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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Heron Therapeutics, Inc. and its wholly owned subsidiary, Heron Therapeutics, B.V., which was organized in the Netherlands in

March 2015.

Heron Therapeutics, B.V. has

operations and

material assets or liabilities, and there have been

significant transactions related to Heron Therapeutics, B.V. since its inception.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes to the financial statements. Our critical accounting policies that involve significant judgment and estimates include revenue recognition, inventory, accrued clinical liabilities, income taxes and stock-based compensation. Actual results could differ materially from those estimates.

Cash, Cash Equivalents, and Short-Term Investments [Policy Text Block]

sh, Cash Equivalents and Short-t

erm Investments

Cash and cash equivalents consist of cash and highly liquid investments with original maturities from the purchase date of

three

months or less.

Short-term investments consist of securities with contractual maturities of greater than

three

months to

one

year. We have classified our short-term investments as available-for-sale securities in the accompanying unaudited condensed consolidated financial statements. Available-for-sale securities are stated at fair market value, with unrealized gains and losses reported in other comprehensive loss and realized gains and losses included in other expense, net. The cost of securities sold is based on the specific-identification method. Interest and dividends on securities classified as available-for-sale are included in interest income.

The following is a summary of our short-term investments (in thousands):

	March 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
U.S. corporate debt securities	$	16,202	$	—	$	(42	)	$	16,160
U.S. commercial paper		17,402		—		—			17,402
Foreign commercial paper		33,801		—		—			33,801
Total	$	67,405	$	—	$	(42	)	$	67,363

	D ecember 31, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
U.S. corporate debt securities	$	13,003	$	—	$	(10	)	$	12,993
U.S. commercial paper		4,929		—		—			4,929
Foreign commercial paper		9,874		—		—			9,874
Total	$	27,806	$	—	$	(10	)	$	27,796

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. We regularly monitor and evaluate the realizable value of our marketable securities. We did

not

recognize any impairment losses for each of the

three

months ended

March 31, 2018

and

2017.

Realized gains and losses associated with our investments, if any, are reported in the statements of operations and comprehensive loss. There were

realized gains or losses for each of the

three

months ended

March 31, 2018

and

2017.

Our bank and investment accounts have been placed under control agreements in accordance with our Senior Secured Convertible Notes (“Convertible Notes”) and our Subordinated Secured Promissory Note (“Promissory Note”) (see Note

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Risk

Cash, cash equivalents and short-term investments are financial instruments that potentially subject us to concentrations of credit risk. We deposit our cash in financial institutions. At times, such deposits

may

be in excess of insured limits. We

may

also invest our excess cash in money market funds, U.S. government and agencies, corporate debt securities and commercial paper. We have established guidelines relative to our diversification of our cash investments and their maturities in an effort to maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates.

Sales of SUSTOL to

two

customers accounted for

10%

or more of our net product sales for the

three

months ended

March 31, 2018.

Sales of CINVANTI to

three

customers accounted for

10%

or more of our net product sales for the

three

months ended

March 31, 2018.

The loss of any of these customers could materially and adversely affect our business, results of operations, financial condition and cash flows.

Inventory, Policy [Policy Text Block]

Inventory

Inventory is stated at the lower of cost or estimated net realizable value on a

first

-in,

first

-out, or FIFO, basis. We periodically analyze our inventory levels and write down inventory that has become obsolete, inventory that has a cost basis in excess of its estimated realizable value and inventory quantities that are in excess of expected sales requirements as cost of product sales. The determination of whether inventory costs will be realizable requires estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory

may

be required, which would be recorded as a cost of product sales.

As of

March 31, 2018,

inventory totaled

$19.4

million, which consisted of raw materials of

$5.0

million, work in process of

$8.1

million and finished goods of

$6.3

million. As of

March 31, 2018,

total inventory included

$8.5

million related to SUSTOL and

$10.9

million related to CINVANTI. As of

December 31, 2017,

inventory totaled

$10.1

million, which consisted of raw materials of

$2.7

million, work in process of

$4.2

million and finished goods of

$3.2

million. As of

December 31, 2017,

total inventory included

$7.1

million related to SUSTOL and

$3.0

million related to CINVANTI.

For the

three

months ended

March 31, 2018,

we recognized cost of product sales of

$3.1

million for sales of SUSTOL and CINVANTI. For the

three

months ended

March 31, 2017,

we recognized

$1.2

million for sales of SUSTOL. Cost of product sales primarily included raw materials, labor and overhead related to the manufacturing of SUSTOL and CINVANTI, as well as shipping and distribution costs.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

May 2014,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2014

09,

Revenue from Contracts with Customers

(“Topic

606”

). Topic

606

is based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Topic

606

is effective for fiscal years beginning after

December 15, 2017,

including interim periods within those fiscal years. Accordingly, in the

first

quarter of

2018,

we adopted Topic

606

using the modified retrospective approach. Under this approach, incremental disclosures are provided to present each financial statement line item for

2018

under the prior standard. As a result of the adoption of Topic

606,

we recorded a cumulative adjustment to retained earnings of

$1.6

million on

January 1, 2018.

This adjustment reflects the acceleration of

$2.9

million in gross product sales less

$1.1

million in product sales allowances and

$0.2

million in cost of product sales (see Note

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Unrealized gains and losses on available-for-sale securities are included in other comprehensive loss and represent the difference between our net loss and comprehensive loss for both periods presented.

Earnings Per Share, Policy [Policy Text Block]

Net L

oss

per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration of common share equivalents. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and common share equivalents outstanding for the period determined using the treasury stock method. For purposes of this calculation, stock options, warrants and shares of common stock underlying Convertible Notes are considered to be common stock equivalents and are included in the calculation of diluted net loss per share only when their effect is dilutive.

Because we have incurred a net loss for both periods presented in the unaudited condensed consolidated statements of operations and comprehensive loss, stock options, warrants and shares of common stock underlying Convertible Notes are

not

included in the computation of net loss per share because their effect would be anti-dilutive. The following table includes the number of stock options, warrants and shares of common stock underlying Convertible Notes

not

included in the computation as of the dates shown below (in thousands):

	As of March 3 1 ,
	2018		2017

Stock options outstanding		12,906		11,849
Warrants outstanding		640		625
Shares of common stock underlying Convertible Notes outstanding		8,103		7,634

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

Recently Adopted

May 2017,

FASB issued ASU

No.

2017

09,

Compensation

– Stock Compensation

: Scope of Modification Accounting

(“ASU

2017

09”

The amendments in ASU

2017

provide guidance about which changes to the terms or conditions of a stock-based payment award require an entity to apply modification accounting in Topic

718.

In the

first

quarter of

2018,

we adopted the provisions of ASU

2017

09,

which did

not

have a material impact on our results of operations or financial condition.

Not

Yet Adopted

February 2016,

FASB issued ASU

No.

2016

02,

Leases

(“ASU

2016

02”

). ASU

2016

requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than

months. In addition, ASU

2016

requires both lessees and lessors to disclose certain key information about lease transactions. ASU

2016

is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. We plan to adopt the provisions of ASU

2016

in the

first

quarter of

2019,

and we are currently evaluating the impact on our results of operations and financial condition.