33 months. Product returns are estimated and recorded at the time of sale based on historical return patterns. Actual returns are tracked by individual production lots and charged against reserves. Returns reserves may be adjusted, if necessary, if actual returns differ from historical estimates. Management also monitors and takes into consideration the amount of estimated product inventory in the distribution channel, product dating and any known or expected changes in the marketplace when establishing the estimated rate of returns.

The following presents changes in reserves for product returns and sales allowances:

				Patient						Wholesaler			Prompt
	Rebates and			Discount						Distribution			Payment
	Chargebacks			Programs			Returns			Fees			Discounts
Balance at December 31, 2017	$	1,315		$	115		$	245		$	465		$	84
Accruals and adjustments		9,586			2,429			1,628			3,519			742
Payments and other reserve reductions		(8,207	)		(1,254	)		(720	)		(3,194	)		(610	)
Balance at December 31, 2018		2,694			1,290			1,153			790			216
Accruals and adjustments		15,383			6,716			2,520			6,393			1,491
Payments and other reserve reductions		(11,769	)		(7,161	)		(3,303	)		(5,500	)		(1,387	)
Balance at December 31, 2019	$	6,308		$	845		$	370		$	1,683		$	320

Partnered Product Sales

The Company is party to several license, development, supply and distribution arrangements with pharmaceutical partners, under which the Company produces and is the exclusive supplier of certain products, devices and/or components. Revenue is recognized when or as control of the goods transfers to the customer as follows:

The Company is the exclusive supplier of the Makena^® subcutaneous auto injector product to AMAG. Because the product is custom manufactured for AMAG with no alternative use and the Company has a contractual right to payment for performance completed to date, control is continuously transferred to the customer as product is produced pursuant to firm purchase orders. Revenue is recognized over time using the output method based on the contractual selling price and number of units produced. The amount of revenue recognized in excess of the amount shipped/billed to the customer, if any, is recorded as contract assets due to the short-term nature in which the amount is ultimately expected to be billed and collected from the customer.

All other partnered product sales are recognized at the point in time in which control is transferred to the customer, which is typically upon shipment. Sales terms and pricing are governed by the respective supply and distribution agreements, and there is generally no price protection or right of return. Revenue is recognized at the transaction price, which includes the contractual per unit selling price and estimated variable consideration, if any. For example, the Company sells Sumatriptan Injection USP to Teva at cost and is entitled to receive 50 percent of the net profits from commercial sales made by Teva, payable to the Company within 45 days after the end of the quarter in which the commercial sales are made. The Company recognizes revenue, including the estimated variable consideration it expects to receive for contract margin on future commercial sales, upon shipment of the goods to Teva. The estimated variable consideration is recognized at an amount the Company believes is not subject to significant reversal based on historical experience, and is adjusted at each reporting period if the most likely amount of expected consideration changes or becomes fixed.

Licensing and Development Revenue

The Company has entered into several license, development and supply arrangements with pharmaceutical partners under which the Company grants a license to its device technology and know-how and provides research and development services that often involve multiple performance obligations and highly customized deliverables. For such arrangements, the Company identifies each of the promised goods and services within the contract and the distinct performance obligations at inception, and allocates consideration to each performance obligation based on relative standalone selling price, which is generally determined based on the expected cost plus margin.

If the contract includes an enforceable right to payment for performance completed to date and performance obligations are satisfied over time, the Company recognized revenue over the development period using either the input or output method depending on which is most appropriate given the nature of the distinct deliverable. For other contracts that do not contain an enforceable right to payment for performance completed to date, revenue is recognized when control is transferred to the customer. Factors that may indicate that the transfer of control has occurred include the transfer of legal title, transfer of physical possession, the customer has obtained the significant risks and rewards of ownership of the assets and the Company has a present right to payment.

The Company’s typical payment terms for development contracts may include an upfront payment equal to a percentage of the total contract value with the remaining portion to be billed upon completion and transfer of the individual deliverables or satisfaction of the individual performance obligations. The Company records a liability for cash received in advance of performance, which is presented within deferred revenue on the consolidated balance sheet and recognized as revenue when the associated performance obligations have been satisfied. The Company recognized $1.0 million in licensing and development revenue in connection with contract liabilities that were outstanding as of December 31, 2018 and satisfied during the year ended December 31, 2019.

License fees and milestones received in exchange for the grant of a license to the Company’s functional intellectual property (“IP”) such as patented technology and know-how in connection with a partnered development arrangement are generally recognized at inception of the arrangement, or over the development period depending on the facts and circumstances, as the license is not generally distinct from the non-licensed goods or services to be provided under the contract. Milestone payments that are contingent upon the occurrence of future events, are evaluated and recorded at the most likely amount, and to the extent that it is probable that a significant reversal will not occur when the associated uncertainty is resolved.

Royalties

The Company earns royalties in connection with licenses granted under license and development arrangements with partners. Royalties are based upon a percentage of commercial sales of partnered products with rates ranging from mid single digit to low double digit and are tiered based on levels of net sales. These sales-based royalties, for which the license was deemed the predominant element to which the royalties relate, are estimated and recognized in the period in which the partners’ commercial sales occur. The royalties are generally reported and payable to the Company within 45 to 60 days of the end of the period in which the commercial sales are made. The Company bases its estimates of royalties earned on actual sales information from its partners when available or estimated prescription sales from external sources and estimated net selling price. If actual royalties received are different than amounts estimated, the Company would adjust the royalty revenue in the period in which the adjustment becomes known.

Remaining Performance Obligations

Remaining performance obligations represents the transaction price of firm orders and development contract deliverables for which work has not been completed or orders fulfilled, and excludes potential purchase orders under ordering-type supply contracts with indefinite delivery or quantity. As of December 31, 2019, the aggregate value of remaining performance obligations, excluding contracts with an original expected length of one year or less, was $7.5 million. The Company expects to recognize revenue on the remaining performance obligations over the next three years, with the majority being recognized in the next twelve months.

Share-Based Compensation

The Company utilizes share-based compensation in the form of stock options, restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”). The Company records compensation expense associated with share-based awards granted to employees at the fair value of the award on the date of grant. The Company uses the Black-Scholes option valuation model to determine the fair value of stock options. The fair values of RSU and PSU grants containing service or performance conditions are based on the market value of the Company’s Common Stock on the date of grant. The fair value of PSUs containing a market condition are estimated using a Monte Carlo simulation. The value of the portion of the award that is ultimately expected to vest is expensed ratably over the requisite service period as compensation expense in the consolidated statements of operations. Forfeitures are recorded as incurred. Assumptions concerning the Company’s stock price volatility and projected employee exercise behavior over the contractual life of the award impact the estimated fair value of the stock option awards.

Research and Development

Research and development expenses include costs directly attributable to the conduct of research and development programs including personnel costs, materials and supplies associated with design work and prototype development, FDA filing fees and the cost of services provided by outside contractors such as expenses related to clinical trials. All costs associated with research and development activities are expensed as incurred.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Net Loss Per Share

Basic net loss per share is computed by dividing net income or loss available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed similar to basic net loss per share except that the weighted average shares outstanding are increased to include additional shares from the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options or warrants were exercised and that the proceeds from such exercise were used to acquire shares of common stock at the average market price during the reporting period. All potentially dilutive common shares were excluded from the calculation because they were anti-dilutive for all annual periods presented. Potentially dilutive securities excluded from dilutive loss per share were 17,103, 17,147 and 14,761 at December 31, 2019, 2018 and 2017, respectively.

Segment Information

Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker currently evaluates the Company’s operations as a whole from a number of different operational perspectives, including but not limited to, on a product-by-product, customer and partner basis. The Company derives all significant revenues from self-administered parenteral pharmaceutical products and technologies, and has a single reportable operating segment of business.

Going Concern

Management is responsible for evaluating, and providing disclosure of uncertainties about, the Company’s ability to continue as a going concern. As of December 31, 2019, the Company had cash, cash equivalents and investments of $45,721. Based on management’s evaluation, management concluded there is no substantial doubt or uncertainty about the Company’s ability to meet its obligations within one year from the date the consolidated financial statements were issued.