Contract Manufacturing Agreement with Endo (Notes)

6 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Contract Manufacturing Agreement with Endo

Contract Manufacturing Agreement with Endo and Associated Exit Activities

As part of the divestiture of the Company’s Sumavel DosePro business to Endo in May 2014, the Company entered into a supply agreement with Endo for the exclusive right, and contractual obligation, to manufacture and supply Sumavel DosePro to Endo for an initial term of eight years. To support the Company’s Sumavel DosePro manufacturing operations, Endo provided the Company with an interest-free working capital advance of $7.0 million under a promissory note (see Note 6). The working capital advance matures upon termination of the supply agreement.

In January 2017, the Company and Endo entered into a letter agreement acknowledging Endo’s decision to have the Company discontinue the manufacturing and supply of the Sumavel DosePro product while the parties finalize termination of the supply agreement. The termination of the manufacturing and supply agreement with Endo has not been finalized. In April 2017, the Company completed fulfillment of the remaining open orders from Endo and all remaining deferred revenue associated with the supply agreement was recognized. The Company currently has no further obligation to supply Endo with additional Sumavel DosePro.

The Company is also in the process of negotiating the termination of manufacturing and supply agreements for the production of Sumavel DosePro with its third-party suppliers. As of June 30, 2017, other than certain asset retirement obligations totaling $0.6 million included in current liabilities in the condensed consolidated balance sheets, no amounts were owed to these third-party suppliers under the existing terms of these manufacturing and supply agreements. The Company may incur additional costs when the termination of these agreements with its third-party suppliers are finalized. These costs would be subject to reimbursement from Endo when the termination of the supply agreement is finalized and would not be significant to the condensed consolidated financial statements.

In the fourth quarter of 2016, the Company performed an analysis to estimate cash flows from property and equipment used in the production of Sumavel DosePro. Based on this analysis, the Company determined its fair value exceeded the carrying value by $6.4 million and recognized an impairment charge for long-lived assets. In the first quarter of 2017, the Company recorded an additional asset impairment charge of $0.8 million for long-lived manufacturing assets associated with the production of Sumavel DosePro. Based on recent negotiations with Endo for the final reimbursement of costs incurred under the supply agreement, the Company recorded a $2.2 million reduction to inventory during the second quarter of 2017 to reflect its current net realizable value.