SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”) and include the accounts of our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

As of June 30, 2018, our CBR business met all of the conditions to be classified as held for sale and represented a discontinued operation, as we considered the disposal of the CBR business to be a strategic shift that would have a major effect on our operations and financial results. All assets and liabilities associated with CBR were therefore classified as assets and liabilities held for sale in our consolidated balance sheets for 2017. Further, all historical operating results for CBR are reflected within discontinued operations in the consolidated statements of operations for all periods presented. For additional information, see Note C, “Discontinued Operations and Held for Sale.”

Use of Estimates and Assumptions

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. The most significant estimates and assumptions are used to determine amounts and values of, but are not limited to: revenue recognition related to product sales revenue; product sales allowances and accruals; allowance for doubtful accounts; marketable securities; inventory; acquisition date fair value and subsequent fair value estimates used to assess impairment of long-lived assets, including goodwill, in-process research and development (“IPR&D”) and other intangible assets; contingent consideration; debt obligations; certain accrued liabilities, including clinical trial accruals; income taxes, inclusive of valuation allowances, and equity-based compensation expense. Actual results could differ materially from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist principally of cash held in commercial bank accounts, money market funds and U.S. Treasury securities having an original maturity of less than three months at the date of acquisition. We consider all highly liquid marketable securities with a maturity of three months or less as of the acquisition date to be cash equivalents. At December 31, 2018 and 2017, substantially all of our cash and cash equivalents were held in either commercial bank accounts or money market funds.

Marketable Securities

We account for and classify our marketable securities as either “available-for-sale,” “held-to-maturity,” or “trading debt securities,” in accordance with the accounting guidance related to the accounting and classification of certain investments in marketable securities. The determination of the appropriate classification by us is based primarily on management’s ability and intent to sell the debt security at the time of purchase. As of December 31, 2018 and 2017, all of our marketable securities were classified as available-for-sale.

Available-for-sale securities are those securities which we view as available for use in current operations, if needed. We generally classify our available-for-sale securities as short-term investments, even though the stated maturity date may be one year or more beyond the current balance sheet date. Available-for-sale marketable securities are stated at fair value with their unrealized gains and losses included in accumulated other comprehensive income (loss) within the consolidated statements of stockholders’ equity, until such gains and losses are realized in other income (expense) within the consolidated statements of operations or until an unrealized loss is considered other-than-temporary.

We recognize other-than-temporary impairments of our marketable securities when there is a decline in fair value below the amortized cost basis and if (a) we have the intent to sell the security or (b) it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis. If either of these conditions is met, we recognize the difference between the amortized cost basis of the security and its fair value at the impairment measurement date in our consolidated statements of operations. If neither of these conditions is met, we must perform additional analysis to evaluate whether the unrealized loss is associated with the creditworthiness of the issuer of the security rather than other factors, such as interest rates or market factors. If we determine from this analysis that we do not expect to receive cash flows sufficient to recover the entire amortized cost of the security, a credit loss exists, the impairment is considered other-than-temporary and is recognized in our consolidated statements of operations.

Inventory

Inventory is stated at the lower of cost or net realizable value, with approximate cost being determined on a first-in, first-out basis. Prior to initial approval from the U.S. Food and Drug Administration (the “FDA”) or other regulatory agencies, we expense costs relating to the production of inventory in the period incurred, unless we believe regulatory approval and subsequent commercialization of the product candidate is probable and we expect the future economic benefit from sales of the product to be realized, at which point we capitalize the costs as inventory. We assess the costs capitalized prior to regulatory approval each quarter for indicators of impairment, such as a reduced likelihood of approval. We expense costs associated with clinical trial material as research and development expense.

On a quarterly basis, we analyze our inventory levels to determine whether we have any obsolete, expired, or excess inventory. If any inventory is expected to expire prior to being sold, has a cost basis in excess of its net realizable value, is in excess of expected sales requirements as determined by internal sales forecasts, or fails to meet commercial sale specifications, the inventory is written-down through a charge to cost of product sales. The determination of whether inventory costs will be realizable requires estimates by management of future expected inventory requirements, based on sales forecasts. Once packaged, our products have a shelf-life ranging from three to five years. As a result of comparison to internal sales forecasts, we expect to fully realize the carrying value of our finished goods inventory. If actual market conditions are less favorable than those projected by management, inventory write-downs may be required. Charges for inventory write-downs are not reversed if it is later determined that the product is saleable.

Restricted Cash

We classified $0.5 million of our cash as restricted cash, a non-current asset on the balance sheet, as of December 31, 2018 and 2017. This amount represented the security deposit delivered to the landlord of our Waltham, Massachusetts headquarters.

Concentrations and Significant Customer Information

Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, marketable securities, and accounts receivable. We currently hold our excess cash primarily in institutional money market funds, corporate debt securities, U.S. treasury and government agency securities, commercial paper and certificates of deposit. As of December 31, 2018, we did not have a material concentration in any single investment.

Our operations are located entirely within the U.S. We focus primarily on developing, manufacturing, and commercializing our products and product candidates. The following table sets forth customers who represented 10% or more of our total revenues for 2018, 2017 and 2016:



	Years Ended December 31,
	2018	2017	2016
AmerisourceBergen Drug Corporation	27%	26%	27%
McKesson Corporation	26%	24%	14%
Caremark, LLC	< 10%	< 10%	10%

Our net accounts receivable primarily represent amounts due for products sold directly to wholesalers, distributors, specialty pharmacies and our authorized generic partner. Accounts receivable for our products are recorded net of reserves for estimated chargeback obligations, prompt payment discounts and any allowance for doubtful accounts.

As part of our credit management policy, we perform ongoing credit evaluations of our customers, and we generally do not require collateral. If the financial condition of any of our significant product sales customers was to deteriorate and result in an impairment of its ability to make payments owed to us, an allowance for doubtful accounts may be required which could have a material effect on earnings in the period of any such adjustment. We did not experience any significant bad debts and have not established an allowance for doubtful accounts as of December 31, 2018 and 2017.

At December 31, 2018 and 2017, three and two customers, respectively, accounted for 10% or more of our accounts receivable balance, representing approximately 73% and 57% in the aggregate of our total accounts receivable, respectively.

We are currently dependent on a single supplier for Feraheme drug substance (produced in two separate facilities) as well as for drug substance and final packaging services for Intrarosa. In addition, we currently have a single supplier for our auto-injector product. We have been and may continue to be exposed to a significant loss of revenue from the sale of our products in the event that our suppliers and/or manufacturers are not able to fulfill demand for any reason.

Property and Equipment, Net

Property and equipment are recorded at cost and depreciated when placed into service using the straight-line method based on their estimated useful lives as follows:



	Useful Life
Computer equipment and software	5 Years
Furniture and fixtures	5 Years
Leasehold improvements	Lesser of Lease or Asset Life
Laboratory and production equipment	5 Years / 8 Years

Costs for capital assets not yet placed in service are capitalized on our balance sheets and will be depreciated in accordance with the above guidelines once placed into service. Costs for maintenance and repairs are expensed as incurred. Upon sale or other disposition of property and equipment, the cost and related depreciation are removed from the accounts and any resulting gain or loss is charged to our consolidated statements of operations. Long-lived assets to be held and used are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written down to their estimated fair values. Assets classified as held for sale are no longer subject to depreciation and are recorded at the lower of carrying value or estimated net realizable value.

Business Combinations and Asset Acquisitions

The purchase price allocation for business combinations requires extensive use of accounting estimates and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. Under Accounting Standards Update (“ASU”) No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business (“2017-01”), we first determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the single asset or group of assets, as applicable, is not a business.

We account for acquired businesses using the acquisition method of accounting, under which the total purchase price of an acquisition is allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. Acquisition-related costs are expensed as incurred. Any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.

The purchase price allocations are initially prepared on a preliminary basis and are subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed. Any adjustments to the purchase price allocations are made as soon as practicable but no later than one year from the acquisition date.

Acquired inventory is recorded at its fair value, which may require a step-up adjustment to recognize the inventory at its expected net realizable value. The inventory step-up is recorded to cost of product sales in our consolidated statements of operations when related inventory is sold, and we record step-up costs associated with clinical trial material as research and development expense.

Acquisition-Related Contingent Consideration

Contingent consideration arising from a business combination is included as part of the purchase price and is recognized at its estimated fair value as of the acquisition date. Subsequent to the acquisition date, we measure contingent consideration arrangements at fair value for each period until the contingency is resolved. These changes in fair value are recognized in selling, general and administrative expenses in our consolidated statements of operations. Changes in fair values reflect new information about the likelihood of the payment of the contingent consideration and the passage of time. For asset acquisitions, we record contingent consideration for obligations we consider to be probable and estimable and these liabilities are not adjusted to fair value.

Goodwill

We test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. Events that could indicate impairment and trigger an interim impairment assessment include, but are not limited to, an adverse change in current economic and market conditions, including a significant prolonged decline in market capitalization, a significant adverse change in legal factors, unexpected adverse business conditions, and an adverse action or assessment by a regulator. Our annual impairment test date is October 31. We have determined that we operate in a single operating segment and have a single reporting unit.

In performing our goodwill impairment tests during 2018 and 2017, we utilized the approach prescribed under Accounting Standards Codification (“ASC”) 350, as amended by ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which requires that an entity perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. For additional information, see Note I, “Goodwill and Intangible Assets, Net.”

Intangible Assets

We amortize our intangible assets that have finite lives based on either the straight-line method, or if reliably determinable, based on the pattern in which the economic benefit of the asset is expected to be utilized. When such facts and circumstances exist, management compares the projected undiscounted future cash flows associated with the asset over its estimated useful life against the carrying amount. The impairment loss, if any, is measured as the excess of the carrying amount of the asset over its fair value.

If we acquire a business as defined under applicable accounting standards, then the acquired IPR&D is capitalized as an intangible asset. If we acquire an asset or a group of assets that do not meet the definition of a business, then the acquired IPR&D is expensed on its acquisition date. Future costs to develop these assets are recorded to research and development expense as they are incurred.

Acquired IPR&D represents the fair value assigned to research and development assets that we acquire and have not been completed at the acquisition date. The fair value of IPR&D acquired in a business combination is capitalized on our consolidated balance sheets at the acquisition-date fair value and is determined by estimating the costs to develop the technology into commercially viable products, estimating the resulting revenue from the projects, and discounting the projected net cash flows to present value. IPR&D is not amortized, but rather is reviewed for impairment on an annual basis or more frequently if indicators of impairment are present, until the project is completed or abandoned. If we determine that IPR&D becomes impaired or is abandoned, the carrying value is written down to its fair value with the related impairment charge recognized in our consolidated statement of operations in the period in which the impairment occurs. Upon successful completion of each project and launch of the product, we will make a separate determination of the estimated useful life of the IPR&D intangible asset and the related amortization will be recorded as an expense prospectively over its estimated useful life.

The projected discounted cash flow models used to estimate our IPR&D reflect significant assumptions regarding the estimates a market participant would make in order to evaluate a drug development asset, including the following:


•	Probability of successfully completing clinical trials and obtaining regulatory approval;


•	Market size, market growth projections, and market share;


•	Estimates regarding the timing of and the expected costs to advance our clinical programs to commercialization;


•	Estimates of future cash flows from potential product sales; and


•	A discount rate.

Additionally, to the extent we acquire other indefinite-lived intangible assets through our business combinations, these assets are reviewed for impairment on an annual basis or more frequently if indicators of impairment are present. If we determine that the asset becomes impaired, the carrying value is written down to its fair value with the related impairment charge recognized in our consolidated statements of operations in the period in which the impairment occurs.

Patents

We expense all patent-related costs in selling, general and administrative expenses as incurred.

Revenue Recognition

Effective January 1, 2018, we adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transition method. We recognized the cumulative effect of applying the new revenue standard to all contracts with customers that were not completed as of January 1, 2018 as an adjustment of $1.1 million to the opening balance of stockholders’ equity at the beginning of 2018. The adjustment recorded was for incremental contract acquisition costs related to the CBR business. The comparative information has not been restated and continues to be reported under the accounting standards in effect for the periods presented. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, certain collaboration arrangements and financial instruments. ASC 606 also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. The standard also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The adoption of ASC 606 did not have an impact on the amount of reported revenues with respect to our product revenue. See Note D, “Revenue Recognition” for additional information.

Research and Development Expenses

Research and development expenses include both external and internal expenses. External expenses primarily include costs of clinical trials and fees paid to contract research organizations (“CROs”), clinical supply and manufacturing expenses, regulatory filing fees, consulting and professional fees as well as other general costs related to the execution of research and development activities. Internal expenses primarily include compensation of employees engaged in research and development activities. Research and development expenses are expensed as incurred. Manufacturing costs are generally expensed as incurred until a product has received the necessary initial regulatory approval.

Advertising Costs

Advertising costs are expensed as incurred and included in selling, general and administrative expenses in our consolidated statements of operations. Advertising costs, including promotional expenses, costs related to trade shows and print media advertising space were $29.8 million, $9.1 million and $4.9 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Equity-Based Compensation

Equity-based compensation cost is generally measured at the estimated grant date fair value and recorded to expense over the requisite service period, which is generally the vesting period. Because equity-based compensation expense is based on awards ultimately expected to vest, we must make certain judgments about whether employees, officers, directors, consultants and advisers will complete the requisite service period, and reduce the compensation expense being recognized for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based upon historical experience and adjusted for unusual events such as corporate restructurings, which can result in higher than expected turnover and forfeitures. If factors change and we employ different assumptions in future periods, the compensation expense that we record in the future may differ significantly from what we have recorded in the current period.

We estimate the fair value of equity-based compensation involving stock options based on the Black-Scholes option pricing model. This model requires the input of several factors such as the expected option term, the expected risk-free interest rate over the expected option term, the expected volatility of our stock price over the expected option term and the expected dividend yield over the expected option term and are subject to various assumptions. The fair value of awards calculated using the Black-Scholes option pricing model is generally amortized on a straight-line basis over the requisite service period, and is recognized based on the proportionate amount of the requisite service period that has been rendered during each reporting period.

We estimate the fair value of our restricted stock units (“RSUs”) whose vesting is contingent upon market conditions, such as total shareholder return, using the Monte-Carlo simulation model. The fair value of RSUs where vesting is contingent upon market conditions is amortized based upon the estimated derived service period. The fair value of RSUs granted to our employees and directors whose vesting is dependent on future service is determined based upon the quoted closing market price per share on the date of grant, adjusted for estimated forfeitures.

We believe our valuation methodologies are appropriate for estimating the fair value of the equity awards we grant to our employees and directors. Our equity award valuations are estimates and may not be reflective of actual future results or amounts ultimately realized by recipients of these grants. These amounts are subject to future quarterly adjustments based upon a variety of factors, which include, but are not limited to, changes in estimated forfeiture rates and the issuance of new equity-based awards.

Income Taxes

We use the asset and liability method of accounting for deferred income taxes. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A deferred tax asset is established for the expected future benefit of net operating loss (“NOL”) and credit carryforwards. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance against net deferred tax assets is required if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Significant judgments, estimates and assumptions regarding future events, such as the amount, timing and character of income, deductions and tax credits, are required in the determination of our provision for income taxes and whether valuation allowances are required against deferred tax assets. In evaluating our ability to recover our deferred tax assets, we consider all available evidence, both positive and negative, including the existence of taxable temporary differences, our past operating results, the existence of cumulative income in the most recent fiscal years, changes in the business in which we operate and our forecast of future taxable income. In determining future taxable income, we are responsible for assumptions utilized including the amount of state and federal operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income. As of December 31, 2018, we have established a valuation allowance on our net deferred tax assets other than refundable alternative minimum tax (“AMT”) credits to the extent that our existing taxable temporary differences would not be available as a source of income to realize the benefits of those deferred tax assets.

We account for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity, and changes in facts or circumstances related to a tax position. We evaluate uncertain tax positions on a quarterly basis and adjust the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. Any changes to these estimates, based on the actual results obtained and/or a change in assumptions, could impact our income tax provision in future periods. Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as a provision for income tax in our consolidated statement of operations.

Comprehensive Loss

Our comprehensive loss consists of net loss and other comprehensive loss. Other comprehensive loss includes changes in equity that are excluded from net loss, which for all periods presented in these consolidated financial statements related to unrealized holding gains and losses on available-for-sale marketable securities, net of tax.

Basic and Diluted Net (Loss) Income per Share

We compute basic net (loss) income per share by dividing net (loss) income by the weighted average number of common shares outstanding during the relevant period. Diluted net (loss) income per common share has been computed by dividing net (loss) income by the diluted number of common shares outstanding during the period. Except where the result would be antidilutive to net income, diluted net income per common share would be computed assuming the impact of the conversion of the 2.5% convertible senior notes due in 2019 (the “2019 Convertible Notes”) and the 3.25% convertible senior notes due in 2022 (the “2022 Convertible Notes”), the exercise of outstanding stock options, the vesting of RSUs, and the exercise of warrants.

We have a choice to settle the conversion obligation of our 2022 Convertible Notes and the 2019 Convertible Notes (together, the “Convertible Notes”) in cash, shares or any combination of the two. Our policy is to settle the principal balance of the Convertible Notes in cash. As such, we apply the treasury stock method to these securities and the dilution related to the conversion premium, if any, of the Convertible Notes is included in the calculation of diluted weighted-average shares outstanding to the extent each issuance is dilutive based on the average stock price during each reporting period being greater than the conversion price of the respective Convertible Notes.

The dilutive effect of the warrants, stock options and RSUs has been calculated using the treasury stock method.

The components of basic and diluted net (loss) income per share for 2018, 2017 and 2016 were as follows (in thousands, except per share data):



	Years Ended December 31,
	2018			2017			2016
Net (loss) income from continuing operations	$	(169,339	)	$	(205,153	)	$	2,093
Net income (loss) from discontinued operations	103,578			5,925			(4,576		)

Weighted average common shares outstanding	34,394			34,907			34,346
Effect of dilutive securities:
Stock options and RSUs	—			—			487
Shares used in calculating dilutive net loss per share	34,394			34,907			34,833

Basic net (loss) income per share:
(Loss) income from continuing operations	$	(4.92	)	$	(5.88	)	$	0.06
Income (loss) from discontinued operations	3.01			0.17			(0.13		)
Total	$	(1.91	)	$	(5.71	)	$	(0.07	)

Diluted net (loss) income per share:
(Loss) income from continuing operations	$	(4.92	)	$	(5.88	)	$	0.06
Income (loss) from discontinued operations	3.01			0.17			(0.13		)
Total	$	(1.91	)	$	(5.71	)	$	(0.07	)

The following table sets forth the potential common shares issuable upon the exercise of outstanding options, the purchase of shares under our employee stock purchase plan, the vesting of RSUs, the exercise of warrants (prior to consideration of the treasury stock method), and the conversion of the Convertible Notes, which were excluded from our computation of diluted net (loss) income per share because their inclusion would have been anti-dilutive (in thousands):



	Years Ended December 31,
	2018	2017		2016
Options to purchase shares of common stock	3,797	3,531		2,590
Shares of common stock issuable upon the vesting of RSUs	1,129	1,070		613
Warrants	1,008	1,008		7,382
2022 Convertible Notes	11,695	11,695		—
2019 Convertible Notes	790	790		7,382
Shares of common stock under employee stock purchase plan	81	—	—	36
Total	18,500	18,094		18,003

In connection with the issuance of the 2019 Convertible Notes, in February 2014, we entered into convertible bond hedges with certain financial institutions. The convertible bond hedges are not included for purposes of calculating the number of diluted shares outstanding, as their effect would be anti-dilutive. The convertible bond hedges are generally expected, but not guaranteed, to reduce the potential dilution and/or offset the cash payments we are required to make upon conversion of the remaining 2019 Convertible Notes. During 2018 and 2017, the average common stock price was below the exercise price of the warrants and during 2016, the average common stock price was above the exercise price of the warrants.

Reclassification

Certain prior period amounts have been reclassified to conform to the current year presentation.

Business Segments

We have determined that we conduct our operations in one business segment: the manufacture, development and commercialization of products for use in treating various conditions, with a focus on maternal and women’s health and anemia management. Long-lived assets consist entirely of property and equipment and are located in the U.S. for all periods presented.