x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 2834 | 20-8179278 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Large accelerated filer o | Accelerated filer x | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o | |||
Emerging growth company o |
Page | ||
Part I - Financial Information | ||
Item 1. | Condensed Consolidated Financial Statements (unaudited) | |
Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016 | ||
Condensed Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016 | ||
Condensed Consolidated Statement of Changes in Stockholders' Equity for the three months ended March 31, 2017 | ||
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016 | ||
Notes to Condensed Consolidated Financial Statements | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II - Other Information | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
March 31, 2017 | December 31, 2016 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 27,710 | $ | 52,820 | |||
Accounts receivable, net | 84,742 | 42,194 | |||||
Inventories | 3,015 | 2,739 | |||||
Prepaid expenses and other current assets | 8,105 | 11,357 | |||||
Total current assets | 123,572 | 109,110 | |||||
Property and equipment, net | 3,796 | 3,316 | |||||
Intangible assets, net | 32,660 | 33,372 | |||||
Goodwill | 39,743 | 39,743 | |||||
Deferred tax asset, net | 24,431 | 28,643 | |||||
Other assets | 618 | 136 | |||||
Total assets | $ | 224,820 | $ | 214,320 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 19,027 | $ | 14,716 | |||
Accrued expenses | 15,399 | 25,237 | |||||
Current portion of contingent consideration | 1,012 | 1,012 | |||||
Total current liabilities | 35,438 | 40,965 | |||||
Contingent consideration, less current portion | 22,555 | 22,129 | |||||
Commitments and contingencies | |||||||
Stockholders' equity: | |||||||
Preferred stock, 1,500,000 shares authorized and no shares issued or outstanding as of March 31, 2017 and December 31, 2016 | — | — | |||||
Common stock, $0.001 par value; 50,000,000 shares authorized; 16,007,789 and 15,890,862 issued as of March 31, 2017 and December 31, 2016, respectively | 16 | 16 | |||||
Additional paid in capital | 220,202 | 213,872 | |||||
Accumulated deficit | (2,735 | ) | (25,659 | ) | |||
Treasury stock, at cost, 755,983 and 566,838 shares as of March 31, 2017 and December 31, 2016 | (50,656 | ) | (37,003 | ) | |||
Total stockholders' equity | 166,827 | 151,226 | |||||
Total liabilities and stockholders' equity | $ | 224,820 | $ | 214,320 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Revenue: | |||||||
Product sales | $ | 15,286 | $ | 14,122 | |||
Royalty revenue | 36,507 | 9,469 | |||||
License and other revenue | 25,000 | 6,000 | |||||
Total revenue | 76,793 | 29,591 | |||||
Operating expenses: | |||||||
Cost of product sales | 10,765 | 12,767 | |||||
Cost of royalty revenue | 7,229 | 1,822 | |||||
Research and development | 7,525 | 5,521 | |||||
Selling, general and administrative | 18,578 | 12,128 | |||||
Gain on sale of asset | — | (1,750 | ) | ||||
Total operating expenses | 44,097 | 30,488 | |||||
Income (Loss) from operations | 32,696 | (897 | ) | ||||
Interest income | 3 | 21 | |||||
Interest expense | (27 | ) | (1 | ) | |||
Total other (expense) income | (24 | ) | 20 | ||||
Income (Loss) before income tax provision | 32,672 | (877 | ) | ||||
Income tax provision | (9,748 | ) | (19 | ) | |||
Net Income (Loss) | $ | 22,924 | $ | (896 | ) | ||
Earnings per share attributable to common stockholders: | |||||||
Basic | $ | 1.50 | $ | (0.06 | ) | ||
Diluted | $ | 1.42 | $ | (0.06 | ) | ||
Weighted average number of common shares outstanding: | |||||||
Basic | 15,257,892 | 15,636,387 | |||||
Diluted | 16,165,361 | 15,636,387 |
Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Deficit | Total Stockholders' Equity | ||||||||||||||||||
Number of Shares | Amount | |||||||||||||||||||||
Balance at December 31, 2016 | 15,891 | 16 | $ | 213,872 | $ | (37,003 | ) | $ | (25,659 | ) | $ | 151,226 | ||||||||||
Stock-based compensation expense | — | — | 4,193 | — | — | 4,193 | ||||||||||||||||
Issuance of common stock upon exercise of stock option grants | 117 | — | 2,137 | — | — | 2,137 | ||||||||||||||||
Common stock repurchases | — | — | — | (13,653 | ) | — | (13,653 | ) | ||||||||||||||
Net income | — | — | — | 22,924 | 22,924 | |||||||||||||||||
Balance at March 31, 2017 | 16,008 | $ | 16 | $ | 220,202 | $ | (50,656 | ) | $ | (2,735 | ) | $ | 166,827 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | 22,924 | $ | (896 | ) | ||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | |||||||
Deferred income taxes | 4,212 | — | |||||
Depreciation expense | 196 | 140 | |||||
Amortization of intangible assets | 712 | 104 | |||||
Stock-based compensation | 4,193 | 2,869 | |||||
Change in fair value of contingent consideration | 426 | 159 | |||||
Gain on sale of diclofenac-misoprostol | — | (1,750 | ) | ||||
Interest expense | 27 | — | |||||
Changes in operating assets and liabilities: | |||||||
Increase in accounts receivable | (42,548 | ) | (259 | ) | |||
(Increase) decrease in inventories | (276 | ) | 7,281 | ||||
Decrease (increase) in prepaid expenses and other current assets | 3,252 | (183 | ) | ||||
(Increase) decrease in other assets | (27 | ) | 49 | ||||
Increase in accounts payable | 4,311 | 6,438 | |||||
Decrease in deferred revenue | — | (6,000 | ) | ||||
Decrease in accrued expenses and other liabilities | (9,838 | ) | (4,844 | ) | |||
Net cash (used in) provided by operating activities | (12,436 | ) | 3,108 | ||||
Cash flows from investing activities: | |||||||
Purchase of property and equipment | (676 | ) | (804 | ) | |||
Purchase of short term investments | — | (62,000 | ) | ||||
Maturities of short term investments | — | 62,000 | |||||
Payment for business acquisition | — | (4,850 | ) | ||||
Proceeds from sale of diclofenac-misoprostol | — | 1,750 | |||||
Net cash used in investing activities | (676 | ) | (3,904 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from common stock option exercise | 2,137 | — | |||||
Payment of debt financing costs | (482 | ) | — | ||||
Repurchases of common stock | (13,653 | ) | — | ||||
Net cash used in financing activities | (11,998 | ) | — | ||||
Net decrease in cash | (25,110 | ) | (796 | ) | |||
Cash and cash equivalents at beginning of period | 52,820 | 79,083 | |||||
Cash and cash equivalents at end of period | $ | 27,710 | $ | 78,287 | |||
Supplemental disclosures of cash flow information: | |||||||
Non-cash financing activities | |||||||
Contingent consideration - business acquisition | $ | — | $ | 6,370 |
• | Level 1: Quoted prices in active markets for identical assets or liabilities. |
• | Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
• | Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Three Months Ended March 31, | |||||
2017 | 2016 | ||||
Net revenues | |||||
The Medicines Company/Chiesi USA, Inc. | 4 | % | 6 | % | |
Sandoz, Inc. | 1 | % | 2 | % | |
Cephalon, Inc. (Teva) - See Revenue Recognition | 87 | % | 61 | % | |
Par Pharmaceutical, Inc. - See Note 10 | — | % | 20 | % | |
Other | 8 | % | 11 | % | |
100 | % | 100 | % |
March 31, | December 31, | ||||
2017 | 2016 | ||||
Accounts receivable | |||||
The Medicines Company/Chiesi USA, Inc. | 2 | % | 3 | % | |
Sandoz, Inc. | 3 | % | 8 | % | |
Cephalon, Inc. (Teva) | 83 | % | 74 | % | |
Other | 12 | % | 15 | % | |
100 | % | 100 | % |
Three Months Ended March 31, | |||||
2017 | 2016 | ||||
Options | 1,522,317 | 2,510,702 | |||
Total | 1,522,317 | 2,510,702 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Numerator | |||||||
Numerator for basic and diluted earnings per share-net income (loss) | $ | 22,924 | $ | (896 | ) | ||
Denominator | |||||||
Basic weighted average common shares outstanding | 15,257,892 | 15,636,387 | |||||
Dilutive effect of stock options | 907,469 | — | |||||
Diluted weighted average common shares outstanding | 16,165,361 | 15,636,387 | |||||
Basic net income (loss) per share | |||||||
Basic net income (loss) per share | $ | 1.50 | $ | (0.06 | ) | ||
Diluted net income (loss) per share | |||||||
Diluted net income (loss) per share | $ | 1.42 | $ | (0.06 | ) |
Opening Balance January 12, 2016 | $ | 6,370 | |
Changes in fair value | 1,082 | ||
Payment of contingent consideration | (286 | ) | |
Closing Balance March 31, 2017 | $ | 7,166 |
The aggregate consideration consisted of: | Preliminary fair value | ||
Cash consideration paid | $ | 27,209 | |
Common stock issued (i) | 3,046 | ||
Fair value of contingent consideration payable to seller(long term) (ii) | 16,100 | ||
Total consideration | $ | 46,355 |
Estimated fair value of assets acquired: | |||
Cash and cash equivalents | $ | 349 | |
Accounts receivable | 8 | ||
Prepaid expenses and other current assets | 55 | ||
Property and equipment | 162 | ||
Developed technology (iii) | 8,100 | ||
Total identifiable assets | 8,674 | ||
Estimated fair value of liabilities assumed: | |||
Accounts payable | 191 | ||
Deferred income tax liability, net (iv) | 1,473 | ||
Accrued expenses | 398 | ||
Total liabilities assumed | 2,062 | ||
Net assets acquired | 6,612 | ||
Goodwill (v) | 39,743 | ||
Total purchase price | $ | 46,355 |
(i) | Under the stock purchase agreement, the number of common shares to be issued to the seller is equal to $2.7 million divided by the average of the closing day price per share for the thirty (30) trading days prior to the Closing Date. The average price of the common stock of 30 days prior to closing was $68.18. Accordingly, the number of common stock to be issued to the seller was determined at 40,200 shares ($2.7 million/$68.18 per share). The fair value of the common stock issued was determined based on the closing price of Eagle’s common stock on November 16, 2016. |
(ii) | Under the stock purchase agreement, the contingent consideration includes four separate milestone payments which could aggregate to a total of $48 million payable to the seller upon achievement of certain clinical, regulatory and development milestones. These milestone payments are also subject to acceleration under certain circumstances described in the Purchase Agreement. In accordance with the provisions of ASC 805-30-25-5, each unit of contingent consideration is recognized at the acquisition date fair value. The acquisition date fair value of the contingent consideration is $16.1 million and has been classified as other liabilities within non-current liabilities. Such fair values are determined based on a probabilistic model with weights assigned on the likelihood of the Company achieving the clinical, regulatory and development milestones as well as acceleration event in the future. Each unit of contingent consideration is classified as a liability in the balance sheet and would be subsequently measured at fair value on each reporting date. Any future change in fair would be recognized in the statement of operations. |
(iii) | The fair value of developed technology is determined primarily using the “cost method”. The cost method is based on the premise that a prudent investor would pay no more for an asset than its replacement or reproduction cost. The cost to replace |
(iv) | The net deferred income tax liability of $1.5 million primarily relates to the developed technology intangible assets, net of acquired net operating losses. |
(v) | Goodwill is calculated as the difference between the acquisition date fair value of the consideration expected to be transferred and the values assigned to the assets acquired. Goodwill is not amortized but tested for impairment on an annual basis or when indications for impairment exists. Goodwill is not deductible for tax purposes. |
Opening Balance November 16, 2016 | $ | 16,100 | |
Changes in fair value | 301 | ||
Payment of contingent consideration | — | ||
Closing Balance March 31, 2017 | $ | 16,401 |
March 31, | December 31, | ||||||
2017 | 2016 | ||||||
Raw material | $ | 1,862 | $ | 1,131 | |||
Work in process | — | 900 | |||||
Finished products | 1,153 | 708 | |||||
$ | 3,015 | $ | 2,739 |
March 31, | December 31, | ||||||
2017 | 2016 | ||||||
Advances to commercial manufacturers | $ | 5,036 | $ | 7,600 | |||
Prepaid FDA user fee | 1,062 | 1,592 | |||||
Prepaid insurance | 792 | 135 | |||||
Prepaid income taxes | — | 1,654 | |||||
All other | 1,215 | 376 | |||||
Total Prepaid expenses and other current assets | $ | 8,105 | $ | 11,357 |
March 31, | December 31, | ||||||
2017 | 2016 | ||||||
Royalties payable to commercial partners | $ | 6,989 | $ | 9,068 | |||
Accrued research & development | 1,816 | 3,528 | |||||
Accrued professional fees | 1,504 | 2,094 | |||||
Accrued salary and other compensation | 2,024 | 6,003 | |||||
Accrued product costs | 2,154 | 2,856 | |||||
Accrued other | 912 | 1,688 | |||||
Total Accrued expenses | $ | 15,399 | $ | 25,237 |
March 31, 2017 | December 31, 2016 | ||||||||||||||||||||||||
Useful Life (In Years) | Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | |||||||||||||||||||
Docetaxel product rights | 18 | $ | 11,220 | $ | (727 | ) | $ | 10,493 | $ | 11,220 | $ | (571 | ) | $ | 10,649 | ||||||||||
Ryanodex intangible | 20 | 15,000 | (325 | ) | 14,675 | 15,000 | (174 | ) | 14,826 | ||||||||||||||||
Developed technology | 5 | 8,100 | (608 | ) | 7,492 | 8,100 | (203 | ) | 7,897 | ||||||||||||||||
Total | $ | 34,320 | $ | (1,660 | ) | $ | 32,660 | $ | 34,320 | $ | (948 | ) | $ | 33,372 |
Estimated Amortization Expense | |||
Year Ending December 31, | |||
2017 (remainder) | $ | 2,134 | |
2018 | 3,021 | ||
2019 | 3,143 | ||
2020 | 3,289 | ||
2021 | 3,246 | ||
All other | 17,827 | ||
Total estimated amortization expense | $ | 32,660 |
Shares of common stock repurchased | 189,145 | ||
Value of common stock repurchased | $ | 13,653 |
Three Months Ended March 31, | |||
2017 | 2016 | ||
Risk-free interest rate | 1.91% - 2.42% | 1.29% - 1.90% | |
Volatility | 37.27% | 31.31% | |
Expected term (in years) | 5.50 - 7.00 years | 5.50 - 7.00 years | |
Expected dividend yield | 0.0% | 0.0% |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Selling, general and administrative | $ | 3,132 | $ | 2,162 | |||
Research and development | 1,061 | 707 | |||||
Total | $ | 4,193 | $ | 2,869 |
Total | 2017 | 2018 | 2019 | 2020 | 2021 | Beyond | ||||||||||||||||
Operating lease obligations | $ | 1,832 | 423 | 564 | 564 | 281 | — | — | ||||||||||||||
Purchase obligations | $ | 20,948 | 20,948 | — | — | — | — | — | ||||||||||||||
Spectrum base fee | $ | 2,265 | 2,265 | — | — | — | — | — |
Three months ended | |||||||
March 31, | March 31, | ||||||
2017 | 2016 | ||||||
Provision for income taxes | $ | 9,748 | $ | 19 | |||
Effective tax rate | 30 | % | (2 | )% |
• | the level of orders submitted by our commercial partner, Teva; |
• | the rate at which Teva can convert the current market to Bendeka; |
• | the level of institutional demand for Bendeka; |
• | unit sales prices charged by our commercial partner, net of any sales reserves; and |
• | the level of orders submitted by wholesalers, hospitals and surgery centers. |
• | the level of orders submitted by our commercial partners, Sandoz and Chiesi; |
• | the level of institutional demand for Argatroban; and |
• | unit sales prices charged by our commercial partners, net of any sales reserves. |
• | the effectiveness of our sales force and co-promotion partner, Spectrum Pharmaceuticals, Inc. ("Spectrum"); |
• | the level of orders submitted by wholesalers, hospitals and surgery centers; |
• | the level of institutional demand for our products; and |
• | unit sales prices, net of any sales reserves. |
Three Months Ended March 31, | Increase | ||||||||||
2017 | 2016 | ||||||||||
(in thousands) | |||||||||||
Product sales | $ | 15,286 | $ | 14,122 | $ | 1,164 | |||||
Royalty revenue | 36,507 | 9,469 | 27,038 | ||||||||
License and other revenue | 25,000 | 6,000 | 19,000 | ||||||||
Total revenue | $ | 76,793 | $ | 29,591 | $ | 47,202 |
Three Months Ended March 31, | Increase (Decrease) | ||||||||||
2017 | 2016 | ||||||||||
(in thousands) | |||||||||||
Cost of product sales | $ | 10,765 | $ | 12,767 | $ | (2,002 | ) | ||||
Cost of royalty revenue | 7,229 | 1,822 | 5,407 | ||||||||
Total cost of revenue | $ | 17,994 | $ | 14,589 | $ | 3,405 |
Three Months Ended March 31, | Increase | ||||||||||
2017 | 2016 | ||||||||||
(in thousands) | |||||||||||
Research and development | $ | 7,525 | $ | 5,521 | $ | 2,004 |
Three Months Ended March 31, | Increase | ||||||||||
2017 | 2016 | ||||||||||
(in thousands) | |||||||||||
Selling, general and administrative | $ | 18,578 | $ | 12,128 | $ | 6,450 |
Three Months Ended March 31, | Decrease | ||||||||||
2017 | 2016 | ||||||||||
(in thousands) | |||||||||||
Interest income | $ | 3 | $ | 21 | $ | (18 | ) | ||||
Interest expense | (27 | ) | (1 | ) | (26 | ) | |||||
Total other income (expense), net | $ | (24 | ) | $ | 20 | $ | (44 | ) |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
(in thousands) | |||||||
Provision for income taxes | $ | 9,748 | $ | 19 | |||
Effective tax rate | 30 | % | (2 | )% |
Total | 2017 | 2018 | 2019 | 2020 | 2021 | Beyond | ||||||||||||||||
Operating lease obligations | $ | 1,832 | 423 | 564 | 564 | 281 | — | — | ||||||||||||||
Purchase obligations | $ | 20,948 | 20,948 | — | — | — | — | — | ||||||||||||||
Spectrum base fee | $ | 2,265 | 2,265 | — | — | — | — | — |
(i) | strengthen and formalize our tax provision review control with improved documentation standards and oversight; |
(ii) | formalize a policy and procedure for the communication and review of non-routine tax matters by senior management; and |
(iii) | as appropriate, engage external tax advisors with respect to non-routine tax matters. |
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part Publicly Announced Plans or Programs (2) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs | |||||||||
(dollars in thousands) | |||||||||||||
January 1, 2017 to January 31, 2017 | 80,955 | $ | 68.51 | 80,955 | $ | 32,395 | |||||||
February 1, 2017 to February 28, 2017 | 78,759 | $ | 72.44 | 78,759 | 26,694 | ||||||||
March 1, 2017 to March 31, 2017 | 29,431 | $ | 80.55 | 29,431 | 24,344 | ||||||||
Total | 189,145 | $ | 72.19 | 189,145 |
EAGLE PHARMACEUTICALS, INC. | |||
DATED: May 8, 2017 | By: | /s/ Scott Tarriff | |
Scott Tarriff | |||
Chief Executive Officer and Director (Principal Executive Officer) | |||
DATED: May 8, 2017 | By: | /s/ David E. Riggs | |
David E. Riggs | |||
Chief Financial Officer (Principal Accounting and Financial Officer) |
Exhibit Number | Description of Exhibit | ||||||
3.1 (1) | Amended and Restated Certificate of Incorporation | ||||||
3.2 (1) | Amended and Restated Bylaws | ||||||
10.1 (2) | Offer Letter by and between the Registrant and David Pernock dated January 2, 2017 | ||||||
10.2 (3) | Credit Agreement, by and among the Registrant, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, dated January 26, 2017 | ||||||
31.1 | Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||
31.2 | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||
32.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||||||
101.INS | XBRL Instance Document | ||||||
101.SCH | XBRL Taxonomy Extension Schema Document | ||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||||||
101.DEF | XBRL Taxonomy Definition Linkbase Document | ||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
1. | The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2017, (the “Quarterly Report”), to which this Certification is attached as Exhibit 32.1, fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act, and |
2. | The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /s/ Scott Tarriff |
Scott Tarriff | |
Chief Executive Officer (Principal Executive Officer) | |
By: | /s/ David E. Riggs |
David E. Riggs | |
Chief Financial Officer (Principal Financial and Accounting Officer) |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
May 03, 2017 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | EAGLE PHARMACEUTICALS, INC. | |
Entity Central Index Key | 0000827871 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding (in shares) | 15,298,206 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, shares authorized (in shares) | 1,500,000 | 1,500,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value per share (in usd per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock, shares issued (in shares) | 16,007,789 | 15,890,862 |
Treasury stock (in shares) | 755,983 | 566,838 |
Condensed Consolidated Statement of Changes in Stockholders' Equity - 3 months ended Mar. 31, 2017 - USD ($) shares in Thousands, $ in Thousands |
Total |
Common Stock |
Additional Paid-In Capital |
Treasury Stock |
Accumulated Deficit |
---|---|---|---|---|---|
Beginning balance (in shares) at Dec. 31, 2016 | 15,891 | ||||
Beginning balance at Dec. 31, 2016 | $ 151,226 | $ 16 | $ 213,872 | $ (37,003) | $ (25,659) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock-based compensation expense | 4,193 | 4,193 | |||
Issuance of common stock upon exercise of stock option grants (in shares) | 117 | ||||
Issuance of common stock upon exercise of stock option grants | 2,137 | 2,137 | |||
Common stock repurchases | (13,653) | (13,653) | |||
Net income | 22,924 | 22,924 | |||
Ending balance (in shares) at Mar. 31, 2017 | 16,008 | ||||
Ending balance at Mar. 31, 2017 | $ 166,827 | $ 16 | $ 220,202 | $ (50,656) | $ (2,735) |
Interim Condensed Financial Statements |
3 Months Ended |
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Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Interim Condensed Condensed Financial Statements | Interim Condensed Consolidated Financial Statements The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. The condensed consolidated balance sheet at December 31, 2016 was derived from audited financial statements, but certain information and footnote disclosures normally included in the Company's annual consolidated financial statements have been condensed or omitted. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of the financial information for the interim periods reported have been made. Results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results for the year ending December 31, 2017 or any period thereafter. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC on March 15, 2017. Unless otherwise indicated or required by context, reference throughout to the "Company," "Eagle Pharmaceuticals," "Eagle," "we," "us" or "our" mean Eagle Pharmaceuticals, Inc., a Delaware corporation and its subsidiary, Eagle Biologics, Inc., and references to "Eagle Biologics" mean Eagle Biologics, Inc. |
Organization and Business Activities |
3 Months Ended |
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Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Business Activities | Organization and Business Activities Eagle Pharmaceuticals, Inc. (the Company, or Eagle, or we) is a specialty pharmaceutical company focused on developing and commercializing injectable products, primarily in the critical care and oncology areas, using the U.S. Food and Drug Administration's ("FDA's") 505(b)(2) NDA regulatory pathway. The Company's business model is to develop proprietary innovations to FDA-approved, injectable drugs, referred to as branded reference drugs, that offer favorable attributes to patients and healthcare providers. The Company has five products currently being sold in the United States under various license agreements in place with commercial partners, including a ready-to-use formulation of Argatroban, Ryanodex®(dantrolene sodium) ("Ryanodex"), diclofenac-misoprostol and docetaxel injection, non-alcohol formulation ("Non-Alcohol Docetaxel Injection") and rapidly infused bendamustine RTD ("Bendeka"). The Company has a number of products currently under development and certain products may be subject to license agreements. On February 13, 2015, the Company submitted a New Drug Application or NDA to the FDA for Bendeka, which was approved by the FDA on December 7, 2015. Also, on February 13, 2015, the Company entered into an Exclusive License Agreement (the “Cephalon License”) with Cephalon, Inc. ("Cephalon"), a wholly-owned subsidiary of Teva Pharmaceutical Industries Ltd. ("Teva"), for U.S. and Canadian rights to Bendeka for treatment of patients with chronic lymphocytic leukemia (“CLL”) and patients with non-Hodgkin’s lymphoma (“NHL”). Pursuant to the terms of the Cephalon License, Cephalon will be responsible for all U.S. commercial activities for the product including promotion and distribution, and the Company is responsible for obtaining and maintaining all regulatory approvals and conducting post-approval clinical studies. Additionally, under the terms of the Cephalon License, the Company received an upfront cash payment of $30 million, in January 2016, received a $15 million milestone payment related to the FDA approval of Bendeka in December 2015, received $40 million in November 2016 related to the receipt of a unique, product-specific billing code, J-code J9034 (the J-Code), for Bendeka and earned $25 million in March 2017 for an additional sales-based milestone payment. In addition, the Company is entitled to receive royalty payments of 20% of net sales of the product, which increased to 25% on receipt of the J-Code. In connection with the Cephalon License, the Company has entered into a supply agreement with Cephalon, pursuant to which the Company is responsible for supplying product to Cephalon. On October 13, 2015, the Company entered into an exclusive U.S. licensing agreement (the "Teikoku Agreement") with Teikoku Pharma USA, Inc. ("Teikoku") to market, sell and distribute Non-Alcohol Docetaxel Injection, an investigational product intended for the treatment of breast cancer, non-small cell lung cancer, prostate cancer, gastric adenocarcinoma, and head and neck cancer. The NDA for Non-Alcohol Docetaxel Injection for these indications was approved by the FDA on December 22, 2015. Under the terms of the agreement, the Company paid an upfront cash payment of $250 upon execution of the agreement which was included in Research and development in the Company's statement of operations in the fourth quarter of 2015. In January 2016, the Company made an additional payment of $4,850 to Teikoku upon FDA approval and NDA transfer to Eagle. In addition, the Company is obligated to pay 25% royalties on future gross profits. The Company accounted for the transaction as a business combination in 2016. The results of operations related to Non-Alcohol Docetaxel Injection have been included in the statements of income from the date of acquisition. The Company did not incur any significant acquisition related costs in connection with the Non-Alcohol Docetaxel Injection acquisition. See Note 4. Acquisitions. On November 4, 2015, the Company entered into a Co-Promotion Agreement (the "Spectrum Agreement") with Spectrum Pharmaceuticals, Inc. ("Spectrum") under which Spectrum agreed to dedicate 80% of its 32-person Corporate Accounts Sales Team's time to selling and marketing one of our products through June 2017. We have the right to extend the initial term of this agreement by six months to December 31, 2017 at our sole election. Any extensions after December 31, 2017 require mutual consent and will be for six months per extension. In preparation for near-term product launches, we are building an internal commercial team anticipated to consist of approximately 50 direct sales representatives, support staff and management who will be a part of our independent commercial organization. On January 11, 2016, the Company entered into an agreement with Albany Molecular Research, Inc. ("AMRI") to jointly develop and manufacture several select and complex parenteral drug products for registration and subsequent commercialization in the United States. Under the terms of the agreement, AMRI will develop and initially provide cGMP manufacturing and analytical support for the registration of the new product candidates. The Company and AMRI will share the costs of development, with 37.5% paid by the Company and 62.5% paid by AMRI. The Company will be responsible for advancing the product candidates through clinical trials and regulatory submissions. On March 18, 2016, the Company received a Complete Response Letter from the FDA for EP-6101 ready-to-use ("RTU") bivalirudin ("EP-6101") in which the FDA stated it cannot approve the application in its present form and requested additional information from the Company. Discussions with the FDA to identify an appropriate pathway to approval are ongoing and could include a human study. On March 28, 2016 the FDA denied the Company's request for seven years of orphan drug exclusivity in the U.S., for Bendeka. On March 29, 2016, the Company entered into an asset purchase agreement (the "Diclofenac Asset Purchase Agreement") pursuant to which the Company sold certain intellectual property related to diclofenac-misoprostol in the United States. In consideration of the assets and rights sold under the Diclofenac Asset Purchase Agreement, the Company received a one-time payment at closing of $1.75 million which was recognized as a gain in the first quarter of 2016. In consideration of the rights granted under the agreement, the purchaser will pay the Company a 25% royalty on net profits of diclofenac-misoprostol in the territory for five years from the date of sale. The Company may continue to market diclofenac-misoprostol until such time that the purchaser is able to launch the product. In April 2016, we filed a lawsuit against the FDA arguing that Bendeka is entitled to orphan drug exclusivity as a matter of law (see Part II, Item I. Legal Proceedings). On July 2, 2014, the FDA granted us orphan drug designations for Bendeka for the treatment of CLL and indolent B-cell NHL. The designations were based on a plausible hypothesis that Bendeka is “clinically superior” to a drug previously approved for the same indications. Generally, an orphan-designated drug is eligible for seven years of marketing exclusivity for the orphan-designated indications upon approval of the drug for those indications. If granted, orphan drug exclusivity for Bendeka would run for seven years from December 7, 2015, the date Bendeka was approved. However, the FDA issued a letter decision to us on March 24, 2016, taking the position that Bendeka is not currently eligible for orphan drug exclusivity because it has not been demonstrated to be clinically superior to the drug previously approved for the same indications. On July 11, 2016, the FDA determined that no additional human safety and efficacy data is required for the submission of EP-4104 (dantrolene sodium) for exertional heatstroke ("EHS"), further confirming that a hybrid development program comprised of clinical data from EHS patients and positive preclinical data from animal studies constitutes an adequate regulatory pathway for future NDA submission. Following the completion of the additional animal studies, the NDA was submitted on January 20, 2017. On August 3, 2016, the Company amended our agreement with Lyotropic Therapeutics, Inc. to reduce future royalties related to Ryanodex net sales from 15% to 3% (subject to further reduction upon the occurrence of certain triggering events) in exchange for $15.0 million, which we recorded as an intangible asset (see Note 7 Intangible assets, net). On August 9, 2016, the Company announced a share repurchase program approved by the Company’s board of directors authorizing the repurchase of up to $75.0 million of the Company’s common stock (the “Share Repurchase Program”). Under the Share Repurchase Program, the Company is authorized to repurchase shares through open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act. The Share Repurchase Program has no time limit and may be suspended or discontinued completely at any time. The specific timing and amount of repurchases will vary based on available capital resources and other financial and operational performance, market conditions, securities law limitations, and other factors. The repurchases will be made using our cash resources. In any period, cash used in financing activities related to shares repurchased may differ from the comparable change in stockholders' equity, reflecting timing differences between the recognition of share repurchase transactions and their settlement for cash. We repurchased 189,145 shares of common stock for $13.7 million during the first quarter of 2017, and a total of 566,838 for $37.0 million in the year ended December 31, 2016. During the quarter-ended September 30, 2016, the Company entered into an amendment to the Cephalon license and supply agreements for Bendeka. The amendment expands the geographical scope of the rights granted under the original agreement to include territories outside the US and Canada. In accordance with this agreement, the Company recorded $1.75 million in license and other revenue on the condensed consolidated statements of operations. The Company is also eligible to receive up to $750 thousand on each regulatory approval received in certain additional territories, not to exceed $2.25 million, and royalties on future sales. On November 2, 2016, the Company announced that the Centers for Medicare and Medicaid Services (CMS) established the J-Code for Bendeka. The J-Code became effective on January 1, 2017. The new J-Code provides reimbursement coding clarity to outpatient facilities and physicians that administer Bendeka, facilitating access for patients and Medicare, Medicaid and commercial insurance reimbursement. Under the terms of the Cephalon License, the Company received a $40 million milestone payment upon receipt of the J-Code in the fourth quarter of 2016, which we recorded in License and other revenue in the statement of operations for the year ended December 31, 2016. Additionally, this event triggered an increase in the royalty rate from 20% to 25% of Bendeka net sales. On November 16, 2016 the Company entered into an agreement to acquire Arsia Therapeutics (“Arsia”), an early-stage biotechnology firm with proprietary viscosity-reducing technology and formulation know-how and subsequently renamed the subsidiary Eagle Biologics, Inc. ("Eagle Biologics"). Under the terms of the stock purchase agreement, we paid approximately $27.2 million in cash and 40,200 shares of Eagle common stock worth $3.0 million at closing. We also agreed to pay up to $48 million in additional payments upon the completion of certain milestones, for aggregate potential payments of $78 million. As part of the agreement, Eagle Biologics founders and Massachusetts Institute of Technology professors, Dr. Robert Langer and Dr. Alexander Klibanov, as well as other key members of the Eagle Biologics team, entered into agreements to work with Eagle to develop new formulations and solve delivery challenges in the large molecules space (see Note 4. Acquisitions). On January 2, 2017, in connection with his appointment as President and Chief Commercial Officer of the Company, David Pernock resigned from the board of directors. On January 26, 2017, the Company entered into a Credit Agreement (the “Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent (“Agent”) and the lenders party thereto. The Credit Agreement provides for a three-year $50 million revolving credit facility (the “Credit Facility”), none of which was drawn at closing. The Credit Facility includes a $5 million letter of credit subfacility. The Company expects to use future loans under the Credit Facility, if any, for working capital needs and for general corporate purposes. Loans under the Credit Facility bear interest, at the Company’s option, at a rate equal to either (a) the LIBOR rate, plus an applicable margin ranging from 2.50% to 3.00% per annum, based upon the total net leverage ratio (as defined in the Credit Agreement), or (b) the prime lending rate, plus an applicable margin ranging from 1.50% to 2.00% per annum, based upon the total net leverage ratio. The Company is required to pay a commitment fee on the unused portion of the Credit Facility at a rate ranging from 0.35% to 0.40% based upon the total net leverage ratio. The Company is permitted to terminate or reduce the revolving commitments of the lenders and to make voluntary prepayments at any time subject to break funding payments. The Company is not required to make mandatory prepayments of outstanding indebtedness under the Credit Agreement other than in the case that the aggregate amount of all outstanding loans and letters of credit issued under the Credit Facility exceed the aggregate commitment of all lenders under the Credit Facility. On March 16, 2017, we announced that Richard A. Edlin, Vice Chair, Chair of the Litigation Practice in New York and member of the Executive Committee of the law firm Greenberg Traurig, LLP, joined Eagle’s board of directors, effective as of March 17, 2017. During the quarter-ended March 31, 2017, under the terms of the Cephalon License, the Company earned a $25 million milestone payment as Teva reached $500 million in cumulative net sales of Bendeka included in license and other revenue on the condensed consolidated statements of operations. |
Summary of Significant Accounting Policies |
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Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Use of Estimates These financial statements are presented in U.S. dollars and are prepared in accordance with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements including disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period and accompanying notes. The Company's critical accounting policies are those that are both most important to the Company's financial condition and results of operations and require the most difficult, subjective or complex judgments on the part of management in their application, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Because of the uncertainty of factors surrounding the estimates or judgments used in the preparation of the financial statements, actual results may materially vary from these estimates. Reclassifications Certain reclassifications have been made to prior year amounts to conform with the current year presentation. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. All cash and cash equivalents are held in United States financial institutions. The carrying amount of cash and cash equivalents approximates its fair value due to its short-term nature. The Company, at times, maintains balances with financial institutions in excess of the FDIC limit. Short Term Investments Investments consisted of U.S. Treasury securities that have an original maturity of greater than three months and typically less than 180 days. The Company's investments were classified as Level 1 and available-for-sale and are recorded at fair value, based upon quoted market prices. No gains or losses on investments are realized until the sale occurs or a decline in fair value is determined to be other-than-temporary. If a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. Fair Value Measurements U.S. GAAP establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
The fair value of interest-bearing cash, cash equivalents, short term investments, accounts receivable and accounts payable approximate fair value due to their life being short term in nature, and are classified as Level 1 for all periods presented. The fair value of the contingent consideration/accrued royalty is classified as Level 3 for the period presented. Intangible Assets The Company capitalizes and includes in intangible assets the costs of acquired product licenses and developed technology purchased individually or identified in a business combination. Intangible assets are recorded at fair value at the time of their acquisition and stated net of accumulated amortization The Company amortizes its definite-lived intangible assets using either the straight-line or accelerated method, based on the useful life of the asset over which it is expected to be consumed utilizing expected undiscounted future cash flows. We will evaluate the potential impairment of other intangible assets if events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Events giving rise to impairment are an inherent risk in our industry and many factors cannot be predicted. Factors that we consider in deciding when to perform an impairment review include significant changes in our forecasted projections for the asset or asset group for reasons including, but not limited to, significant under-performance of a product in relation to expectations, significant changes or planned changes in our use of the assets, significant negative industry or economic trends, and new or competing products that enter the marketplace. The impairment test is based on a comparison of the undiscounted cash flows expected to be generated from the use of the asset group and its eventual disposition to the carrying value of the asset group. If impairment is indicated, the asset is written down by the amount by which the carrying value of the asset exceeds the related fair value of the asset with the related impairment charge recognized within the statements of operations. We did not identify any impairment to our definite-lived intangible assets in the periods presented. With respect to determining an asset’s fair value and useful life, because this process involves management making certain estimates and because these estimates form the basis of the determination of whether or not an impairment charge should be recorded, these estimates are considered to be critical accounting estimates. Such impairment charges may be material to our results. Goodwill Goodwill, which represents the excess of purchase price over the fair value of net assets acquired in the Eagle Biologics acquisition, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value based test. Goodwill is assessed for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment model requires a two-step method for determining goodwill impairment. In the first step, we determine the fair value of our reporting units using an appropriate valuation methodology. If the net book value of a reporting unit exceeds its fair value, we would then perform the second step of the impairment test which requires allocation of the reporting unit’s fair value to all of its assets and liabilities using the acquisition method prescribed under authoritative guidance for business combinations. Any residual fair value is allocated to goodwill. An impairment charge is recognized only when the implied fair value of our reporting unit’s goodwill is less than its carrying amount. We did not identify any impairment to goodwill during the periods presented. Acquisition-Related Contingent Consideration Contingent consideration related to a business combination is recorded at the acquisition date at the estimated fair value of the contingent payments. The acquisition date fair value is measured based on the consideration expected to be transferred using probability-weighted assumptions and discounted back to present value. The discount rate used is determined at the time of the acquisition in accordance with accepted valuation methods. The fair value of the acquisition-related contingent consideration is re-measured at the estimated fair value at each reporting period with the change in fair value recognized as income or expense in the consolidated statements of operations. Concentration of Major Customers and Vendors The Company is dependent on commercial partners to market and sell Argatroban and Bendeka. The Company's customers for Argatroban are its commercial and licensing partners, therefore, the Company's future revenues are highly dependent on these collaboration and distribution arrangements. The Company received a $30 million upfront payment during February 2015 and earned a $15 million milestone payment received in January 2016 upon product approval in December 2015 under the terms of the Cephalon License- See "revenue recognition" below for more detail. The Company received a $40 million milestone payment in December 2016 upon receipt of the J-Code and received $25 million in March 2017 for a sales-based milestone payment. Additionally, the J-Code receipt triggered an increase in the royalty rate from 20% to 25% of Bendeka net sales. The total revenues and accounts receivables broken down by major customers as a percentage of the total are as follows:
Currently, for Argatroban and Bendeka, the Company uses one vendor as its sole source supplier. Because of the unique equipment and process for manufacturing, transferring manufacturing activities to an alternate supplier would be a time consuming and costly endeavor, and there are only a limited number of manufacturers that are capable of performing this function for the Company. Inventory Inventory is recorded at the lower of cost or market, with cost determined on a first-in first-out basis. The Company periodically reviews the composition of inventory in order to identify obsolete, slow-moving or otherwise non-saleable items. If non-saleable items are observed and there are no alternate uses for the inventory, the Company will record a write-down to net realizable value in the period that the decline in value is first recognized. In most instances, inventory is shipped from the Company's vendor directly to the Company's customers. Property and Equipment Property and equipment are stated at cost. Depreciation is recorded over the estimated useful lives of the assets utilizing the straight-line method. Leasehold improvements are being amortized over the shorter of their useful lives or the lease term. Research and Development Expense Costs incurred for research and product development, including costs incurred for technology in the development stage, are expensed as incurred. Clinical study costs are accrued over the service periods specified in the contracts and adjusted as necessary based upon an ongoing review of the level of effort and costs actually incurred. Advance payments for goods or services that will be used for future research and development activities are capitalized as deferred cost and expensed as the related goods are delivered or services performed. Recoveries of previously recognized R&D expenses from third parties are recorded as a reduction to R&D expense in the period it becomes realizable. Advertising and Marketing Advertising and marketing costs are expensed as incurred. Advertising and marketing costs were $5,936 and $2,404 for the three months ended March 31, 2017 and 2016, respectively. Income Taxes We account for income taxes using the liability method in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), Topic 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and are measured by applying enacted rates and laws to taxable years in which differences are expected to be recovered or settled. Further, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that the rate changes. A valuation allowance is required when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. Since our inception, we have incurred substantial cumulative losses and through the third quarter of 2016 we recorded a full valuation allowance against our net deferred tax assets which was largely made up of our net operating loss carryforward. In the fourth quarter of 2016, the Company reversed the reserve on its net deferred tax asset (See Note 11 - Income Taxes). ASC 740 also prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return, including a decision whether to file or not file a return in a particular jurisdiction. We recognize any interest and penalties accrued related to unrecognized tax benefits as income tax expense. Revenue Recognition Product revenue - The Company recognizes net revenue on sales to its commercial partners and to end users. In each instance, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered and collectability is reasonably assured. Revenue on sales to commercial partners relates to Argatroban and Bendeka. The Company’s commercial partners can return product within specified timeframes if the product does not meet certain inspection tests. Sales to our commercial partners are presented gross primarily because the Company is the primary obligor in the arrangement, is responsible to ensure that the product is produced in accordance with the related supply agreement and bears risk of loss while the inventory is in-transit to the commercial partner. Revenue on sales to end users for Non-Alcohol Docetaxel Injection, Ryanodex and diclofenac-misoprostol are recorded net of chargebacks, rebates, returns, prompt pay discounts, wholesaler fees and other deductions. Our products are contracted with a limited number of oncology distributors and hospital buying groups with narrow differences in ultimate realized contract prices used to estimate our chargeback and rebate reserves. The Company has a product returns policy on some of its products that allows the customer to return pharmaceutical products within a specified period of time both prior to and subsequent to the product’s expiration date. The Company's estimate of the provision for returns is analyzed quarterly and is based upon many factors, including historical experience of actual returns and analysis of the level of inventory in the distribution channel, if any. The Company has terms on sales of Ryanodex by which the Company does not accept returns. The Company believes that the reserves it has established are reasonable based upon current facts and circumstances. Applying different judgments to the same facts and circumstances could result in the estimated amount for reserves to vary. Royalty Revenue — The Company recognizes revenue from license arrangements with its commercial partners' net sales of products. Royalties are recognized as earned in accordance with contract terms when they can be reasonably estimated and collectability is reasonably assured. The Company's commercial partners are obligated to report their net product sales and the resulting royalty due to the Company within 25 days for Bendeka and 60 days for Argatroban from the end of each quarter. Based on historical product sales, royalty receipts and other relevant information, the Company accrues royalty revenue each quarter and subsequently determines a true-up when it receives royalty reports from its commercial partners. Historically, these true-up adjustments have been immaterial. License and other revenue — The Company analyzes each element of its licensing agreements to determine the appropriate revenue recognition. The terms of the license agreement may include payment to us of non-refundable up-front license fees, milestone payments if specified objectives are achieved, and/or royalties on product sales. The Company recognizes revenue from upfront payments over the period of significant involvement under the related agreements unless the fee is in exchange for products delivered or services rendered that represent the culmination of a separate earnings process and no further performance obligation exists under the contract. When a sale combines multiple elements upon performance of multiple services, the Company allocates revenue for transactions that include multiple elements to each unit of accounting which is a deliverable or combination of deliverables under the arrangement that has stand-alone value to the counter-party based on its relative selling price, and recognizes revenue for each unit of accounting when the revenue recognition criteria have been met. The Company follows the selling price hierarchy as outlined in the guidance Revenue Recognition (ASC Topic 605) - Multiple-Deliverable Revenue Arrangements. The guidance provides a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence (“VSOE”), (ii) third-party evidence (“TPE”) if available and when VSOE is not available, and (iii) best estimate of the selling price (“BESP”) if neither VSOE nor TPE is available. The Company uses BESP to determine the stand-alone selling price for such deliverables. The Company has an established process for developing BESP, which incorporates pricing practices, historical selling prices, the effect of market conditions as well as entity-specific factors. Estimated selling price is monitored and evaluated on a regular basis to ensure that changes in circumstances are accounted for in a timely manner. The Company recognizes milestone payments as revenue upon the achievement of specified milestones only if (1) the milestone payment is non-refundable, (2) substantive effort is involved in achieving the milestone, (3) the amount of the milestone is reasonable in relation to the effort expended or the risk associated with achievement of the milestone, and (4) the milestone is at risk for both parties. If any of these conditions are not met, we defer the milestone payment and recognize it as revenue over the estimated period of performance under the contract. As described above, under the terms of the Cephalon License, the Company received an upfront cash payment of $30 million, received a milestone payment of $15 million for regulatory approval, received $40 million milestone upon receipt of the J-Code and received $25 million in an additional sales based milestone payment for reaching $500 million in net product sales of Bendeka. In 2015, the $30 million upfront payment was allocated between the license issued to Cephalon and obtaining and maintaining regulatory approvals and conducting post-approval clinical studies using the Company’s best estimate of selling price for each deliverable. The full $30 million was recognized as income in the first quarter of 2015, as the Company substantially completed its requirements for obtaining regulatory approval, which consisted of filing an NDA, on February 13, 2015, and the remaining obligations were estimated to require minimal effort. On December 7, 2015, the FDA approved Bendeka (50 mL bendamustine hydrochloride) marking the achievement of a milestone which entitled the Company to a $15 million payment which was received in January 2016. The Company received a $40 million milestone payment in November 2016 upon receipt of the unique J-Code. Additionally, this event triggered an increase in the royalty rate from 20% to 25% of Bendeka net sales. In March 2017, the Company received a $25 million sales-based milestone payment for reaching $500 million in net product sales. Collaborative licensing and development revenue — The Company recognizes revenue from reimbursements received in connection with feasibility studies and development work for third parties when its contractual services are performed, provided collectability is reasonably assured. Its principal costs under these agreements include its personnel conducting research and development, and its allocated overhead, as well as the research and development performed by outside contractors or consultants. Upon termination of a collaboration agreement, any remaining non-refundable license fees received by the Company, which had been deferred, are generally recognized in full. All such recognized revenues are included in collaborative licensing and development revenue in its statements of operations. The Company recognizes revenue from milestone payments received under collaboration agreements when earned, provided that the milestone event is substantive, its achievability was not reasonably assured at the inception of the agreement, the Company has no further performance obligations relating to the event, and collectability is reasonably assured. If these criteria are not met, the Company recognizes milestone payments ratably over the remaining period of its performance obligations under the collaboration agreement. Stock-Based Compensation The Company accounts for stock-based compensation using the fair value provisions of ASC 718, Compensation - Stock Compensation that requires the recognition of compensation expense, using a fair-value based method, for costs related to all stock-based payments including stock options and restricted stock. This topic requires companies to estimate the fair value of the stock-based awards on the date of grant for options issued to employees and directors and record expense over the employees service periods, which are generally the vesting period of the equity awards. Awards for consultants are accounted for under ASC 505-50, Equity Based Payments to Non-Employees. Any compensation expense related to consultants is marked-to-market over the applicable vesting period as they vest. There are customary limitations on the sale or transfer of the stock. The Company accounts for stock-based compensation by measuring and recognizing compensation expense for all stock-based payments made to employees and directors based on estimated grant date fair values. The straight-line method is used to allocate compensation cost to reporting periods over each optionee's requisite service period, which is generally the vesting period. The fair value of our stock-based awards to employees and directors is estimated using the Black-Scholes option valuation model, or Black-Scholes model. The Black-Scholes model requires the input of subjective assumptions, including the expected stock price volatility, the calculation of expected term, forfeitures and the fair value of the underlying common stock on the date of grant, among other inputs. The risk-free interest rate was determined with the implied yield currently available for zero-coupon U.S. government issues with a remaining term approximating the expected life of the options. Earnings (Loss) Per Share Basic earnings (loss) per common share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share is computed in a manner similar to the basic earnings (loss) per share, except that the weighted-average number of shares outstanding is increased to include all common shares, including those with the potential to be issued by virtue of warrants, options, convertible debt and other such convertible instruments. Diluted earnings per share contemplate a complete conversion to common shares of all convertible instruments only if they are dilutive in nature with regards to earnings per share. The anti-dilutive common shares equivalents outstanding at the three months ended March 31, 2017 and 2016 were as follows:
The following table sets forth the computation for basic and diluted net income (loss) per share for the three months ended March 31, 2017 and 2016:
Recent Accounting Pronouncements Recent Accounting Pronouncements - Not Yet Adopted In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In July 2015, the FASB finalized a one year delay in the effective date of this standard, which will now be effective for us on January 1, 2018, however early adoption is permitted any time after the original effective date, which for us is January 1, 2017. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments relate to when another party, along with the entity, is involved in providing a good or service to a customer. Topic 606 Revenue from Contracts with Customers requires an entity to determine whether the nature of its promise is to provide that good or service to the customer (i.e., the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (i.e., the entity is an agent). The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date and transition of these amendments is the same as the effective date and transition of ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Public entities should apply the amendments in ASU 2014-09 for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). We have not yet selected a transition method. We are currently evaluating the impact of ASU 2014-09 on our financial statements. In January 2016, the FASB issued ASU 2016-01, which revises the guidance in ASC 825-10, Recognition and Measurement of Financial Assets and Financial Liabilities, and provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. The guidance is effective for reporting periods (interim and annual) beginning after December 15, 2017, for public companies. We are currently assessing the potential impact of this ASU on our financial position and results of operations. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The adoption of this new standard will increase assets and liabilities on our balance sheet when adopted. We are still fully assessing the overall impact of this ASU on our financial position and results of operations. In January 2017, the FASB issued guidance to simplify the measurement of goodwill. The guidance eliminates Step 2 from the goodwill impairment test. Instead, under the amendments in this guidance, an entity should 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; however the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. The guidance also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. The guidance is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted for interim or annual goodwill impairment tests performed for testing dates after January 1, 2017. The guidance must be adopted on a prospective basis. We do not expect this guidance to have an impact on our consolidated financial statements. In January 2017, the FASB issued guidance clarifying the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The guidance provides a screen to determine when an integrated set of assets and activities is not a business, provides a framework to assist entities in evaluating whether both an input and substantive process are present, and narrows the definition of the term output. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is permitted. The guidance must be adopted on a prospective basis. We will consider the guidance for future transactions. No other accounting standards or interpretations issued recently are expected to have a material impact on our financial statements. Recent Adopted Accounting Pronouncements In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. For public companies, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. In 2016, we early adopted this ASU. With the adoption of this ASU, the Company continues to estimate forfeitures in the calculation of stock based compensation. In November 2015, the FASB issued ASU 2015-17, which revises the guidance in ASC 740, Income Taxes, to simplify the presentation of deferred income taxes and require that deferred tax liabilities and assets be classified as non-current in the statement of financial position. We adopted this standard in 2016. It did not have a material impact on our financial position or results of operations. |
Acquisitions |
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Acquisitions | Acquisitions Acquisition of Docetaxel-Injection, Non-Alcohol Formula On October 13, 2015, the Company entered into the Teikoku Agreement with Teikoku to market, sell and distribute Non-Alcohol Docetaxel Injection, an investigational product intended for the treatment of breast cancer, non-small cell lung cancer, prostate cancer, gastric adenocarcinoma, and head and neck cancer. The NDA for Non-Alcohol Docetaxel Injection for these indications was approved by the FDA on December 22, 2015. Under the terms of the agreement, the Company paid $4,850 upon FDA approval and NDA transfer to the Company, which occurred on January 12, 2016. The Company will also pay 25% royalties on future gross profits to Teikoku. The Company accounted for the transaction as a purchase of a business in 2016, in accordance with FASB Accounting Standard Codification 805 Business Combinations. The Company has measured the fair value of the future royalty payment using its own assumptions of future profitability of Non-Alcohol Docetaxel Injection. Acquisition contingent consideration is measured at fair value on a recurring basis using unobservable inputs; which accordingly represents a Level 3 measurement within the fair value hierarchy. Any change in fair value of the contingent consideration subsequent to the acquisition date is recognized in operating income within the condensed statement of operations. The following table represents a reconciliation of the change in the fair value measurement of the contingent consideration liability since acquisition through March 31, 2017 which was recorded in selling, general and administrative expense in the condensed consolidated statements of operations:
Total consideration of $11,220, which is comprised of the $4,850 cash paid on FDA approval and NDA transfer to the Company and the fair value of contingent consideration has been attributed to the intangible asset for Non-Alcohol Docetaxel Injection product rights. The results of operations related to Non-Alcohol Docetaxel Injection have been included in the statements of operations from the date of acquisition. Pro forma results of operations have not been presented because the effect of Non-Alcohol Docetaxel Injection was not material. The Company recorded product sales of Non-Alcohol Docetaxel Injection of $1,432 and a net loss of $2,503 in the three months ended March 31, 2017. The Company did not incur any significant acquisition related costs in connection with the Non-Alcohol Docetaxel Injection acquisition. Eagle Biologics Acquisition On November 16, 2016 the Company entered into an agreement to acquire Arsia Therapeutics (“Arsia”), an early-stage biotechnology firm with proprietary viscosity-reducing technology and formulation know-how and subsequently renamed the subsidiary Eagle Biologics, Inc. ("Eagle Biologics"). Under the terms of the stock purchase agreement, we paid approximately $27.2 million in cash and 40,200 shares of Eagle common stock worth $3.0 million at closing. We also agreed to pay up to $48 million in additional payments upon the completion of certain milestones, for aggregate potential payments of $78 million. As part of the agreement, Eagle Biologics founders and Massachusetts Institute of Technology professors, Dr. Robert Langer and Dr. Alexander Klibanov, as well as other key members of the Eagle Biologics team, entered into agreements to work with Eagle to develop new formulations and solve delivery challenges in the large molecules space. The acquisition was accounted for as a business combination in accordance with ASC 805 which requires the assets acquired and liabilities assumed from Eagle Biologics were recorded as the acquisition date at their respective fair values. Eagle Biologics’ results of operations are included in the financial statements from the date of acquisition. Eagle Biologics’ platform technology enables subcutaneous administration of high-dose biologics through improved formulation. Eagle Biologics has developed early-stage partnerships with major pharmaceutical companies to apply its technology to their biosimilar molecules, create subcutaneous versions of currently-marketed IV products and produce high-concentration formulations of clinical candidates. In addition to acquiring the technology platform, the Company plans to establish a Biologics Innovation Center in Kendall Square in Cambridge, Massachusetts. The following table summarizes the consideration transferred to acquire Eagle Biologics at the date of acquisition:
The following table summarizes the preliminary estimated fair values of assets acquired and liabilities assumed:
The core technology intangible assets represent developed technology, which we refer to as excipient library, which may be used to improve current and future drug deliveries and have a finite useful lives. These assets are expected to be on a straight line basis over 5 years. These estimates will be adjusted accordingly if the final identifiable intangible asset valuation generates results, including corresponding useful lives and related amortization methods, that differ from the estimates, or if the above scope of intangible assets is modified. The final valuation is expected to be completed within 12 months from the completion of the acquisition.
The following table represents a reconciliation of the change in the fair value measurement of the contingent consideration liability since acquisition through March 31, 2017 which was recorded in selling, general and administrative expense in the condensed statements of operations:
Non-recurring transactions costs of $0.7 million related to the acquisition for the year ended December 31, 2016 are included in the consolidated statement of operations in selling, general and administrative expenses; these non-recurring transaction costs are excluded from the pro forma results in the above table. |
Inventories |
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Inventories | Inventories Inventories consist of the following:
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Balance Sheet Accounts |
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Balance Sheet Accounts | Balance Sheet Accounts Prepaid and Other Current Assets Prepaid and other current assets consist of the following:
Accrued Expenses Accrued expenses consist of the following:
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Intangible Assets, Net | Intangible Assets, Net The gross carrying amounts and net book value of our intangible assets are as follows:
Amortization expense was $712 and $104 for the three months ended March 31, 2017 and 2016, respectively. Based on definite-lived intangible assets recorded as of March 31, 2017, and assuming that the underlying assets will not be impaired and that the Company will not change the expected lives of the assets, future amortization expenses are estimated as follows:
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Common Stock and Stock-Based Compensation |
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Common Stock and Stock-Based Compensation | Common Stock and Stock-Based Compensation On August 9, 2016, the Company announced a share repurchase program approved by the Company’s board of directors authorizing the repurchase of up to $75.0 million of the Company’s common stock (the “Share Repurchase Program”). Under the Share Repurchase Program, the Company is authorized to repurchase shares through open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act. The Share Repurchase Program has no time limit and may be suspended or discontinued completely at any time. The specific timing and amount of repurchases will vary based on available capital resources and other financial and operational performance, market conditions, securities law limitations, and other factors. The repurchases will be made using the Company's cash resources. In any period, cash used in financing activities related to shares repurchased may differ from the comparable change in stockholders' equity, reflecting timing differences between the recognition of share repurchase transactions and their settlement for cash. We repurchased the following shares of common stock with cash resources during the three months ended March 31, 2017:
In December 2007, the Company's board of directors approved the 2007 Incentive Compensation Plan (the "2007 Plan") enabling the Company to grant multiple stock based awards to employees, directors and consultants, the most common being stock options and restricted stock awards. In November 2013, the Company's board of directors approved the 2014 Equity Incentive Plan (the "2014 Plan") which became effective on February 11, 2014. The 2007 Plan was terminated upon the effectiveness of the 2014 Plan and all shares available for issuance under the 2007 Plan were made available under the 2014 Plan. The 2014 Plan provides for the awards of incentive stock options, non-qualified stock options, restricted stock, restricted stock units and other stock-based awards. Awards generally vest equally over a period of four years from grant date. Vesting is accelerated under a change in control of the Company or in the event of death or disability to the recipient. In the event of termination, any unvested shares or options are forfeited. At the Company's annual meeting of stockholders held on August 4, 2015, the stockholders approved an amendment to the 2014 Plan to, among other things, increase the number of shares of common stock authorized for issuance thereunder by 500,000 shares. After accounting for such increase, and as of such amendment, the Company has reserved and made available 2,048,812 shares of common stock for issuance under the 2014 Plan. The fair value of stock options granted to employees, directors, and consultants was estimated using the following assumptions:
The Company recognized share-based compensation in its statements of operations for the three months ended March 31, 2017 and 2016 as follows:
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Commitments | Commitments At March 31, 2017, the Company has purchase obligations in the amount of $20,948 which represent the contractual commitments under Contract Manufacturing and Supply Agreements with suppliers. The obligation under the supply agreement is primarily for finished product, inventory, and research and development. The Company leases its office space under a lease agreement that expires on June 30, 2020. Rental expense was $162 and $162 for the three months ended March 31, 2017 and 2016, respectively. The future lease payments under the operating lease are $1,832 as of March 31, 2017, payable monthly through June 30, 2020. The Company is obligated to pay Spectrum Pharmaceuticals, Inc. $2,265, which represents the base fee from the co-promotion agreement entered into on November 4, 2015 with an 18 month term.
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Deferred Revenue Disclosure [Abstract] | |
Asset Sales | Asset Sales During fiscal year 2010 and 2011, the Company divested a non-core product and received proceeds of $6,500, comprised of $5,500 as a signing milestone which was previously recorded in deferred revenues and $500 for the initiation of Tech Transfer of which $250 previously remained in deferred revenues and a second payment of $500 for the completion of the Tech Transfer of which $250 previously remained in deferred revenues. Under the terms of this agreement, the licensor must obtain all of the following milestones with regard to the filing of the product in order for the Company to earn the revenues. These milestones are a) the receipt of an approval letter from the FDA, b) acknowledgment from the FDA that no further clinical studies will be needed and c) an approval letter from the FDA. The Company, through various requests for information, was informed by the licensor in 2016 that it had voluntarily withdrawn the filing of the product application from the FDA in a prior year. Under the terms of the agreement, the milestones required to earn the $6,000 previously included in deferred revenue all related to the filing. The voluntary withdrawal of the filing by the licensor relieved the Company of further obligation with regard to performance under the milestones. Accordingly, during the quarter ended March 31, 2016, the Company recognized the $6,000 as license and other income. On March 29, 2016, the Company entered into the Diclofenac Asset Purchase Agreement pursuant to which the Company sold certain intellectual property related to diclofenac-misoprostol in the United States. In consideration of the assets and rights sold under the Diclofenac Asset Purchase Agreement, the Company received a one-time payment at closing of $1.75 million, which was recognized as a gain in the first quarter of 2016. In consideration of the rights granted under the Diclofenac Asset Purchase Agreement, the purchaser will pay the Company a 25% royalty on net profits of diclofenac-misoprostol in the territory for five years from the date of sale. The Company may continue to market diclofenac-misoprostol until such time that the purchaser is able to launch. |
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Income Taxes | Income Taxes
The effective tax rate for the three months ended March 31, 2017 reflects the tax benefit of stock option exercises in the period and credits for research and development activity. During the three months ended March 31, 2016, we maintained a full valuation allowance on tax assets. The amount of the provision for that period reflects the Company’s estimated federal AMT and state tax liability. Deferred income tax assets at March 31, 2017 consist of temporary differences primarily related to net operating loss carryforwards, stock based compensation, and research and development tax credit carryforwards, partially offset by temporary differences related to intangible assets. The Company files income tax returns in the U.S. federal jurisdiction and several states. Given that the company has incurred tax losses since its inception, all of the Company’s tax years are effectively open to examination. The Company has no amount recorded for any unrecognized tax benefits as of March 31, 2017. The Company regularly evaluates its tax positions for additional unrecognized tax benefits and associated interest and penalties, if applicable. There are many factors that are considered when evaluating these tax positions including: interpretation of tax laws, recent tax litigation on a position, past audit or examination history, and subjective estimates and assumptions. We reflect interest and penalties attributable to income taxes, to the extent they arise, as a component of income tax provision or benefit. |
Legal Proceedings |
3 Months Ended |
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Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Legal Proceedings | Legal Proceedings Medicines Company v. Eagle On February 2, 2016, The Medicines Company (“MDCO”) filed a complaint in the U.S. District Court for the District of New Jersey against the Company, SciDose LLC and TherDose Pharma Pvt. Ltd. (collectively the “Defendants”) relating to the Defendants’ work on a novel ready-to-use bivalirudin injection product (the “Bivalirudin Product”). The Complaint seeks statutory, contractual and equitable damages growing out of the Company’s filing for approval with the FDA an NDA for its RTU bivalirudin product. MDCO amended that complaint in April of 2016. The suit cites the May 7, 2008 License and Development Agreement (the “LDA”) between the Defendants and MDCO. In the lawsuit, MDCO alleges that the Company violated the terms of the LDA by, inter alia, developing the Bivalirudin Product, and that the Company's Bivalirudin Product infringes two patents that are jointly-owned by the Company and MDCO and violates an exclusive license that MDCO claims exists under the LDA. The Company filed a motion for summary judgment in October 2016. The Company continues to dispute the allegations made by MDCO and believes it has meritorious defenses to all of MDCO’s claims. Fact discovery is ongoing and closes in December 2017, with expert discovery closing in April 2018. Eagle v. Burwell On April 27, 2016, the Company filed an action in the U.S. District Court for the District of Columbia against the FDA and other federal defendants seeking an order requiring the FDA to grant us orphan drug exclusivity for Bendeka for the treatment of CLL and indolent B-cell NHL. The Company believes Bendeka is entitled to orphan drug exclusivity as a matter of law, and that the FDA’s decision violates federal law and is inconsistent with the holding of the U.S. District Court for the District of Columbia in Depomed Inc. v. U.S. Department of Health and Human Services. The parties have filed all substantive motions and pleadings and expect oral argument in mid 2017. Bauer v. Eagle On May 31, 2016, a federal securities class-action lawsuit (captioned Bauer v. Eagle Pharmaceuticals, Inc., et al., Case No. 16-cv-03091-JLL-JAD) was filed in the United States District Court for the District of New Jersey against the Company and the Company’s Chief Executive Officer. On August 1, 2016, plaintiffs Blake Bauer, Brent Kawamura and Guarang Patel (the "EGRX Investors Group"), filed a motion requesting the court to appoint the EGRX Investors Group as lead plaintiff and Kirby McInerney LLP as lead counsel. The motion was granted on September 9, 2016. On October 31, 2016, the EGRX Investors Group filed an amended class action complaint (the “Amended Complaint”) against the defendants, seeking compensatory damages and an award of costs and expenses, including attorneys’ and experts’ fees. The Amended Complaint alleges the defendants violated sections 10(b) and 20(a) of the Securities Exchange Act, as amended, by making false and/or misleading statements about, among other things: (a) EP-6101, (b) the Company’s expectations regarding the New Drug Application submitted for EP-6101, and (c) the Company’s business prospects. On December 16, 2016, defendants’ filed a motion to dismiss the Amended Complaint. Plaintiffs opposed that motion on January 30, 2017. Defendants’ filed their reply on March 1, 2017 and expect the court to decide the motion based on the filed motions unless otherwise notified by the court. In Re: Taxotere (Docetaxel) On February 1, 2017, the Company was named as a defendant, among various other manufacturers, in several product liability suits that are consolidated in the U.S. District Court for the Eastern District of Louisiana as part of MDL 2740 (Civil Action No 2:16 md-2740). The claims are for personal injuries allegedly arising out of the use of docetaxel. The Company believes that it has substantial meritorious defenses to these cases and maintains product liability insurance against such cases. However, litigation is inherently uncertain and the Company cannot predict the outcome of this litigation. These actions, if successful, or if our indemnification arrangements or insurance do not provide sufficient coverage against such claims, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. In March 2017, the Company reached agreements in principle with the Plaintiffs’ Steering Committee in this matter to voluntarily dismiss the Company from all of the law suits in which it was named and from the master complaint. The Company is in the process of working with the other parties in this matter to have it removed from the Multidistrict litigation entirely. As part of the agreement, in the event a case is brought in the future with facts that justify the Company’s inclusion, the plaintiffs reserved the right to include the Company in such matter. Other In addition to the above proceedings, from time to time, the Company is and may be a party to litigation and subject to claims incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on the Company’s business, financial condition or results of operations. Furthermore, the Company believes that it has adequate reserves and adequate insurance coverage in respect of these claims; however, no assurance can be given as to the sufficiency of such reserves or insurance coverage in the event of any unfavorable outcome resulting from such actions. Regardless of the outcome, litigation and claims can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||
Use of Estimates | Use of Estimates These financial statements are presented in U.S. dollars and are prepared in accordance with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements including disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period and accompanying notes. The Company's critical accounting policies are those that are both most important to the Company's financial condition and results of operations and require the most difficult, subjective or complex judgments on the part of management in their application, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Because of the uncertainty of factors surrounding the estimates or judgments used in the preparation of the financial statements, actual results may materially vary from these estimates. |
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Reclassifications | Reclassifications Certain reclassifications have been made to prior year amounts to conform with the current year presentation. |
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Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. All cash and cash equivalents are held in United States financial institutions. The carrying amount of cash and cash equivalents approximates its fair value due to its short-term nature. The Company, at times, maintains balances with financial institutions in excess of the FDIC limit. |
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Short Term Investments | Short Term Investments Investments consisted of U.S. Treasury securities that have an original maturity of greater than three months and typically less than 180 days. The Company's investments were classified as Level 1 and available-for-sale and are recorded at fair value, based upon quoted market prices. No gains or losses on investments are realized until the sale occurs or a decline in fair value is determined to be other-than-temporary. If a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. |
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Fair Value Measurements | Fair Value Measurements U.S. GAAP establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
The fair value of interest-bearing cash, cash equivalents, short term investments, accounts receivable and accounts payable approximate fair value due to their life being short term in nature, and are classified as Level 1 for all periods presented. The fair value of the contingent consideration/accrued royalty is classified as Level 3 for the period presented. |
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Intangible Assets | Intangible Assets The Company capitalizes and includes in intangible assets the costs of acquired product licenses and developed technology purchased individually or identified in a business combination. Intangible assets are recorded at fair value at the time of their acquisition and stated net of accumulated amortization The Company amortizes its definite-lived intangible assets using either the straight-line or accelerated method, based on the useful life of the asset over which it is expected to be consumed utilizing expected undiscounted future cash flows. We will evaluate the potential impairment of other intangible assets if events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Events giving rise to impairment are an inherent risk in our industry and many factors cannot be predicted. Factors that we consider in deciding when to perform an impairment review include significant changes in our forecasted projections for the asset or asset group for reasons including, but not limited to, significant under-performance of a product in relation to expectations, significant changes or planned changes in our use of the assets, significant negative industry or economic trends, and new or competing products that enter the marketplace. The impairment test is based on a comparison of the undiscounted cash flows expected to be generated from the use of the asset group and its eventual disposition to the carrying value of the asset group. If impairment is indicated, the asset is written down by the amount by which the carrying value of the asset exceeds the related fair value of the asset with the related impairment charge recognized within the statements of operations. We did not identify any impairment to our definite-lived intangible assets in the periods presented. With respect to determining an asset’s fair value and useful life, because this process involves management making certain estimates and because these estimates form the basis of the determination of whether or not an impairment charge should be recorded, these estimates are considered to be critical accounting estimates. Such impairment charges may be material to our results. |
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Goodwill | Goodwill Goodwill, which represents the excess of purchase price over the fair value of net assets acquired in the Eagle Biologics acquisition, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value based test. Goodwill is assessed for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment model requires a two-step method for determining goodwill impairment. In the first step, we determine the fair value of our reporting units using an appropriate valuation methodology. If the net book value of a reporting unit exceeds its fair value, we would then perform the second step of the impairment test which requires allocation of the reporting unit’s fair value to all of its assets and liabilities using the acquisition method prescribed under authoritative guidance for business combinations. Any residual fair value is allocated to goodwill. An impairment charge is recognized only when the implied fair value of our reporting unit’s goodwill is less than its carrying amount. We did not identify any impairment to goodwill during the periods presented. |
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Acquisition-Related Contingent Consideration | Acquisition-Related Contingent Consideration Contingent consideration related to a business combination is recorded at the acquisition date at the estimated fair value of the contingent payments. The acquisition date fair value is measured based on the consideration expected to be transferred using probability-weighted assumptions and discounted back to present value. The discount rate used is determined at the time of the acquisition in accordance with accepted valuation methods. The fair value of the acquisition-related contingent consideration is re-measured at the estimated fair value at each reporting period with the change in fair value recognized as income or expense in the consolidated statements of operations. |
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Concentration of Major Customers and Vendors | Currently, for Argatroban and Bendeka, the Company uses one vendor as its sole source supplier. Because of the unique equipment and process for manufacturing, transferring manufacturing activities to an alternate supplier would be a time consuming and costly endeavor, and there are only a limited number of manufacturers that are capable of performing this function for the Company. Concentration of Major Customers and Vendors The Company is dependent on commercial partners to market and sell Argatroban and Bendeka. The Company's customers for Argatroban are its commercial and licensing partners, therefore, the Company's future revenues are highly dependent on these collaboration and distribution arrangements. |
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Inventory | Inventory Inventory is recorded at the lower of cost or market, with cost determined on a first-in first-out basis. The Company periodically reviews the composition of inventory in order to identify obsolete, slow-moving or otherwise non-saleable items. If non-saleable items are observed and there are no alternate uses for the inventory, the Company will record a write-down to net realizable value in the period that the decline in value is first recognized. In most instances, inventory is shipped from the Company's vendor directly to the Company's customers. |
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Property and Equipment | Property and Equipment Property and equipment are stated at cost. Depreciation is recorded over the estimated useful lives of the assets utilizing the straight-line method. Leasehold improvements are being amortized over the shorter of their useful lives or the lease term. |
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Research and Development Expense | Research and Development Expense Costs incurred for research and product development, including costs incurred for technology in the development stage, are expensed as incurred. Clinical study costs are accrued over the service periods specified in the contracts and adjusted as necessary based upon an ongoing review of the level of effort and costs actually incurred. Advance payments for goods or services that will be used for future research and development activities are capitalized as deferred cost and expensed as the related goods are delivered or services performed. Recoveries of previously recognized R&D expenses from third parties are recorded as a reduction to R&D expense in the period it becomes realizable. |
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Advertising and Marketing | Advertising and Marketing Advertising and marketing costs are expensed as incurred. |
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Income Taxes | Income Taxes We account for income taxes using the liability method in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), Topic 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and are measured by applying enacted rates and laws to taxable years in which differences are expected to be recovered or settled. Further, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that the rate changes. A valuation allowance is required when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. Since our inception, we have incurred substantial cumulative losses and through the third quarter of 2016 we recorded a full valuation allowance against our net deferred tax assets which was largely made up of our net operating loss carryforward. In the fourth quarter of 2016, the Company reversed the reserve on its net deferred tax asset (See Note 11 - Income Taxes). ASC 740 also prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return, including a decision whether to file or not file a return in a particular jurisdiction. We recognize any interest and penalties accrued related to unrecognized tax benefits as income tax expense. |
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Revenue Recognition | Revenue Recognition Product revenue - The Company recognizes net revenue on sales to its commercial partners and to end users. In each instance, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered and collectability is reasonably assured. Revenue on sales to commercial partners relates to Argatroban and Bendeka. The Company’s commercial partners can return product within specified timeframes if the product does not meet certain inspection tests. Sales to our commercial partners are presented gross primarily because the Company is the primary obligor in the arrangement, is responsible to ensure that the product is produced in accordance with the related supply agreement and bears risk of loss while the inventory is in-transit to the commercial partner. Revenue on sales to end users for Non-Alcohol Docetaxel Injection, Ryanodex and diclofenac-misoprostol are recorded net of chargebacks, rebates, returns, prompt pay discounts, wholesaler fees and other deductions. Our products are contracted with a limited number of oncology distributors and hospital buying groups with narrow differences in ultimate realized contract prices used to estimate our chargeback and rebate reserves. The Company has a product returns policy on some of its products that allows the customer to return pharmaceutical products within a specified period of time both prior to and subsequent to the product’s expiration date. The Company's estimate of the provision for returns is analyzed quarterly and is based upon many factors, including historical experience of actual returns and analysis of the level of inventory in the distribution channel, if any. The Company has terms on sales of Ryanodex by which the Company does not accept returns. The Company believes that the reserves it has established are reasonable based upon current facts and circumstances. Applying different judgments to the same facts and circumstances could result in the estimated amount for reserves to vary. Royalty Revenue — The Company recognizes revenue from license arrangements with its commercial partners' net sales of products. Royalties are recognized as earned in accordance with contract terms when they can be reasonably estimated and collectability is reasonably assured. The Company's commercial partners are obligated to report their net product sales and the resulting royalty due to the Company within 25 days for Bendeka and 60 days for Argatroban from the end of each quarter. Based on historical product sales, royalty receipts and other relevant information, the Company accrues royalty revenue each quarter and subsequently determines a true-up when it receives royalty reports from its commercial partners. Historically, these true-up adjustments have been immaterial. License and other revenue — The Company analyzes each element of its licensing agreements to determine the appropriate revenue recognition. The terms of the license agreement may include payment to us of non-refundable up-front license fees, milestone payments if specified objectives are achieved, and/or royalties on product sales. The Company recognizes revenue from upfront payments over the period of significant involvement under the related agreements unless the fee is in exchange for products delivered or services rendered that represent the culmination of a separate earnings process and no further performance obligation exists under the contract. When a sale combines multiple elements upon performance of multiple services, the Company allocates revenue for transactions that include multiple elements to each unit of accounting which is a deliverable or combination of deliverables under the arrangement that has stand-alone value to the counter-party based on its relative selling price, and recognizes revenue for each unit of accounting when the revenue recognition criteria have been met. The Company follows the selling price hierarchy as outlined in the guidance Revenue Recognition (ASC Topic 605) - Multiple-Deliverable Revenue Arrangements. The guidance provides a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence (“VSOE”), (ii) third-party evidence (“TPE”) if available and when VSOE is not available, and (iii) best estimate of the selling price (“BESP”) if neither VSOE nor TPE is available. The Company uses BESP to determine the stand-alone selling price for such deliverables. The Company has an established process for developing BESP, which incorporates pricing practices, historical selling prices, the effect of market conditions as well as entity-specific factors. Estimated selling price is monitored and evaluated on a regular basis to ensure that changes in circumstances are accounted for in a timely manner. The Company recognizes milestone payments as revenue upon the achievement of specified milestones only if (1) the milestone payment is non-refundable, (2) substantive effort is involved in achieving the milestone, (3) the amount of the milestone is reasonable in relation to the effort expended or the risk associated with achievement of the milestone, and (4) the milestone is at risk for both parties. If any of these conditions are not met, we defer the milestone payment and recognize it as revenue over the estimated period of performance under the contract. As described above, under the terms of the Cephalon License, the Company received an upfront cash payment of $30 million, received a milestone payment of $15 million for regulatory approval, received $40 million milestone upon receipt of the J-Code and received $25 million in an additional sales based milestone payment for reaching $500 million in net product sales of Bendeka. In 2015, the $30 million upfront payment was allocated between the license issued to Cephalon and obtaining and maintaining regulatory approvals and conducting post-approval clinical studies using the Company’s best estimate of selling price for each deliverable. The full $30 million was recognized as income in the first quarter of 2015, as the Company substantially completed its requirements for obtaining regulatory approval, which consisted of filing an NDA, on February 13, 2015, and the remaining obligations were estimated to require minimal effort. On December 7, 2015, the FDA approved Bendeka (50 mL bendamustine hydrochloride) marking the achievement of a milestone which entitled the Company to a $15 million payment which was received in January 2016. The Company received a $40 million milestone payment in November 2016 upon receipt of the unique J-Code. Additionally, this event triggered an increase in the royalty rate from 20% to 25% of Bendeka net sales. In March 2017, the Company received a $25 million sales-based milestone payment for reaching $500 million in net product sales. Collaborative licensing and development revenue — The Company recognizes revenue from reimbursements received in connection with feasibility studies and development work for third parties when its contractual services are performed, provided collectability is reasonably assured. Its principal costs under these agreements include its personnel conducting research and development, and its allocated overhead, as well as the research and development performed by outside contractors or consultants. Upon termination of a collaboration agreement, any remaining non-refundable license fees received by the Company, which had been deferred, are generally recognized in full. All such recognized revenues are included in collaborative licensing and development revenue in its statements of operations. The Company recognizes revenue from milestone payments received under collaboration agreements when earned, provided that the milestone event is substantive, its achievability was not reasonably assured at the inception of the agreement, the Company has no further performance obligations relating to the event, and collectability is reasonably assured. If these criteria are not met, the Company recognizes milestone payments ratably over the remaining period of its performance obligations under the collaboration agreement. |
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Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation using the fair value provisions of ASC 718, Compensation - Stock Compensation that requires the recognition of compensation expense, using a fair-value based method, for costs related to all stock-based payments including stock options and restricted stock. This topic requires companies to estimate the fair value of the stock-based awards on the date of grant for options issued to employees and directors and record expense over the employees service periods, which are generally the vesting period of the equity awards. Awards for consultants are accounted for under ASC 505-50, Equity Based Payments to Non-Employees. Any compensation expense related to consultants is marked-to-market over the applicable vesting period as they vest. There are customary limitations on the sale or transfer of the stock. The Company accounts for stock-based compensation by measuring and recognizing compensation expense for all stock-based payments made to employees and directors based on estimated grant date fair values. The straight-line method is used to allocate compensation cost to reporting periods over each optionee's requisite service period, which is generally the vesting period. The fair value of our stock-based awards to employees and directors is estimated using the Black-Scholes option valuation model, or Black-Scholes model. The Black-Scholes model requires the input of subjective assumptions, including the expected stock price volatility, the calculation of expected term, forfeitures and the fair value of the underlying common stock on the date of grant, among other inputs. The risk-free interest rate was determined with the implied yield currently available for zero-coupon U.S. government issues with a remaining term approximating the expected life of the options. |
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Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic earnings (loss) per common share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share is computed in a manner similar to the basic earnings (loss) per share, except that the weighted-average number of shares outstanding is increased to include all common shares, including those with the potential to be issued by virtue of warrants, options, convertible debt and other such convertible instruments. Diluted earnings per share contemplate a complete conversion to common shares of all convertible instruments only if they are dilutive in nature with regards to earnings per share. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements Recent Accounting Pronouncements - Not Yet Adopted In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In July 2015, the FASB finalized a one year delay in the effective date of this standard, which will now be effective for us on January 1, 2018, however early adoption is permitted any time after the original effective date, which for us is January 1, 2017. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments relate to when another party, along with the entity, is involved in providing a good or service to a customer. Topic 606 Revenue from Contracts with Customers requires an entity to determine whether the nature of its promise is to provide that good or service to the customer (i.e., the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (i.e., the entity is an agent). The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date and transition of these amendments is the same as the effective date and transition of ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Public entities should apply the amendments in ASU 2014-09 for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). We have not yet selected a transition method. We are currently evaluating the impact of ASU 2014-09 on our financial statements. In January 2016, the FASB issued ASU 2016-01, which revises the guidance in ASC 825-10, Recognition and Measurement of Financial Assets and Financial Liabilities, and provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. The guidance is effective for reporting periods (interim and annual) beginning after December 15, 2017, for public companies. We are currently assessing the potential impact of this ASU on our financial position and results of operations. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The adoption of this new standard will increase assets and liabilities on our balance sheet when adopted. We are still fully assessing the overall impact of this ASU on our financial position and results of operations. In January 2017, the FASB issued guidance to simplify the measurement of goodwill. The guidance eliminates Step 2 from the goodwill impairment test. Instead, under the amendments in this guidance, an entity should 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; however the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. The guidance also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. The guidance is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted for interim or annual goodwill impairment tests performed for testing dates after January 1, 2017. The guidance must be adopted on a prospective basis. We do not expect this guidance to have an impact on our consolidated financial statements. In January 2017, the FASB issued guidance clarifying the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The guidance provides a screen to determine when an integrated set of assets and activities is not a business, provides a framework to assist entities in evaluating whether both an input and substantive process are present, and narrows the definition of the term output. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is permitted. The guidance must be adopted on a prospective basis. We will consider the guidance for future transactions. No other accounting standards or interpretations issued recently are expected to have a material impact on our financial statements. Recent Adopted Accounting Pronouncements In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. For public companies, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. In 2016, we early adopted this ASU. With the adoption of this ASU, the Company continues to estimate forfeitures in the calculation of stock based compensation. In November 2015, the FASB issued ASU 2015-17, which revises the guidance in ASC 740, Income Taxes, to simplify the presentation of deferred income taxes and require that deferred tax liabilities and assets be classified as non-current in the statement of financial position. We adopted this standard in 2016. It did not have a material impact on our financial position or results of operations. |
Summary of Significant Accounting Policies (Tables) |
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Schedule of Revenues and Accounts Receivables By Major Customers | The total revenues and accounts receivables broken down by major customers as a percentage of the total are as follows:
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Schedule of Dilutive and Anti-Dilutive Common Shares Equivalents Outstanding | The anti-dilutive common shares equivalents outstanding at the three months ended March 31, 2017 and 2016 were as follows:
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Computation for Basic and Diluted Net Income (Loss) Per Share | The following table sets forth the computation for basic and diluted net income (loss) per share for the three months ended March 31, 2017 and 2016:
|
Acquisitions (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Contingent Consideration Liability | The following table summarizes the consideration transferred to acquire Eagle Biologics at the date of acquisition:
The following table represents a reconciliation of the change in the fair value measurement of the contingent consideration liability since acquisition through March 31, 2017 which was recorded in selling, general and administrative expense in the condensed consolidated statements of operations:
The following table represents a reconciliation of the change in the fair value measurement of the contingent consideration liability since acquisition through March 31, 2017 which was recorded in selling, general and administrative expense in the condensed statements of operations:
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the preliminary estimated fair values of assets acquired and liabilities assumed:
The core technology intangible assets represent developed technology, which we refer to as excipient library, which may be used to improve current and future drug deliveries and have a finite useful lives. These assets are expected to be on a straight line basis over 5 years. These estimates will be adjusted accordingly if the final identifiable intangible asset valuation generates results, including corresponding useful lives and related amortization methods, that differ from the estimates, or if the above scope of intangible assets is modified. The final valuation is expected to be completed within 12 months from the completion of the acquisition.
|
Inventories (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventories | Inventories consist of the following:
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Balance Sheet Accounts (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Related Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Prepaid and Other Current Assets | Prepaid and other current assets consist of the following:
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Schedule of Accrued Expenses | Accrued expenses consist of the following:
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Intangible Assets, Net (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Intangible Asset | The gross carrying amounts and net book value of our intangible assets are as follows:
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Schedule of Future Amortization Expense of Finite-Lived Intangible Assets | Based on definite-lived intangible assets recorded as of March 31, 2017, and assuming that the underlying assets will not be impaired and that the Company will not change the expected lives of the assets, future amortization expenses are estimated as follows:
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Common Stock and Stock-Based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Common Stock Repurchased | We repurchased the following shares of common stock with cash resources during the three months ended March 31, 2017:
|
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Fair Value of Stock Options | The fair value of stock options granted to employees, directors, and consultants was estimated using the following assumptions:
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Schedule of Share-based Compensation Recognized in Statements of Operations | The Company recognized share-based compensation in its statements of operations for the three months ended March 31, 2017 and 2016 as follows:
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Commitments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Operating Lease Obligations and Purchase Obligations |
|
Income Taxes (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effective Income Tax Rate Reconciliation |
|
Summary of Significant Accounting Policies - Anti-Dilutive Common Shares Equivalents Outstanding (Details) - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive common shares equivalents outstanding (in shares) | 1,522,317 | 2,510,702 |
Options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive common shares equivalents outstanding (in shares) | 1,522,317 | 2,510,702 |
Summary of Significant Accounting Policies - Schedule of Basic and Diluted Net Income (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Numerator | ||
Numerator for basic and diluted earnings per share-net income (loss) | $ 22,924 | $ (896) |
Denominator | ||
Basic weighted average common shares outstanding (in shares) | 15,257,892 | 15,636,387 |
Dilutive effect of stock options (in shares) | 907,469 | 0 |
Diluted weighted average common shares outstanding (in shares) | 16,165,361 | 15,636,387 |
Basic net income (loss) per share (in usd per share) | $ 1.50 | $ (0.06) |
Diluted net income (loss) per share (in usd per share) | $ 1.42 | $ (0.06) |
Acquisitions - Narrative, Docetaxel (Details) - USD ($) $ in Thousands |
3 Months Ended | ||||
---|---|---|---|---|---|
Jan. 12, 2016 |
Oct. 13, 2015 |
Mar. 31, 2017 |
Mar. 31, 2016 |
Jan. 31, 2016 |
|
Business Acquisition [Line Items] | |||||
Payments to acquire business | $ 0 | $ 4,850 | |||
Product sales | 15,286 | 14,122 | |||
Net loss | (22,924) | $ 896 | |||
Non-Alcohol Docetaxel Injection | |||||
Business Acquisition [Line Items] | |||||
Total consideration | $ 11,220 | ||||
Non-Alcohol Docetaxel Injection | Docetaxel product rights | |||||
Business Acquisition [Line Items] | |||||
Payments to acquire business | $ 4,850 | $ 250 | |||
Royalties on Gross Profits | Non-Alcohol Docetaxel Injection | Docetaxel product rights | |||||
Business Acquisition [Line Items] | |||||
Contingent consideration, percentage of gross profits | 25.00% | 25.00% | |||
Non-Alcohol Docetaxel Injection | |||||
Business Acquisition [Line Items] | |||||
Product sales | 1,432 | ||||
Net loss | $ 2,503 |
Acquisitions - Change in Fair Value of Contingent Consideration Liability, Docetaxel (Details) - Contingent Consideration Liability - Non-Alcohol Docetaxel Injection - Docetaxel product rights $ in Thousands |
15 Months Ended |
---|---|
Mar. 31, 2017
USD ($)
| |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Opening Balance January 12, 2016 | $ 6,370 |
Changes in fair value | 1,082 |
Payment of contingent consideration | (286) |
Closing Balance March 31, 2017 | $ 7,166 |
Acquisitions - Narrative, Bioligics (Details) - USD ($) |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Nov. 16, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
|
Business Acquisition [Line Items] | ||||
Payments to acquire business | $ 0 | $ 4,850,000 | ||
Selling, general and administrative | $ 18,578,000 | $ 12,128,000 | ||
Eagle Biologics | ||||
Business Acquisition [Line Items] | ||||
Payments to acquire business | $ 27,209,000 | |||
Business combination equity consideration (in shares) | 40,200 | |||
Business combination equity consideration | $ 3,046,000 | |||
Milestone Payments | Eagle Biologics | ||||
Business Acquisition [Line Items] | ||||
Business combination, contingent consideration range of outcome high | 48,000,000 | |||
Business combination consideration including contingent consideration | $ 78,000,000 | |||
Acquisition-related Costs | Eagle Biologics | ||||
Business Acquisition [Line Items] | ||||
Selling, general and administrative | $ 700,000 |
Acquisitions - Schedule of Consideration Transferred, Biologics (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Nov. 16, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Business Acquisition [Line Items] | |||
Cash consideration paid | $ 0 | $ 4,850 | |
Fair Value of contingent consideration payable to seller (long term) | $ 0 | $ 6,370 | |
Eagle Biologics | |||
Business Acquisition [Line Items] | |||
Cash consideration paid | $ 27,209 | ||
Common stock issued | 3,046 | ||
Fair Value of contingent consideration payable to seller (long term) | 16,100 | ||
Total consideration | $ 46,355 |
Acquisitions - Schedule of Contingent Consideration, Biologic (Details) - USD ($) $ in Thousands |
2 Months Ended | 3 Months Ended | |
---|---|---|---|
Dec. 31, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Contingent Consideration Liability [Roll Forward] | |||
Changes in fair value | $ 426 | $ 159 | |
Eagle Biologics | |||
Contingent Consideration Liability [Roll Forward] | |||
Changes in fair value | $ 301 | ||
Payment of contingent consideration | $ 0 | ||
Closing Balance March 31, 2017 | $ 16,401 |
Inventories (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw material | $ 1,862 | $ 1,131 |
Work in process | 0 | 900 |
Finished products | 1,153 | 708 |
Inventories | $ 3,015 | $ 2,739 |
Balance Sheet Accounts - Prepaid and Other Current Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Advances to commercial manufacturers | $ 5,036 | $ 7,600 |
Prepaid FDA user fee | 1,062 | 1,592 |
Prepaid insurance | 792 | 135 |
Prepaid income taxes | 0 | 1,654 |
All other | 1,215 | 376 |
Total Prepaid expenses and other current assets | $ 8,105 | $ 11,357 |
Balance Sheet Accounts - Accrued Expenses (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Royalties payable to commercial partners | $ 6,989 | $ 9,068 |
Accrued research & development | 1,816 | 3,528 |
Accrued professional fees | 1,504 | 2,094 |
Accrued salary and other compensation | 2,024 | 6,003 |
Accrued product costs | 2,154 | 2,856 |
Accrued other | 912 | 1,688 |
Total Accrued expenses | $ 15,399 | $ 25,237 |
Intangible Assets, Net - Schedule of Future Amortization Expense (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Mar. 31, 2016 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2017 (remainder) | $ 2,134 | |
2018 | 3,021 | |
2019 | 3,143 | |
2020 | 3,289 | |
2021 | 3,246 | |
All other | 17,827 | |
Net Book Value | $ 32,660 | $ 33,372 |
Common Stock and Stock-Based Compensation - Narrative (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Aug. 04, 2015 |
Mar. 31, 2017 |
Aug. 09, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock repurchase program, authorized amount | $ 75,000,000.0 | ||
Award vesting period | 4 years | ||
Common Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of additional shares authorized for grant (in shares) | 500,000 | ||
Number of shares available for grant (in shares) | 2,048,812 |
Common Stock and Stock-Based Compensation - Schedule of Common Stock Repurchased (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2017 |
Dec. 31, 2016 |
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Shares of common stock repurchased (in shares) | 189,145 | 566,838 |
Value of common stock repurchased | $ 13,653 | $ 37,000 |
Common Stock and Stock-Based Compensation - Fair Value of Stock Options Granted (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free interest minimum rate | 1.91% | 1.29% |
Risk-free interest maximum rate | 2.42% | 1.90% |
Volatility | 37.27% | 31.17% |
Expected dividend yield | 0.00% | 0.00% |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term | 5 years 6 months | 5 years 6 months |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term | 7 years | 7 years |
Common Stock and Stock-Based Compensation - Schedule of Share-based Compensation (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Share-based compensation expense | $ 4,193 | $ 2,869 |
Selling, general and administrative | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Share-based compensation expense | 3,132 | 2,162 |
Research and development | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Share-based compensation expense | $ 1,061 | $ 707 |
Commitments - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Nov. 04, 2015 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Spectrum base fee | |||
Purchase obligations | $ 20,948 | ||
Operating leases rent expense | 162 | $ 162 | |
Future operating lease payments | 1,832 | ||
Spectrum | Affiliated Entity | Spectrum Agreement | |||
Spectrum base fee | |||
Base fee payable | $ 2,265 | ||
Agreement term | 18 months |
Commitments - Schedule of Operating Lease Obligations and Purchase Obligations (Details) $ in Thousands |
Mar. 31, 2017
USD ($)
|
---|---|
Operating lease obligations | |
Total | $ 1,832 |
2017 | 423 |
2018 | 564 |
2019 | 564 |
2020 | 281 |
2021 | 0 |
Beyond | 0 |
Purchase obligations | |
Total | 20,948 |
2017 | 20,948 |
2018 | 0 |
2019 | 0 |
2020 | 0 |
2021 | 0 |
Beyond | 0 |
Spectrum base fee | |
2017 | 2,265 |
2018 | 0 |
2019 | 0 |
2020 | 0 |
2021 | 0 |
Beyond | $ 0 |
Income Taxes (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Income Tax Disclosure [Abstract] | ||
Unrecognized tax benefits | $ 0 | |
Provision for income taxes | $ 9,748,000 | $ 19,000 |
Effective tax rate | 30.00% | (2.00%) |
Legal Proceedings - Narrative (Details) |
1 Months Ended |
---|---|
Feb. 29, 2016
patent
| |
Commitments and Contingencies Disclosure [Abstract] | |
Patents allegedly infringed on | 2 |
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