Revision of Prior Period Financial Statements

9 Months Ended

Sep. 30, 2020

Accounting Changes and Error Corrections [Abstract]

Revision of Prior Period Financial Statements

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

Prior period amounts, specifically net product sales and accrued expenses have been revised to correct prior period errors related to gross-to-net (“GTN”) adjustments for governmental rebates and the related accrual for certain state programs.

During the third quarter of 2020, in conjunction with our remediation efforts related to the errors identified during the second quarter of 2020 described below, we identified certain individually immaterial errors aggregating to $5.2 million related to governmental rebate accruals associated with Makena sales during the first and second quarters of 2020. We understated our GTN adjustments for governmental rebates and the related accrual for certain state programs by $2.8 million for the quarter ended March 31, 2020 and $2.8 million for the quarter ended June 30, 2020. This understatement also resulted in an overstatement of our related royalty obligation of $0.2 million for the quarter ended March 31, 2020 and $0.2 million for the quarter ended June 30, 2020. During the third quarter of 2020, we concluded that the errors were not material to any prior interim periods. However, we determined that correcting the aggregate error during the third quarter of 2020 would be material to the three-month period ended September 30, 2020. As a result, we have revised our historical financial statements to properly reflect the GTN adjustments and related royalty impact and accrual in the appropriate periods through an immaterial correction.

The effect of the correction to our condensed consolidated statement of stockholders’ equity is as follows:

	June 30, 2020
	As reported		Adjustment		As adjusted
Accumulated deficit	$	(1,051,153)	$	(5,216)	$	(1,056,369)
Total stockholders' equity	$	249,322	$	(5,216)	$	244,106

As previously reported, subsequent to the issuance of our Form 10-Q for the quarter ended March 31, 2020, management identified certain individually immaterial errors aggregating to $6.3 million related to governmental rebate accruals associated with Makena sales from 2016 through the first quarter of 2020. From 2016 through 2019, we understated our GTN adjustments for governmental rebates and the related accrual for a certain state program by $6.3 million and for the quarter ended March 31, 2020, we overstated these amounts by $1.8 million. As previously reported, we concluded that the errors were not material to any prior annual or interim period; however, we determined that correcting the aggregate error during the second quarter of 2020 would be material to the three-month period ended June 30, 2020. As a result, we have revised our historical financial statements to properly reflect GTN adjustments and the related accrual in the appropriate periods.

The effect of the corrections to our condensed consolidated statements of operations for the three and nine months ended September 30, 2019 are as follows (in thousands, except per share amounts):

	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
	As reported		Adj		As adjusted		As reported		Adj		As adjusted
Product sales, net	$	84,107	$	(323)	$	83,784	$	237,812	$	(981)	$	236,831
Total revenues	84,131		(323)		83,808		238,043		(981)		237,062
Net loss	$	(23,617)	$	(323)	$	(23,940)	$	(266,528)	$	(981)	$	(267,509)
Basic and diluted net loss per share	$	(0.70)	$	(0.01)	$	(0.71)	$	(7.83)	$	(0.02)	$	(7.85)

The condensed consolidated statements of other comprehensive loss for the three and nine months ended September 30, 2019 have been revised to include the changes to “net loss” summarized above.

The condensed consolidated statement of stockholders’ equity for the three months ended September 30, 2020 has been revised to reflect an increase of $5.2 million to the beginning “accumulated deficit” as of July 1, 2020, representing the accumulated error through that date. The condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2019 have been revised to include the changes to “net loss” summarized above as well as an increase of $5.1 million to the beginning “accumulated deficit” as of January 1, 2019, representing the accumulated error through that date.

The impact on our condensed consolidated statements of cash flows for the nine months ended September 30, 2019, was limited to the offsetting correction between “net loss” and changes in “accounts payable and accrued expenses” presented within “net cash used in operating activities”, as summarized in the above tables.

Refer to Amendment No. 1 on Form 10-K/A to our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on September 15, 2020 for the impact on periods reported in the Company’s 2019 Annual Report on Form 10-K filed with the SEC on March 6, 2020 and for the impact on our condensed consolidated statement of operations for the impacted periods.