Delaware
|
11-3054851
|
|
(State or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S. Employer Identification No.)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, $0.001 par value per share
|
BSTC
|
The Nasdaq Capital Market
|
Large accelerated filer ☐
|
Accelerated filer ☒
|
Non-accelerated filer ☐
|
Smaller reporting company ☒
Emerging growth company ☐
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for comply with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
|
Page
|
||
PART I – FINANCIAL INFORMATION
|
||
ITEM 1.
|
Financial Statements
Unaudited Condensed Consolidated Financial Statements
|
|
4
|
||
5
|
||
6
|
||
7
|
||
8
|
||
ITEM 2.
|
18
|
|
ITEM 3.
|
26
|
|
ITEM 4.
|
27
|
PART II – OTHER INFORMATION
|
||
ITEM 1.
|
27
|
|
ITEM 1A.
|
27
|
|
ITEM 2.
|
27
|
|
ITEM 6.
|
29
|
|
30
|
Item 1:
|
Condensed Consolidated Financial Statements
|
June 30,
2019 |
December 31,
2018 |
|||||||
(unaudited)
|
(audited)
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
13,972,558
|
$
|
13,176,452
|
||||
Short term investments
|
71,304,188
|
67,707,143
|
||||||
Accounts receivable
|
16,729,636
|
16,518,687
|
||||||
Deferred royalty buy-down
|
-
|
184,931
|
||||||
Prepaid expenses and other current assets
|
1,012,172
|
646,749
|
||||||
Total current assets
|
103,018,554
|
98,233,962
|
||||||
Long-term investments
|
8,233,138
|
1,099,834
|
||||||
Deferred tax assets, net
|
154,309
|
313,768
|
||||||
Patent costs, net
|
493,856
|
444,478
|
||||||
Total assets
|
$
|
111,899,857
|
$
|
100,092,042
|
||||
Liabilities and stockholders’ equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable and accrued expenses
|
$
|
710,812
|
$
|
1,798,588
|
||||
Income tax payable
|
878,624
|
704,934
|
||||||
Total current liabilities
|
1,589,436
|
2,503,522
|
||||||
Commitments and Contingencies
|
||||||||
Stockholders’ equity:
|
||||||||
Series A Preferred stock, $.50 par value, 700,000 shares authorized; none outstanding
|
-
|
-
|
||||||
Common stock, $.001 par value; 10,000,000 shares authorized 7,796,230 and 7,738,167 shares issued, 7,331,917 and 7,275,902 shares outstanding as of June 30, 2019 and December 31, 2018,
respectively
|
7,796
|
7,738
|
||||||
Additional paid-in capital
|
38,299,800
|
36,302,446
|
||||||
Retained earnings
|
83,019,774
|
72,176,719
|
||||||
Treasury stock, 464,313 and 462,265 shares at cost as of June 30, 2019 and December 31, 2018, respectively
|
(11,016,949
|
)
|
(10,898,383
|
)
|
||||
Total stockholders’ equity
|
110,310,421
|
97,588,520
|
||||||
Total liabilities and stockholders’ equity
|
$
|
111,899,857
|
$
|
100,092,042
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2019
|
2018
|
2019
|
2018
|
|||||||||||||
Revenues:
|
||||||||||||||||
Royalties
|
$
|
8,852,986
|
$
|
7,815,504
|
$
|
16,982,127
|
$
|
14,900,504
|
||||||||
Licensing revenues
|
-
|
35,270
|
-
|
39,679
|
||||||||||||
Total Revenues
|
8,852,986
|
7,850,774
|
16,982,127
|
14,940,183
|
||||||||||||
Costs and expenses:
|
||||||||||||||||
Research and development
|
161,321
|
211,796
|
310,857
|
407,023
|
||||||||||||
General and administrative
|
1,728,125
|
2,043,952
|
4,635,284
|
4,113,585
|
||||||||||||
Total Cost and Expenses
|
1,889,446
|
2,255,748
|
4,946,141
|
4,520,608
|
||||||||||||
Operating income
|
6,963,540
|
5,595,026
|
12,035,986
|
10,419,575
|
||||||||||||
Other income:
|
||||||||||||||||
Interest income
|
517,156
|
273,746
|
966,580
|
491,697
|
||||||||||||
Other income (expense)
|
-
|
81,985
|
-
|
96,663
|
||||||||||||
517,156
|
355,731
|
966,580
|
588,360
|
|||||||||||||
Income before income tax expense
|
7,480,696
|
5,950,757
|
13,002,566
|
11,007,935
|
||||||||||||
Provision for income tax expense
|
(1,054,236
|
)
|
(1,102,826
|
)
|
(2,159,511
|
)
|
(2,181,400
|
)
|
||||||||
Net income
|
$
|
6,426,460
|
$
|
4,847,931
|
$
|
10,843,055
|
$
|
8,826,535
|
||||||||
Basic net income per share
|
$
|
0.88
|
$
|
0.67
|
$
|
1.49
|
$
|
1.23
|
||||||||
Diluted net income per share
|
$
|
0.87
|
$
|
0.66
|
$
|
1.48
|
$
|
1.21
|
||||||||
Shares used in computation of basic net income per share
|
7,308,268
|
7,215,057
|
7,292,663
|
7,204,040
|
||||||||||||
Shares used in computation of diluted net income per share
|
7,349,696
|
7,315,276
|
7,344,008
|
7,309,325
|
Common Stock
|
||||||||||||||||||||||||
Shares
|
Amount
|
Additional
Paid in
Capital
|
Retained
Earnings
|
Treasury
Stock
|
Stockholders’
Equity
Total
|
|||||||||||||||||||
Balances - December 31, 2018
|
7,738,167
|
$
|
7,738
|
$
|
36,302,446
|
$
|
72,176,719
|
$
|
(10,898,383
|
)
|
$
|
97,588,520
|
||||||||||||
Issuance of common stock upon stock option exercise
|
58,063
|
58
|
1,736,888
|
-
|
-
|
1,736,946
|
||||||||||||||||||
Stock compensation expense
|
-
|
-
|
260,466
|
-
|
-
|
260,466
|
||||||||||||||||||
Repurchases of common stock
|
-
|
-
|
-
|
-
|
(118,566
|
)
|
(118,566
|
)
|
||||||||||||||||
Net income
|
-
|
-
|
-
|
10,843,055
|
-
|
10,843,055
|
||||||||||||||||||
Balances – June 30, 2019
|
7,796,230
|
$
|
7,796
|
$
|
38,299,800
|
$
|
83,019,774
|
$
|
(11,016,949
|
)
|
$
|
110,310,421
|
Common Stock
|
||||||||||||||||||||||||
Shares
|
Amount
|
Additional
Paid in
Capital
|
Retained
Earnings
|
Treasury
Stock
|
Stockholders’
Equity
Total
|
|||||||||||||||||||
Balances – March 31, 2019
|
7,740,167
|
$
|
7,740
|
$
|
36,502,652
|
$
|
76,593,314
|
$
|
(10,898,383
|
)
|
$
|
102,205,323
|
||||||||||||
Issuance of common stock upon stock option exercise
|
56,063
|
56
|
1,678,470
|
-
|
-
|
1,678,526
|
||||||||||||||||||
Stock compensation expense
|
-
|
-
|
118,678
|
-
|
-
|
118,678
|
||||||||||||||||||
Repurchases of common stock
|
-
|
-
|
-
|
-
|
(118,566
|
)
|
(118,566
|
)
|
||||||||||||||||
Net income
|
-
|
-
|
-
|
6,426,460
|
-
|
6,426,460
|
||||||||||||||||||
Balances – June 30, 2019
|
7,796,230
|
$
|
7,796
|
$
|
38,299,800
|
$
|
83,019,774
|
$
|
(11,016,949
|
)
|
$
|
110,310,421
|
Common Stock
|
||||||||||||||||||||||||
Shares
|
Amount
|
Additional
Paid in
Capital
|
Retained
Earnings
|
Treasury
Stock
|
Stockholders’
Equity
Total
|
|||||||||||||||||||
Balances - December 31, 2017
|
7,600,167
|
$
|
7,600
|
$
|
33,468,323
|
$
|
41,939,115
|
$
|
(7,898,200
|
)
|
$
|
67,516,838
|
||||||||||||
Adjustment due to adoption of ASC606
|
-
|
-
|
-
|
10,184,335
|
-
|
10,184,335
|
||||||||||||||||||
Issuance of common stock upon stock option exercise
|
55,000
|
55
|
859,995
|
-
|
-
|
860,050
|
||||||||||||||||||
Stock compensation expense
|
-
|
-
|
96,314
|
-
|
-
|
96,314
|
||||||||||||||||||
Net income
|
-
|
-
|
-
|
8,826,535
|
-
|
8,826,535
|
||||||||||||||||||
Balances – June 30, 2018
|
7,655,167
|
$
|
7,655
|
$
|
34,424,632
|
$
|
60,949,985
|
$
|
(7,898,200
|
)
|
$
|
87,484,072
|
Common Stock
|
||||||||||||||||||||||||
Shares
|
Amount
|
Additional
Paid in
Capital
|
Retained
Earnings
|
Treasury
Stock
|
Stockholders’
Equity
Total
|
|||||||||||||||||||
Balances – March 31, 2018
|
7,610,167
|
$
|
7,610
|
$
|
33,633,225
|
$
|
56,102,054
|
$
|
(7,898,200
|
)
|
$
|
81,844,689
|
||||||||||||
Issuance of common stock upon stock option exercise
|
45,000
|
45
|
727,605
|
-
|
-
|
727,650
|
||||||||||||||||||
Stock compensation expense
|
-
|
-
|
63,802
|
-
|
-
|
63,802
|
||||||||||||||||||
Net income
|
-
|
-
|
-
|
4,847,931
|
-
|
4,847,931
|
||||||||||||||||||
Balances – June 30, 2018
|
7,655,167
|
$
|
7,655
|
$
|
34,424,632
|
$
|
60,949,985
|
$
|
(7,898,200
|
)
|
$
|
87,484,072
|
Six Months Ended
June 30,
|
||||||||
Cash flows from operating activities:
|
2019
|
2018
|
||||||
Net income
|
$
|
10,843,055
|
$
|
8,826,535
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Amortization
|
150,636
|
1,369,227
|
||||||
Stock-based compensation expense
|
260,466
|
96,314
|
||||||
Deferred tax expense
|
159,459
|
82,341
|
||||||
Extinguishment of accrued liabilities
|
-
|
(78,138
|
)
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(210,949
|
)
|
(1,438,426
|
)
|
||||
Income tax payable
|
173,690
|
(518,513
|
)
|
|||||
Prepaid expenses and other current assets
|
(365,423
|
)
|
(213,476
|
)
|
||||
Patent costs
|
(92,582
|
)
|
(79,485
|
)
|
||||
Accounts payable and accrued expenses
|
(1,087,775
|
)
|
177,436
|
|||||
Deferred revenue
|
-
|
(139,680
|
)
|
|||||
Net cash provided by operating activities
|
9,830,577
|
8,084,135
|
||||||
Cash flows from investing activities:
|
||||||||
Maturity of marketable investments
|
42,451,229
|
37,279,000
|
||||||
Purchases of marketable investments
|
(53,104,080
|
)
|
(40,596,520
|
)
|
||||
Net cash used in investing activities
|
(10,652,851
|
)
|
(3,317,520
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Proceeds from stock option exercises
|
1,736,946
|
860,050
|
||||||
Payments for repurchase of common stock
|
(118,566
|
)
|
-
|
|||||
Net cash provided by financing activities
|
1,618,380
|
860,050
|
||||||
Increase in cash and cash equivalents
|
796,106
|
5,626,665
|
||||||
Cash and cash equivalents at beginning of year
|
13,176,452
|
7,333,810
|
||||||
Cash and cash equivalents at end of period
|
$
|
13,972,558
|
$
|
12,960,475
|
||||
Supplemental disclosures of cash flow information:
|
||||||||
Cash paid during the period for:
|
||||||||
Interest
|
-
|
-
|
||||||
Taxes
|
$
|
1,826,362
|
$
|
2,617,572
|
• |
An agreement with Swedish Orphan Biovitrum AB (“Sobi”), pursuant to which Sobi has marketing rights for Xiapex® for the treatment of DC and PD in Europe and certain Eurasian countries;
|
• |
An agreement with Asahi Kasei Pharma Corporation (“Asahi”), pursuant to which Asahi has the right to commercialize XIAFLEX® for the treatment of DC and PD in Japan; and
|
• |
An agreement with Actelion Pharmaceuticals Ltd. (“Actelion”), pursuant to which Actelion obtained marketing and commercial rights for XIAFLEX® in Australia and New Zealand.
|
Maturities as of
June 30, 2019
|
Maturities as of
December 31, 2018
|
|||||||||||||||
1 Year or
Less
|
Greater than 1
Year
|
1 Year or
Less
|
Greater than 1
Year
|
|||||||||||||
U.S Government agency
|
$
|
1,993,638
|
$
|
2,235,124
|
$
|
-
|
$
|
-
|
||||||||
Municipal bonds
|
10,821,680
|
$
|
-
|
1,295,350
|
-
|
|||||||||||
Corporate bonds
|
53,392,333
|
5,749,303
|
61,321,162
|
1,099,834
|
||||||||||||
Certificates of deposit
|
5,096,537
|
248,711
|
5,090,631
|
|||||||||||||
Total
|
$
|
71,304,188
|
$
|
8,233,138
|
$
|
67,707,143
|
$
|
1,099,834
|
June 30, 2019
|
Type of Instrument
|
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Cash equivalents
|
Institutional Money Market
|
$
|
1,267,261
|
$
|
1,267,261
|
$
|
-
|
$
|
-
|
|||||||||
Investments
|
U.S. Government Agency
|
4,228,762
|
-
|
4,228,762
|
-
|
|||||||||||||
Investments
|
Municipal Bonds
|
10,821,680
|
-
|
10,821,680
|
-
|
|||||||||||||
Investments
|
Corporate Bonds
|
59,141,636
|
-
|
59,141,636
|
-
|
|||||||||||||
Investments
|
Certificates of Deposit
|
5,345,248
|
5,345,248
|
-
|
-
|
December 31, 2018
|
Type of Instrument
|
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Cash equivalents
|
Institutional Money Market
|
$
|
6,078,025
|
$
|
6,078,025
|
$
|
-
|
$
|
-
|
|||||||||
Investments
|
Municipal Bonds
|
1,295,350
|
-
|
1,295,350
|
-
|
|||||||||||||
Investments
|
Corporate Bonds
|
62,420,996
|
-
|
62,420,996
|
-
|
|||||||||||||
Investments
|
Certificates of Deposit
|
5,090,631
|
5,090,631
|
-
|
-
|
Six Months Ended
June 30, 2019
|
||||
Risk-free interest rate
|
2.18
|
%
|
||
Expected term of option
|
|
6.25 years
|
||
Expected stock price volatility
|
39.5
|
%
|
||
Expected dividend yield
|
$
|
0.0
|
Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
|||||||||||||
Outstanding at December 31, 2018
|
175,500
|
$
|
37.73
|
6.33
|
$
|
4,014,235
|
||||||||||
Grants
|
10,000
|
66.40
|
-
|
-
|
||||||||||||
Exercised
|
(58,063
|
)
|
29.91
|
-
|
1,729,995
|
|||||||||||
Forfeitures
|
(11,250
|
)
|
41.82
|
-
|
-
|
|||||||||||
Outstanding at June 30, 2019
|
116,187
|
$
|
43.70
|
6.89
|
$
|
1,926,782
|
||||||||||
Exercisable at June 30, 2019
|
92,000
|
$
|
23.35
|
2.84
|
$
|
1,593,140
|
June 30,
2019 |
December 31,
2018 |
|||||||
Trade accounts payable
|
$
|
84,617
|
$
|
122,199
|
||||
Accrued legal and other professional fees
|
228,548
|
308,725
|
||||||
Accrued payroll and related costs
|
105,787
|
173,123
|
||||||
Third party royalties
|
170,005
|
1,168,837
|
||||||
Other accruals
|
121,855
|
25,704
|
||||||
Total
|
$
|
710,812
|
$
|
1,798,588
|
June 30,
2019 |
December 31,
2018 |
|||||||
Patents
|
$
|
1,138,797
|
$
|
1,046,216
|
||||
Accumulated amortization
|
(644,941
|
)
|
(601,738
|
)
|
||||
Total
|
$
|
493,856
|
$
|
444,478
|
July 1, 2019 – December 31, 2019
|
$
|
43,000
|
||
2020
|
68,000
|
|||
2021
|
51,000
|
|||
2022
|
51,000
|
|||
2023
|
51,000
|
|||
Thereafter
|
230,000
|
|||
Total
|
$
|
494,000
|
• |
An agreement with Swedish Orphan Biovitrum AB (“Sobi”), pursuant to which Sobi has marketing rights for Xiapex® for the treatment of DC and PD in Europe and certain Eurasian countries;
|
• |
An agreement with Asahi Kasei Pharma Corporation (“Asahi”), pursuant to which Asahi has the right to commercialize XIAFLEX® for the treatment of DC and PD in Japan; and
|
• |
An agreement with Actelion Pharmaceuticals Ltd. (“Actelion”), pursuant to which Actelion obtained marketing and commercial rights for XIAFLEX® in Australia and New Zealand.
|
Three Months Ended
June 30, 2019
|
Three Months Ended
June 30, 2018
|
|||||||
Program
|
||||||||
Uterine Fibroids
|
$
|
66,127
|
$
|
104,596
|
||||
Pre-clinical/other research projects
|
95,194
|
107,200
|
||||||
Total R&D expenses
|
$
|
161,321
|
$
|
211,796
|
• |
the nature, timing and estimated costs of the efforts necessary to complete the development of our drug candidate projects;
|
• |
the anticipated completion dates for our drug candidate projects;
|
• |
the scope, rate of progress and cost of our clinical trials that we are currently running or may commence in the future with respect to our drug candidate projects;
|
• |
the scope, rate of progress of our preclinical studies and other R&D activities related to our drug candidate projects;
|
• |
clinical trial results for our drug candidate projects;
|
• |
the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights relating to our drug candidate projects;
|
• |
the terms and timing of any strategic alliance, licensing and other arrangements that we have or may establish in the future relating to our drug candidate projects;
|
• |
the cost and timing of regulatory approvals with respect to our drug candidate projects; and
|
• |
the cost of establishing clinical supplies for our drug candidate projects.
|
Six Months Ended
June 30, 2019
|
Six Months Ended
June 30, 2018
|
|||||||
Program
|
||||||||
Uterine Fibroids
|
$
|
126,412
|
$
|
127,534
|
||||
Pre-clinical/other research projects
|
184,445
|
279,489
|
||||||
Total R&D expenses
|
$
|
310,857
|
$
|
407,023
|
• |
the nature, timing and estimated costs of the efforts necessary to complete the development of our drug candidate projects;
|
• |
the anticipated completion dates for our drug candidate projects;
|
• |
the scope, rate of progress and cost of our clinical trials that we are currently running or may commence in the future with respect to our drug candidate projects;
|
• |
the scope, rate of progress of our preclinical studies and other R&D activities related to our drug candidate projects;
|
• |
clinical trial results for our drug candidate projects;
|
• |
the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights relating to our drug candidate projects;
|
• |
the terms and timing of any strategic alliance, licensing and other arrangements that we have or may establish in the future relating to our drug candidate projects;
|
• |
the cost and timing of regulatory approvals with respect to our drug candidate projects; and
|
• |
the cost of establishing clinical supplies for our drug candidate projects.
|
Period
|
Total Number of
Shares
Purchased (1)
|
Average
Price Paid
Per Share (2)
|
Total Number of
Shares
Purchased as
Part of Publicly
Announced Plan
|
Maximum
Number (or
Dollar Value) of
Shares that May
Yet be Purchased
under the Plan
|
||||||||||||
$
|
4,000,000
|
(3)
|
||||||||||||||
April 1, 2019 – April 30, 2019
|
-
|
-
|
-
|
-
|
||||||||||||
May 1, 2019 – May 31, 2019
|
-
|
-
|
-
|
-
|
||||||||||||
June 1, 2019 – June 30, 2019
|
2,048
|
$
|
57.8937
|
2,048
|
$
|
3,881,433
|
||||||||||
Total
|
2,048
|
(1) |
The purchases were made in open-market transactions in compliance with rule 10b-18 or under the company’s 10b-18 plan.
|
(2) |
Includes commissions paid, if any, related to the stock repurchase transactions.
|
(3) |
On May 23, 2019, we announced that our Board of Directors had authorized the repurchase of up to $4.0 million of our common stock under the stock repurchase program, which program is not
subject to an expiration date.
|
Form of Director Restricted Stock Unit Award Agreement
|
||
Restricted Stock Unit Award Agreement for P. Caldwell
|
||
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002
|
BIOSPECIFICS TECHNOLOGIES CORP.
|
|
(Registrant)
|
|
Date: August 9, 2019
|
/s/ Ronald E. Law
|
Ronald E. Law
|
|
Principal Executive Officer
|
BIOSPECIFICS TECHNOLOGIES CORP.
|
||
Name:
|
||
Title:
|
|
|||
Date
|
Participant
|
BIOSPECIFICS TECHNOLOGIES CORP.
|
||
/s/ Ronald E. Law
|
||
Name:
|
Ronald E. Law
|
|
Title:
|
Principal Executive Officer
|
July 12, 2019
|
/s/ Patrick M. Caldwell
|
Date
|
Patrick M. Caldwell
|
1. |
I have reviewed this quarterly report on Form 10-Q of BioSpecifics Technologies Corp. for the quarterly period ended June 30, 2019;
|
2. |
Based on my knowledge, the 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 consolidated 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(s) 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:
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over
financial reporting; and
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of
the registrant’s board of directors (or persons performing the equivalent functions):
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
|
1. |
I have reviewed this quarterly report on Form 10-Q of BioSpecifics Technologies Corp. for the quarterly period ended June 30, 2019;
|
2. |
Based on my knowledge, the 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 consolidated 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(s) 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:
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over
financial reporting; and
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of
the registrant’s board of directors (or persons performing the equivalent functions):
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
August 9, 2019
|
/s/ Ronald Law
|
|
Ronald Law
|
|
Principal Executive Officer
|
|
/s/ Pat Caldwell
|
|
Pat Caldwell
|
|
Principal Financial Officer
|
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Aug. 09, 2019 |
|
Cover [Abstract] | ||
Entity Registrant Name | BIOSPECIFICS TECHNOLOGIES CORP | |
Entity Central Index Key | 0000875622 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Shell Company | false | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 7,330,349 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Entity Address, State or Province | NY |
Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Stockholders' equity: | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 10,000,000 | 10,000,000 |
Common stock, issued (in shares) | 7,796,230 | 7,738,167 |
Common stock, outstanding (in shares) | 7,331,917 | 7,275,902 |
Treasury stock, shares (in shares) | 464,313 | 462,265 |
Series A Preferred Stock [Member] | ||
Stockholders' equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.50 | $ 0.50 |
Preferred stock, authorized (in shares) | 700,000 | 700,000 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Condensed Consolidated Income Statements (unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Revenues: | ||||
Total Revenues | $ 8,852,986 | $ 7,850,774 | $ 16,982,127 | $ 14,940,183 |
Costs and expenses: | ||||
Research and development | 161,321 | 211,796 | 310,857 | 407,023 |
General and administrative | 1,728,125 | 2,043,952 | 4,635,284 | 4,113,585 |
Total Cost and Expenses | 1,889,446 | 2,255,748 | 4,946,141 | 4,520,608 |
Operating income | 6,963,540 | 5,595,026 | 12,035,986 | 10,419,575 |
Other income: | ||||
Interest income | 517,156 | 273,746 | 966,580 | 491,697 |
Other income (expense) | 0 | 81,985 | 0 | 96,663 |
Total other income | 517,156 | 355,731 | 966,580 | 588,360 |
Income before income tax expense | 7,480,696 | 5,950,757 | 13,002,566 | 11,007,935 |
Provision for income tax expense | (1,054,236) | (1,102,826) | (2,159,511) | (2,181,400) |
Net income | $ 6,426,460 | $ 4,847,931 | $ 10,843,055 | $ 8,826,535 |
Basic net income per share (in dollars per share) | $ 0.88 | $ 0.67 | $ 1.49 | $ 1.23 |
Diluted net income per share (in dollars per share) | $ 0.87 | $ 0.66 | $ 1.48 | $ 1.21 |
Shares used in computation of basic net income per share (in shares) | 7,308,268 | 7,215,057 | 7,292,663 | 7,204,040 |
Shares used in computation of diluted net income per share (in shares) | 7,349,696 | 7,315,276 | 7,344,008 | 7,309,325 |
Royalties [Member] | ||||
Revenues: | ||||
Total Revenues | $ 8,852,986 | $ 7,815,504 | $ 16,982,127 | $ 14,900,504 |
Licensing Revenues [Member] | ||||
Revenues: | ||||
Total Revenues | $ 0 | $ 35,270 | $ 0 | $ 39,679 |
ORGANIZATION AND DESCRIPTION OF BUSINESS |
6 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | ||||||||||
ORGANIZATION AND DESCRIPTION OF BUSINESS [Abstract] | ||||||||||
ORGANIZATION AND DESCRIPTION OF BUSINESS | 1. ORGANIZATION AND DESCRIPTION OF BUSINESS We are a biopharmaceutical company involved in the development of an injectable collagenase clostridium histolyticum (CCH) for multiple indications. We maintain intellectual property with respect to injectable CCH that treats, among other indications, Dupuytren’s contracture (DC), Peyronie’s disease (PD), frozen shoulder syndrome, and removal of adipose tissue. Injectable CCH currently is approved and marketed in the U.S. under the trademark XIAFLEX® for the treatment of both DC and PD. XIAFLEX® also is commercialized in Japan, Europe (where it is marketed as Xiapex®), Canada, and Australia for DC, and for PD in Canada, Europe and Australia. We generate revenue primarily from our license agreement with Endo, under which we receive license, sublicense income, royalties, milestones and mark-up on cost of goods sold payments related to the sale, regulatory submissions and approval of XIAFLEX®. On August 31, 2011, we entered into the Second Amended and Restated Development and License Agreement (as amended, the “License Agreement”) with Auxilium Pharmaceuticals, Inc. (“Auxilium”), an entity that was acquired by Endo in 2015. The License Agreement originally was entered into in June 2004 to obtain exclusive worldwide rights to develop, market, and sell certain products containing our enzyme CCH, which Endo markets for approved indications under the trademark XIAFLEX®. Endo’s licensed rights concern the development and commercialization of products, other than dermal formulations labeled for topical administration. Currently, Endo’s licensed rights cover the indications of DC, Dupuytren’s nodules, PD, frozen shoulder, cellulite, canine and human lipomas, plantar fibromatosis, lateral hip fat, and other potential aesthetic indications. We and Endo may further expand the License Agreement to cover other indications as they are developed. Pursuant to the License Agreement, Endo currently is selling XIAFLEX® in the U.S. for the treatment of DC and PD and is distributing XIAFLEX® in Canada through its operating company, Paladin Labs Inc. Additionally, Endo has entered into several non-affiliated sublicensee agreements (as permitted by the License Agreement), including the following:
On February 1, 2016, we entered into the First Amendment (the “First Amendment”) to the License Agreement. Pursuant to the First Amendment, the Company and Endo Global Ventures mutually agreed that in exchange for a $8.25 million lump sum payment, we will not receive future additional mark-up on cost of goods sold for sales by non-affiliated sublicensees of Endo outside of the U.S.; provided, however, that Endo will still be required to pay a mark-up on cost of goods sold for sales made in the “Endo Territory,” which includes sales made in the U.S. and sales made in any other country where Endo sells the product directly or through affiliated sublicensees. We received this $8.25 million lump sum payment in February 2016 and began recognizing this income over time based on sales by non-affiliated sublicensees of Endo outside of the U.S. according to our revenue recognition policy in the second quarter of 2016. Additionally, we agreed that Endo may opt-in early to indications, prior to our submission of a clinical trial report, with our consent, such consent not to be unreasonably withheld. For early opt-ins, Endo will be required to make an opt-in payment of $0.5 million on a per indication basis. For regular opt-ins, following our submission of a clinical trial report, Endo will be required to make an opt-in payment of $0.75 million on a per indication basis. Endo has opted-in to the following indications: frozen shoulder, cellulite, canine lipoma, lateral hip fat, plantar fibromatosis and human lipoma. On February 26, 2019, we and Endo entered into the Second Amendment to the License Agreement (the “Second Amendment”) to amend certain provisions of the License Agreement. The Second Amendment has an effective date of January 1, 2019. Pursuant to the terms of the Second Amendment, we have consented to the assignment of the License Agreement by Endo Global Ventures to Endo Global Aesthetics Limited, an Irish private company and an affiliate of Endo Global Ventures that is indirectly wholly-owned by Endo. In addition, the Second Amendment amends certain provisions of the License Agreement to require Endo to provide timely estimates of royalties to assist us in complying with our financial reporting obligations. The two marketed indications involving our injectable collagenase are DC and PD. Endo has opted-in to the following indications: frozen shoulder, cellulite, canine lipoma, lateral hip fat, plantar fibromatosis and human lipoma. Endo exercised, with our consent, an early opt-in for lateral hip fat and plantar fibromatosis in November 2015. Endo opted-in for human lipoma in July 2016. We manage the development of XIAFLEX® for uterine fibroids and initiate the development of XIAFLEX® in new potential indications, not licensed by Endo. Endo presented positive results from two Phase 3 studies, RELEASE-1 and RELEASE-2, of CCH for the treatment of cellulite. Subjects receiving CCH showed highly statistically significant levels of improvement in the appearance of cellulite with treatment, as measured by the trial's primary endpoint (RELEASE-1, p=0.006 & RELEASE-2, p=0.002), which was at least a 2-level composite improvement in cellulite severity at Day 71 as compared to subjects receiving placebo. Statistically significant improvements with CCH versus placebo were observed for 8 of 8 (RELEASE-1) and 7 of 8 (RELEASE-2) secondary endpoints, in addition to patient-centric endpoints. These data were presented at 2019 American Academy of Dermatology Annual Meeting on March 2, 2019. On May 17, 2019, Endo announced that clinical data from a Phase 3 investigational study of CCH for the treatment of cellulite was presented at the annual meeting of the American Society for Aesthetic Plastic Surgery. Endo expects to file its Biologics License Application (BLA) with the U.S. Food and Drug Administration (FDA) for CCH for the treatment of cellulite in the second half of 2019 with an expected commercial launch in the second half of 2020 upon approval. We presented data from the Phase 1 clinical trial of CCH for the treatment of uterine fibroids at the 66th Annual Meeting of the Society of Reproductive Investigation (SRI) on March 14, 2019 in Paris, France. This presentation follows positive top-line results announced in October 2018 demonstrating that CCH significantly reduced collagen content in uterine fibroids. BioSpecifics and its clinical partners continue to analyze the full Phase 1 data to guide the design of a Phase 2 study of CCH for the treatment of uterine fibroids. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Except as detailed below, there have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2019, as compared to the significant accounting policies disclosed in Note 2 of the Consolidated Financial Statements in the Company’s 2018 Annual Report. Basis of Presentation The accompanying condensed consolidated financial statements are unaudited, but include all adjustments (consisting only of normal, recurring adjustments) that we consider necessary for a fair presentation of our financial position at such dates and the operating results and cash flows for those periods. Although we believe that the disclosures in our financial statements are adequate to make the information presented not misleading, certain information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for quarterly reporting. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the risk factors discussed in Part I, Item 1A. Risk Factors in our 2018 Annual Report, filed with the SEC on April 2, 2019 and in Item 1A of Part 2 of our Quarterly Report on Form 10-Q for the quarter end March 31, 2019, filed with the SEC on May 10, 2019. Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its subsidiary, Advance Biofactures Corp. All intercompany balances and transactions have been eliminated. Critical Accounting Policies, Estimates and Assumptions The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the use of management’s estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company makes certain assumptions and estimates for its revenues, deferred tax assets, third party royalties and deferred royalty buy-down. We base our estimates on historical experience, and other relevant data including interim data provided by Endo and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and the amount of revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions. For further details, see notes “Revenue Recognition.”, “Provision for Income Taxes” and “Third-Party Royalties and Royalty Buy-Down.” Actual results may differ from those estimates. Revenue Recognition Beginning in 2014, Financial Accounting Standards Board (“FASB”) issued several Accounting Standards Updates establishing Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). ASC 606 requires retrospective implementation, and replaces most industry-specific revenue recognition guidance in U.S. GAAP with a new principles-based, five-step revenue recognition model. The Company adopted ASC 606 effective January 1, 2018. Under ASC 606, we recognize revenues when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. We recognize revenues following the five step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation(s). Revenues, and their respective treatment for financial reporting purposes under ASC 606 and our license agreement with Endo, are as follows: Royalty / Mark-Up on Cost of Goods Sold We receive royalty revenues on net sales and mark-up on cost of goods sold revenue in the U.S. under our License Agreement with Endo. These are presented in “Royalties” in our condensed consolidated statements of income. We do not have future performance obligations under this revenue stream. In accordance with ASC 606, we record these revenues based on estimates of the net sales that occurred during the relevant period. The relevant period estimates of these royalties are based on interim data provided by Endo and analysis of historical royalties and mark-up on cost of goods sold revenue that have been paid to us, adjusted for any changes in facts and circumstances, as appropriate. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known. The royalties payable by Endo to us are subject to set-off for certain patent costs. Licensing Revenue We include revenue recognized from upfront licensing, sublicensing and milestone payments in “License Revenues” in our condensed consolidated statements of income. The Company recognizes licensing revenues generated through development and/or commercialization agreements. The terms of these agreements typically include payment to the Company of one or more of the following: nonrefundable, upfront license fees; sublicensing; development and commercial milestone payments; development activities; and royalties on net sales of licensed products. Each of these types of payments results in licensing revenues except for revenues from royalties on net sales of licensed products and the mark-up of cost of goods sold revenues which are classified as royalty revenues. Revenue is recognized upon satisfaction of a performance obligation by transferring control of a good or service to the customer. For each development and/or commercialization agreement that result in revenues, the Company identifies all performance obligations, aside from those that are immaterial, which may include a license to intellectual property and know-how, development activities and/or transition activities. In order to determine the transaction price, in addition to any upfront payment, the Company estimates the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract. The Company constrains (reduces) the estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required. If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, upfront license fees based on the relative standalone selling price prescribed to the license compared to the total value of the arrangement. The revenue is recognized when the license is transferred to the collaborator and the collaborator is able to use and benefit from the license. For licenses that are not distinct from other obligations identified in the arrangement, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, the Company applies an appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront license fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Development and Regulatory Milestone Payments Depending on facts and circumstances, the Company may conclude that it is appropriate to include the milestone, representing variable consideration, in the estimated total transaction price, or that it is appropriate to fully constrain the milestone. The Company may include revenues from certain milestones in the total transaction price in a reporting period before the milestone is achieved if the Company concludes that achievement of the milestone is probable and that recognition of revenue related to the milestone will not result in a significant reversal in amounts recognized in future periods. The Company records a corresponding contract asset when this conclusion is reached. Milestone payments that have not been included in the transaction price to date are fully constrained. The Company re-evaluates the probability of achievement of such development milestones and any related constraint each reporting period. The Company adjusts its estimate of the total transaction price, including the amount of revenue that it has recorded, if necessary. RECENT ACCOUNTING PRONOUNCEMENTS Accounting Pronouncements Adopted In February 2016, FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the lease commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and ASC 606. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The adoption of the new standard as of January 1, 2019 did not have a material impact on our consolidated financial statements due to the short term nature of our leases. Accounting Pronouncements Not Yet Adopted In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The amendment revises the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in more timely recognition of losses on financial instruments, including, but not limited to, available for sale debt securities and accounts receivable. The Company is required to adopt this standard starting in the first quarter of fiscal year 2021. Early adoption is permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements and related disclosures. Cash, Cash Equivalents and Investments Cash equivalents include only securities having a maturity of 90 days or less at the time of purchase. Investments are stated on an amortized cost basis. The Company limits its credit risk associated with cash, cash equivalents and investments by placing its investments with banks it believes are highly creditworthy and with highly rated money market funds, certificates of deposit, U.S. government agency bonds, municipal bonds and corporate bonds. All investments are classified as held to maturity. As of June 30, 2019 and December 31, 2018, the amortized cost of these investments was $79.5 million and $68.8 million, respectively. No unrealized gains or losses were recorded in either period. Fair Value Measurements Management believes that the carrying amounts of the Company’s financial instruments, including cash, cash equivalents, held to maturity investments, accounts receivable, accounts payable and accrued expenses approximate fair value due to the duration of those instruments. As of June 30, 2019 and December 31, 2018, there were no recorded unrealized gains or losses on our investments as they are classified as held to maturity. As of June 30, 2019 and December 31, 2018, amortized cost basis of the investments approximated their fair value. Interest income for the three and six months ended June 30, 2019 was $0.5 million and $1.0 million, respectively as compared to $0.3 million and $0.5 million in the 2018 periods. At June 30, 2019 and December 31, 2018, the amortized net discount / (net premium) included in interest income was approximately $77,000 and ($372,000), respectively. At June 30, 2019 and December 31, 2018, the remaining unamortized net premium / (net discount) was approximately $82,000 and ($121,000), respectively. The following table presents the Company’s schedule of maturities at June 30, 2019 and December 31, 2018:
The authoritative literature for fair value measurements established a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. These tiers are as follows: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than the quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as significant unobservable inputs (entity developed assumptions) in which little or no market data exists. As of June 30, 2019, the Company held certain investments that are required to be measured at fair value on a recurring basis. The following tables present the Company’s fair value hierarchy for these financial assets as of June 30, 2019 and December 31, 2018:
Concentration of Credit Risk and Major Customers The Company maintains bank account balances, which, at times, may exceed insured limits. The Company has not experienced any losses with these accounts and believes that it is not exposed to any significant credit risk on cash. The Company maintains investments in FDIC insured certificates of deposits, U.S. government agency bonds, municipal bonds and corporate bonds. The Company is currently dependent on one customer, Endo, which generates almost all of the Company’s revenues. For the three and six months ended June 30, 2019, licensing, sublicensing, milestones and royalty revenues under the License Agreement with Endo were approximately $8.9 million and $17.0 million, respectively and for the three and six months ended June 30, 2018, licensing, sublicensing, milestones and royalty revenues under the License Agreement with Endo were approximately $7.9 million and $14.9 million, respectively. At June 30, 2019 and December 31, 2018, our accounts receivable balances from Endo were $16.7 million and $16.5 million, respectively. Treasury Stock The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity. For the six months ended June 30, 2019 there were 2,048 shares repurchased at an average price of $57.89 compared to no repurchases in the 2018 comparable period. Stock Repurchase Plan On May 23, 2019, the Company announced the authorization of a new stock repurchase program under which we can repurchase up to $4 million of our outstanding common stock. Pursuant to the repurchase program, we plan to repurchase stock through a broker in the open market, provided that the timing, actual number and price per share of the common stock to be purchased will be subject to market conditions, applicable legal requirements, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended, and various other factors. Receivables and Doubtful Accounts Trade accounts receivable are stated at the amount the Company expects to collect. We may maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We consider the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. Our accounts receivable balance is typically due from Endo, our one large specialty pharmaceutical customer. Endo has historically paid timely and has been a financially stable organization. Due to the nature of the accounts receivable balance, we believe the risk of doubtful accounts is minimal and therefore no allowance is recorded. If the financial condition of our customer were to deteriorate, adversely affecting its ability to make payments, additional allowances would be required. We may provide for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. At June 30, 2019 and December 31, 2018 our accounts receivable balance was $16.7 million and $16.5 million, respectively, and was from one customer, Endo. Reimbursable Third-Party Patent Costs We accrue patent costs that are reimbursable to Endo by us under the License Agreement. We capitalize certain patent costs related to patent prosecution and maintenance and expense others. As of June 30, 2019 and December 31, 2018, our net reimbursable third party patent expense was $67,000 and $40,000, respectively, and recorded as a reduction to our accounts receivable balance. Third-Party Royalties We have entered into licensing and royalty agreements with third parties and agreed to pay certain royalties on net sales of products for specific indications. The royalty rates differ from agreement to agreement and, in certain cases, have been redacted with the permission of the SEC. No assumptions should be made that any disclosed royalty rate payable to a particular third party is the same or similar with respect to any royalty rate payable to any other third parties. We accrue third-party royalty expenses on net sales reported to us by Endo. Third-party royalty costs are expensed under general and administrative in the quarter that the net sales have occurred. For the three and six month periods ended June 30, 2019 and 2018, third-party royalty expenses were $0.2 million and $0.6 million, respectively. For the three and six month periods ended June 30, 2018, third-party royalty expenses were $0.6 million and $1.0 million, respectively. As of June 30, 2019, we have no further third party royalties in connection with PD as the agreement expired in February 2019. Royalty Buy-Down On March 31, 2012, we entered into an amendment to our existing agreement with Dr. Martin K. Gelbard, dated August 27, 2008, related to our future royalty obligations in connection with PD. The amendment enables us to buy down a portion of our future royalty obligations in exchange for an initial cash payment of $1.5 million and five additional cash payments of $600,000, all of which have been paid as of January 1, 2018. In March 2019, royalty obligations were terminated, which was five years after first commercial sale, which occurred in January 2014. The Company amortizes long-term contracts with finite lives in a manner that reflects the pattern in which the economic benefits of the assets are consumed or otherwise used up. Dr. Gelbard’s agreement is amortized based on an income forecast method by estimating sales of XIAFLEX® and Xiapex® for PD on an annual basis as measured by the proportion of the total estimated sales over the five year period. For the three and six months ended June 30, 2019, we amortized zero and approximately $0.2 million related to this agreement, respectively. For the three and six months ended June 30, 2018 we amortized approximately $0.5 million and $1.0 million, respectively, related to this agreement. Royalty buy-down expenses are recorded as part of general and administrative expenses. As of June 30, 2019 and December 31, 2018, the remaining capitalized balances were zero and $0.2 million, respectively. Research and Development Expenses R&D expenses include, but are not limited to, internal costs, such as salaries and benefits, costs of materials, lab expense, facility costs and overhead. R&D expenses also consist of third party costs, such as medical professional fees, product costs used in clinical trials, consulting fees and costs associated with clinical study arrangements. We may fund R&D at medical research institutions under agreements that are generally cancelable. All of these costs are charged to R&D as incurred, which may be measured by percentage of completion, contract milestones, patient enrollment, or the passage of time. Clinical Trial Expenses Our cost accruals for clinical trials are based on estimates of the services received and efforts expended pursuant to contracts with various clinical trial centers and clinical research consultants. In the normal course of business, we contract with third parties to perform various clinical trial activities in the ongoing development of potential drugs. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events, the successful enrollment of patients, the completion of portions of the clinical trial, or similar conditions. The objective of our accrual policy is to match the recording of expenses in our financial statements to the actual cost of services received and efforts expended. As such, expenses related to each patient enrolled in a clinical trial are recognized ratably beginning upon entry into the trial and over the course of the patient’s continued participation in the trial. In the event of early termination of a clinical trial, we accrue an amount based on our estimate of the remaining non-cancelable obligations associated with the winding down of the clinical trial. Our estimates and assumptions could differ significantly from the amounts that may actually be incurred. Stock-Based Compensation and 2019 Omnibus Incentive Compensation Plan On June 13, 2019, at the Company’s annual meeting, the Company’s stockholders approved the 2019 Omnibus Incentive Compensation Plan (the “2019 Plan”). Upon the 2019 Plan’s approval, approximately 1,248,848 shares of Company common stock were available for issuance thereunder, consisting of 1,100,000 shares authorized for issuance under the 2019 Plan and 148,848 shares then remaining available for issuance under the Company’s 2001 Stock Option Plan (the “2001 Plan”). The 2019 Plan replaced the 2001 Plan. No new awards will be granted under the 2001 Plan; however, awards outstanding under the 2001 Plan upon approval of the 2019 Plan remain subject to and will be settled under the applicable 2001 Plan. Grants under the 2019 Plan may consist of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards, or cash awards. Employees, key advisors or non-employee directors are eligible to participate in the 2019 Plan. Grants under the 2019 Plan vest over periods ranging from one to four years and expire ten years from date of grant. ASC 718, Compensation - Stock Compensation (“ASC 718”), requires the recognition of compensation expense, using a fair-value based method, for costs related to all stock options including stock options and common stock issued to our employees and directors under our stock plans. ASC 718 requires companies to estimate the fair value of stock option awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service periods in our condensed consolidated statements of operations. Under ASC 718, we estimate the fair value of our employee stock option awards at the date of grant using the Black-Scholes option-pricing model, which requires the use of certain subjective assumptions. The most significant of these assumptions are our estimates of the expected volatility of the market price of our stock and the expected term of an award. When establishing an estimate of the expected term of an option award, we consider the vesting period for the award, our recent historical experience of employee stock option exercises (including forfeitures) and the expected volatility of our common stock. As required under the accounting rules, we review our estimates at each grant date and, as a result, the valuation assumptions that we use to value employee stock-based awards granted in future periods may change. For the six months ended June 30, 2019, we granted a total of 10,000 stock options from the 2001 Plan with a weighted average grant date fair value of $66.40 per share. The assumptions used in the valuation of stock options granted during the six months ended June 30, 2019 were as follows:
Further, ASC 718 requires that employee stock-based compensation costs be recognized over the requisite service period, or the vesting period, in a manner similar to all other forms of compensation paid to employees. The allocation of employee stock-based compensation costs to each operating expense line are estimated based on specific employee headcount information at each grant date and estimated stock option forfeiture rates and revised, if necessary, in future periods if actual employee headcount information or forfeitures differ materially from those estimates. As a result, the amount of employee stock-based compensation costs we recognize in each operating expense category in future periods may differ significantly from what we have recorded in the current period. Stock-based compensation expense recognized in general and administrative expenses was approximately $119,000 and $260,000 for the three and six month periods ended June 30, 2019 and $63,000 and $96,000 for the three and six month periods ended June 30, 2018, respectively. Stock Option Activity A summary of our stock option activity during the six months ended June 30, 2019 is presented below:
During the six months ended June 30, 2019 and 2018, the Company received approximately $1.7 million and $0.9 million, respectively, from stock options exercised by option holders. Aggregate intrinsic value represents the total pre-tax intrinsic value based on the closing price of our common stock of $59.71 on June 30, 2019, which would have been received by the option holders had all option holders exercised their options as of that date. We have approximately $1.5 million in unrecognized compensation cost related to stock options outstanding as of June 30, 2019, which we expect to recognize over the next 3.38 years. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Machinery and equipment, furniture and fixtures, and autos are depreciated on a straight-line basis over their estimated useful lives of five to ten years. Leasehold improvements are amortized over the lesser of their estimated useful lives or the remaining life of the lease. At each of June 30, 2019 and December 31, 2018, property and equipment were fully depreciated. Comprehensive Income For each of the three and six month periods ended June 30, 2019 and 2018, we had no components of other comprehensive income other than net income itself. Provision for Income Taxes We use the asset and liability method of accounting for income taxes, as set forth in ASC 740-10-25-2. Under this method, deferred income taxes, when required, are provided on the basis of the difference between the financial reporting and income tax basis of assets and liabilities at the statutory rates enacted for future periods when the differences are expected to reverse. A valuation allowance is applied against any net deferred tax asset if, based on the weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement. As of June 30, 2019 and December 31, 2018, the Company has not recorded any unrecognized tax benefits. We classify interest associated with income taxes under interest expense and tax penalties under other. Commitments and Contingencies On August 14, 2018, the Company entered into an agreement with 35 Wilbur Street Associates, LLC (the “Landlord”) to extend the term of the lease to our corporate headquarters, which are currently located at 35 Wilbur St., Lynbrook, NY 11563, for an additional one year period (the “Extended Lease Agreement”). The one year extension will end on November 30, 2019. Pursuant to the Extended Lease Agreement, the base rent is $11,500 per month and the Company may cancel the lease with three months’ prior written notice to the Landlord at any time during the term. Our rent expense amounted to approximately $34,000 and $67,000 for the three and six months ended June 30, 2019, respectively, and $32,000 and $65,000 for the three and six months in the 2018 periods, respectively. |
NET INCOME PER SHARE |
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NET INCOME PER SHARE [Abstract] | |
NET INCOME PER SHARE | 3. NET INCOME PER SHARE In accordance with ASC 260, Earnings Per Share, basic net income per share amount is computed using the weighted-average number of shares of common stock outstanding during the periods presented, while diluted net income per share is computed using the sum of the weighted-average number of common and common equivalent shares outstanding. Common equivalent shares used in the computation of diluted earnings per share result from the assumed exercise of stock options using the treasury stock method. For the three and six month periods ended June 30, 2019 there were 41,428 and 51,345, respectively, of common equivalent shares attributable to stock options that were included in the calculation of diluted net income per share. There were 63,750 stock options to purchase shares excluded from the calculation of diluted net income per share for the three and six month periods ended June 30, 2019, because their effects are anti-dilutive. For the three and six month periods ended June 30, 2018 there were 100,219 and 105,285, respectively, of common equivalent shares attributable to stock options that were included in the calculation of diluted net income per share. There were zero stock options to purchase shares excluded from the calculation of diluted net income per share for the three and six month periods ended June 30, 2018, respectively, because their effects are anti-dilutive. |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES |
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ACCOUNTS PAYABLE AND ACCRUED EXPENSES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following:
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PATENT COSTS |
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PATENT COSTS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PATENT COSTS | 5. PATENT COSTS We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives, ranging from two to ten years, and review for impairment on a quarterly basis and when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We analyze our intangible assets, specifically, capitalized patent costs, on an annual basis for any indicator that an impairment exists. As of June 30, 2019 and December 31, 2018, no impairment existed and no adjustments were warranted. We capitalized approximately $93,000 of patent costs for the three and six months ended June 30, 2019 as compared to approximately $35,000 and $79,000 for three and six months ended June 30, 2018, respectively. Patent costs may be creditable against future royalty revenues. For each period presented below, net patent costs consisted of:
The amortization expense for patents for the three and six months ended June 30, 2019 was approximately $24,000 and $43,000, respectively, and for the three and six months ended June 30, 2018 was approximately $18,000 and $35,000, respectively. The estimated aggregate amortization expense for the remaining six months of 2019 and each of the years below is approximately as follows:
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PROVISION FOR INCOME TAXES |
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PROVISION FOR INCOME TAXES [Abstract] | |
PROVISION FOR INCOME TAXES | 6. PROVISION FOR INCOME TAXES Our deferred tax liabilities and deferred tax assets are impacted by events and transactions arising in the ordinary course of business, R&D activities, vesting of nonqualified options and other items. The provision for income taxes is based on an estimated effective tax rate derived from our consolidated earnings before taxes, adjusted for nondeductible expenses and other permanent differences for the fiscal year. For the three months ended June 30, 2019 and 2018, the provision for income taxes was $1.1 million and $1.0 million, respectively. As of June 30, 2019 and December 31, 2018, our remaining deferred tax assets were approximately $0.2 million and $0.3 million, respectively. The estimated effective tax rate for the three and six months ended June 30, 2019 was approximately 14% and 17%, respectively, of pre-tax income reported in the period, calculated based on the estimated annual effective rate anticipated for the year ending December 31, 2019 plus the effects, if any, of certain discrete items occurring in 2019. The estimated effective tax rate for the three and six months ended June 30, 2018 was approximately 18% and 20%, respectively, of pre-tax income reported in the period, calculated based on the estimated annual effective rate anticipated for the year ending December 31, 2018 plus the effects of certain discrete items occurring in 2018. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements are unaudited, but include all adjustments (consisting only of normal, recurring adjustments) that we consider necessary for a fair presentation of our financial position at such dates and the operating results and cash flows for those periods. Although we believe that the disclosures in our financial statements are adequate to make the information presented not misleading, certain information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for quarterly reporting. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the risk factors discussed in Part I, Item 1A. Risk Factors in our 2018 Annual Report, filed with the SEC on April 2, 2019 and in Item 1A of Part 2 of our Quarterly Report on Form 10-Q for the quarter end March 31, 2019, filed with the SEC on May 10, 2019. |
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Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its subsidiary, Advance Biofactures Corp. All intercompany balances and transactions have been eliminated. |
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Critical Accounting Policies, Estimates and Assumptions | Critical Accounting Policies, Estimates and Assumptions The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the use of management’s estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company makes certain assumptions and estimates for its revenues, deferred tax assets, third party royalties and deferred royalty buy-down. We base our estimates on historical experience, and other relevant data including interim data provided by Endo and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and the amount of revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions. For further details, see notes “Revenue Recognition.”, “Provision for Income Taxes” and “Third-Party Royalties and Royalty Buy-Down.” Actual results may differ from those estimates. |
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Revenue Recognition | Revenue Recognition Beginning in 2014, Financial Accounting Standards Board (“FASB”) issued several Accounting Standards Updates establishing Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). ASC 606 requires retrospective implementation, and replaces most industry-specific revenue recognition guidance in U.S. GAAP with a new principles-based, five-step revenue recognition model. The Company adopted ASC 606 effective January 1, 2018. Under ASC 606, we recognize revenues when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. We recognize revenues following the five step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation(s). Revenues, and their respective treatment for financial reporting purposes under ASC 606 and our license agreement with Endo, are as follows: Royalty / Mark-Up on Cost of Goods Sold We receive royalty revenues on net sales and mark-up on cost of goods sold revenue in the U.S. under our License Agreement with Endo. These are presented in “Royalties” in our condensed consolidated statements of income. We do not have future performance obligations under this revenue stream. In accordance with ASC 606, we record these revenues based on estimates of the net sales that occurred during the relevant period. The relevant period estimates of these royalties are based on interim data provided by Endo and analysis of historical royalties and mark-up on cost of goods sold revenue that have been paid to us, adjusted for any changes in facts and circumstances, as appropriate. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known. The royalties payable by Endo to us are subject to set-off for certain patent costs. Licensing Revenue We include revenue recognized from upfront licensing, sublicensing and milestone payments in “License Revenues” in our condensed consolidated statements of income. The Company recognizes licensing revenues generated through development and/or commercialization agreements. The terms of these agreements typically include payment to the Company of one or more of the following: nonrefundable, upfront license fees; sublicensing; development and commercial milestone payments; development activities; and royalties on net sales of licensed products. Each of these types of payments results in licensing revenues except for revenues from royalties on net sales of licensed products and the mark-up of cost of goods sold revenues which are classified as royalty revenues. Revenue is recognized upon satisfaction of a performance obligation by transferring control of a good or service to the customer. For each development and/or commercialization agreement that result in revenues, the Company identifies all performance obligations, aside from those that are immaterial, which may include a license to intellectual property and know-how, development activities and/or transition activities. In order to determine the transaction price, in addition to any upfront payment, the Company estimates the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract. The Company constrains (reduces) the estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required. If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, upfront license fees based on the relative standalone selling price prescribed to the license compared to the total value of the arrangement. The revenue is recognized when the license is transferred to the collaborator and the collaborator is able to use and benefit from the license. For licenses that are not distinct from other obligations identified in the arrangement, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, the Company applies an appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront license fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Development and Regulatory Milestone Payments Depending on facts and circumstances, the Company may conclude that it is appropriate to include the milestone, representing variable consideration, in the estimated total transaction price, or that it is appropriate to fully constrain the milestone. The Company may include revenues from certain milestones in the total transaction price in a reporting period before the milestone is achieved if the Company concludes that achievement of the milestone is probable and that recognition of revenue related to the milestone will not result in a significant reversal in amounts recognized in future periods. The Company records a corresponding contract asset when this conclusion is reached. Milestone payments that have not been included in the transaction price to date are fully constrained. The Company re-evaluates the probability of achievement of such development milestones and any related constraint each reporting period. The Company adjusts its estimate of the total transaction price, including the amount of revenue that it has recorded, if necessary. |
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Recent Accounting Pronouncements | RECENT ACCOUNTING PRONOUNCEMENTS Accounting Pronouncements Adopted In February 2016, FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the lease commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and ASC 606. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The adoption of the new standard as of January 1, 2019 did not have a material impact on our consolidated financial statements due to the short term nature of our leases. Accounting Pronouncements Not Yet Adopted In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The amendment revises the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in more timely recognition of losses on financial instruments, including, but not limited to, available for sale debt securities and accounts receivable. The Company is required to adopt this standard starting in the first quarter of fiscal year 2021. Early adoption is permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements and related disclosures. |
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Cash, Cash Equivalents and Investments | Cash, Cash Equivalents and Investments Cash equivalents include only securities having a maturity of 90 days or less at the time of purchase. Investments are stated on an amortized cost basis. The Company limits its credit risk associated with cash, cash equivalents and investments by placing its investments with banks it believes are highly creditworthy and with highly rated money market funds, certificates of deposit, U.S. government agency bonds, municipal bonds and corporate bonds. All investments are classified as held to maturity. As of June 30, 2019 and December 31, 2018, the amortized cost of these investments was $79.5 million and $68.8 million, respectively. No unrealized gains or losses were recorded in either period. |
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Fair Value Measurements | Fair Value Measurements Management believes that the carrying amounts of the Company’s financial instruments, including cash, cash equivalents, held to maturity investments, accounts receivable, accounts payable and accrued expenses approximate fair value due to the duration of those instruments. As of June 30, 2019 and December 31, 2018, there were no recorded unrealized gains or losses on our investments as they are classified as held to maturity. As of June 30, 2019 and December 31, 2018, amortized cost basis of the investments approximated their fair value. Interest income for the three and six months ended June 30, 2019 was $0.5 million and $1.0 million, respectively as compared to $0.3 million and $0.5 million in the 2018 periods. At June 30, 2019 and December 31, 2018, the amortized net discount / (net premium) included in interest income was approximately $77,000 and ($372,000), respectively. At June 30, 2019 and December 31, 2018, the remaining unamortized net premium / (net discount) was approximately $82,000 and ($121,000), respectively. The following table presents the Company’s schedule of maturities at June 30, 2019 and December 31, 2018:
The authoritative literature for fair value measurements established a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. These tiers are as follows: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than the quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as significant unobservable inputs (entity developed assumptions) in which little or no market data exists. As of June 30, 2019, the Company held certain investments that are required to be measured at fair value on a recurring basis. The following tables present the Company’s fair value hierarchy for these financial assets as of June 30, 2019 and December 31, 2018:
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Concentration of Credit Risk and Major Customers | Concentration of Credit Risk and Major Customers The Company maintains bank account balances, which, at times, may exceed insured limits. The Company has not experienced any losses with these accounts and believes that it is not exposed to any significant credit risk on cash. The Company maintains investments in FDIC insured certificates of deposits, U.S. government agency bonds, municipal bonds and corporate bonds. The Company is currently dependent on one customer, Endo, which generates almost all of the Company’s revenues. For the three and six months ended June 30, 2019, licensing, sublicensing, milestones and royalty revenues under the License Agreement with Endo were approximately $8.9 million and $17.0 million, respectively and for the three and six months ended June 30, 2018, licensing, sublicensing, milestones and royalty revenues under the License Agreement with Endo were approximately $7.9 million and $14.9 million, respectively. At June 30, 2019 and December 31, 2018, our accounts receivable balances from Endo were $16.7 million and $16.5 million, respectively. |
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Treasury Stock | Treasury Stock The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity. For the six months ended June 30, 2019 there were 2,048 shares repurchased at an average price of $57.89 compared to no repurchases in the 2018 comparable period. |
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Stock Repurchase Plan | Stock Repurchase Plan On May 23, 2019, the Company announced the authorization of a new stock repurchase program under which we can repurchase up to $4 million of our outstanding common stock. Pursuant to the repurchase program, we plan to repurchase stock through a broker in the open market, provided that the timing, actual number and price per share of the common stock to be purchased will be subject to market conditions, applicable legal requirements, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended, and various other factors. |
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Receivables and Doubtful Accounts | Receivables and Doubtful Accounts Trade accounts receivable are stated at the amount the Company expects to collect. We may maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We consider the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. Our accounts receivable balance is typically due from Endo, our one large specialty pharmaceutical customer. Endo has historically paid timely and has been a financially stable organization. Due to the nature of the accounts receivable balance, we believe the risk of doubtful accounts is minimal and therefore no allowance is recorded. If the financial condition of our customer were to deteriorate, adversely affecting its ability to make payments, additional allowances would be required. We may provide for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. At June 30, 2019 and December 31, 2018 our accounts receivable balance was $16.7 million and $16.5 million, respectively, and was from one customer, Endo. |
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Reimbursable Third-Party Patent Costs | Reimbursable Third-Party Patent Costs We accrue patent costs that are reimbursable to Endo by us under the License Agreement. We capitalize certain patent costs related to patent prosecution and maintenance and expense others. As of June 30, 2019 and December 31, 2018, our net reimbursable third party patent expense was $67,000 and $40,000, respectively, and recorded as a reduction to our accounts receivable balance. |
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Third Party Royalties | Third-Party Royalties We have entered into licensing and royalty agreements with third parties and agreed to pay certain royalties on net sales of products for specific indications. The royalty rates differ from agreement to agreement and, in certain cases, have been redacted with the permission of the SEC. No assumptions should be made that any disclosed royalty rate payable to a particular third party is the same or similar with respect to any royalty rate payable to any other third parties. We accrue third-party royalty expenses on net sales reported to us by Endo. Third-party royalty costs are expensed under general and administrative in the quarter that the net sales have occurred. For the three and six month periods ended June 30, 2019 and 2018, third-party royalty expenses were $0.2 million and $0.6 million, respectively. For the three and six month periods ended June 30, 2018, third-party royalty expenses were $0.6 million and $1.0 million, respectively. As of June 30, 2019, we have no further third party royalties in connection with PD as the agreement expired in February 2019. |
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Royalty Buy-Down | Royalty Buy-Down On March 31, 2012, we entered into an amendment to our existing agreement with Dr. Martin K. Gelbard, dated August 27, 2008, related to our future royalty obligations in connection with PD. The amendment enables us to buy down a portion of our future royalty obligations in exchange for an initial cash payment of $1.5 million and five additional cash payments of $600,000, all of which have been paid as of January 1, 2018. In March 2019, royalty obligations were terminated, which was five years after first commercial sale, which occurred in January 2014. The Company amortizes long-term contracts with finite lives in a manner that reflects the pattern in which the economic benefits of the assets are consumed or otherwise used up. Dr. Gelbard’s agreement is amortized based on an income forecast method by estimating sales of XIAFLEX® and Xiapex® for PD on an annual basis as measured by the proportion of the total estimated sales over the five year period. For the three and six months ended June 30, 2019, we amortized zero and approximately $0.2 million related to this agreement, respectively. For the three and six months ended June 30, 2018 we amortized approximately $0.5 million and $1.0 million, respectively, related to this agreement. Royalty buy-down expenses are recorded as part of general and administrative expenses. As of June 30, 2019 and December 31, 2018, the remaining capitalized balances were zero and $0.2 million, respectively. |
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Research and Development Expenses | Research and Development Expenses R&D expenses include, but are not limited to, internal costs, such as salaries and benefits, costs of materials, lab expense, facility costs and overhead. R&D expenses also consist of third party costs, such as medical professional fees, product costs used in clinical trials, consulting fees and costs associated with clinical study arrangements. We may fund R&D at medical research institutions under agreements that are generally cancelable. All of these costs are charged to R&D as incurred, which may be measured by percentage of completion, contract milestones, patient enrollment, or the passage of time. |
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Clinical Trial Expenses | Clinical Trial Expenses Our cost accruals for clinical trials are based on estimates of the services received and efforts expended pursuant to contracts with various clinical trial centers and clinical research consultants. In the normal course of business, we contract with third parties to perform various clinical trial activities in the ongoing development of potential drugs. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events, the successful enrollment of patients, the completion of portions of the clinical trial, or similar conditions. The objective of our accrual policy is to match the recording of expenses in our financial statements to the actual cost of services received and efforts expended. As such, expenses related to each patient enrolled in a clinical trial are recognized ratably beginning upon entry into the trial and over the course of the patient’s continued participation in the trial. In the event of early termination of a clinical trial, we accrue an amount based on our estimate of the remaining non-cancelable obligations associated with the winding down of the clinical trial. Our estimates and assumptions could differ significantly from the amounts that may actually be incurred. |
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Stock-Based Compensation and 2019 Omnibus Incentive Compensation Plan | Stock-Based Compensation and 2019 Omnibus Incentive Compensation Plan On June 13, 2019, at the Company’s annual meeting, the Company’s stockholders approved the 2019 Omnibus Incentive Compensation Plan (the “2019 Plan”). Upon the 2019 Plan’s approval, approximately 1,248,848 shares of Company common stock were available for issuance thereunder, consisting of 1,100,000 shares authorized for issuance under the 2019 Plan and 148,848 shares then remaining available for issuance under the Company’s 2001 Stock Option Plan (the “2001 Plan”). The 2019 Plan replaced the 2001 Plan. No new awards will be granted under the 2001 Plan; however, awards outstanding under the 2001 Plan upon approval of the 2019 Plan remain subject to and will be settled under the applicable 2001 Plan. Grants under the 2019 Plan may consist of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards, or cash awards. Employees, key advisors or non-employee directors are eligible to participate in the 2019 Plan. Grants under the 2019 Plan vest over periods ranging from one to four years and expire ten years from date of grant. ASC 718, Compensation - Stock Compensation (“ASC 718”), requires the recognition of compensation expense, using a fair-value based method, for costs related to all stock options including stock options and common stock issued to our employees and directors under our stock plans. ASC 718 requires companies to estimate the fair value of stock option awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service periods in our condensed consolidated statements of operations. Under ASC 718, we estimate the fair value of our employee stock option awards at the date of grant using the Black-Scholes option-pricing model, which requires the use of certain subjective assumptions. The most significant of these assumptions are our estimates of the expected volatility of the market price of our stock and the expected term of an award. When establishing an estimate of the expected term of an option award, we consider the vesting period for the award, our recent historical experience of employee stock option exercises (including forfeitures) and the expected volatility of our common stock. As required under the accounting rules, we review our estimates at each grant date and, as a result, the valuation assumptions that we use to value employee stock-based awards granted in future periods may change. For the six months ended June 30, 2019, we granted a total of 10,000 stock options from the 2001 Plan with a weighted average grant date fair value of $66.40 per share. The assumptions used in the valuation of stock options granted during the six months ended June 30, 2019 were as follows:
Further, ASC 718 requires that employee stock-based compensation costs be recognized over the requisite service period, or the vesting period, in a manner similar to all other forms of compensation paid to employees. The allocation of employee stock-based compensation costs to each operating expense line are estimated based on specific employee headcount information at each grant date and estimated stock option forfeiture rates and revised, if necessary, in future periods if actual employee headcount information or forfeitures differ materially from those estimates. As a result, the amount of employee stock-based compensation costs we recognize in each operating expense category in future periods may differ significantly from what we have recorded in the current period. Stock-based compensation expense recognized in general and administrative expenses was approximately $119,000 and $260,000 for the three and six month periods ended June 30, 2019 and $63,000 and $96,000 for the three and six month periods ended June 30, 2018, respectively. Stock Option Activity A summary of our stock option activity during the six months ended June 30, 2019 is presented below:
During the six months ended June 30, 2019 and 2018, the Company received approximately $1.7 million and $0.9 million, respectively, from stock options exercised by option holders. Aggregate intrinsic value represents the total pre-tax intrinsic value based on the closing price of our common stock of $59.71 on June 30, 2019, which would have been received by the option holders had all option holders exercised their options as of that date. We have approximately $1.5 million in unrecognized compensation cost related to stock options outstanding as of June 30, 2019, which we expect to recognize over the next 3.38 years. |
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Property and Equipment | Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Machinery and equipment, furniture and fixtures, and autos are depreciated on a straight-line basis over their estimated useful lives of five to ten years. Leasehold improvements are amortized over the lesser of their estimated useful lives or the remaining life of the lease. At each of June 30, 2019 and December 31, 2018, property and equipment were fully depreciated. |
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Comprehensive Income | Comprehensive Income For each of the three and six month periods ended June 30, 2019 and 2018, we had no components of other comprehensive income other than net income itself. |
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Provision for Income Taxes | Provision for Income Taxes We use the asset and liability method of accounting for income taxes, as set forth in ASC 740-10-25-2. Under this method, deferred income taxes, when required, are provided on the basis of the difference between the financial reporting and income tax basis of assets and liabilities at the statutory rates enacted for future periods when the differences are expected to reverse. A valuation allowance is applied against any net deferred tax asset if, based on the weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement. As of June 30, 2019 and December 31, 2018, the Company has not recorded any unrecognized tax benefits. We classify interest associated with income taxes under interest expense and tax penalties under other. |
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Commitments and Contingencies | Commitments and Contingencies On August 14, 2018, the Company entered into an agreement with 35 Wilbur Street Associates, LLC (the “Landlord”) to extend the term of the lease to our corporate headquarters, which are currently located at 35 Wilbur St., Lynbrook, NY 11563, for an additional one year period (the “Extended Lease Agreement”). The one year extension will end on November 30, 2019. Pursuant to the Extended Lease Agreement, the base rent is $11,500 per month and the Company may cancel the lease with three months’ prior written notice to the Landlord at any time during the term. Our rent expense amounted to approximately $34,000 and $67,000 for the three and six months ended June 30, 2019, respectively, and $32,000 and $65,000 for the three and six months in the 2018 periods, respectively. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maturities | The following table presents the Company’s schedule of maturities at June 30, 2019 and December 31, 2018:
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Fair Value Assets Measured on Recurring Basis | As of June 30, 2019, the Company held certain investments that are required to be measured at fair value on a recurring basis. The following tables present the Company’s fair value hierarchy for these financial assets as of June 30, 2019 and December 31, 2018:
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Assumptions Used to Estimate the Fair Values of the Stock Options Granted | The assumptions used in the valuation of stock options granted during the six months ended June 30, 2019 were as follows:
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Stock Option Activity | A summary of our stock option activity during the six months ended June 30, 2019 is presented below:
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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCOUNTS PAYABLE AND ACCRUED EXPENSES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable and Accrued Expenses | Accounts payable and accrued expenses consisted of the following:
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PATENT COSTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||
PATENT COSTS [Abstract] | |||||||||||||||||||||||||||||||||||||
Net Patent Costs | Patent costs may be creditable against future royalty revenues. For each period presented below, net patent costs consisted of:
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Estimated Aggregate Future Amortization Expense | The estimated aggregate amortization expense for the remaining six months of 2019 and each of the years below is approximately as follows:
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ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) - Endo [Member] - USD ($) |
1 Months Ended | ||
---|---|---|---|
Feb. 29, 2016 |
Jun. 30, 2019 |
Feb. 01, 2016 |
|
Organization and Description of Business [Abstract] | |||
Deferred revenue | $ 8,250,000 | ||
Proceeds from licensing agreement | $ 8,250,000 | ||
Opt-in fee receivable for each indication | $ 500,000 | ||
Regular opt-in fee receivable for each indication | $ 750,000 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Cash, Cash Equivalents and Investments (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Cash, Cash Equivalents and Investments [Abstract] | ||
Aggregate fair value of investments | $ 79.5 | $ 68.8 |
Held-to-maturity securities, unrecognized gain | 0.0 | 0.0 |
Held-to-maturity securities, unrecognized (loss) | $ 0.0 | $ 0.0 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Concentration of Credit Risk and Major Customers (Details) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019
USD ($)
Customer
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2019
USD ($)
Customer
|
Jun. 30, 2018
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
Concentration of Credit Risk and Major Customers [Abstract] | |||||
Total revenues | $ 8,852,986 | $ 7,850,774 | $ 16,982,127 | $ 14,940,183 | |
Accounts receivable | 16,729,636 | 16,729,636 | $ 16,518,687 | ||
Royalties [Member] | |||||
Concentration of Credit Risk and Major Customers [Abstract] | |||||
Total revenues | $ 8,852,986 | 7,815,504 | $ 16,982,127 | 14,900,504 | |
Endo [Member] | |||||
Concentration of Credit Risk and Major Customers [Abstract] | |||||
Number of customers | Customer | 1 | 1 | |||
Total revenues | $ 8,900,000 | $ 7,900,000 | $ 17,000,000 | $ 14,900,000 | |
Accounts receivable | $ 16,700,000 | $ 16,700,000 | $ 16,500,000 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Treasury Stock, Stock Repurchase Plan, Receivables and Doubtful Accounts (Details) - USD ($) |
6 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
May 23, 2019 |
Dec. 31, 2018 |
|
Treasury Stock [Abstract] | ||||
Treasury stock purchased (in shares) | 2,048 | 0 | ||
Average price of share (in dollars per share) | $ 57.89 | |||
Stock Repurchase Plan [Abstract] | ||||
Number of shares authorized to be repurchased (in shares) | 4,000,000 | |||
Receivables and Doubtful Accounts [Abstract] | ||||
Accounts receivable | $ 16,729,636 | $ 16,518,687 | ||
Endo [Member] | ||||
Receivables and Doubtful Accounts [Abstract] | ||||
Accounts receivable | $ 16,700,000 | $ 16,500,000 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Reimbursable Third-Party Patent Costs, Third party Royalties and Royalty Buy-Down (Details) |
3 Months Ended | 6 Months Ended | 81 Months Ended | |||
---|---|---|---|---|---|---|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2018
USD ($)
|
Dec. 31, 2018
USD ($)
Payment
|
Mar. 31, 2012
USD ($)
|
|
Reimbursable Third-Party Patent Costs [Abstract] | ||||||
Accrued patent costs | $ 67,000 | $ 67,000 | $ 40,000 | |||
Third-Party Royalties [Abstract] | ||||||
Royalty expenses | 200,000 | $ 600,000 | 600,000 | $ 1,000,000 | ||
Royalty Buy-Down [Abstract] | ||||||
Deferred royalty buy-down | $ 0 | $ 0 | $ 200,000 | $ 1,500,000 | ||
Deferred royalty buy-down, number of additional cash payments | Payment | 5 | |||||
Deferred royalty buy-down, five additional capitalized cost | $ 600,000 | |||||
Deferred costs, amortization period | 5 years | 5 years | ||||
Deferred royalty buy-down, amortization expense | $ 0 | $ 500,000 | $ 200,000 | $ 1,000,000 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Property and Equipment, Comprehensive Income, Provision for Income Taxes and Commitments and Contingencies (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Comprehensive Income [Abstract] | |||||
Other comprehensive income | $ 0 | $ 0 | $ 0 | $ 0 | |
Income Taxes [Abstract] | |||||
Unrecognized tax benefits | $ 0 | $ 0 | $ 0 | ||
Commitments and Contingencies [Abstract] | |||||
Additional lease term extension period | 1 year | 1 year | |||
Monthly base rent | $ 11,500 | ||||
Notice period to cancel lease agreements | 3 months | ||||
Rent expense | $ 34,000 | $ 32,000 | $ 67,000 | $ 65,000 | |
Minimum [Member] | |||||
Property and Equipment [Abstract] | |||||
Estimated useful life | 5 years | ||||
Maximum [Member] | |||||
Property and Equipment [Abstract] | |||||
Estimated useful life | 10 years |
NET INCOME PER SHARE (Details) - Stock Options [Member] - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Net Income Per Share [Abstract] | ||||
Common equivalent shares attributable to stock options included in calculation of diluted net income per share (in shares) | 41,428 | 100,219 | 51,345 | 105,285 |
Antidilutive securities excluded from earnings per share calculation (in shares) | 63,750 | 0 | 63,750 | 0 |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Accounts payable and accrued expenses [Abstract] | ||
Trade accounts payable | $ 84,617 | $ 122,199 |
Accrued legal and other professional fees | 228,548 | 308,725 |
Accrued payroll and related costs | 105,787 | 173,123 |
Third party royalties | 170,005 | 1,168,837 |
Other accruals | 121,855 | 25,704 |
Total | $ 710,812 | $ 1,798,588 |
PROVISION FOR INCOME TAXES (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
PROVISION FOR INCOME TAXES [Abstract] | |||||
Provision for income taxes | $ 1,054,236 | $ 1,102,826 | $ 2,159,511 | $ 2,181,400 | |
Deferred tax assets | $ 200,000 | $ 200,000 | $ 300,000 | ||
Estimated effective tax rate | 14.00% | 18.00% | 17.00% | 20.00% |
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