Quarterly Report (10-q)

Date : 05/07/2019 @ 10:12PM
Source : Edgar (US Regulatory)
Stock : Acorda Therapeutics, Inc. (ACOR)
Quote : 6.56  -0.06 (-0.91%) @ 11:00PM

Quarterly Report (10-q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

Commission File Number 001-31938

 

ACORDA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

13-3831168

(State or other jurisdiction of incorporation

or organization)

 

(I.R.S. Employer

Identification No.)

 

420 Saw Mill River Road, Ardsley, New York

 

10502

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (914) 347-4300

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

  

Small 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 complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

Securities registered pursuant to Section 12(b) of the Act:

 

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

 

 

Common Stock $0.001 par value

 

ACOR

 

Nasdaq Global Market

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at May 1, 2019

Common Stock, $0.001 par value per share

 

48,129,672 shares

 

 


 

ACORDA THERAPEUTICS, INC.

TABLE OF CONTENTS

 

 

 

Page

PART I—FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements

 

1

 

Consolidated Balance Sheets as of March 31, 2019 (unaudited) and December 31, 2018

 

1

 

Consolidated Statements of Operations (unaudited) for the Three-month Periods Ended March 31, 2019 and 2018

 

2

 

Consolidated Statements of Comprehensive Loss (unaudited) for the Three-month Periods Ended March 31, 2019 and 2018

 

3

 

Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Three-month Periods Ended March 31, 2019 and 2018

 

4

 

Consolidated Statements of Cash Flows (unaudited) for the Three-month Periods Ended March 31, 2019 and 2018

 

5

 

Notes to Consolidated Financial Statements (unaudited)

 

6

Item 2 .

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

29

Item 4.

Controls and Procedures

 

30

PART II—OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

 

31

Item 1A.

Risk Factors

 

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

32

Item 6.

Exhibits

 

33

Signatures

 

 

34

 

 


 

This Quarterly Report on Form 10-Q contains forward ‑looking statements relating to future events and our future performance within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Stockholders are cautioned that such statements involve risks and uncertainties, including: we may not be able to successfully market Inbrija or any other products under developme nt; risks associated with complex, regulated manufacturing processes for pharmaceuticals, which could affect whether we have sufficient commercial supply of Inbrija to meet market demand; third party payers (including governmental agencies) may not reimbur se for the use of Inbrija or our other products at acceptable rates or at all and may impose restrictive prior authorization requirements that limit or block prescriptions; competition for Inbrija, Ampyra and other products we may develop and market in the future, including increasing competition and accompanying loss of revenues in the U.S. from generic versions of Ampyra (dalfampridine) following our loss of patent exclusivity; the ability to realize the benefits anticipated from acquisitions, among other reasons because acquired development programs are generally subject to all the risks inherent in the drug development process and our knowledge of the risks specifically relevant to acquired programs generally improves over time; we may need to raise addi tional funds to finance our operations and may not be able to do so on acceptable terms; the risk of unfavorable results from future studies of Inbrija (levodopa inhalation powder) or from our other research and development programs, or any other acquired or in-licensed programs; the occurrence of adverse safety events with our products; the outcome (by judgment or settlement) and costs of legal, administrative or regulatory proceedings, investigations or inspections, including, without limitation, collecti ve, representative or class action litigation; failure to protect our intellectual property, to defend against the intellectual property claims of others or to obtain third party intellectual property licenses needed for the commercialization of our produc ts; and failure to comply with regulatory requirements could result in adverse action by regulatory agencies. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which w e operate and management’s beliefs and assumptions. All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” and similar expressions are intended to identify forward-looking statements, a lthough not all forward-looking statements contain these identifying words. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make, and investors should not place und ue reliance on these statements. In addition to the risks and uncertainties described above, we have included important factors in the cautionary statements included in this report and in our Annual Report on Form 10-K for the year ended December 31, 2018, particularly in the “Risk Factors” section (as updated by the disclosures in our subsequent quarterly reports, including this report), that we believe could cause actual results or events to differ materially from the forward-looking statements that we ma ke. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make. Forward-looking statements in this report are made only as of the date hereof, and we do not assume any obligation to publicly update any forward-looking statements as a result of developments occurring after the date of this report.

We and our subsidiaries own several registered trademarks in the U.S. and in other countries. These registered trademarks include, in the U.S., the marks “Acorda Therapeutics,” our stylized Acorda Therapeutics logo, “Biotie Therapies,” “Ampyra,” and “ARCUS.”  Also, our mark “Fampyra” is a registered mark in the European Community Trademark Office and we have registrations or pending applications for this mark in other jurisdictions. Our trademark portfolio also includes several registered trademarks and pending trademark applications (e.g., “Inbrija”) in the U.S. and worldwide for potential product names or for disease awareness activities. Third party trademarks, trade names, and service marks used in this report are the property of their respective owners.

 

 

 


 

P ART I

Item 1.  Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

 

(In thousands, except share data)

 

March 31, 2019

 

 

December 31, 2018

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

197,093

 

 

$

293,564

 

Restricted cash

 

 

567

 

 

 

532

 

Short term investments

 

 

146,157

 

 

 

151,989

 

Trade accounts receivable, net of allowances of $1,033 and $2,681, as of

   March 31, 2019 and December 31, 2018, respectively

 

 

20,652

 

 

 

23,430

 

Prepaid expenses

 

 

14,223

 

 

 

19,384

 

Inventory, net

 

 

31,465

 

 

 

29,014

 

Other current assets

 

 

7,747

 

 

 

10,194

 

Total current assets

 

 

417,904

 

 

 

528,107

 

Property and equipment, net of accumulated depreciation

 

 

83,032

 

 

 

60,519

 

Goodwill

 

 

280,128

 

 

 

282,059

 

Intangible assets, net of accumulated amortization

 

 

425,777

 

 

 

428,570

 

Right of use assets

 

 

26,802

 

 

 

 

Other assets

 

 

295

 

 

 

411

 

Total assets

 

$

1,233,938

 

 

$

1,299,666

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

25,955

 

 

$

48,859

 

Accrued expenses and other current liabilities

 

 

45,918

 

 

 

76,882

 

Current portion of acquired contingent consideration

 

 

8,179

 

 

 

4,914

 

Current portion of lease liabilities

 

 

7,458

 

 

 

 

Current portion of loans payable

 

 

604

 

 

 

616

 

Current portion of liability related to sale of future royalties

 

 

9,173

 

 

 

8,985

 

Total current liabilities

 

 

97,287

 

 

 

140,256

 

Convertible senior notes (due 2021)

 

 

321,210

 

 

 

318,670

 

Non-current portion of acquired contingent consideration

 

 

167,221

 

 

 

163,086

 

Non-current portion of lease liabilities

 

 

26,455

 

 

 

 

Non-current portion of loans payable

 

 

24,643

 

 

 

24,470

 

Deferred tax liability

 

 

5,401

 

 

 

7,483

 

Non-current portion of liability related to sale of future royalties

 

 

20,174

 

 

 

21,731

 

Other non-current liabilities

 

 

4,961

 

 

 

11,987

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value. Authorized 20,000,000 shares at March 31,

   2019 and December 31, 2018; no shares issued as of March 31,

   2019 and December 31, 2018, respectively

 

 

 

 

 

 

Common stock, $0.001 par value. Authorized 80,000,000 shares at March 31,

   2019 and December 31, 2018; issued 47,563,184 and 47,508,505 shares,

   including those held in treasury, as of March 31, 2019 and

   December 31, 2018, respectively

 

 

48

 

 

 

48

 

Treasury stock at cost (91,594 shares at March 31, 2019 and 87,737 shares

  at December 31, 2018)

 

 

(2,185

)

 

 

(2,133

)

Additional paid-in capital

 

 

1,008,796

 

 

 

1,005,105

 

Accumulated deficit

 

 

(441,448

)

 

 

(393,843

)

Accumulated other comprehensive income

 

 

1,375

 

 

 

2,806

 

Total stockholders’ equity

 

 

566,586

 

 

 

611,983

 

Total liabilities and stockholders’ equity

 

$

1,233,938

 

 

$

1,299,666

 

 

 

See accompanying Unaudited Notes to Consolidated Financial Statements

1


 

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited)

 

(In thousands, except per share data)

 

Three-month period ended March 31, 2019

 

 

Three-month period ended March 31, 2018

 

Revenues:

 

 

 

 

 

 

 

 

Net product revenues

 

$

41,334

 

 

$

103,003

 

Royalty revenues

 

 

2,803

 

 

 

3,162

 

Total net revenues

 

 

44,137

 

 

 

106,165

 

Costs and expenses:

 

 

 

 

 

 

 

 

Cost of sales

 

 

8,799

 

 

 

20,634

 

Research and development

 

 

16,028

 

 

 

30,560

 

Selling, general and administrative

 

 

52,725

 

 

 

47,601

 

Amortization of intangible assets

 

 

2,564

 

 

 

716

 

Changes in fair value of acquired contingent consideration

 

 

7,400

 

 

 

6,200

 

Total operating expenses

 

 

87,516

 

 

 

105,711

 

Operating (loss) income

 

 

(43,379

)

 

 

454

 

Other (expense) income, net:

 

 

 

 

 

 

 

 

Interest and amortization of debt discount expense

 

 

(6,424

)

 

 

(5,497

)

Interest income

 

 

1,496

 

 

 

326

 

Realized loss on foreign currency transactions

 

 

(13

)

 

 

(5

)

Total other expense, net

 

 

(4,941

)

 

 

(5,176

)

Loss before taxes

 

 

(48,320

)

 

 

(4,722

)

Benefit from (Provision for) income taxes

 

 

715

 

 

 

(3,477

)

Net loss

 

$

(47,605

)

 

$

(8,199

)

 

 

 

 

 

 

 

 

 

Net loss per share—basic

 

$

(1.00

)

 

$

(0.18

)

Net loss per share—diluted

 

$

(1.00

)

 

$

(0.18

)

Weighted average common shares outstanding used in

   computing net loss per share—basic

 

 

47,472

 

 

 

46,529

 

Weighted average common shares outstanding used in

   computing net loss per share—diluted

 

 

47,472

 

 

 

46,529

 

 

See accompanying Unaudited Notes to Consolidated Financial Statements

2


 

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Loss

(unaudited)

 

(In thousands)

 

Three-month period ended March 31, 2019

 

 

Three-month period ended March 31, 2018

 

Net loss

 

$

(47,605

)

 

$

(8,199

)

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(1,609

)

 

 

2,547

 

Unrealized income (loss) on available for sale debt securities

 

 

178

 

 

 

(92

)

Other comprehensive (loss) income, net of tax

 

 

(1,431

)

 

 

2,455

 

Comprehensive loss

 

$

(49,036

)

 

$

(5,744

)

 

See accompanying Unaudited Notes to Consolidated Financial Statements

3


 

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

 

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Number

of

shares

 

 

Par

value

 

 

Treasury stock

 

 

Additional

paid-in

capital

 

 

Accumulated

deficit

 

 

Accumulated

other

comprehensive

income

 

 

Total

stockholders

equity

 

Balance at December 31, 2018

 

 

47,508

 

 

$

48

 

 

$

(2,133

)

 

$

1,005,105

 

 

$

(393,843

)

 

$

2,806

 

 

$

611,983

 

Compensation expense for

   issuance of stock options

   to employees

 

 

 

 

 

 

 

 

 

 

 

2,745

 

 

 

 

 

 

 

 

 

2,745

 

Compensation expense for

   issuance of restricted

   stock to employees

 

 

49

 

 

 

 

 

 

 

 

 

922

 

 

 

 

 

 

 

 

 

922

 

Exercise of stock options

 

 

2

 

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

24

 

Purchase of Treasury Stock

 

 

4

 

 

 

 

 

 

(52

)

 

 

 

 

 

 

 

 

 

 

 

(52

)

Other comprehensive loss,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,431

)

 

 

(1,431

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(47,605

)

 

 

 

 

 

(47,605

)

Balance at March 31, 2019

 

 

47,563

 

 

$

48

 

 

$

(2,185

)

 

$

1,008,796

 

 

$

(441,448

)

 

$

1,375

 

 

$

566,586

 

 

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Number

of

shares

 

 

Par

value

 

 

Treasury stock

 

 

Additional

paid-in

capital

 

 

Accumulated

deficit

 

 

Accumulated

other

comprehensive

income

 

 

Total

stockholders

equity

 

Balance at December 31, 2017

 

 

46,441

 

 

$

46

 

 

$

(389

)

 

$

968,580

 

 

$

(455,108

)

 

$

6,858

 

 

$

519,987

 

Adjustment to accumulated deficit

   (pursuant to adoption of

   ASU 2014-09)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,582

 

 

 

 

 

 

27,582

 

Compensation expense for

   issuance of stock options

   to employees

 

 

 

 

 

 

 

 

 

 

 

4,095

 

 

 

 

 

 

 

 

 

4,095

 

Compensation expense for

   issuance of restricted

   stock to employees

 

 

100

 

 

 

 

 

 

 

 

 

1,840

 

 

 

 

 

 

 

 

 

1,840

 

Exercise of stock options

 

 

137

 

 

 

1

 

 

 

 

 

 

 

3,366

 

 

 

 

 

 

 

 

 

3,367

 

Purchase of Treasury Stock

 

 

47

 

 

 

 

 

 

 

(1,202

)

 

 

 

 

 

 

 

 

 

 

 

(1,202

)

Other comprehensive income,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,455

 

 

 

2,455

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,199

)

 

 

 

 

 

(8,199

)

Balance at March 31, 2018

 

 

46,725

 

 

$

47

 

 

$

(1,591

)

 

$

977,881

 

 

$

(435,725

)

 

$

9,313

 

 

$

549,925

 

 

See accompanying Unaudited Notes to Consolidated Financial Statements

4


 

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited)

 

(In thousands)

 

Three-month period ended March 31, 2019

 

 

Three-month period ended March 31, 2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(47,605

)

 

$

(8,199

)

Adjustments to reconcile net loss to net cash (used in) provided by

   operating activities:

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

3,667

 

 

 

5,867

 

Amortization of net premiums and discounts on investments

 

 

(521

)

 

 

(92

)

Amortization of debt discount and debt issuance costs

 

 

4,717

 

 

 

4,003

 

Depreciation and amortization expense

 

 

4,850

 

 

 

3,310

 

Change in acquired contingent consideration obligation

 

 

7,400

 

 

 

6,200

 

Non-cash royalty revenue

 

 

(2,467

)

 

 

(2,782

)

Deferred tax benefit

 

 

(1,092

)

 

 

(293

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Decrease in accounts receivable

 

 

2,777

 

 

 

30,616

 

Decrease (increase) in prepaid expenses and other current assets

 

 

7,602

 

 

 

(1,535

)

(Increase) decrease in inventory

 

 

(2,451

)

 

 

9,839

 

Decrease in other assets

 

 

 

 

 

8

 

Decrease in accounts payable, accrued expenses and other current

   liabilities

 

 

(54,042

)

 

 

(18,271

)

(Decrease) increase in other non-current liabilities

 

 

(331

)

 

 

30

 

Net cash (used in) provided by operating activities

 

 

(77,496

)

 

 

28,701

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(24,655

)

 

 

(4,807

)

Purchases of intangible assets

 

 

 

 

 

(5

)

Purchases of investments

 

 

(48,685

)

 

 

(106,767

)

Proceeds from maturities of investments

 

 

55,219

 

 

 

 

Net cash used in investing activities

 

 

(18,121

)

 

 

(111,579

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock and option exercises

 

 

24

 

 

 

3,367

 

Purchase of treasury stock

 

 

(52

)

 

 

(1,202

)

Repayment of loans payable

 

 

(614

)

 

 

(656

)

Net cash (used in) provided by financing activities

 

 

(642

)

 

 

1,509

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(177

)

 

 

378

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(96,436

)

 

 

(80,991

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

294,351

 

 

 

308,039

 

Cash, cash equivalents and restricted cash at end of period

 

$

197,915

 

 

$

227,048

 

Supplemental disclosure:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

18

 

 

$

26

 

Cash paid for taxes

 

 

19

 

 

 

465

 

 

See accompanying Unaudited Notes to Consolidated Financial Statements

 

 

5


 

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(unaudited)

(1) Organization and Business Activities

Acorda Therapeutics, Inc. (“Acorda” or the “Company”) is a biopharmaceutical company focused on developing therapies that restore function and improve the lives of people with neurological disorders.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information, Accounting Standards Codification (ASC) Topic 270-10 and with the instructions to Form 10-Q. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, all adjustments considered necessary for a fair presentation have been included in the interim periods presented and all adjustments are of a normal recurring nature. The Company has evaluated subsequent events through the date of this filing. Operating results for the three-month period ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. When used in these notes, the terms “Acorda” or “the Company” mean Acorda Therapeutics, Inc. The December 31, 2018 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. You should read these unaudited interim condensed consolidated financial statements in conjunction with the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K, for the year ended December 31, 2018.

Certain reclassifications were made to prior period amounts in the consolidated financial statements to conform to the current year presentation.

(2) Summary of Significant Accounting Policies

Our significant accounting policies are detailed in our Annual Report on Form 10-K for the year ended December 31, 2018. Effective January 1, 2019, the Company adopted ASU 2016-02, “Leases” (Topic 842), ASU 2018-05, Income Taxes (Topic 740), ASU 2018-09, “Codification Improvements” and ASU 2018-02, ‘Income Statement—Reporting Comprehensive Income’ (Topic 220). Other than the adoption of the new accounting guidance, our significant accounting policies have not changed materially from December 31, 2018.

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same amounts shown in the statement of cash flows:

 

Three-month period ended March 31, 2019

 

 

Three-month period ended March 31, 2018

 

(In thousands)

Beginning of period

 

 

End of period

 

 

Beginning of period

 

 

End of period

 

Cash and cash equivalents

$

293,564

 

 

$

197,093

 

 

$

307,068

 

 

$

226,276

 

Restricted cash

 

532

 

 

 

567

 

 

 

410

 

 

 

460

 

Restricted cash included in Other assets

 

255

 

 

 

255

 

 

 

561

 

 

 

312

 

Total Cash, cash equivalents and restricted cash per statement of cash flows

$

294,351

 

 

$

197,915

 

 

$

308,039

 

 

$

227,048

 

Amounts included in restricted cash represent those amounts required to be set aside to cover the Company’s self-funded employee health insurance. Restricted cash included in other assets on the statement of financial position relates to cash collateralized standby letters of credit in connection with obligations under facility leases, which is included with other assets in the consolidated balance sheet due to the long-term nature of the letters of credit.

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Inventory

The major classes of inventory were as follows:

(In thousands)

 

March 31, 2019

 

 

December 31, 2018

 

Raw materials

 

$

548

 

 

$

 

Work-in-progress

 

 

5,913

 

 

 

 

Finished goods

 

 

25,004

 

 

 

29,014

 

Total

 

$

31,465

 

 

$

29,014

 

The Company reviews inventory, including inventory purchase commitments, for slow moving or obsolete amounts based on expected product sales volume and provides reserves against the carrying amount of inventory as appropriate.

Revenue Recognition

In accordance with ASC 606, the Company recognizes revenue when the customer obtains control of a promised good or service, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the good or service.  ASC 606 outlines a five-step process for recognizing revenue from contracts with customers: i) identify the contract with the customer, ii) identify the performance obligations in the contract, (iii) determine the transaction price, iv) allocate the transaction price to the separate performance obligations in the contract, and (v) recognize revenue associated with the performance obligations as they are satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606, the Company determines the performance obligations that are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to each respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company's performance obligations are transferred to customers at a point in time, typically upon receipt of the product by the customer.

ASC 606 requires entities to record a contract asset when a performance obligation has been satisfied or partially satisfied, but the amount of consideration has not yet been received because the receipt of the consideration is conditioned on something other than the passage of time. ASC 606 also requires an entity to present a revenue contract as a contract liability in instances when a customer pays consideration, or an entity has a right to an amount of consideration that is unconditional (e.g. receivable), before the entity transfers a good or service to the customer. We did not have any contract assets or any contract liabilities as of March 31, 2019.   

The following table disaggregates our revenue by major source (in thousands):

 

(In thousands)

Three-month period ended March 31, 2019

 

 

Three-month period ended March 31, 2018

 

Revenues:

 

 

 

 

 

 

 

Net product revenues

$

41,334

 

 

$

103,003

 

Royalty revenues

 

2,803

 

 

 

3,162

 

Total net revenues

$

44,137

 

 

$

106,165

 

Foreign Currency Translation

The functional currency of operations outside the United States of America is deemed to be the currency of the local country, unless otherwise determined that the United States dollar would serve as a more appropriate functional currency given the economic operations of the entity. Accordingly, the assets and liabilities of the Company’s foreign subsidiary, Biotie, are translated into United States dollars using the period-end exchange rate; income and expense items are translated using the average exchange rate during the period; and equity transactions are translated at historical rates. Cumulative translation adjustments are reflected as a separate component of equity. Foreign currency transaction losses and gains are recognized in the period incurred and are reported as other (expense) income, net in the statement of operations.

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Segment and Geographic Information

The Company is managed and operated as one business which is focused on developing therapies that restore function and improve the lives of people with neurological disorders. The entire business is managed by a single management team that reports to the Chief Executive Officer. The Company does not operate separate lines of business with respect to any of its products or product candidates and the Company does not prepare discrete financial information with respect to separate products or product candidates or by location. Accordingly, the Company views its business as one reportable operating segment. Net product revenues reported are derived from the sales of Inbrija in the U.S. for the three-month period ended March 31, 2019 and from the sales of Ampyra and Qutenza in the U.S for the three-month periods ended March 31, 2019 and 2018.

 

 

Subsequent Events

Subsequent events are defined as those events or transactions that occur after the balance sheet date, but before the financial statements are filed with the Securities and Exchange Commission. The Company completed an evaluation of the impact of any subsequent events through the date these financial statements were issued, and determined there were no subsequent events required disclosure in these financial statements.

Accounting Pronouncements Adopted

In February 2016, the FASB issued ASU 2016-02, “Leases” Topic 842, which amends the guidance in former ASC Topic 840,  Leases . The new standard increases transparency and comparability most significantly by requiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases longer than 12 months. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. For lessees, leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

The Company adopted the new lease guidance effective January 1, 2019 using the modified retr ospective transition approach , applying the new standard to all of its leases existing at the date of initial application which is the effective date of adoption. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. We elected the package of practical expedients which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change our previously reported consolidated statements of operations and did not result in a cumulative catch-up adjustment to opening equity. The adoption of the new guidance resulted in the recognition of ROU assets of $28.0 million and lease liabilities of $35.1 million. The difference between the ROU assets and the lease liabilities is primarily due to unamortized initial direct costs , lease incentives and deferred rent related to the Company’s operating leases at December 31, 2018.

The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. In calculating the present value of the lease payments, the Company elected to utilize its incremental borrowing rate based on the remaining lease terms as of the January 1, 2019 adoption date.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred, if any. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Our leases have remaining lease terms of 3 years to 8 years, some of which include options to extend the lease term for up to 15 years, and some of which include options to terminate the lease within 3 years.

The Company has elected the practical expedient to combine lease and non-lease components as a single component. The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized on the balance sheet as right-of-use assets, current operating lease liabilities and non-current operating lease liabilities.

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The new standard also provides practical expedients and certain exemptions for an entity’s ongoing accounting. We have elected the short-term lease recognition exemption for all leases that qualify. This mea ns, for those leases where the initial lease term is one year or less or for which the ROU asset at inception is deemed immaterial, we will not recognize ROU assets or lease liabilities. Those leases are expensed on a straight line basis over the term of t he lease.

Operating Leases

We lease certain office space, manufacturing and warehouse space under arrangements classified as leases under ASC 842. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal options ranging from 5 to 15 years. The exercise of lease renewal options is at our sole discretion. One of our leases also includes an option to early terminate the lease within 3 years.

Ardsley, New York

In June 2011, the Company entered into a 15-year lease for an aggregate of approximately 138,000 square feet of office and laboratory space in Ardsley, New York. In 2014, the Company exercised its option to expand into an additional 25,405 square feet of office space, which the Company occupied in January 2015. The Company has options to extend the term of the lease for three additional five-year periods, and the Company has an option to terminate the lease after 10 years subject to payment of an early termination fee. Also, the Company has a right of first refusal until mid-2020 to lease up to approximately 95,000 additional square feet of space in additional buildings at the same location. The Company’s extension, early termination, and expansion rights are subject to specified terms and conditions, including specified time periods when they must be exercised, and are also subject to limitations including that the Company not be in default under the lease.

The Ardsley lease provides for monthly payments of rent during the lease term. These payments consist of base rent, which takes into account the costs of the facility improvements funded by the facility owner prior to the Company’s occupancy, and additional rent covering customary items such as charges for utilities, taxes, operating expenses, and other facility fees and charges. The base rent is currently $4.7 million per year, which reflects an annual 2.5% escalation factor.

Chelsea, Massachusetts

Through our Civitas subsidiary, we lease a manufacturing facility in Chelsea, Massachusetts with commercial-scale capabilities. The approximately 90,000 square foot facility also includes office and laboratory space. Civitas leases this facility from North River Everett Ave, LLC pursuant to a lease with a term that expires on December 31, 2025, and Civitas has two additional extension options of five years each. The base rent under the lease is currently $1.6 million per year, which reflects an annual escalation factor of 2.5% as well as an amendment to the lease to add additional property at the Chelsea, Massachusetts site as further described below.

In 2017, the Company’s Civitas subsidiary amended its existing Chelsea, Massachusetts lease. The amendment added expansion property located in Chelsea, Massachusetts next to the existing facility. The additional property includes land being used for parking and a free-standing warehouse building on the same site. The base rent for the additional property under the lease included in the rent number above, is currently $0.5 million per year with an annual escalation factor of 3.0%.

In 2018, the Company initiated a renovation and expansion of a building within the Chelsea manufacturing facility that will increase the size of the facility to approximately 95,000 square feet. The project will add a new manufacturing production line for Inbrija and other ARCUS products that has greater capacity than the existing manufacturing line, and it will create additional warehousing space for manufactured product. Pursuant to a 2018 lease amendment that enabled the renovation and expansion, upon completion of the project, annual rent under the lease will increase to $1.7 million. Construction of the project is scheduled for completion in the third quarter of 2019, though we cannot be assured that the project will meet this schedule, and it will take additional time after completion of construction to obtain the FDA approval needed to use the new production line for commercial manufacturing. All costs to renovate and expand the facility are borne by the Company, therefore, the lease for that building is accounted for as a build to suit lease.

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Additional Facilities

In October 2016, we entered into a 10-year lease agreement with a term commencing January 1, 2017, for approximately 26,000 square feet of lab and office space in Waltham, MA. The lease provides for monthly rental payments over the lease term. The base rent under the lease is currently $1.1 million per year.

Our leases have remaining lease terms of 3 years to 8 years which assumes exercise of the early termination of our Ardsley, NY lease. We do not include any renewal options in our lease terms when calculating our lease liabilities as we are not reasonably certain that we will exercise these options. One of our leases includes the early termination option in the lease term when calculating the lease liability. The weighted-average remaining lease term for our operating leases was 5 years at March 31, 2019. The weighted-average discount rate was 7.13% at March 31, 2019.

ROU assets and lease liabilities related to our operating leases are as follows:

 

(In thousands)

 

Balance Sheet Classification

 

March 31, 2019

 

Right-of-use assets

 

Right of use assets

 

$

26,802

 

Current lease liabilities

 

Current portion of lease liabilities

 

 

7,458

 

Non-current lease liabilities

 

Non-current portion of lease liabilities

 

 

26,455

 

 

We have lease agreements that contain both lease and non-lease components. We account for lease components together with non-lease components (e.g., common-area maintenance). The components of lease costs were as follows:

 

(In thousands)

 

Three-month period ended March 31, 2019

 

Operating lease cost

 

$

1,781

 

Variable lease cost

 

 

664

 

Short-term lease cost

 

 

322

 

Total lease cost

 

$

2,767

 

Future minimum commitments under all non-cancelable operating leases are as follows:

(In thousands)

 

 

 

 

2019 (excluding the three months ended March 31, 2019)

 

$

5,572

 

2020

 

 

7,608

 

2021

 

 

7,793

 

2022

 

 

9,825

 

2023

 

 

2,892

 

Later years

 

 

7,357

 

Total lease payments

 

 

41,047

 

Less: Imputed interest

 

 

(7,134

)

Present value of lease liabilities

 

$

33,913

 

 

Supplemental cash flow information and non-cash activity related to our operating leases are as follows:

 

(In thousands)

 

Three-month period ended March 31, 2019

 

Operating cash flow information:

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities

 

$

1,834

 

Non-cash activity:

 

 

 

 

Right-of-use assets obtained in exchange for lease obligations

 

$

 

In August 2018, the Securities Exchange Commission (“SEC”) adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of

10


 

comprehensive income is required to be filed. The Company included its first presentation of changes in stockholders’ equity in its Form 10-Q for the three-month period ended March 31, 2019.

In February 2018, the FASB issued ASU 2018-02, ‘Income Statement—Reporting Comprehensive Income’ (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). This new standard provides entities with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The reclassification is the difference between the amount previously recorded in other comprehensive income at the historical U.S. federal tax rate that remains in accumulated other comprehensive loss at the time the Act was effective and the amount that would have been recorded using the newly enacted rate. This guidance became effective in Q1 2019; however, the Company did not elect to make the optional reclassification.

In July 2018, the FASB issued ASU 2018-09, “Codification Improvements.” The ASU’s amendments clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2018-09 are not expected to have a significant effect on current accounting practices. Some of the amendments in this update do not require transition guidance and will be effective upon issuance of this update. However, many of the amendments in this update do have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities. The ASU became effective in Q1 2019. The ASU did not have a significant impact on its consolidated financial statements. 

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” (Topic 326): Measurement of Credit Losses on Financial Instruments. This new standard amends the current guidance on the impairment of financial instruments. The ASU adds to U.S. GAAP an impairment model known as current expected credit loss (CECL) model that is based on expected losses rather than incurred losses. Under the new guidance, an entity will recognize as an allowance its estimate of expected credit losses. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other” (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). This new standard simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. ASU 2017-04 allows for prospective application and is effective for fiscal years beginning after December 15, 2019, and interim periods therein with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating whether it will adopt this guidance early. The Company does not expect the adoption of this guidance to have a significant impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13 “Fair Value Measurement (Topic 820): “Disclosure Framework—Changes to the Discl osure Requirements for Fair Value Measurement.” The amendment in this ASU eliminate, add and modify certain disclosure requirements for fair value measurements as part of its disclosure framework project. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public business entities will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The ASU is effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The ASU clarifies certain aspects of ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” which was issued in April 2015. Specifically, the ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).” The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

In November 2018, the FASB issued ASU 2018-18, Collaborative arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606. ASU 2018-18 clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer and precludes an entity from

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presenting consideration fr om a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those f iscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

(3) Share-based Compensation

During the three‑month periods ended March 31, 2019 and 2018, the Company recognized share-based compensation expense of $3.7 million and $5.9 million, respectively. Activity in options and restricted stock during the three-month period ended March 31, 2019 and related balances outstanding as of that date are reflected below. The weighted average fair value per share of options granted to employees for the three-month periods ended March 31, 2019 and 2018 were approximately $7.41 and $12.37, respectively.

The following table summarizes share-based compensation expense included within the consolidated statements of operations:

 

 

 

For the three-month period ended March 31,

 

(In millions)

 

2019

 

 

2018

 

Research and development expense

 

$

0.7

 

 

$

1.7

 

Selling, general and administrative expense

 

 

2.8

 

 

 

4.2

 

Cost of Sales

 

 

0.2

 

 

 

 

Total

 

$

3.7

 

 

$

5.9

 

 

A summary of share-based compensation activity for the three-month period ended March 31, 2019 is presented below:

Stock Option Activity

 

 

 

Number of

Shares

(In   thousands)

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term

 

 

Intrinsic

Value

(In   thousands)

 

Balance at January 1, 2019

 

 

8,194

 

 

$

29.81

 

 

 

 

 

 

 

 

 

Granted

 

 

440

 

 

 

13.88

 

 

 

 

 

 

 

 

 

Cancelled

 

 

(202

)

 

 

23.34

 

 

 

 

 

 

 

 

 

Exercised

 

 

(2

)

 

 

16.00

 

 

 

 

 

 

 

 

 

Balance at March 31, 2019

 

 

8,430

 

 

$

29.14

 

 

 

5.5

 

 

$

 

Vested and expected to vest at

    March 31, 2019

 

 

8,398

 

 

$

29.18

 

 

 

5.5

 

 

$

 

Vested and exercisable at

    March 31, 2019

 

 

6,905

 

 

$

30.54

 

 

 

4.8

 

 

$

 

 

Restricted Stock and Performance Stock Unit Activity

 

(In thousands)

 

 

 

 

Restricted Stock and Performance Stock Units

 

Number of Shares

 

Nonvested at January 1, 2019

 

 

231

 

Granted

 

 

576

 

Vested

 

 

(53

)

Forfeited

 

 

(3

)

Nonvested at March 31, 2019

 

 

751

 

 

Unrecognized compensation cost for unvested stock options, restricted stock awards and performance stock units as of March 31, 2019 totaled $21.0 million and is expected to be recognized over a weighted average period of approximately 2.1 years.

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During the three ‑month period ended March 31, 2019, the Company repurchased 3,857 shares of common stock at an average price of $13.38 per share or approxi mately $52 thousand. The share repurchase consists primarily of common stock withheld to cover tax liabilities in connection with the settlement of vested restricted stock units in the three-month period ended March 31, 2019.

(4) Loss Per Share

The following table sets forth the computation of basic and diluted loss per share for the three-month periods ended March 31, 2019 and 2018:

 

(In thousands, except per share data)

 

Three-month period ended March 31, 2019

 

 

Three-month period ended March 31, 2018

 

Basic and diluted

 

 

 

 

 

 

 

 

Net loss

 

$

(47,605

)

 

$

(8,199

)

Weighted average common shares outstanding used in

   computing net loss per share—basic

 

 

47,472

 

 

 

46,529

 

Plus: net effect of dilutive stock options and restricted

   common shares

 

 

 

 

 

 

Weighted average common shares outstanding used in

   computing net loss per share—diluted

 

 

47,472

 

 

 

46,529

 

Net loss per share—basic