x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
California | 33-0361285 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
4550 Towne Centre Court, San Diego, CA | 92121 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | o | Accelerated filer | x |
Non-accelerated filer | o | Smaller reporting company | o |
Emerging growth company | o |
June 30, 2018 | December 31, 2017 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 241,427 | $ | 90,915 | |||
Accounts receivable, net | 372 | — | |||||
Inventory | 939 | — | |||||
Prepaid expenses and other current assets | 5,282 | 3,147 | |||||
Total current assets | 248,020 | 94,062 | |||||
Property and equipment, net | 24,211 | 24,568 | |||||
Restricted cash | 909 | 909 | |||||
Total assets | $ | 273,140 | $ | 119,539 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 6,069 | $ | 11,484 | |||
Accrued expenses | 6,952 | 703 | |||||
Accrued payroll and related expenses | 4,618 | 4,995 | |||||
Deferred rent, current portion | 1,370 | 1,370 | |||||
Total current liabilities | 19,009 | 18,552 | |||||
Deferred rent, less current portion | 14,161 | 12,785 | |||||
Deferred royalty obligation, net | 124,303 | — | |||||
Total liabilities | 157,473 | 31,337 | |||||
Shareholders’ equity: | |||||||
Common Stock, $0.0001 par value; 100,000,000 shares authorized, 26,218,522 and 22,167,529 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively | 3 | 2 | |||||
Series C-12 Convertible Preferred Stock, $0.0001 par value; 11,000 shares authorized, 3,906 shares issued and outstanding at June 30, 2018 and December 31, 2017; and liquidation preference of $3,906 at June 30, 2018 and December 31, 2017 | 3,906 | 3,906 | |||||
Series F Convertible Preferred Stock, $0.0001 par value; 10,000 shares authorized, 2,737 shares issued and outstanding at June 30, 2018 and December 31, 2017; and liquidation preference of $2,737 at June 30, 2018 and December 31, 2017 | 2,737 | 2,737 | |||||
Additional paid-in capital | 933,841 | 803,071 | |||||
Accumulated deficit | (824,820 | ) | (721,514 | ) | |||
Total shareholders’ equity | 115,667 | 88,202 | |||||
Total liabilities and shareholders’ equity | $ | 273,140 | $ | 119,539 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue | |||||||||||||||
Net product sales | $ | 1,593 | $ | — | $ | 2,402 | $ | — | |||||||
Total revenue | 1,593 | — | 2,402 | — | |||||||||||
Operating expenses | |||||||||||||||
Cost of product sales | 129 | — | 187 | — | |||||||||||
Research and development | 30,867 | 20,808 | 59,296 | 38,573 | |||||||||||
Selling, general and administrative | 22,164 | 6,022 | 45,180 | 11,525 | |||||||||||
Total operating expenses | 53,160 | 26,830 | 104,663 | 50,098 | |||||||||||
Loss from operations | (51,567 | ) | (26,830 | ) | (102,261 | ) | (50,098 | ) | |||||||
Interest (expense) income, net | (1,211 | ) | 101 | (1,045 | ) | 129 | |||||||||
Net loss | $ | (52,778 | ) | $ | (26,729 | ) | $ | (103,306 | ) | $ | (49,969 | ) | |||
Net loss per share, basic and diluted | $ | (2.02 | ) | $ | (1.21 | ) | $ | (4.22 | ) | $ | (2.46 | ) | |||
Weighted-average common shares outstanding, basic and diluted | 26,182 | 22,123 | 24,462 | 20,277 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Operating activities | |||||||
Net loss | $ | (103,306 | ) | $ | (49,969 | ) | |
Adjustments to reconcile net loss to net cash used for operating activities: | |||||||
Share-based compensation expense | 19,246 | 9,694 | |||||
Depreciation expense | 2,088 | 581 | |||||
Loss on disposal of equipment | 150 | — | |||||
Interest expense | 1,655 | — | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net | (372 | ) | — | ||||
Inventory | (939 | ) | — | ||||
Prepaid expenses and other current assets | (2,135 | ) | (270 | ) | |||
Other assets | — | 219 | |||||
Accounts payable | (5,415 | ) | (732 | ) | |||
Accrued expenses | 4,608 | (541 | ) | ||||
Accrued payroll and related expenses | (377 | ) | (214 | ) | |||
Deferred rent | 1,376 | — | |||||
Net cash used for operating activities | (83,421 | ) | (41,232 | ) | |||
Investing activities | |||||||
Purchase of property and equipment | (1,881 | ) | (2,021 | ) | |||
Net cash used for investing activities | (1,881 | ) | (2,021 | ) | |||
Financing activities | |||||||
Net proceeds from royalty financing | 124,289 | — | |||||
Net proceeds from the issuance of common stock | 109,809 | 117,480 | |||||
Proceeds from the exercise of stock options for common stock | 1,716 | 2,074 | |||||
Net cash provided by financing activities | 235,814 | 119,554 | |||||
Net increase in cash, cash equivalents and restricted cash | 150,512 | 76,301 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 91,824 | 65,926 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 242,336 | $ | 142,227 | |||
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets | |||||||
Cash and cash equivalents | $ | 241,427 | $ | 141,317 | |||
Restricted cash, current portion | — | 910 | |||||
Restricted cash, less current portion | 909 | — | |||||
Total cash, cash equivalents and restricted cash | $ | 242,336 | $ | 142,227 |
June 30, 2018 | December 31, 2017 | |||||||
Accrued clinical trials | $ | 1,972 | $ | 577 | ||||
Accrued interest expense | 1,641 | — | ||||||
Accrued other | 3,339 | 126 | ||||||
Total accrued expenses | $ | 6,952 | $ | 703 |
Shares Underlying Stock Options | Weighted- average Exercise Price per Share | |||||
Outstanding at December 31, 2017 | 6,037,302 | $ | 24.19 | |||
Granted | 886,900 | $ | 30.15 | |||
Exercised | (97,937 | ) | $ | 17.54 | ||
Forfeited | (140,757 | ) | $ | 26.35 | ||
Outstanding at June 30, 2018 | 6,685,508 | $ | 25.03 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Research and development: | |||||||||||||||
Stock options | $ | 5,695 | $ | 2,563 | $ | 11,081 | $ | 5,016 | |||||||
Warrants | 6 | 16 | 16 | 33 | |||||||||||
Research and development share-based compensation expense | 5,701 | 2,579 | 11,097 | 5,049 | |||||||||||
Selling, general and administrative: | |||||||||||||||
Stock options | 4,143 | 1,993 | 8,149 | 3,948 | |||||||||||
Restricted stock | — | — | — | 409 | |||||||||||
Warrants | — | 139 | — | 288 | |||||||||||
Selling, general and administrative share-based compensation expense | 4,143 | 2,132 | 8,149 | 4,645 | |||||||||||
Total share-based compensation expense | $ | 9,844 | $ | 4,711 | $ | 19,246 | $ | 9,694 |
• | Business Overview. This section provides a general description of our business and significant events and transactions that we believe are important in understanding our financial condition and results of operations. |
• | Program Overview. This section provides an overview of GIAPREZA and LJPC-401. |
• | Critical Accounting Policies and Estimates. This section provides a description of our significant accounting policies, including the critical accounting policies and estimates, which are summarized in Note 2 to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. |
• | Results of Operations. This section provides an analysis of our results of operations presented in the accompanying unaudited condensed consolidated statements of operations by comparing the results for the three and six months ended June 30, 2018 to the results for the three and six months ended June 30, 2017. |
• | Liquidity and Capital Resources. This section provides an analysis of our historical cash flows, as well as our future capital requirements. |
• | In September 2017, an analysis was presented during the 30th European Society of Intensive Care Medicine Annual Congress, entitled “Baseline angiotensin levels and ACE effects in patients with vasodilatory shock treated with angiotensin II.” The pre-specified analysis showed that a relatively low angiotensin II state (as measured by the ratio of angiotensin I to angiotensin II) predicted increased mortality in patients with vasodilatory shock, suggesting that a low angiotensin II state is a negative prognostic indicator of outcomes. Furthermore, the analysis showed a statistically significant treatment effect of GIAPREZA compared to placebo on mortality in these patients with a relatively low angiotensin II state (relative risk reduction of 36%; HR=0.64; 95% CI: 0.41-1.00; p=0.047). |
• | In February 2018, an abstract was presented at the Society of Critical Care Medicine’s (SCCM) 47th Critical Care Congress, entitled “Effect of Disease Severity on Survival in Patients Receiving Angiotensin II for Vasodilatory Shock.” The abstract, which was published in the January Supplement of Critical Care Medicine, includes results from a pre-specified analysis from the ATHOS-3 Phase 3 study of GIAPREZA in patients with high severity of illness, defined as an APACHE II (Acute Physiology and Chronic Health Evaluation II) score > 30 or baseline MAP < 65 mmHg, despite treatment with high-dose vasopressors. The authors presented data showing a lower 28-day mortality rate in patients with baseline APACHE II scores > 30 in the GIAPREZA group versus the placebo group: 28-day mortality was 51.8% (n = 58) for the GIAPREZA group compared to 70.8% (n = 65) for the placebo group (hazard ratio=0.62 [95% CI: 0.39, 0.98; p=0.037]). In patients with a baseline MAP < 65 mmHg, a trend towards improved 28-day mortality was seen in the GIAPREZA group compared to the placebo group: 28-day mortality was 54.2% (n = 52) for the GIAPREZA group compared to 70.4% (n = 50) for the placebo group (hazard ratio=0.66 [95% CI: 0.40, 1.09; p=0.10]). |
• | In March 2018, an analysis was presented at the 23rd International Conference on Advances in Critical Care Nephrology AKI & CRRT 2018, entitled “Outcomes in Patients with Acute Kidney Injury Receiving Angiotensin II for Vasodilatory Shock.” The manuscript of this analysis, entitled “Outcomes in patients with vasodilatory shock and renal replacement therapy treated with intravenous angiotensin II,” was published online in Critical Care Medicine. The presentation and manuscript detail the outcomes of patients with acute kidney injury (AKI) and vasodilatory shock enrolled in the ATHOS-3 study of GIAPREZA. In this post-hoc analysis, the data from 105 AKI patients (GIAPREZA n=45; placebo n=60) requiring renal replacement therapy (RRT) at study drug initiation were analyzed. Survival through day 28 was 53% (95% CI: 38%-67%) for the GIAPREZA group compared to 30% (95% CI: 19%-41%) for the placebo group (p = 0.012). By day 7, 38% (95% CI: 25%-54%) of patients treated with GIAPREZA discontinued RRT compared to 15% (95% CI: 8%-27%) of patients treated with placebo (p = 0.007). Mean arterial pressure (MAP) response at hour 3 was achieved in 53% (95% CI: 38%-68%) of patients treated with GIAPREZA compared to 22% (95% CI: 12%-34%) of patients treated with placebo (p = 0.001). |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net product sales | $ | 1,593 | $ | — | $ | 2,402 | $ | — | |||||||
Cost of product sales | (129 | ) | — | (187 | ) | — | |||||||||
Research and development expense | (30,867 | ) | (20,808 | ) | (59,296 | ) | (38,573 | ) | |||||||
Selling, general and administrative expense | (22,164 | ) | (6,022 | ) | (45,180 | ) | (11,525 | ) | |||||||
Interest (expense) income, net | (1,211 | ) | 101 | (1,045 | ) | 129 | |||||||||
Net loss | $ | (52,778 | ) | $ | (26,729 | ) | $ | (103,306 | ) | $ | (49,969 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Clinical development costs | $ | 11,639 | $ | 10,157 | $ | 21,432 | $ | 18,151 | |||||||
Personnel and related costs | 9,180 | 5,433 | 18,344 | 10,704 | |||||||||||
Share-based compensation expense | 5,701 | 2,579 | 11,097 | 5,049 | |||||||||||
Other research and development costs | 4,347 | 2,639 | 8,423 | 4,669 | |||||||||||
Total research and development expense | $ | 30,867 | $ | 20,808 | $ | 59,296 | $ | 38,573 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Personnel and related costs | $ | 9,557 | $ | 1,440 | $ | 19,143 | $ | 2,794 | |||||||
Selling and marketing costs | 6,278 | 1,016 | 13,374 | 1,107 | |||||||||||
Share-based compensation expense | 4,143 | 2,132 | 8,149 | 4,645 | |||||||||||
General and administrative costs | 2,186 | 1,434 | 4,514 | 2,979 | |||||||||||
Total selling, general and administrative expense | $ | 22,164 | $ | 6,022 | $ | 45,180 | $ | 11,525 |
Exhibit Number | Description | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
La Jolla Pharmaceutical Company | ||
Date: | August 8, 2018 | /s/ George F. Tidmarsh |
George F. Tidmarsh, M.D., Ph.D. | ||
President, Chief Executive Officer and Secretary | ||
(Principal Executive Officer) | ||
/s/ Dennis M. Mulroy | ||
Dennis M. Mulroy | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of La Jolla Pharmaceutical Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(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 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 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 control over financial reporting. |
Date: | August 8, 2018 | /s/ George F. Tidmarsh |
George F. Tidmarsh, M.D., Ph.D. | ||
President, Chief Executive Officer and Secretary | ||
(Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of La Jolla Pharmaceutical Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(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 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 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 control over financial reporting. |
Date: | August 8, 2018 | /s/ Dennis M. Mulroy |
Dennis M. Mulroy | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
• | the Quarterly Report of the Registrant on Form 10-Q for the quarter ended June 30, 2018 (Report), which accompanies this certification, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition of the Registrant at the end of such quarter and the results of operations of the Registrant for such quarter. |
Date: | August 8, 2018 | /s/ George F. Tidmarsh |
George F. Tidmarsh, M.D., Ph.D. | ||
President, Chief Executive Officer and Secretary | ||
(Principal Executive Officer) | ||
/s/ Dennis M. Mulroy | ||
Dennis M. Mulroy | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jul. 27, 2018 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | LA JOLLA PHARMACEUTICAL CO | |
Entity Central Index Key | 0000920465 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 26,226,201 |
Unaudited Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Revenue | ||||
Net product sales | $ 1,593 | $ 0 | $ 2,402 | $ 0 |
Total revenue | 1,593 | 0 | 2,402 | 0 |
Operating expenses | ||||
Cost of product sales | 129 | 0 | 187 | 0 |
Research and development | 30,867 | 20,808 | 59,296 | 38,573 |
Selling, general and administrative | 22,164 | 6,022 | 45,180 | 11,525 |
Total operating expenses | 53,160 | 26,830 | 104,663 | 50,098 |
Loss from operations | (51,567) | (26,830) | (102,261) | (50,098) |
Interest (expense) income, net | (1,211) | 101 | (1,045) | 129 |
Net loss | $ (52,778) | $ (26,729) | $ (103,306) | $ (49,969) |
Net loss per share, basic and diluted (usd per share) | $ (2.02) | $ (1.21) | $ (4.22) | $ (2.46) |
Weighted-average common shares outstanding - basic and diluted (in shares) | 26,182 | 22,123 | 24,462 | 20,277 |
Business |
6 Months Ended |
---|---|
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business | Business La Jolla Pharmaceutical Company (collectively with its subsidiaries, the Company) is a biopharmaceutical company focused on the discovery, development and commercialization of innovative therapies intended to significantly improve outcomes in patients suffering from life-threatening diseases. GIAPREZATM (angiotensin II), formerly known as LJPC-501, was approved by the U.S. Food and Drug Administration (FDA) on December 21, 2017 as a vasoconstrictor to increase blood pressure in adults with septic or other distributive shock. LJPC-401 (synthetic human hepcidin), a clinical-stage investigational product, is being developed for the potential treatment of conditions characterized by iron overload, such as hereditary hemochromatosis, beta thalassemia, sickle cell disease and myelodysplastic syndrome. As of June 30, 2018, the Company had $241.4 million in cash and cash equivalents, compared to $90.9 million in cash and cash equivalents as of December 31, 2017. Based on the Company’s current operating plans and projections, management believes that available cash and cash equivalents are sufficient to fund operations for at least one year from the date this Quarterly Report on Form 10-Q is filed with the U.S. Securities and Exchange Commission (SEC). The Company was incorporated in 1989 as a Delaware corporation and reincorporated in California in 2012. |
Basis of Presentation and Summary of Significant Accounting Policies |
6 Months Ended |
---|---|
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation and Use of Estimates The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of the SEC Regulation S-X. Accordingly, they should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 22, 2018 (the Form 10-K). The accompanying unaudited condensed consolidated financial statements include the accounts of La Jolla Pharmaceutical Company and its wholly-owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. The unaudited condensed consolidated financial statements contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the condensed consolidated balance sheet of the Company at June 30, 2018, the condensed consolidated statement of operations for the three and six months ended June 30, 2018 and the condensed consolidated statement of cash flows for the six months ended June 30, 2018. The preparation of the Company’s unaudited condensed consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the Company’s unaudited condensed consolidated financial statements and the accompanying notes. Actual results could differ materially from those estimates. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the full year or any future interim periods. The accompanying condensed consolidated balance sheet at December 31, 2017 has been derived from the audited consolidated balance sheet at December 31, 2017 contained in the Form 10-K. Summary of Significant Accounting Policies During the three and six months ended June 30, 2018, there have been no changes to the Company’s significant accounting policies as described in the Form 10-K, except as described below. Accounts Receivable Accounts receivable are recorded net of customers’ allowances for prompt-pay discounts, chargebacks and doubtful accounts. Allowances for prompt-pay discounts and chargebacks are based on contractual terms. The Company estimates the allowance for doubtful accounts based on existing contractual payment terms, actual payment patterns of its customers and individual customer circumstances. At June 30, 2018, the Company did not have any allowances for doubtful accounts. Inventory Inventory is stated at the lower of cost or estimated net realizable value on a first-in, first-out (FIFO) basis. The Company periodically analyzes its inventory levels and writes down inventory as cost of product sales when: inventory has become obsolete; inventory has a cost basis in excess of its estimated net realizable value; or inventory quantities are in excess of expected sales. As of June 30, 2018, the Company had $0.9 million of inventory, which consisted of work in process of $0.2 million and finished goods of $0.7 million. Revenue Recognition The Company adopted the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606 - Revenue from Contracts with Customers (ASC 606) at the time of its first commercial shipment of GIAPREZA in the first quarter of 2018. The Company had no revenue from product sales prior to the first quarter of 2018. Under ASC 606, the Company recognizes revenue when distributors (our customers) obtain control of the Company’s product, which typically occurs on delivery. Revenue is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those goods. To determine revenue recognition for contracts with customers within the scope of ASC 606, the Company performs the following five steps: (i) identify the 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 revenue when (or as) the entity satisfies a performance obligation. Revenue from product sales is recorded at the transaction price, net of estimates for variable consideration consisting of chargebacks, discounts, returns and other allowances offered to our customers. Variable consideration is estimated using the most-likely amount method, which is the single-most likely outcome under a contract and is typically at the stated contractual rate. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results vary materially from the Company’s estimates, the Company will adjust these estimates, which will affect revenue from product sales and earnings in the period such estimates are adjusted. Chargebacks. Chargebacks are discounts the Company provides to distributors in the event that the sales prices to end users are below the distributors’ acquisition price. Chargebacks are estimated based on known chargeback rates and recorded as a reduction of revenue upon delivery to the Company’s customers. Discounts. The Company offers customers various forms of incentives and consideration, including prompt-pay discounts, service fees and other contract fees. The Company estimates discounts and fees primarily based on contractual terms. These discounts and fees are recorded as a reduction of revenue upon delivery to the Company’s customers. Returns. The Company offers customers a limited right of return, generally for damaged or expired product. The Company estimates returns based on an internal analysis, which includes actual experience and a review of comparable companies. The estimates for returns are recorded as a reduction of revenue upon delivery to the Company’s customers. The Company will continue to assess its estimates of variable consideration as it accumulates additional historical data and will adjust these estimates accordingly. Interest Expense Interest expense and the amortization of debt issuance costs related to the deferred royalty obligation (see Note 5) are recognized over the expected repayment term of the deferred royalty obligation using the effective interest method. The assumptions used in determining the expected repayment term of the deferred royalty obligation require the Company to make estimates that could impact the effective interest rate. Each reporting period, the Company estimates the expected repayment term of the deferred royalty obligation based on forecasted net product sales of GIAPREZA. Changes in interest expense resulting from changes in the effective interest rate, if any, are recorded on a prospective basis. Net Loss per Share Basic net loss per share is calculated based on the weighted-average number of common shares outstanding. Diluted net loss per share is calculated based on the weighted-average number of common shares outstanding plus common stock equivalents. Convertible preferred stock, stock options and warrants are considered common stock equivalents and are included in the calculation of diluted net loss per share using the treasury stock method when their effect is dilutive. Common stock equivalents are excluded from the calculation of diluted net loss per share when their effect is anti-dilutive. As of June 30, 2018 and 2017, there were 14.2 million shares and 11.5 million shares, respectively, of common stock equivalents, which were excluded from the calculation of diluted net loss per share because their effect was anti-dilutive. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In the first quarter of 2018, the Company adopted Accounting Standard Update (ASU) 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The standard clarifies the presentation of restricted cash and cash equivalents and requires companies to include restricted cash and cash equivalents in the beginning and ending balances of cash and cash equivalents on the statement of cash flows. The standard also requires additional disclosures to describe the amount and detail of the restriction by balance sheet line item. Accordingly, restricted cash is included as a component of cash, cash equivalents and restricted cash in the unaudited condensed consolidated statement of cash flows for all periods presented, and we have disclosed the amount and detail of the restriction by balance sheet line item. Not Yet Adopted Accounting Pronouncements In June 2018, the FASB issued ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-based Payment Accounting. The standard expands the scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods and services. The provisions of this standard are effective for annual periods beginning after December 15, 2018, and for interim periods within those years. Early adoption is permitted. The Company will adopt the standard in the first quarter of 2019. The Company is currently evaluating the impact of this standard on it consolidated financial statements and disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The standard requires lessees to recognize right-of-use assets and lease liabilities for most leases. The provisions of this standard are effective for annual periods beginning after December 15, 2018, and for interim periods within those years; early adoption is permitted. The Company will adopt the standard in the first quarter of 2019 using the modified retrospective approach. Although the Company is in the process of evaluating the impact of adoption of the standard on its consolidated financial statements, the Company currently believes the most significant changes will be related to the recognition of a new right-of-use asset and lease liability on the balance sheet for its 10-year operating lease agreement for its corporate headquarters, which commenced October 30, 2017. |
Balance Sheet Account Details |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Account Details | Balance Sheet Account Details Cash, Cash Equivalents and Restricted Cash Restricted cash as of June 30, 2018 and December 31, 2017 represents a standby letter of credit for the Company’s building lease in lieu of a security deposit during the term of such lease. There is a requirement to maintain $0.9 million of cash collateral in an account pledged as security for such letter of credit. Accrued Expenses Accrued expenses consist of the following (in thousands):
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Shareholders' Equity |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders’ Equity | Shareholders’ Equity 2017 Common Stock Offering In March 2017, the Company offered and sold 3,731,344 shares of common stock in an underwritten public offering at a price of $33.50 per share for gross proceeds of approximately $125.0 million. The Company received proceeds of approximately $117.5 million, net of approximately $7.5 million in underwriting commissions, discounts and other issuance costs. 2018 Common Stock Offering In March 2018, the Company offered and sold 3,910,000 shares of common stock in an underwritten public offering at a price of $29.50 per share for gross proceeds of approximately $115.3 million. The Company received proceeds of approximately $109.8 million, net of approximately $5.5 million in underwriting commissions, discounts and other issuance costs. Stock Option Activity The Company’s stock option activity under its option plans for the six months ended June 30, 2018 was comprised of the following:
As of June 30, 2018, there were 1,129,589 shares of common stock available for future grants under its option plans, and the Company has reserved an additional 6,685,508 shares of common stock for future issuance upon exercise of all outstanding stock options granted under its option plans. During the six months ended June 30, 2018, stock options to purchase 97,937 shares of common stock were exercised with an intrinsic value of $1.4 million. Share-based Compensation Expense Total share-based compensation expense related to all share-based awards for the three and six months ended June 30, 2018 and 2017 was comprised of the following (in thousands):
As of June 30, 2018, $98.0 million of total unrecognized share-based compensation expense related to unvested stock options remains and is expected to be recognized over a weighted-average period of 3.1 years. Warrants As of June 30, 2018, the Company had outstanding warrants to purchase 10,000 shares of common stock. In March 2018, the Company issued 43,056 shares of common stock in a cashless exercise of 83,013 warrants to a third-party warrant holder. |
Deferred Royalty Obligation |
6 Months Ended |
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Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Deferred Royalty Obligation | Deferred Royalty Obligation On May 10, 2018, the Company closed a $125.0 million royalty financing agreement (the Royalty Agreement) with HealthCare Royalty Partners (HCR). Under the terms of the Royalty Agreement, the Company received $125.0 million in exchange for tiered royalty payments on worldwide net product sales of GIAPREZA. HCR is entitled to receive royalties on worldwide net product sales of GIAPREZA beginning April 1, 2018. Payments to HCR under the Royalty Agreement start annually at a maximum royalty rate, with step-downs based on the achievement of annual net product sales thresholds. Through December 31, 2021, the royalty rate will be a maximum of 10%. Starting January 1, 2022, the maximum royalty rate may increase by 4% if an agreed-upon, cumulative sales threshold has not been met, and, starting January 1, 2024, the maximum royalty rate may increase by an additional 4% if a different agreed-upon, cumulative sales threshold has not been met. The Royalty Agreement is subject to maximum aggregate royalty payments to HCR of 180% of the $125.0 million to be received by the Company, at which time the payment obligations under the Royalty Agreement would expire. The Royalty Agreement was entered into by the Company’s wholly owned subsidiary, La Jolla Pharma, LLC, and HCR has no recourse under the Royalty Agreement against La Jolla Pharmaceutical Company or any assets other than GIAPREZA. On receipt of the $125.0 million payment from HCR, the Company recorded a deferred royalty obligation of $125.0 million, net of debt issuance costs of $0.7 million. For both the three and six months ended June 30, 2018, the Company recognized interest expense, including amortization of the debt discount, of $1.7 million. The carrying value of the deferred royalty obligation as of June 30, 2018 was $124.3 million, net of unamortized debt discount of $0.7 million, and was classified as non-current. Accrued interest expense of $1.6 million is included in accrued expenses in the condensed consolidated balance sheet as of June 30, 2018. In the event of certain material breaches of the Royalty Agreement, HCR would have the right to terminate the Royalty Agreement and demand payment of an amount equal to either $125.0 million, minus aggregate royalties paid to HCR, or $225.0 million, minus aggregate royalties paid to HCR. The Company concluded that certain of these material breaches are embedded derivatives that require bifurcation from the deferred royalty obligation and fair value recognition. The Company determined the fair value of each derivative by assessing the probability of each event occurring, as well as the potential repayment amounts and timing of such repayments that would result under various scenarios. As a result of this assessment, the Company determined that the fair value of the embedded derivatives is immaterial as of June 30, 2018. Each reporting period, the Company estimates the fair value of the embedded derivatives until the features lapse and/or the termination of the Royalty Agreement. Any change in the fair value of the embedded derivatives will be recorded as either a gain or loss on the consolidated statements of operations. |
Basis of Presentation and Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation and Use of Estimates The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of the SEC Regulation S-X. Accordingly, they should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 22, 2018 (the Form 10-K). |
Principles of Consolidation | The accompanying unaudited condensed consolidated financial statements include the accounts of La Jolla Pharmaceutical Company and its wholly-owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. The unaudited condensed consolidated financial statements contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the condensed consolidated balance sheet of the Company at June 30, 2018, the condensed consolidated statement of operations for the three and six months ended June 30, 2018 and the condensed consolidated statement of cash flows for the six months ended June 30, 2018. |
Use of Estimates | The preparation of the Company’s unaudited condensed consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the Company’s unaudited condensed consolidated financial statements and the accompanying notes. Actual results could differ materially from those estimates. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the full year or any future interim periods. The accompanying condensed consolidated balance sheet at December 31, 2017 has been derived from the audited consolidated balance sheet at December 31, 2017 contained in the Form 10-K. |
Accounts Receivable | Accounts Receivable Accounts receivable are recorded net of customers’ allowances for prompt-pay discounts, chargebacks and doubtful accounts. Allowances for prompt-pay discounts and chargebacks are based on contractual terms. The Company estimates the allowance for doubtful accounts based on existing contractual payment terms, actual payment patterns of its customers and individual customer circumstances. |
Inventory | Inventory Inventory is stated at the lower of cost or estimated net realizable value on a first-in, first-out (FIFO) basis. The Company periodically analyzes its inventory levels and writes down inventory as cost of product sales when: inventory has become obsolete; inventory has a cost basis in excess of its estimated net realizable value; or inventory quantities are in excess of expected sales. |
Revenue Recognition | Revenue Recognition The Company adopted the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606 - Revenue from Contracts with Customers (ASC 606) at the time of its first commercial shipment of GIAPREZA in the first quarter of 2018. The Company had no revenue from product sales prior to the first quarter of 2018. Under ASC 606, the Company recognizes revenue when distributors (our customers) obtain control of the Company’s product, which typically occurs on delivery. Revenue is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those goods. To determine revenue recognition for contracts with customers within the scope of ASC 606, the Company performs the following five steps: (i) identify the 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 revenue when (or as) the entity satisfies a performance obligation. Revenue from product sales is recorded at the transaction price, net of estimates for variable consideration consisting of chargebacks, discounts, returns and other allowances offered to our customers. Variable consideration is estimated using the most-likely amount method, which is the single-most likely outcome under a contract and is typically at the stated contractual rate. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results vary materially from the Company’s estimates, the Company will adjust these estimates, which will affect revenue from product sales and earnings in the period such estimates are adjusted. Chargebacks. Chargebacks are discounts the Company provides to distributors in the event that the sales prices to end users are below the distributors’ acquisition price. Chargebacks are estimated based on known chargeback rates and recorded as a reduction of revenue upon delivery to the Company’s customers. Discounts. The Company offers customers various forms of incentives and consideration, including prompt-pay discounts, service fees and other contract fees. The Company estimates discounts and fees primarily based on contractual terms. These discounts and fees are recorded as a reduction of revenue upon delivery to the Company’s customers. Returns. The Company offers customers a limited right of return, generally for damaged or expired product. The Company estimates returns based on an internal analysis, which includes actual experience and a review of comparable companies. The estimates for returns are recorded as a reduction of revenue upon delivery to the Company’s customers. The Company will continue to assess its estimates of variable consideration as it accumulates additional historical data and will adjust these estimates accordingly. |
Interest Expense | Interest Expense Interest expense and the amortization of debt issuance costs related to the deferred royalty obligation (see Note 5) are recognized over the expected repayment term of the deferred royalty obligation using the effective interest method. The assumptions used in determining the expected repayment term of the deferred royalty obligation require the Company to make estimates that could impact the effective interest rate. Each reporting period, the Company estimates the expected repayment term of the deferred royalty obligation based on forecasted net product sales of GIAPREZA. Changes in interest expense resulting from changes in the effective interest rate, if any, are recorded on a prospective basis. |
Net Loss per Share | Net Loss per Share Basic net loss per share is calculated based on the weighted-average number of common shares outstanding. Diluted net loss per share is calculated based on the weighted-average number of common shares outstanding plus common stock equivalents. Convertible preferred stock, stock options and warrants are considered common stock equivalents and are included in the calculation of diluted net loss per share using the treasury stock method when their effect is dilutive. Common stock equivalents are excluded from the calculation of diluted net loss per share when their effect is anti-dilutive. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In the first quarter of 2018, the Company adopted Accounting Standard Update (ASU) 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The standard clarifies the presentation of restricted cash and cash equivalents and requires companies to include restricted cash and cash equivalents in the beginning and ending balances of cash and cash equivalents on the statement of cash flows. The standard also requires additional disclosures to describe the amount and detail of the restriction by balance sheet line item. Accordingly, restricted cash is included as a component of cash, cash equivalents and restricted cash in the unaudited condensed consolidated statement of cash flows for all periods presented, and we have disclosed the amount and detail of the restriction by balance sheet line item. Not Yet Adopted Accounting Pronouncements In June 2018, the FASB issued ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-based Payment Accounting. The standard expands the scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods and services. The provisions of this standard are effective for annual periods beginning after December 15, 2018, and for interim periods within those years. Early adoption is permitted. The Company will adopt the standard in the first quarter of 2019. The Company is currently evaluating the impact of this standard on it consolidated financial statements and disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The standard requires lessees to recognize right-of-use assets and lease liabilities for most leases. The provisions of this standard are effective for annual periods beginning after December 15, 2018, and for interim periods within those years; early adoption is permitted. The Company will adopt the standard in the first quarter of 2019 using the modified retrospective approach. Although the Company is in the process of evaluating the impact of adoption of the standard on its consolidated financial statements, the Company currently believes the most significant changes will be related to the recognition of a new right-of-use asset and lease liability on the balance sheet for its 10-year operating lease agreement for its corporate headquarters, which commenced October 30, 2017. |
Balance Sheet Account Details (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses | Accrued expenses consist of the following (in thousands):
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Shareholders' Equity (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock Option Activity | The Company’s stock option activity under its option plans for the six months ended June 30, 2018 was comprised of the following:
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Summary of Share-based Compensation Expense | Total share-based compensation expense related to all share-based awards for the three and six months ended June 30, 2018 and 2017 was comprised of the following (in thousands):
|
Business (Narrative) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
Jun. 30, 2017 |
---|---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Cash and cash equivalents | $ 241,427 | $ 90,915 | $ 141,317 |
Basis of Presentation and Summary of Significant Accounting Policies (Narrative) (Details) - USD ($) $ in Thousands, shares in Millions |
6 Months Ended | |||
---|---|---|---|---|
Oct. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Inventory, Work in Process, Net of Reserves | $ 200 | |||
Total inventory | 939 | $ 0 | ||
Finished goods | $ 700 | |||
Potentially dilutive common shares related to the outstanding preferred stock, stock options, restricted stock units and warrants (in shares) | 14.2 | 11.5 | ||
Term of lease agreement | 10 years |
Balance Sheet Account Details (Narrative) (Details) $ in Millions |
Jun. 30, 2018
USD ($)
|
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4550 Towne Centre Court, San Diego, California | Financial Standby Letter of Credit | Letter of Credit | |
Restricted Cash and Cash Equivalents Items [Line Items] | |
Cash collateral as security | $ 0.9 |
Balance Sheet Account Details (Summary of Accrued Expenses) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accrued clinical trials | $ 1,972 | $ 577 |
Accrued interest expense | 1,641 | 0 |
Accrued other | 3,339 | 126 |
Total accrued expenses | $ 6,952 | $ 703 |
Label | Element | Value |
---|---|---|
Restricted Cash, Noncurrent | us-gaap_RestrictedCashNoncurrent | $ 0 |
Restricted Cash, Noncurrent | us-gaap_RestrictedCashNoncurrent | 909,000 |
Restricted Cash, Current | us-gaap_RestrictedCashCurrent | 910,000 |
Restricted Cash, Current | us-gaap_RestrictedCashCurrent | $ 0 |
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