VICAL INC, 10-K filed on 2/15/2013
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2012
Jan. 31, 2013
Jun. 30, 2012
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
VICAL INC 
 
 
Entity Central Index Key
0000819050 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2012 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2012 
 
 
Document Fiscal Period Focus
FY 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Entity Public Float
 
 
$ 237,681,310 
Entity Common Stock, Shares Outstanding
 
86,248,217 
 
Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Current assets:
 
 
Cash and cash equivalents
$ 43,159 
$ 38,696 
Marketable securities, available-for-sale
37,639 
8,733 
Restricted cash
3,059 
2,998 
Receivables and other assets
2,152 
3,130 
Total current assets
86,009 
53,557 
Long-term investments
2,225 
5,928 
Property and equipment, net
5,284 
6,226 
Intangible assets, net
2,813 
2,871 
Other assets
191 
191 
Total assets
96,522 
68,773 
Current liabilities:
 
 
Accounts payable and accrued expenses
5,629 
6,362 
Deferred revenue
150 
99 
Total current liabilities
5,779 
6,461 
Long-term liabilities:
 
 
Deferred rent
1,657 
1,964 
Commitments and contingencies (Notes 6 and 7)
   
   
Stockholders' equity:
 
 
Preferred stock, $0.01 par value, 5,000 shares authorized, none issued and outstanding
   
   
Common stock, $0.01 par value, 160,000 shares authorized, 86,136 and 71,913 shares issued and outstanding at December'31, 2012 and 2011, respectively
861 
719 
Additional paid-in capital
435,915 
384,087 
Accumulated deficit
(347,937)
(325,038)
Accumulated other comprehensive income
247 
580 
Total stockholders' equity
89,086 
60,348 
Total liabilities and stockholders' equity
$ 96,522 
$ 68,773 
Balance Sheets (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Balance Sheets [Abstract]
 
 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
5,000 
5,000 
Preferred stock, shares issued
   
   
Preferred stock, shares outstanding
   
   
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
160,000 
160,000 
Common Stock, shares, issued
86,136 
71,913 
Common stock, shares outstanding
86,136 
71,913 
Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Revenues:
 
 
 
Contract and grant revenue
$ 6,176 
$ 4,223 
$ 6,249 
License and royalty revenue
11,343 
25,795 
2,462 
Total revenues
17,519 
30,018 
8,711 
Operating expenses:
 
 
 
Research and development
17,340 
17,975 
19,692 
Manufacturing and production
13,055 
10,267 
11,436 
General and administrative
10,557 
9,598 
8,798 
Total operating expenses
40,952 
37,840 
39,926 
Loss from operations
(23,433)
(7,822)
(31,215)
Other income (expense):
 
 
 
Investment and other income, net
534 
539 
830 
Net loss
$ (22,899)
$ (7,283)
$ (30,385)
Basic and diluted net loss per share
$ (0.27)
$ (0.10)
$ (0.51)
Weighted average shares used in computing basic and diluted net loss per share
85,966 
72,031 
60,084 
Statements of Comprehensive Loss (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Statement of Comprehensive Income [Abstract]
 
 
 
Net loss
$ (22,899)
$ (7,283)
$ (30,385)
Unrealized gains (losses) on available-for-sale and long-term marketable securities:
 
 
 
Unrealized gains (losses) arising during holding period
257 
108 
(35)
Less: Reversal of unrealized gains in accumulated other comprehensive income upon the sale of long-term marketable securities
(590)
 
(5)
Other comprehensive (loss) income
(333)
108 
(40)
Total comprehensive loss
$ (23,232)
$ (7,175)
$ (30,425)
Statements of Stockholders' Equity (USD $)
In Thousands, except Share data
Total
Common Stock
Additional Paid-in Capital
Accumulated Deficit
Accumulated Other Comprehensive Income/(Loss)
Beginning Balance at Dec. 31, 2009
$ 54,982 
$ 538 
$ 341,302 
$ (287,370)
$ 512 
Beginning Balance, shares at Dec. 31, 2009
 
53,781,000 
 
 
 
Net loss
(30,385)
 
 
(30,385)
 
Other comprehensive loss
(30,425)
 
 
 
(40)
Issuance of common stock
32,179 
153 
32,026 
 
 
Issuance of common stock, shares
 
15,368,000 
 
 
 
Exercise of stock options, warrants and issuance of common stock underlying restricted stock units
4,990 
25 
4,965 
 
 
Exercise of stock options, warrants and issuance of common stock underlying restricted stock units, shares
 
2,491,000 
 
 
 
Non-cash compensation expense related to grant of equity based compensation
2,636 
 
2,636 
 
 
Ending Balance at Dec. 31, 2010
64,362 
716 
380,929 
(317,755)
472 
Ending Balance, shares at Dec. 31, 2010
 
71,640,000 
 
 
 
Net loss
(7,283)
 
 
(7,283)
 
Other comprehensive loss
(7,175)
 
 
 
108 
Exercise of stock options and issuance of common stock underlying restricted stock units, value
55 
3 
52 
 
 
Exercise of stock options and issuance of common stock underlying restricted stock units, shares
 
273,000 
 
 
 
Non-cash compensation expense related to grant of equity based compensation
3,106 
 
3,106 
 
 
Ending Balance at Dec. 31, 2011
60,348 
719 
384,087 
(325,038)
580 
Ending Balance, shares at Dec. 31, 2011
 
71,913,000 
 
 
 
Net loss
(22,899)
 
 
(22,899)
 
Other comprehensive loss
(23,232)
 
 
 
(333)
Issuance of common stock
48,709 
139 
48,570 
 
 
Issuance of common stock, shares
 
13,909,000 
 
 
 
Exercise of stock options and issuance of common stock underlying restricted stock units, value
(29)
3 
(32)
 
 
Exercise of stock options and issuance of common stock underlying restricted stock units, shares
 
314,000 
 
 
 
Non-cash compensation expense related to grant of equity based compensation
3,290 
 
3,290 
 
 
Ending Balance at Dec. 31, 2012
$ 89,086 
$ 861 
$ 435,915 
$ (347,937)
$ 247 
Ending Balance, shares at Dec. 31, 2012
 
86,136,000 
 
 
 
Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Cash flows from operating activities:
 
 
 
Net loss
$ (22,899)
$ (7,283)
$ (30,385)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
1,984 
2,298 
2,808 
Write-off of abandoned patents
71 
75 
148 
Gain on sale of property and equipment
(9)
 
 
Compensation expense related to stock options and awards
3,290 
3,106 
2,636 
Changes in operating assets and liabilities:
 
 
 
Receivables and other assets
977 
(1,923)
409 
Accounts payable and accrued expenses
(792)
(51)
(1,771)
Deferred revenue
51 
99 
(1,990)
Deferred rent
(247)
(169)
(83)
Net cash used in operating activities
(17,574)
(3,848)
(28,228)
Cash flows from investing activities:
 
 
 
Proceeds from the sale of marketable securities
3,750 
 
 
Maturities of marketable securities
22,495 
20,429 
31,815 
Purchases of marketable securities
(51,842)
(24,598)
(18,549)
Purchases of property and equipment
(646)
(256)
(347)
Proceeds from the sale of property and equipment
9 
 
 
Patent and licensed technology expenditures
(409)
(406)
(413)
Net cash (used in) provided by investing activities
(26,643)
(4,831)
12,506 
Cash flows from financing activities:
 
 
 
Net proceeds from issuance of common stock
48,933 
214 
37,261 
Payment of withholding taxes for net settlement of restricted stock units
(253)
(159)
(92)
Net cash provided by financing activities
48,680 
55 
37,169 
Net increase (decrease) in cash and cash equivalents
4,463 
(8,624)
21,447 
Cash and cash equivalents at beginning of year
38,696 
47,320 
25,873 
Cash and cash equivalents at end of year
43,159 
38,696 
47,320 
Supplemental information:
 
 
 
Interest paid
   
   
   
Organization and Summary of Significant Accounting Policies
Organization and Summary of Significant Accounting Policies

1. Organization and Summary of Significant Accounting Policies

Organization and Business Activity

Vical Incorporated, or the Company, a Delaware corporation, was incorporated in April 1987 and has devoted substantially all of its resources since that time to its research and development programs. The Company researches and develops biopharmaceutical products based on its patented DNA delivery technologies for the prevention and treatment of serious or life-threatening diseases.

All of the Company’s potential products are in research and development phases. No revenues have been generated from the sale of any such products, nor are any such revenues expected for at least the next several years. The Company earns revenue from research and development agreements with pharmaceutical collaborators and grant and contract arrangements with government entities. Most of the Company’s product candidates will require significant additional research and development efforts, including extensive preclinical and clinical testing. All product candidates that advance to clinical testing will require regulatory approval prior to commercial use, and will require significant costs for commercialization. There can be no assurance that the Company’s research and development efforts, or those of its collaborators, will be successful. The Company expects to continue to incur substantial losses and not generate positive cash flows from operations for at least the next several years. No assurance can be given that the Company can generate sufficient product revenue to become profitable or generate positive cash flows from operations.

Basis of Presentation

These financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The Company has evaluated all subsequent events through the date and time its financial statements were issued.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes. Actual results could differ materially from those estimates.

Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents consist of cash and highly liquid securities with original maturities at the date of acquisition of ninety days or less. Investments with an original maturity of more than ninety days are considered marketable securities and have been classified by management as available-for-sale. These investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current balance sheet date which reflects management’s intention to use the proceeds from sales of these securities to fund its operations, as necessary. Such investments are carried at fair value, with unrealized gains and losses included as a separate component of stockholders’ equity. Realized gains and losses from the sale of available-for-sale securities or the amounts, net of tax, reclassified out of accumulated other comprehensive income, if any, are determined on a specific identification basis.

Restricted Cash and Marketable Securities

The Company is required to maintain a letter of credit securing an amount equal to twelve months of the current monthly installment of base rent for the term of the lease for its facilities, which ends in August 2017. Under certain circumstances the Company may be able to eliminate the need for the letter of credit. At December 31, 2012 and 2011, restricted cash of $3.1 million and $3.0 million, respectively, was pledged as collateral for the letter of credit.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash equivalents, marketable securities and receivables. The Company invests its excess cash in debt instruments of financial institutions and of corporations with strong credit ratings, in U.S. government obligations, and in money market funds and certificates of deposits at financial institutions.

Property and Equipment

Property and equipment is recorded at cost and depreciation is computed using the straight-line method over the estimated useful lives of the assets. Assets acquired pursuant to capital lease arrangements and leasehold improvements are amortized using the straight-line method over the shorter of the life of the remaining lease term or the remaining useful life of the asset. Manufacturing equipment has estimated useful lives of ten years. All other property and equipment have estimated useful lives of 3 to 5 years. Maintenance and repairs of property and equipment are expensed as incurred.

Intangible Assets

Intangible assets include licensed technology rights and certain costs related to patent applications. The Company capitalizes license fees paid to acquire access to proprietary technology if the technology is expected to have alternative future use in multiple research and development projects. The cost of licensed technology rights is amortized using the straight-line method over the estimated useful life of the technology. Certain costs related to patent applications are amortized over the estimated economic lives of the patents, which is generally 20 years and typically commences at the time the patent application is filed. Amortization expense for licensed technology and capitalized patent cost is included in research and development expenses.

Impairment of Long-lived Assets

The Company reviews long-lived assets for impairment at least annually, quarterly for intangible assets, and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount of the asset over the asset’s fair value and the loss recognized in current earnings. The Company recognized research and development expense of approximately $0.1 million for each of the years ended December 31, 2012, 2011 and 2010, related to patents for which the value was deemed to be impaired. The Company believes the future cash flows to be received from its remaining long-lived assets will exceed the assets’ carrying value, and accordingly has not recognized any additional impairment losses.

Revenue Recognition

Revenue is recognized when the four basic criteria of revenue recognition are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. Certain of the Company’s revenue is generated through manufacturing contracts and stand-alone license agreements.

The Company has entered into multiple-element arrangements. In order to account for the multiple-element arrangements, the Company identifies the deliverables included within the agreement and evaluates which deliverables represent separate units of accounting. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation.

Multiple-element arrangements after January 1, 2011

Effective January 1, 2011, the Company follows the provisions of ASU No. 2009-13 for all multiple element agreements, including contract manufacturing, contract services and license agreements. Under the revised guidance, the delivered item(s) has value to the customer on a standalone basis and, if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in the Company’s control.

A delivered item is considered a separate unit of accounting when the delivered item has value to the partner on a standalone basis based on the consideration of the relevant facts and circumstances for each arrangement. Factors considered in this determination include the research capabilities of the partner and the availability of research expertise in this field in the general marketplace. Arrangement consideration is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence, or VSOE, of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists, the Company uses its best estimate of the selling price for the deliverable. The amount of allocable arrangement consideration is limited to amounts that are fixed or determinable. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. Changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement. If facts and circumstances dictate that the license has standalone value from the undelivered items, which generally include research and development services and the manufacture of drug products, the license is identified as a separate unit of accounting and the amounts allocated to the license are recognized upon the delivery of the license, assuming the other revenue recognition criteria have been met. However, if the amounts allocated to the license through the relative selling price allocation exceed the upfront license fee, the amount recognized upon the delivery of the license is limited to the upfront fee received. If facts and circumstances dictate that the license does not have standalone value, the transaction price, including any upfront license fee payments received, are allocated to the identified separate units of accounting and recognized as those items are delivered.

The terms of the Company’s partnership agreements provide for milestone payments upon achievement of certain regulatory and commercial events. Effective January 1, 2011, the Company adopted on a prospective basis the Milestone Method of accounting under ASU 2010-17. Under the Milestone Method, the Company recognizes consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following three criteria: 1) The consideration is commensurate with either the entity’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone, 2) The consideration relates solely to past performance, and 3) The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. A milestone is defined as an event (i) that can only be achieved based in whole or in part on either the entity’s performance or on the occurrence of a specific outcome resulting from the entity’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and (iii) that would result in additional payments being due to the Company.

 

Multiple-element arrangements prior to January 1, 2011

Prior to adopting the revised multiple element guidance on January 1, 2011, the Company analyzed its multiple element arrangements to determine whether the identified deliverables could be accounted for individually as separate units of accounting. The delivered item(s) were considered a separate unit of accounting if all of the following criteria were met: (1) the delivered item(s) has value to the customer on a standalone basis; (2) there is objective and reliable evidence of the fair value of the undelivered item(s); and (3) if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in the Company’s control. If these criteria were not met, the deliverable was combined with other deliverables in the arrangement and accounted for as a combined unit of accounting.

Contract Services, Grant and Royalty Revenue

The Company recognizes revenues from contract services and federal government research grants during the period in which the related expenditures are incurred and related payments for those services are received or collection is reasonably assured. Royalties to be received based on sales of licensed products by the Company’s partners incorporating the Company’s licensed technology are recognized when received.

Accruals for Potential Disallowed Costs on Government Contracts

The Company has contracts with U.S. government agencies under which it bills for direct and indirect costs incurred. These billed costs are subject to audit by government agencies. The Company established accruals of approximately $49,000 at each of December 31, 2012 and 2011 to provide for potential disallowed costs. In the event that the final costs allowed are different from what the Company has estimated, the Company may need to make a change in its estimated accrual, which could also affect its results of operations and cash flow.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development costs include salaries and personnel-related costs, supplies and materials, outside services, costs of conducting preclinical and clinical trials, facilities costs and amortization of intangible assets. The Company accounts for its clinical trial costs by estimating the total cost to treat a patient in each clinical trial, and accruing this total cost for the patient over the estimated treatment period, which corresponds with the period over which the services are performed, beginning when the patient enrolls in the clinical trial. This estimated cost includes payments to the site conducting the trial, and patient-related lab and other costs related to the conduct of the trial. Cost per patient varies based on the type of clinical trial, the site of the clinical trial, the method of administration of the treatment, and the number of treatments that a patient receives. Treatment periods vary depending on the clinical trial. The Company makes revisions to the clinical trial cost estimates in the current period, as clinical trials progress.

Manufacturing and Production Costs

Manufacturing and production costs include expenses related to manufacturing contracts and expenses related to the production of plasmid DNA for use in the Company’s research and development efforts. Manufacturing expenses related to manufacturing contracts are deferred and expensed when the related revenue is recognized. Production expenses related to the Company’s research and development efforts are expensed as incurred.

 

Net Loss Per Share

Basic and diluted net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period. The weighted-average number of shares used to compute diluted loss per share excludes any assumed exercise of stock options, and the assumed issuance of common stock under restricted stock units, or RSUs, as the effect would be antidilutive. Common stock equivalents of 1.4 million, 1.4 million and 0.7 million for the years ended December 31, 2012, 2011 and 2010, respectively, were excluded from the calculation because of their antidilutive effect.

Fair Value of Financial Instruments

The carrying amounts of cash, cash equivalents, restricted marketable securities, marketable securities, receivables, accounts payable and accrued expenses at December 31, 2012 and 2011, are considered to reasonably approximate fair value because of the short term nature of those items.

Income Taxes

The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. There were no unrecognized tax benefits recorded by the Company as of the date of adoption in 2007. There are no unrecognized tax benefits included in the balance sheets that would, if recognized, affect the effective tax rate.

Deferred income taxes result primarily from temporary differences between financial and tax reporting. Deferred tax assets and liabilities are determined based on the difference between the financial statement bases and the tax bases of assets and liabilities using enacted tax rates. A valuation allowance is established to reduce a deferred tax asset to the amount that is expected more likely than not to be realized.

Comprehensive Loss

Comprehensive loss consists of net loss and certain changes in equity that are excluded from net loss. Comprehensive loss for the years ended December 31, 2012, 2011 and 2010, has been reflected in the Statements of Comprehensive Loss. Accumulated other comprehensive income (loss), which is included in stockholders’ equity, represents unrealized gains and losses on marketable securities.

Business Segments

The Company operates in one business segment, which is within the United States, and is dedicated to research and development of DNA delivery technology.

Share-Based Compensation

The Company records its compensation expense associated with stock options and other forms of equity compensation based on their fair value at the date of grant using the Black-Scholes-Merton option pricing model. Stock-based compensation includes amortization related to stock option awards based on the estimated grant date fair value. Stock-based compensation expense related to stock options includes an estimate for forfeitures and the portion that is ultimately expected to vest is recognized ratably over the vesting period of the option. In addition, the Company records expense related to RSUs granted based on the fair value of those awards on the grant date. The fair value related to the RSUs is amortized to expense over the vesting term of those awards. Stock-based compensation expense related to RSUs includes an estimate for forfeitures and is recognized over the expected term of the award using the straight-line method. The expected forfeiture rate of all equity based compensation is based on observed historical patterns of the Company’s employees and is estimated to be 11.2% annually for each of the years ended December 31, 2012, 2011 and 2010.

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton valuation model using the assumptions noted in the following table. The expected life of options is based on the Company’s observed historical exercise patterns. The expected volatility of stock options is based upon the historical volatility of the Company’s stock. The risk-free interest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option. The dividend yield reflects that the Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future.

 

             
    Years Ended December 31,
    2012   2011   2010

Assumptions:

            

Assumed risk-free interest rate

   0.80%   1.90%   2.44%

Assumed volatility

   72%   68%   66%

Average expected option life

   4.5 years   4.5 years   4.5 years

Expected dividend yield

   —     —     —  

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board, or FASB, issued authoritative guidance regarding comprehensive income. This newly issued accounting standard allows an entity to have the option to present the components of net income and comprehensive income in either one or two consecutive financial statements. The guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in stockholders’ equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. The guidance was effective for fiscal years and interim periods beginning after December 15, 2011. The Company adopted these provisions as of January 1, 2012. The adoption did not have a material impact on the Company’s financial position or results of operations.

In May 2011, the FASB issued authoritative guidance regarding common fair value measurements and disclosure requirements in U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards. This newly issued accounting standard clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable inputs. This guidance was effective on a prospective basis for annual and interim reporting periods beginning on or after December 15, 2011. The Company adopted these provisions as of January 1, 2012. The adoption did not have a material impact on the Company’s financial position or results of operations.

 

Short-Term Marketable Securities
Short-Term Marketable Securities

2. Short-Term Marketable Securities

The following is a summary of short-term marketable securities classified as available-for-sale (in thousands):

 

                                 

December 31, 2012

   Amortized
Cost		     Unrealized
Gain		     Unrealized
Loss		     Market
Value		  

U.S. treasuries

   $ 10,135     $           1     $         —       $ 10,136  

Government-sponsored enterprise securities

     15,507       —         1       15,506  

Corporate bonds

     11,509       —         8       11,501  

Certificate of deposit

     496       —         —         496  
   

 

 

    

 

 

    

 

 

    

 

 

  
    $ 37,647     $ 1     $ 9     $ 37,639  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

December 31, 2011

   Amortized
Cost		     Unrealized
Gain		     Unrealized
Loss		     Market
Value		  

U.S. treasuries

   $ 1,008     $ 2     $ —       $ 1,010  

Government-sponsored enterprise securities

     7,200       —         2       7,198  

Certificate of deposit

     525       —         —          525  
   

 

 

    

 

 

    

 

 

    

 

 

  
    $ 8,733     $ 2     $ 2     $ 8,733  
   

 

 

    

 

 

    

 

 

    

 

 

  

At December 31, 2012, $17.9 million of these securities were scheduled to mature outside of one year. There were no net realized gains (losses) on sales of available-for-sale securities for the years ended December 31, 2012, 2011 and 2010. None of these investments have been in a continuous unrealized loss position for more than 12 months as of December 31, 2012 and 2011.

Long-Term Investments
Long-Term Investments

3. Long-Term Investments

As of December 31, 2012, the Company held an auction rate security with a par value of $2.5 million. This auction rate security has not experienced a successful auction since the liquidity issues experienced in the global credit and capital markets in 2008. As a result the security is classified as a long-term investment as it is scheduled to mature in 2038. The security was rated BBB by Standard and Poor’s as of December 31, 2012. The security continues to pay interest according to its stated terms.

The valuation of the Company’s auction rate security is subject to uncertainties that are difficult to predict. The fair value of the security is estimated utilizing a discounted cash flow analysis. The key drivers of the valuation model include the expected term, collateral underlying the security investment, the creditworthiness of the counterparty, the timing of expected future cash flows, discount rates, liquidity and the expected holding period. The security was also compared, when possible, to other observable market data for securities with similar characteristics. Based on the valuation of the security, the Company has recognized cumulative losses of $0.5 million as of December 31, 2012, none of which were realized during the year ended December 31, 2012. The losses when recognized are included in investment and other income. The market value of the security has partially recovered. Included in other comprehensive income are unrealized gains of $0.1 million and $0.3 million for the years ended December 31, 2012 and 2011, respectively. As of December 31, 2012, the Company had recorded cumulative unrealized gains of $0.4 million. The resulting carrying value of the auction rate security at December 31, 2012, was $2.2 million. Any future decline in market value may result in additional losses being recognized.

 

Fair Value Measurements
Fair Value Measurements

4. Fair Value Measurements

The Company measures fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements are based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

  •  

Level 1: Observable inputs such as quoted prices in active markets;

 

  •  

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

 

  •  

Level 3: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

Cash equivalents, marketable securities and long-term investments measured at fair value are classified in the table below in one of the three categories described above (in thousands):

 

                                 
    Fair Value Measurements  

December 31, 2012

   Level 1     Level 2     Level 3     Total  

Certificates of deposit

   $ 496     $ —       $ —       $ 496  

Money market funds

     18,500       —         —         18,500  

U.S. treasuries

     10,136       —         —         10,136  

Corporate bonds

     —         11,501       —         11,501  

Government-sponsored enterprise securities

     —         15,506       —         15,506  

Auction rate securities

     —         —         2,225       2,225  
   

 

 

    

 

 

    

 

 

    

 

 

  
    $ 29,132     $ 27,007     $ 2,225     $ 58,364  
   

 

 

    

 

 

    

 

 

    

 

 

  
   
    Fair Value Measurements  

December 31, 2011

   Level 1     Level 2     Level 3     Total  

Certificates of deposit

   $ 525     $ —       $ —       $ 525  

Money market funds

     12,778       —         —         12,778  

U.S. treasuries

     1,010       —         —         1,010  

Government-sponsored enterprise securities

     —         7,198       —         7,198  

Auction rate securities

     —         —         5,928       5,928  
   

 

 

    

 

 

    

 

 

    

 

 

  
    $ 14,313     $ 7,198     $ 5,928     $ 27,439  
   

 

 

    

 

 

    

 

 

    

 

 

  

The Company’s investments in U.S. treasury securities, certificates of deposit and money market funds are valued based on publicly available quoted market prices for identical securities as of December 31, 2012. The Company determines the fair value of other government-sponsored enterprise related securities with the aid of valuations provided by third parties using proprietary valuation models and analytical tools. These valuation models and analytical tools use market pricing or similar instruments that are both objective and publicly available, including matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids and/or offers. The Company validates the valuations received from its primary pricing vendors for its level 2 securities by examining the inputs used in that vendor’s pricing process and determines whether they are reasonable and observable. The Company also compares those valuations to recent reported trades for those securities. The Company did not adjust any of the valuations received from these third parties with respect to any of its level 2 securities at December 31, 2012. The valuation of the Company’s investment in auction rate securities is more fully described in Note 3.

Activity for assets measured at fair value using significant unobservable inputs (Level 3) is presented in the table below (in thousands):

 

         

Balance at December 31, 2011

   $ 5,928  

Total net realized gains included in earnings

     (590 ) 

Total net unrealized gains included in other comprehensive income

     47  

Net transfers in and/out of Level 3

     (3,160 ) 
   

 

 

  

Balance at December 31, 2012

   $ 2,225  
   

 

 

  

Amount of total losses for the period included in net loss attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2012

   $ —    
   

 

 

  

The Company transferred $6.5 million of its long-term investments into the Level 3 category during the year ended December 31, 2008. Total unrealized losses of $0.5 million relate to Level 3 assets still held as of December 31, 2012. There were no unrealized losses related to Level 3 assets included in earnings for the year ended December 31, 2012, 2011 and 2010, respectively.

Other Balance Sheet Accounts
Other Balance Sheet Accounts

5. Other Balance Sheet Accounts

Property and equipment consisted of the following at December 31 (in thousands):

 

                 
    2012     2011  

Equipment

   $ 19,660     $ 19,147  

Leasehold improvements

     7,992       7,992  
   

 

 

    

 

 

  
      27,652       27,139  

Less accumulated depreciation and amortization

     (22,368 )      (20,913 ) 
   

 

 

    

 

 

  
    $ 5,284     $ 6,226  
   

 

 

    

 

 

  

Depreciation and amortization of equipment and leasehold improvements for the years ended December 31, 2012, 2011 and 2010, was $1.6 million, $1.6 million and $2.0 million, respectively.

Intangible assets consisted of the following at December 31 (in thousands):

 

                 
    2012     2011  

Licensed technology rights

   $ 4,015     $ 4,015  

Patent application costs

     6,420       6,093  
   

 

 

    

 

 

  
      10,435       10,108  

Accumulated amortization licensed technology rights

     (3,931 )      (3,906 ) 

Accumulated amortization patent costs

     (3,691 )      (3,331 ) 
   

 

 

    

 

 

  
    $ 2,813     $ 2,871  
   

 

 

    

 

 

  

Amortization of licensed technology rights and patent application costs for the years ended December 31, 2012, 2011 and 2010, was $0.4 million, $0.7 million and $0.8 million, respectively. Estimated annual amortization for these assets for each of the years in the period from 2013 to 2017 is $0.4 million, $0.4 million, $0.3 million, $0.3 million and $0.2 million, respectively.

 

Accounts payable and accrued expenses consisted of the following at December 31 (in thousands):

 

                 
    2012     2011  

Employee compensation

   $ 3,858     $ 3,653  

Clinical trial accruals

     660       1,681  

Accounts payable

     377       351  

Deferred rent

     307       247  

Other accrued liabilities

     427       430  
   

 

 

    

 

 

  
    $ 5,629     $ 6,362  
   

 

 

    

 

 

  
Significant Contracts, Grants, License and Royalty Agreements
Significant Contracts, Grants, License and Royalty Agreements

6. Significant Contracts, Grants, License and Royalty Agreements

Contract and Grant Agreements

Astellas

In July 2011, the Company entered into license agreements with Astellas Pharma Inc., or Astellas, granting Astellas exclusive, worldwide, royalty-bearing licenses under certain of the Company’s know-how and intellectual property to develop and commercialize certain products containing plasmids encoding certain forms of glycoprotein B and/or phosphoprotein 65, including TransVax™ but excluding CyMVectin™. Under the agreements, Astellas is responsible for the worldwide development and commercialization of products in the licensed field, at its expense, and has agreed to use commercially reasonable efforts to develop, obtain regulatory approval for and commercialize at least one licensed product for use in certain immunocompromised patients in the licensed field in the United States and certain other major markets. Under the terms of the license agreements, Astellas paid a nonrefundable upfront license fee of $25.0 million.

In 2012 the Company received a $10.0 million milestone payment upon finalization of the trial design for a Phase 3 registration trial of TransVax™ in hematopoietic stem cell transplant recipients. The Company is also entitled to receive additional cash payments potentially totaling $95.0 million for achievement of certain milestones through commercial launch and to receive double-digit royalties on net sales of products. In addition, the Company has an option to co-promote TransVax™ in the United States. Under the terms of a supply and services agreement entered into by the Company and Astellas on the same date, the Company agreed to perform certain development and regulatory activities, at Astellas’ expense, and to supply licensed products to Astellas, at Astellas’ expense, for use in development and initial commercialization activities in the licensed field.

In August 2012 the Company amended its license and supply agreements with Astellas to, among other things, extend the time period that the Company is obligated to supply licensed products for commercial use to Astellas, at Astellas’ expense, modify the allocation of $95.0 million of milestone payments among certain milestones through commercial launch and modify the structure of the royalties on net sales from a fixed double digit royalty to tiered double digit royalties.

The Company identified the deliverables at the inception of the agreements. The Company has determined that the license and related know-how, the development and regulatory services and the drug product supply individually represent separate units of accounting, because each deliverable has standalone value. The best estimated selling prices for these units of accounting was determined based on market conditions, the terms of comparable collaborative arrangements for similar technology in the pharmaceutical and biotechnology industry and entity-specific factors, such as the terms of the Company’s previous collaborative agreements, the Company’s pricing practices and pricing objectives and the nature of the research and development services to be performed for the partner. The arrangement consideration was allocated to the deliverables based on the relative selling price method.

 

However, the amount of allocable arrangement consideration is limited to amounts that are fixed or determinable; therefore, the amount allocated to the licenses was limited to the extent of cash received. As a result, during the years ended December 31, 2012 and 2011, the Company recognized $10.7 million and $25.3 million, respectively, related to the license fee and know-how. The Company will recognize the amounts allocated to research and development services as revenues under the agreements as the related services are delivered and as reimbursements are received. During the years ended December 31, 2012 and 2011, the Company recognized $3.9 million and $2.7 million, respectively, of revenue related to contract services delivered. The Company will recognize as revenue the amounts allocated to the sales of drug product when the sale of that drug product has met all required specifications and the related title and risk of loss and damages have passed to Astellas. During the years ended December 31, 2012 and 2011, the Company recognized $1.8 million and $0.0 million, respectively, of revenue related to drug product delivered. The Company is eligible to receive additional cash payments upon the achievement of specified regulatory and commercial milestones. The Company has determined that each of the regulatory and commercial milestones meets the definition of a milestone and that each milestone is substantive in accordance with the milestone method of revenue recognition. Accordingly, the Company expects to recognize such regulatory and commercial milestone payments as revenues under the agreements upon achievement of each milestone.

AnGes Research and Development Agreement

On May 25, 2006, the Company entered into a research and development agreement, or R&D Agreement, with AnGes MG, Inc., or AnGes, whereby AnGes agreed to fund, up to certain limits, the Company’s Allovectin ® Phase 3 clinical trial. The funding consisted of purchases by AnGes of $10.85 million of restricted shares of the Company’s common stock and additional non-refundable cash payments by AnGes of up to $11.8 million. The Company and AnGes have agreed to share project costs, up to certain limits, that are in excess of $22.6 million. All of the funding provided by AnGes, including those funds used to purchase the Company’s common stock, must be used for actual and documented costs related to the conduct of the Allovectin ® Phase 3 trial.

Under the R&D Agreement, the Company has granted to AnGes exclusive marketing rights for Allovectin® in specified countries in Asia and AnGes has agreed to pursue regulatory approvals in those countries, subject to receipt by the Company of regulatory approval in the United States. The Company has also granted AnGes certain royalty-bearing licenses to its technology and know-how. AnGes is obligated to pay royalties to the Company on sales of Allovectin® in specified countries in Asia. AnGes also obtained the right to receive royalties from the Company on any commercial sales of Allovectin® in the United States outside specified Asian countries. AnGes may also purchase supplies of Allovectin® from the Company for resale by AnGes in Asia.

The first equity installment of $6.9 million was received by the Company upon execution of the R&D Agreement and a related stock purchase agreement. In accordance with the terms of the stock purchase agreement AnGes was issued 1,061,538 shares of the Company’s restricted common stock at $6.50 per share in exchange for the first installment. The second equity installment of $3.95 million was received by the Company during 2008. In accordance with the terms of the stock purchase agreement AnGes was issued 1,109,550 shares of the Company’s restricted common stock at $3.56 per share in exchange for the second installment.

Under the stock purchase agreement, the Company has also granted AnGes limited rights to require the Company to register the shares of common stock under the Securities Act of 1933, as amended, upon the occurrence of certain events. AnGes has also agreed to certain transfer restrictions with respect to the shares of common stock sold under the stock purchase agreement and has further agreed to certain standstill provisions whereby AnGes will refrain from acquiring or taking certain other actions with respect to the Company’s common stock, subject to certain exceptions.

 

The Company has received total cash installments of $11.8 million from AnGes under the agreement. Revenue of $0.0 million, $0.0 million and $2.0 million has been recognized during the years ended December 31, 2012, 2011 and 2010, respectively, based on the ratio of actual costs incurred to total estimated costs expected to be incurred.

U.S. Navy

In 2009, the Company entered into a Cooperative Research and Development Agreement, or CRADA, with the Naval Medical Research Center, or NMRC, to develop an H1N1 DNA vaccine formulated with the Company’s Vaxfectin® adjuvant. Under the agreement, the Company was obligated to manufacture the vaccine and adjuvant, perform preclinical studies, file an IND with the FDA, and develop a clinical immunoassay. These activities were being funded under a $1.3 million contract with the U.S. government. NMRC plans to utilize the vaccine in a Phase 1 clinical trial which began in 2010. The Company recognized $0.7 million in revenue related to this contract in 2010.

In 2010, the Company entered into a $0.8 million contract with the U.S. Navy, through the Henry M. Jackson Foundation for the Advancement of Military Medicine, Inc., to conduct a Phase 1 clinical trial of the company’s Vaxfectin®-formulated DNA vaccine against A/H1N1 pandemic influenza utilizing the vaccine the Company manufactured under the 2009 CRADA with the NMRC. The Company recognized $0.8 million in revenue related to this contract in 2010.

IPPOX Foundation

In 2010, the Company entered into an agreement to manufacture bulk plasmid DNA vaccines against HIV under a $2.4 million contract with the IPPOX Foundation, a collaborating institution for the Poxvirus Vaccine Regimen Design led by the Centre Hospitalier Universitaire Vaudois under the auspices of the Collaboration for AIDS Vaccine Discovery. The Company recognized $2.4 million in revenue related to this contract in 2010.

Government Grants

In 2008, the Company was awarded a two-year, $2.0 million Phase II Small Business Technology Transfer grant from the National Institute of Allergy and Infectious Diseases, or NIAID, of the National Institutes of Health, or NIH. The grant period was extended to allow preclinical development to continue for a third year. The grant will fund the ongoing development of the Company’s immunotherapeutic plasmid DNA vaccine against herpes simplex virus type 2, or HSV-2. The Company recognized $0.0 million, $0.2 million and $0.7 million in revenue under this grant in 2012, 2011 and 2010, respectively.

In 2007, the Company was awarded funding for a three-year, $6.0 million grant from the NIAID for development of a DNA vaccine manufacturing process with the potential to produce several million doses of vaccines in a matter of days. The grant period was extended to allow preclinical development to continue for a fourth year. The Company recognized $0.0 million, $0.9 million and $1.5 million in revenue under this grant in 2012, 2011 and 2010, respectively.

In-licensing Agreements

City of Hope

In 2003 the Company licensed from the City of Hope on an exclusive basis various U.S. patents that provide protection for CMV-related polynucleotide based vaccines, including TransVax TM and CyMVectinTM vaccine candidates. The agreement expires upon the last to expire of the patent rights licensed by the Company under the agreement, unless earlier terminated as set forth in the agreement. The City of Hope may terminate the agreement early, in accordance with notice provisions set forth in the agreement, if the Company ceases to operate, fails to make payments when due or materially breaches the agreement. Subject to certain conditions, the Company may terminate the agreement early at any time upon prior written notice to the City of Hope. The Company is also obligated to pay a low double-digit percentage of any payments it receives from the sub-license of products that incorporate the licensed technology. The Company paid the City of Hope $2.6 million, $2.0 million and $0.1 million under the agreement for the years ended December 31, 2012, 2011 and 2010, respectively.

CytRx

In 2001, the Company entered into an exclusive agreement with CytRx which grants to the Company the rights to use or sublicense CytRx’s poloxamer technology to enhance viral or non-viral delivery of polynucleotides in all preventive and therapeutic human and animal health applications, including CMV. The agreement excludes applications for four infectious disease vaccine targets that had been licensed to Merck and prostate-specific membrane antigen. In addition, the agreement permits the Company’s use of CytRx’s technology to enhance the delivery of proteins in prime-boost vaccine applications that involve the use of polynucleotides. As part of the agreement, the Company made a $3.8 million up-front payment and agreed to make potential future milestone and royalty payments. The license fee is fully amortized.

Wisconsin Alumni Research Foundation and University of Michigan License Agreements

The Company has research and exclusive license agreements with the Wisconsin Alumni Research Foundation, or WARF, and the University of Michigan for continuing research and license rights to technology related to DNA delivery. The agreements grant the Company the right to commercialize any product derived from specified technology. The fees paid by the Company under these agreements are expensed as incurred.

Under the Merck, Sanofi, AnGes, Merial and Aqua Health agreements, the Company is required to pay up to 10% of certain initial upfront monetary payments, and a small percentage of some royalty payments, to the WARF. The CytRx, University of Michigan, and other license agreements require the Company to make payments if the Company or its sublicensees advance products through clinical development. For programs developed with the support of U.S. government funding, the U.S. government may have rights to resulting products without payment of royalties.

Milestone Payments

The Company may be required to make future payments to its licensors based on the achievement of milestones set forth in various in-licensing agreements. In most cases, these milestone payments are based on the achievement of development or regulatory milestones, including the exercise of options to obtain licenses related to specific disease targets, commencement of various phases of clinical trials, filing of product license applications, approval of product licenses from the FDA or a foreign regulatory agency, and the first commercial sale of a related product. Payment for the achievement of milestones under the Company’s in-license agreements is highly speculative and subject to a number of contingencies.

The aggregate amount of additional milestone payments that the Company could be required to pay under all of its in-license agreements in place at December 31, 2012, is approximately $15.1 million, of which approximately $7.2 million is related to the Company’s independent programs and corporate and government collaborations which are currently in clinical trials. These amounts assume that all remaining milestones associated with the milestone payments are met. In the event that product license approval for any of the related products is obtained, the Company may be required to make royalty payments in addition to these milestone payments. Although the Company believes that some of the milestones contained in its in-license agreements may be achieved, it is highly unlikely that a significant number of them will be achieved. Because the milestones are contingent the Company is not in a position to reasonably estimate how much, if any, of the potential milestone payments will ultimately be paid. Additionally, under the in-license agreements, many of the milestone events are related to progress in clinical trials which will take several years to achieve.

Commitments and Contingencies
Commitments and Contingencies

7. Commitments and Contingencies

Facility Leases

The Company is currently leasing its facility which has approximately 68,400 square feet of manufacturing, research laboratory and office space. The lease expires in August 2017. The Company has the option to renew the lease for three additional five-year periods beyond its expiration.

The lease related to the facility is treated as an operating lease. The minimum annual rent on the facility is subject to increases specified in the lease. The Company is also required to pay taxes, insurance and operating costs under the facility lease. The Company recognizes level monthly rent for its facility lease over the entire lease period. The monthly rent is calculated by adding the total rent payments over the entire lease period and then dividing the result by the total term of the lease. The $2.0 million difference between the base rent paid and the rent expensed through December 31, 2012 is recorded as deferred rent in the balance sheet. Rent expense for the years ended December 31, 2012, 2011 and 2010 was $2.9 million, $2.9 million and $2.9 million, respectively.

At December 31, 2012, future minimum rental payments due under the Company’s facilities lease were as follows (in thousands):

 

         

Year ending December 31,

        

2013

   $ 3,372  

2014

     3,440  

2015

     3,509  

2016

     3,579  

2017

     2,417  

Thereafter

     —    
   

 

 

  

Total lease payments

   $ 16,317  
   

 

 

  

Other Contingencies

The Company prosecutes its intellectual property estate vigorously to obtain the broadest valid scope for its patents. Due to uncertainty of the ultimate outcome of these matters, the impact on future operating results or the Company’s financial condition is not subject to reasonable estimates.

In the ordinary course of business, the Company may become a party to lawsuits involving various matters. The Company is unaware of any such lawsuits presently pending against it which, individually or in the aggregate, are deemed to be material to the Company’s financial condition or results of operations.

Stockholders' Equity
Stockholders' Equity

8. Stockholders’ Equity

As of the date of this filing the Company has on file a shelf registration statement that allows it to raise up to an additional $150.0 million from the sale of common stock, preferred stock, debt securities and/or warrants. Specific terms of any offering under the shelf registration statements and the securities involved would be established at the time of sale.

 

In November 2012, the Company entered into an At-The-Market Equity Offering Sales Agreement, or Sales Agreement, with Stifel, Nicolaus & Company, Incorporated, or Stifel, under which the Company may issue and sell up to $50,000,000 of shares of its common stock from time to time. Under the Sales Agreement, the Company will set the parameters for the sale of shares, including the number of shares to be issued and any minimum price below which sales may not be made. Subject to the terms and conditions of the Sales Agreement, shares may be sold through Stifel acting as sales agent or directly to Stifel acting as principal, by means of ordinary brokers’ transactions on the Nasdaq Global Market, in privately negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices. Any sales other than by methods deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, or the Securities Act, will require the Company’s prior consent. Stifel is obligated to use commercially reasonable efforts in conducting sales activities consistent with its normal trading and sales practices. The Sales Agreement may be terminated by the Company upon prior notice to Stifel or by Stifel upon prior notice to the company, or at any time under certain circumstances, including but not limited to the occurrence of a material adverse change in the company.

The Sales Agreement provides that Stifel will be entitled to compensation for its services in an amount of 2.5% of the gross proceeds from the sale of shares sold through Stifel under the Sales Agreement. The company has no obligation to sell any shares under the Sales Agreement, and may at any time suspend offers under the Sales Agreement. The Company agreed in the Sales Agreement to provide indemnification and contribution to Stifel against certain liabilities, including liabilities under the Securities Act, and to reimburse Stifel for certain legal expenses incurred in connection with the Sales Agreement.

In January 2012, the Company sold 13,333,334 shares of its common stock in a public offering at a price to the public of $3.75 per share. In February 2012, the Company sold an additional 576,358 shares pursuant to a partial exercise of the underwriters’ overallotment option at a price to the public of $3.75 per share. Net proceeds from the offering, after deducting underwriting discounts and commissions and other offering expenses payable by the Company, totaled $48.7 million. All of the shares of common stock were offered pursuant to two effective shelf registration statements.

In September 2010, the Company sold 15.0 million shares of its common stock in a public offering at a price to the public of $2.25 per share. Net proceeds from the offering, after deducting underwriting discounts and commissions and other offering expenses payable by the Company, totaled $31.5 million. In October 2010, the Company sold an additional 368,662 shares pursuant to the exercise of the underwriters’ overallotment option at a price to the public of $2.25 per share. Net proceeds from the overallotment option exercise, after deducting underwriting discounts and commissions and other offering expenses payable by the Company, totaled $0.8 million. All of the shares of common stock were offered pursuant to an effective shelf registration statement.

In the fourth quarter of 2009 and again in the first quarter of 2010, certain of the Company’s investors exercised warrants to purchase an aggregate of 1,967,689 and 2,365,644 shares of common stock, respectively. The Company received net proceeds of $4.2 million and $5.0 million as a result of these exercises in 2009 and 2010, respectively. The warrants were issued in connection with the Company’s May 2009 registered direct offering.

Stock Based Compensation
Stock Based Compensation

9. Stock Based Compensation

On December 31, 2012, the Company had two stock-based compensation plans, which are described below. Total stock-based compensation expense of $3.3 million, $3.1 million and $2.6 million was recognized for the years ended December 31, 2012, 2011 and 2010, respectively.

 

Total stock-based compensation expense was allocated to research and development, manufacturing and production and general and administrative expense as follows (in thousands):

 

                         
    Years ended December 31,  
    2012     2011     2010  

Research and development

   $ 1,035     $ 947     $ 727  

Manufacturing and production

     207       165       281  

General and administrative

     2,048       1,994       1,628  
   

 

 

    

 

 

    

 

 

  

Total stock-based compensation expense

   $ 3,290     $ 3,106     $ 2,636  
   

 

 

    

 

 

    

 

 

  

Cash received from options exercised

   $ 221     $ 212     $ 35  
   

 

 

    

 

 

    

 

 

  

Stock Plan and Directors’ Stock Option Plan

The Company has a stock incentive plan, under which 15,700,000 shares of common stock, subject to adjustment as provided in the plan, are reserved for issuance to employees, non-employee directors and consultants of the Company. As of December 31, 2012 there were 13,702,618 shares reserved for future issuance under the plan. The plan provides for the grant of incentive and nonstatutory stock options and the direct award or sale of shares, including restricted stock. The exercise price of stock options must equal at least the fair market value of the underlying common stock on the date of grant. The maximum term of options granted under the plan is ten years. Except for annual grants to non-employee directors which vest at the next annual meeting, options generally vest 25% on the first anniversary of the date of grant, with the balance vesting quarterly over the remaining three years. The plan also limits the number of options that may be granted to any plan participant in a single calendar year to 1,300,000 shares.

The Company has granted RSUs to executive officers, other executives, and employees under the stock incentive plan. In 2012, 2011, and 2010 the Company granted RSUs covering an aggregate of 258,456, 545,780, and 438,329 shares of common stock, respectively. These RSUs vest 25% on the first anniversary date of the grant, with the remaining rights vesting quarterly over the remaining three years and, once vested, allow the participants to acquire the underlying shares of common stock at par value. The participants are not entitled to sell or transfer any unvested RSUs and are not entitled to vote or receive dividends on any shares of common stock covered by the RSUs prior to the acquisition of such shares. Granted but unvested RSUs are forfeited at termination of employment. Compensation expense related to the RSUs for the years ended December 31, 2012, 2011, and 2010 was approximately $0.8 million, $1.1 million and $0.9 million, respectively.

 

The following table summarizes stock option transactions under the Company’s stock incentive plans for the years ended December 31, 2012, 2011 and 2010:

 

                 
    Shares     Weighted Average
Exercise Price		  

Outstanding December 31, 2009

     4,300,352     $ 5.67  

Granted

     1,722,204     $ 3.35  

Exercised

     (20,123 )    $ 1.75  

Forfeited

     (816,328 )    $ 11.10  
   

 

 

          

Outstanding December 31, 2010

     5,186,105     $ 4.06  
     

Granted

     2,052,000     $ 2.34  

Exercised

     (74,386 )    $ 2.85  

Forfeited

     (208,619 )    $ 5.77  
   

 

 

          

Outstanding December 31, 2011

     6,955,100     $ 3.51  
     

Granted

     1,687,257     $ 3.50  

Exercised

     (96,345 )    $ 2.29  

Forfeited

     (549,443 )    $ 5.94  
   

 

 

          

Outstanding December 31, 2012

     7,996,569     $ 3.36  
   

 

 

          

Vested and unvested options expected to vest as of December 31, 2012

     7,667,133     $ 3.37  

The number of underlying shares and weighted average exercise price of options exercisable at December 31, 2012, 2011 and 2010, were 5,031,587 shares at $3.55, 3,895,520 shares at $4.26, and 2,899,922 shares at $4.84, respectively. The weighted average remaining contractual term of options outstanding and options exercisable at December 31, 2012, was 6.5 years and 5.3 years, respectively. The weighted average remaining contractual term of vested and unvested options expected to vest at December 31, 2012, was 6.4 years. The aggregate intrinsic value of options outstanding and options exercisable at December 31, 2012, was $2.4 million and $1.6 million, respectively. As of December 31, 2012, the total unrecognized compensation cost related to unvested options was $2.1 million, which is expected to be recognized over a weighted-average period of 1.42 years.

The weighted average grant-date fair value of options granted during the years ended December 31, 2012, 2011 and 2010, was $1.88, $1.21 and $1.73 per share, respectively. The total intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010, was $121,000, $124,000 and $9,000, respectively. At December 31, 2012, there were 4,742,239 shares available for grant under the Company’s stock incentive plans.

A summary of the outstanding RSUs as of December 31, 2012, and changes during the year then ended is presented below:

 

                 
    Shares     Weighted Average
Grant-Date Fair
Value per Share		  

Unvested at December 31, 2011

     804,224     $ 2.59  

Granted

     258,456     $ 3.53  

Vested

     (423,457 )    $ 2.70  

Cancelled

     (46,951 )    $ 2.74  
   

 

 

          

Unvested at December 31, 2012

     592,272     $ 2.91  
   

 

 

          

 

The aggregate grant-date fair value of RSUs granted during the years ended December 31, 2012, 2011 and 2010, was $0.9 million, $1.3 million and $1.5 million, respectively. As of December 31, 2012, the total unrecognized compensation cost related to unvested RSUs was $0.9 million, which is expected to be recognized over a weighted average period of 1.80 years. The aggregate grant-date fair value of shares subject to RSUs vested during the years ended December 31, 2012, 2011 and 2010, was $1.1 million, $1.0 million and $0.5 million, respectively. As of December 31, 2012, there were 371,538 shares of common stock underlying RSUs that were fully vested but the issuance of such shares has been deferred.

Income Taxes
Income Taxes

10. Income Taxes

At December 31, 2012, the Company had deferred tax assets of $106.7 million. Due to uncertainties surrounding the Company’s ability to generate future taxable income to realize these assets, a full valuation allowance has been established to offset the net deferred tax asset. Pursuant to Sections 382 and 383 of the Internal Revenue Code, or IRC, annual use of the Company’s net operating loss and credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company determined that such an ownership change occurred on December 29, 2006, as defined in the provisions of Section 382 of the IRC as a result of various stock issuances used to finance the Company’s operations. Such ownership change resulted in annual limitations on the utilization of tax attributes, including net operating loss carryforwards and tax credits. The Company estimates that $101.2 million and $33.3 million of its net operating loss carryforwards will expire unused under Section 382 for federal and California purposes, respectively. A portion of the remaining net operating losses limited by Section 382 become available each year. The Company also estimates that $12.6 million and $0.2 million of its research and development credits and other tax credits will expire unused under Section 383 for federal and California purposes, respectively. As a result of the Section 382 analysis completed during 2012, the Company has included in the deferred tax asset schedule the deferred tax assets for net operating losses of $67.1 million and tax credits of $16.4 million which were previously removed from the deferred tax asset schedule. There was a corresponding increase in the valuation allowance as a result. The company has not performed a Section 382 analysis through December 31, 2012. There is a risk that additional changes in ownership could have occurred since that date. If a change in ownership were to have occurred, additional net operating loss and tax credit carryforwards could be eliminated or restricted. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. The Company has not completed an analysis of uncertain tax positions related to the net operating losses and credits recorded as deferred tax assets. If such analysis is performed at a later date and an uncertain tax position is identified, the related deferred tax asset would be reduced along with a corresponding reduction in the valuation allowance.

The Company’s practice is to recognize interest and/or penalties related to income tax matters as income tax expense. The Company had no accrual for interest or penalties on its balance sheets at December 31, 2012 and 2011, and has not recognized interest and/or penalties in its statement of operations for any of the years ended December 31, 2012, 2011 or 2010.

The Company is subject to taxation in the United States and California. The Company’s tax years for 1996 and forward are subject to examination by the United States and California tax authorities due to the carryforward of unutilized net operating losses and R&D credits.

Significant components of the Company’s deferred tax assets as of December 31, 2012 and 2011 are listed below. A valuation allowance of $106.7 million and $6.2 million at December 31, 2012 and 2011, respectively, has been recognized to offset the net deferred tax assets as realization of such assets is uncertain. Amounts for the years ended December 31 were as follows (in thousands):

 

                 

Deferred Tax Assets

   2012     2011  

Net operating losses

   $ 76,152     $ —    

Credit carryovers

     18,405       —    

Depreciation and amortization

     8,210       2,604  

Accruals and reserves

     414       366  

Capital loss carryover

     45       45  

Other

     3,501       3,182  
   

 

 

    

 

 

  

Total deferred tax assets

     106,727       6,197  

Less valuation allowance

     (106,727 )      (6,197 ) 
   

 

 

    

 

 

  

Net deferred tax assets (1)

   $ —       $ —    
   

 

 

    

 

 

  

The reconciliation between the provision for income taxes and income taxes computed using the U.S. federal statutory corporate tax rate were as follows for the years ended December 31(in thousands):

 

                         
    2012     2011     2010  

Computed “expected” tax benefit

   $ (7,712 )    $ (2,606 )    $ (10,331 ) 

State income taxes, net of federal benefit

     451       (545 )      (2,117 ) 

Tax effect of:

                        

Change in valuation allowance (1)

     (37,179 )      2,185       12,987  

Expiration of prior year credits and net operating losses

     45,382       1,880       1,838  

Research and development and other tax credits carryovers

     (1,097 )      (1,468 )      (2,519 ) 

Stock compensation

     358       297       294  

Other

     (203 )      257       (152 ) 
   

 

 

    

 

 

    

 

 

  

Provision for income taxes

   $ —       $ —       $ —    
   

 

 

    

 

 

    

 

 

  

 

(1) The increase in the valuation allowance related to prior year net operating loss carryforwards and tax credits is not included in the change in the valuation allowance. See above explanation.

As of December 31, 2012 and 2011, the Company had available federal net operating loss carryforwards of approximately $285.8 million and $265.0 million, respectively, which expire from 2018 through 2032. In addition, the Company had federal research and development credit and orphan drug credit carryforwards of $25.0 million and $23.7 million as of December 31, 2012 and 2011, respectively, to reduce future federal income taxes, if any. These carryforwards expire from 2013 through 2032 and are subject to review and possible adjustment by the Internal Revenue Service. The Company also has available California state net operating loss carryforwards of approximately $261.6 million and $234.2 million as of December 31, 2012 and 2011, respectively, which expire from 2013 to 2032. In addition, the Company had California research and development credits and manufacturers’ investment credits of approximately $8.6 million and $8.1 million as of December 31, 2012 and 2011, respectively, to reduce future California income tax, if any. Due to Section 382 and 383 limitations some of these net operating loss carryforwards and research and development credits may expire unused. The manufacturers’ investment credits expire in 2013. The California research and development credits do not expire.

The Company generated windfall tax benefits from the settlement of certain stock awards. The tax benefit will be recorded as a credit to additional paid-in capital in the year the deduction reduces income taxes payable. The net operating loss carryforwards related to these windfall tax benefits of approximately $1.2 million are included in the net operating loss carryforwards disclosed above.

The American Taxpayer Relief Act of 2012, which retroactively reinstated the United States federal research and development tax credit from January 1, 2012 through December 31, 2013, was not enacted into law until the first quarter of 2013. Therefore the deferred tax asset and corresponding increase in the valuation allowance for the amount of the credit generated in 2012 will not be reflected until 2013.

Employee Benefit Plan
Employee Benefit Plan

11. Employee Benefit Plan

The Company has a defined contribution savings plan under section 401(k) of the IRC. The plan covers substantially all employees. The Company matches employee contributions made to the plan according to a specified formula. The Company’s matching contributions totaled approximately $0.2 million for each the years ended 2012, 2011 and 2010.

Summary of Unaudited Quarterly Financial Information
Summary of Unaudited Quarterly Financial Information

12. Summary of Unaudited Quarterly Financial Information

The following is a summary of the Company’s unaudited quarterly results of operations for the years ended December 31 (in thousands, except per share amounts):

 

                                 

2012:

   March 31,     June 30,     Sept. 30,     Dec. 31,  

Total revenues

   $ 11,460     $ 1,565     $ 2,175     $ 2,319  

Total operating expenses

     11,600       9,502       9,955       9,895  

Net income (loss)

     244       (7,868 )      (7,726 )      (7,549 ) 

Basic net income (loss) per share (1)

     (0.00 )      (0.09 )      (0.09 )      (0.09 ) 

Diluted net income (loss) per share (1)

     (0.00 )      (0.09 )      (0.09 )      (0.09 ) 
         

2011:

   March 31,     June 30,     Sept. 30,     Dec. 31,  

Total revenues

   $ 649     $ 818     $ 26,619     $ 1,932  

Total operating expenses

     9,366       9,269       10,227       8,978  

Net income (loss)

     (8,694 )      (8,406 )      16,431       (6,614 ) 

Basic net income (loss) per share (1)

     (0.12 )      (0.12 )      0.23       (0.09 ) 

Diluted net income (loss) per share (1)

     (0.12 )      (0.12 )      0.22       (0.09 ) 

 

(1) Net income (loss) per share is computed independently for each quarter and the full year based upon respective shares outstanding. Therefore, the sum of the quarterly loss per share amounts may not equal the annual amounts reported.
Organization and Summary of Significant Accounting Policies (Policies)
Organization and Business Activity 

Organization and Business Activity

Vical Incorporated, or the Company, a Delaware corporation, was incorporated in April 1987 and has devoted substantially all of its resources since that time to its research and development programs. The Company researches and develops biopharmaceutical products based on its patented DNA delivery technologies for the prevention and treatment of serious or life-threatening diseases.

All of the Company’s potential products are in research and development phases. No revenues have been generated from the sale of any such products, nor are any such revenues expected for at least the next several years. The Company earns revenue from research and development agreements with pharmaceutical collaborators and grant and contract arrangements with government entities. Most of the Company’s product candidates will require significant additional research and development efforts, including extensive preclinical and clinical testing. All product candidates that advance to clinical testing will require regulatory approval prior to commercial use, and will require significant costs for commercialization. There can be no assurance that the Company’s research and development efforts, or those of its collaborators, will be successful. The Company expects to continue to incur substantial losses and not generate positive cash flows from operations for at least the next several years. No assurance can be given that the Company can generate sufficient product revenue to become profitable or generate positive cash flows from operations.

Basis of Presentation 

Basis of Presentation

These financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The Company has evaluated all subsequent events through the date and time its financial statements were issued.

Use of Estimates 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes. Actual results could differ materially from those estimates.

Cash, Cash Equivalents and Marketable Securities 

Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents consist of cash and highly liquid securities with original maturities at the date of acquisition of ninety days or less. Investments with an original maturity of more than ninety days are considered marketable securities and have been classified by management as available-for-sale. These investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current balance sheet date which reflects management’s intention to use the proceeds from sales of these securities to fund its operations, as necessary. Such investments are carried at fair value, with unrealized gains and losses included as a separate component of stockholders’ equity. Realized gains and losses from the sale of available-for-sale securities or the amounts, net of tax, reclassified out of accumulated other comprehensive income, if any, are determined on a specific identification basis.

Restricted Cash and Marketable Securities 

Restricted Cash and Marketable Securities

The Company is required to maintain a letter of credit securing an amount equal to twelve months of the current monthly installment of base rent for the term of the lease for its facilities, which ends in August 2017. Under certain circumstances the Company may be able to eliminate the need for the letter of credit. At December 31, 2012 and 2011, restricted cash of $3.1 million and $3.0 million, respectively, was pledged as collateral for the letter of credit.

Concentrations of Credit Risk 

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash equivalents, marketable securities and receivables. The Company invests its excess cash in debt instruments of financial institutions and of corporations with strong credit ratings, in U.S. government obligations, and in money market funds and certificates of deposits at financial institutions.

Property and Equipment 

Property and Equipment

Property and equipment is recorded at cost and depreciation is computed using the straight-line method over the estimated useful lives of the assets. Assets acquired pursuant to capital lease arrangements and leasehold improvements are amortized using the straight-line method over the shorter of the life of the remaining lease term or the remaining useful life of the asset. Manufacturing equipment has estimated useful lives of ten years. All other property and equipment have estimated useful lives of 3 to 5 years. Maintenance and repairs of property and equipment are expensed as incurred.

Intangible Assets 

Intangible Assets

Intangible assets include licensed technology rights and certain costs related to patent applications. The Company capitalizes license fees paid to acquire access to proprietary technology if the technology is expected to have alternative future use in multiple research and development projects. The cost of licensed technology rights is amortized using the straight-line method over the estimated useful life of the technology. Certain costs related to patent applications are amortized over the estimated economic lives of the patents, which is generally 20 years and typically commences at the time the patent application is filed. Amortization expense for licensed technology and capitalized patent cost is included in research and development expenses.

Impairment of Long-lived Assets 

Impairment of Long-lived Assets

The Company reviews long-lived assets for impairment at least annually, quarterly for intangible assets, and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount of the asset over the asset’s fair value and the loss recognized in current earnings. The Company recognized research and development expense of approximately $0.1 million for each of the years ended December 31, 2012, 2011 and 2010, related to patents for which the value was deemed to be impaired. The Company believes the future cash flows to be received from its remaining long-lived assets will exceed the assets’ carrying value, and accordingly has not recognized any additional impairment losses.

Revenue Recognition 

Revenue Recognition

Revenue is recognized when the four basic criteria of revenue recognition are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. Certain of the Company’s revenue is generated through manufacturing contracts and stand-alone license agreements.

The Company has entered into multiple-element arrangements. In order to account for the multiple-element arrangements, the Company identifies the deliverables included within the agreement and evaluates which deliverables represent separate units of accounting. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation.

Multiple-element arrangements 

Multiple-element arrangements after January 1, 2011

Effective January 1, 2011, the Company follows the provisions of ASU No. 2009-13 for all multiple element agreements, including contract manufacturing, contract services and license agreements. Under the revised guidance, the delivered item(s) has value to the customer on a standalone basis and, if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in the Company’s control.

A delivered item is considered a separate unit of accounting when the delivered item has value to the partner on a standalone basis based on the consideration of the relevant facts and circumstances for each arrangement. Factors considered in this determination include the research capabilities of the partner and the availability of research expertise in this field in the general marketplace. Arrangement consideration is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence, or VSOE, of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists, the Company uses its best estimate of the selling price for the deliverable. The amount of allocable arrangement consideration is limited to amounts that are fixed or determinable. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. Changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement. If facts and circumstances dictate that the license has standalone value from the undelivered items, which generally include research and development services and the manufacture of drug products, the license is identified as a separate unit of accounting and the amounts allocated to the license are recognized upon the delivery of the license, assuming the other revenue recognition criteria have been met. However, if the amounts allocated to the license through the relative selling price allocation exceed the upfront license fee, the amount recognized upon the delivery of the license is limited to the upfront fee received. If facts and circumstances dictate that the license does not have standalone value, the transaction price, including any upfront license fee payments received, are allocated to the identified separate units of accounting and recognized as those items are delivered.

The terms of the Company’s partnership agreements provide for milestone payments upon achievement of certain regulatory and commercial events. Effective January 1, 2011, the Company adopted on a prospective basis the Milestone Method of accounting under ASU 2010-17. Under the Milestone Method, the Company recognizes consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following three criteria: 1) The consideration is commensurate with either the entity’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone, 2) The consideration relates solely to past performance, and 3) The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. A milestone is defined as an event (i) that can only be achieved based in whole or in part on either the entity’s performance or on the occurrence of a specific outcome resulting from the entity’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and (iii) that would result in additional payments being due to the Company.

 

Multiple-element arrangements prior to January 1, 2011

Prior to adopting the revised multiple element guidance on January 1, 2011, the Company analyzed its multiple element arrangements to determine whether the identified deliverables could be accounted for individually as separate units of accounting. The delivered item(s) were considered a separate unit of accounting if all of the following criteria were met: (1) the delivered item(s) has value to the customer on a standalone basis; (2) there is objective and reliable evidence of the fair value of the undelivered item(s); and (3) if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in the Company’s control. If these criteria were not met, the deliverable was combined with other deliverables in the arrangement and accounted for as a combined unit of accounting.

Contract Services, Grant and Royalty Revenue 

Contract Services, Grant and Royalty Revenue

The Company recognizes revenues from contract services and federal government research grants during the period in which the related expenditures are incurred and related payments for those services are received or collection is reasonably assured. Royalties to be received based on sales of licensed products by the Company’s partners incorporating the Company’s licensed technology are recognized when received.

Accruals for Potential Disallowed Costs on Government Contracts 

Accruals for Potential Disallowed Costs on Government Contracts

The Company has contracts with U.S. government agencies under which it bills for direct and indirect costs incurred. These billed costs are subject to audit by government agencies. The Company established accruals of approximately $49,000 at each of December 31, 2012 and 2011 to provide for potential disallowed costs. In the event that the final costs allowed are different from what the Company has estimated, the Company may need to make a change in its estimated accrual, which could also affect its results of operations and cash flow.

Research and Development Costs 

Research and Development Costs

Research and development costs are expensed as incurred. Research and development costs include salaries and personnel-related costs, supplies and materials, outside services, costs of conducting preclinical and clinical trials, facilities costs and amortization of intangible assets. The Company accounts for its clinical trial costs by estimating the total cost to treat a patient in each clinical trial, and accruing this total cost for the patient over the estimated treatment period, which corresponds with the period over which the services are performed, beginning when the patient enrolls in the clinical trial. This estimated cost includes payments to the site conducting the trial, and patient-related lab and other costs related to the conduct of the trial. Cost per patient varies based on the type of clinical trial, the site of the clinical trial, the method of administration of the treatment, and the number of treatments that a patient receives. Treatment periods vary depending on the clinical trial. The Company makes revisions to the clinical trial cost estimates in the current period, as clinical trials progress.

Manufacturing and Production Costs 

Manufacturing and Production Costs

Manufacturing and production costs include expenses related to manufacturing contracts and expenses related to the production of plasmid DNA for use in the Company’s research and development efforts. Manufacturing expenses related to manufacturing contracts are deferred and expensed when the related revenue is recognized. Production expenses related to the Company’s research and development efforts are expensed as incurred.

Net Loss Per Share 

Net Loss Per Share

Basic and diluted net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period. The weighted-average number of shares used to compute diluted loss per share excludes any assumed exercise of stock options, and the assumed issuance of common stock under restricted stock units, or RSUs, as the effect would be antidilutive. Common stock equivalents of 1.4 million, 1.4 million and 0.7 million for the years ended December 31, 2012, 2011 and 2010, respectively, were excluded from the calculation because of their antidilutive effect.

Fair Value of Financial Instruments 

Fair Value of Financial Instruments

The carrying amounts of cash, cash equivalents, restricted marketable securities, marketable securities, receivables, accounts payable and accrued expenses at December 31, 2012 and 2011, are considered to reasonably approximate fair value because of the short term nature of those items.

Income Taxes 

Income Taxes

The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. There were no unrecognized tax benefits recorded by the Company as of the date of adoption in 2007. There are no unrecognized tax benefits included in the balance sheets that would, if recognized, affect the effective tax rate.

Deferred income taxes result primarily from temporary differences between financial and tax reporting. Deferred tax assets and liabilities are determined based on the difference between the financial statement bases and the tax bases of assets and liabilities using enacted tax rates. A valuation allowance is established to reduce a deferred tax asset to the amount that is expected more likely than not to be realized.

Comprehensive Loss 

Comprehensive Loss

Comprehensive loss consists of net loss and certain changes in equity that are excluded from net loss. Comprehensive loss for the years ended December 31, 2012, 2011 and 2010, has been reflected in the Statements of Comprehensive Loss. Accumulated other comprehensive income (loss), which is included in stockholders’ equity, represents unrealized gains and losses on marketable securities.

Business Segments 

Business Segments

The Company operates in one business segment, which is within the United States, and is dedicated to research and development of DNA delivery technology.

Share-Based Compensation 

Share-Based Compensation

The Company records its compensation expense associated with stock options and other forms of equity compensation based on their fair value at the date of grant using the Black-Scholes-Merton option pricing model. Stock-based compensation includes amortization related to stock option awards based on the estimated grant date fair value. Stock-based compensation expense related to stock options includes an estimate for forfeitures and the portion that is ultimately expected to vest is recognized ratably over the vesting period of the option. In addition, the Company records expense related to RSUs granted based on the fair value of those awards on the grant date. The fair value related to the RSUs is amortized to expense over the vesting term of those awards. Stock-based compensation expense related to RSUs includes an estimate for forfeitures and is recognized over the expected term of the award using the straight-line method. The expected forfeiture rate of all equity based compensation is based on observed historical patterns of the Company’s employees and is estimated to be 11.2% annually for each of the years ended December 31, 2012, 2011 and 2010.

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton valuation model using the assumptions noted in the following table. The expected life of options is based on the Company’s observed historical exercise patterns. The expected volatility of stock options is based upon the historical volatility of the Company’s stock. The risk-free interest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option. The dividend yield reflects that the Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future.

 

             
    Years Ended December 31,
    2012   2011   2010

Assumptions:

            

Assumed risk-free interest rate

   0.80%   1.90%   2.44%

Assumed volatility

   72%   68%   66%

Average expected option life

   4.5 years   4.5 years   4.5 years

Expected dividend yield

   —     —     —  
Recent Accounting Pronouncements 

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board, or FASB, issued authoritative guidance regarding comprehensive income. This newly issued accounting standard allows an entity to have the option to present the components of net income and comprehensive income in either one or two consecutive financial statements. The guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in stockholders’ equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. The guidance was effective for fiscal years and interim periods beginning after December 15, 2011. The Company adopted these provisions as of January 1, 2012. The adoption did not have a material impact on the Company’s financial position or results of operations.

In May 2011, the FASB issued authoritative guidance regarding common fair value measurements and disclosure requirements in U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards. This newly issued accounting standard clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable inputs. This guidance was effective on a prospective basis for annual and interim reporting periods beginning on or after December 15, 2011. The Company adopted these provisions as of January 1, 2012. The adoption did not have a material impact on the Company’s financial position or results of operations.

Organization and Summary of Significant Accounting Policies (Tables)
Summary of fair value of Share-Based Compensation stock options
             
    Years Ended December 31,
    2012   2011   2010

Assumptions:

            

Assumed risk-free interest rate

   0.80%   1.90%   2.44%

Assumed volatility

   72%   68%   66%

Average expected option life

   4.5 years   4.5 years   4.5 years

Expected dividend yield

   —     —     —  
Short-Term Marketable Securities (Tables)
Summary of short-term marketable securities
                                 

December 31, 2012

   Amortized
Cost		     Unrealized
Gain		     Unrealized
Loss		     Market
Value		  

U.S. treasuries

   $ 10,135     $           1     $         —       $ 10,136  

Government-sponsored enterprise securities

     15,507       —         1       15,506  

Corporate bonds

     11,509       —         8       11,501  

Certificate of deposit

     496       —         —         496  
   

 

 

    

 

 

    

 

 

    

 

 

  
    $ 37,647     $ 1     $ 9     $ 37,639  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

December 31, 2011

   Amortized
Cost		     Unrealized
Gain		     Unrealized
Loss		     Market
Value		  

U.S. treasuries

   $ 1,008     $ 2     $ —       $ 1,010  

Government-sponsored enterprise securities

     7,200       —         2       7,198  

Certificate of deposit

     525       —         —          525  
   

 

 

    

 

 

    

 

 

    

 

 

  
    $ 8,733     $ 2     $ 2     $ 8,733  
   

 

 

    

 

 

    

 

 

    

 

 

  
Fair Value Measurements (Tables)
Summary of cash equivalents, marketable securities and long-term investments measured at fair value 
                                 
    Fair Value Measurements  

December 31, 2012

   Level 1     Level 2     Level 3     Total  

Certificates of deposit

   $ 496     $ —       $ —       $ 496  

Money market funds

     18,500       —         —         18,500  

U.S. treasuries

     10,136       —         —         10,136  

Corporate bonds

     —         11,501       —         11,501  

Government-sponsored enterprise securities

     —         15,506       —         15,506  

Auction rate securities

     —         —         2,225       2,225  
   

 

 

    

 

 

    

 

 

    

 

 

  
    $ 29,132     $ 27,007     $ 2,225     $ 58,364  
   

 

 

    

 

 

    

 

 

    

 

 

  
   
    Fair Value Measurements  

December 31, 2011

   Level 1     Level 2     Level 3     Total  

Certificates of deposit

   $ 525     $ —       $ —       $ 525  

Money market funds

     12,778       —         —         12,778  

U.S. treasuries

     1,010       —         —         1,010  

Government-sponsored enterprise securities

     —         7,198       —         7,198  

Auction rate securities

     —         —         5,928       5,928  
   

 

 

    

 

 

    

 

 

    

 

 

  
    $ 14,313     $ 7,198     $ 5,928     $ 27,439  
   

 

 

    

 

 

    

 

 

    

 

 

  
Summary of activity for assets measured at fair value using significant unobservable inputs 
         

Balance at December 31, 2011

   $ 5,928  

Total net realized gains included in earnings

     (590 ) 

Total net unrealized gains included in other comprehensive income

     47  

Net transfers in and/out of Level 3

     (3,160 ) 
   

 

 

  

Balance at December 31, 2012

   $ 2,225  
   

 

 

  

Amount of total losses for the period included in net loss attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2012

   $ —    
   

 

 

  
Other Balance Sheet Accounts (Tables)
Summary of property and equipment 
                 
    2012     2011  

Equipment

   $ 19,660     $ 19,147  

Leasehold improvements

     7,992       7,992  
   

 

 

    

 

 

  
      27,652       27,139  

Less accumulated depreciation and amortization

     (22,368 )      (20,913 ) 
   

 

 

    

 

 

  
    $ 5,284     $ 6,226  
   

 

 

    

 

 

  
Summary of Intangible assets 
                 
    2012     2011  

Licensed technology rights

   $ 4,015     $ 4,015  

Patent application costs

     6,420       6,093  
   

 

 

    

 

 

  
      10,435       10,108  

Accumulated amortization licensed technology rights

     (3,931 )      (3,906 ) 

Accumulated amortization patent costs

     (3,691 )      (3,331 ) 
   

 

 

    

 

 

  
    $ 2,813     $ 2,871  
   

 

 

    

 

 

  
Summary of accounts payable and accrued expenses 
                 
    2012     2011  

Employee compensation

   $ 3,858     $ 3,653  

Clinical trial accruals

     660       1,681  

Accounts payable

     377       351  

Deferred rent

     307       247  

Other accrued liabilities

     427       430  
   

 

 

    

 

 

  
    $ 5,629     $ 6,362  
   

 

 

    

 

 

  
Commitments and Contingencies (Tables)
Summary of future minimum rental payments due under the Company's facilities lease
         

Year ending December 31,

        

2013

   $ 3,372  

2014

     3,440  

2015

     3,509  

2016

     3,579  

2017

     2,417  

Thereafter

     —    
   

 

 

  

Total lease payments

   $ 16,317  
   

 

 

  
Stock-Based Compensation (Tables)
Summary of total stock-based compensation expense 
                         
    Years ended December 31,  
    2012     2011     2010  

Research and development

   $ 1,035     $ 947     $ 727  

Manufacturing and production

     207       165       281  

General and administrative

     2,048       1,994       1,628  
   

 

 

    

 

 

    

 

 

  

Total stock-based compensation expense

   $ 3,290     $ 3,106     $ 2,636  
   

 

 

    

 

 

    

 

 

  

Cash received from options exercised

   $ 221     $ 212     $ 35  
   

 

 

    

 

 

    

 

 

  
Summary of stock option transactions under the Company's stock incentive plans 
                 
    Shares     Weighted Average
Exercise Price		  

Outstanding December 31, 2009

     4,300,352     $ 5.67  

Granted

     1,722,204     $ 3.35  

Exercised

     (20,123 )    $ 1.75  

Forfeited

     (816,328 )    $ 11.10  
   

 

 

          

Outstanding December 31, 2010

     5,186,105     $ 4.06  
     

Granted

     2,052,000     $ 2.34  

Exercised

     (74,386 )    $ 2.85  

Forfeited

     (208,619 )    $ 5.77  
   

 

 

          

Outstanding December 31, 2011

     6,955,100     $ 3.51  
     

Granted

     1,687,257     $ 3.50  

Exercised

     (96,345 )    $ 2.29  

Forfeited

     (549,443 )    $ 5.94  
   

 

 

          

Outstanding December 31, 2012

     7,996,569     $ 3.36  
   

 

 

          

Vested and unvested options expected to vest as of December 31, 2012

     7,667,133     $ 3.37  
Summary of the outstanding RSUs 
                 
    Shares     Weighted Average
Grant-Date Fair
Value per Share		  

Unvested at December 31, 2011

     804,224     $ 2.59  

Granted

     258,456     $ 3.53  

Vested

     (423,457 )    $ 2.70  

Cancelled

     (46,951 )    $ 2.74  
   

 

 

          

Unvested at December 31, 2012

     592,272     $ 2.91  
   

 

 

          
Income Taxes (Tables)
Summary of Deferred Tax Assets 
                 

Deferred Tax Assets

   2012     2011  

Net operating losses

   $ 76,152     $ —    

Credit carryovers

     18,405       —    

Depreciation and amortization

     8,210       2,604  

Accruals and reserves

     414       366  

Capital loss carryover

     45       45  

Other

     3,501       3,182  
   

 

 

    

 

 

  

Total deferred tax assets

     106,727       6,197  

Less valuation allowance

     (106,727 )      (6,197 ) 
   

 

 

    

 

 

  

Net deferred tax assets (1)

   $ —       $ —    
   

 

 

    

 

 

  
Reconciliation between the provision for income taxes and income taxes 
                         
    2012     2011     2010  

Computed “expected” tax benefit

   $ (7,712 )    $ (2,606 )    $ (10,331 ) 

State income taxes, net of federal benefit

     451       (545 )      (2,117 ) 

Tax effect of:

                        

Change in valuation allowance (1)

     (37,179 )      2,185       12,987  

Expiration of prior year credits and net operating losses

     45,382       1,880       1,838  

Research and development and other tax credits carryovers

     (1,097 )      (1,468 )      (2,519 ) 

Stock compensation

     358       297       294  

Other

     (203 )      257       (152 ) 
   

 

 

    

 

 

    

 

 

  

Provision for income taxes

   $ —       $ —       $ —    
   

 

 

    

 

 

    

 

 

  

 

(1) The increase in the valuation allowance related to prior year net operating loss carryforwards and tax credits is not included in the change in the valuation allowance. See above explanation.
Summary of Unaudited Quarterly Financial Information (Tables)
Summary of the Company's unaudited quarterly results of operations
                                 

2012:

   March 31,     June 30,     Sept. 30,     Dec. 31,  

Total revenues

   $ 11,460     $ 1,565     $ 2,175     $ 2,319  

Total operating expenses

     11,600       9,502       9,955       9,895  

Net income (loss)

     244       (7,868 )      (7,726 )      (7,549 ) 

Basic net income (loss) per share (1)

     (0.00 )      (0.09 )      (0.09 )      (0.09 ) 

Diluted net income (loss) per share (1)

     (0.00 )      (0.09 )      (0.09 )      (0.09 ) 
         

2011:

   March 31,     June 30,     Sept. 30,     Dec. 31,  

Total revenues

   $ 649     $ 818     $ 26,619     $ 1,932  

Total operating expenses

     9,366       9,269       10,227       8,978  

Net income (loss)

     (8,694 )      (8,406 )      16,431       (6,614 ) 

Basic net income (loss) per share (1)

     (0.12 )      (0.12 )      0.23       (0.09 ) 

Diluted net income (loss) per share (1)

     (0.12 )      (0.12 )      0.22       (0.09 ) 

 

(1) Net income (loss) per share is computed independently for each quarter and the full year based upon respective shares outstanding. Therefore, the sum of the quarterly loss per share amounts may not equal the annual amounts reported.
Organization and Summary of Significant Accounting Policies (Details)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Fair Value Assumptions and Methodology for Assets and Liabilities [Abstract]
 
 
 
Assumed risk-free interest rate
0.80% 
1.90% 
2.44% 
Assumed volatility
72.00% 
68.00% 
66.00% 
Average expected option life
4 years 6 months 
4 years 6 months 
4 years 6 months 
Expected dividend yield
   
   
   
Organization and Summary of Significant Accounting Policies (Details Textual) (USD $)
Share data in Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Organization and Summary of Significant Accounting Policies (Textual) [Abstract]
 
 
 
Maximum period for cash and highly liquid securities with original maturities
ninety days or less 
 
 
Minimum period for marketable securities classified as available-for-sale with original maturities
more than ninety days 
 
 
Restricted cash
$ 3,059,000 
$ 2,998,000 
 
Research and Development Expense
17,340,000 
17,975,000 
19,692,000 
Accruals for Potential Disallowed Costs on Government Contracts
49,000 
49,000 
 
Expected forfeiture rate of equity based compensation
11.20% 
11.20% 
11.20% 
Common stock equivalents excluded from the calculation of diluted net income per share
1.4 
1.4 
0.7 
Uncertain income tax position
50.00% 
 
 
Unrecognized tax benefits
$ 0 
 
 
Letter of Credit [Member]
 
 
 
Organization and Summary of Significant Accounting Policies (Textual) [Abstract]
 
 
 
Amount of letter of credit, description
 
Company is required to maintain a letter of credit securing an amount equal to twelve months of the current monthly installment of base rent for the term of its primary facilities lease, which ends in August 2017. 
 
Equipment [Member]
 
 
 
Organization and Summary of Significant Accounting Policies (Textual) [Abstract]
 
 
 
Estimated useful life of property and equipment
10 years 
 
 
Patents [Member]
 
 
 
Organization and Summary of Significant Accounting Policies (Textual) [Abstract]
 
 
 
Estimated economic lives of the patents
20 years 
 
 
Maximum [Member] |
Property Plant and Equipment Other Types [Member]
 
 
 
Organization and Summary of Significant Accounting Policies (Textual) [Abstract]
 
 
 
Estimated useful life of property and equipment
5 years 
 
 
Minimum [Member] |
Property Plant and Equipment Other Types [Member]
 
 
 
Organization and Summary of Significant Accounting Policies (Textual) [Abstract]
 
 
 
Estimated useful life of property and equipment
3 years 
 
 
Short-Term Marketable Securities (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Summary of available for sale marketable securities
 
 
Amortized Cost
$ 37,647 
$ 8,733 
Unrealized Gain
1 
2 
Unrealized Loss
9 
2 
Market Value
37,639 
8,733 
U.S. treasuries [Member]
 
 
Summary of available for sale marketable securities
 
 
Amortized Cost
10,135 
1,008 
Unrealized Gain
1 
2 
Unrealized Loss
   
   
Market Value
10,136 
1,010 
Government-sponsored enterprise securities [Member]
 
 
Summary of available for sale marketable securities
 
 
Amortized Cost
15,507 
7,200 
Unrealized Gain
   
   
Unrealized Loss
1 
2 
Market Value
15,506 
7,198 
Corporate bonds [Member]
 
 
Summary of available for sale marketable securities
 
 
Amortized Cost
11,509 
 
Unrealized Gain
   
 
Unrealized Loss
8 
 
Market Value
11,501 
 
Certificates of deposit [Member]
 
 
Summary of available for sale marketable securities
 
 
Amortized Cost
496 
525 
Unrealized Gain
   
   
Unrealized Loss
   
   
Market Value
$ 496 
$ 525 
Short-Term Marketable Securities (Details Textual) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Marketable Securities, Available For Sale (Textual) [Abstract]
 
 
 
Available-for-Sale Securities Maturing Outside of One Year
 
$ 17,900,000 
 
Realized gains or losses on sales of available-for-sale securities
0 
0 
0 
Available-for-Sale Securities in a continuous loss position longer than one year
$ 0 
$ 0 
 
Long-Term Investments (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Long-Term Investments (Textual) [Abstract]
 
 
Auction rate securities at par value
$ 2.5 
 
Maturity of long-term investment
2038 
 
Recognized cumulative losses
0.5 
 
Unrealized gains on auction rate securities
0.1 
0.3 
Cumulative unrealized gains
0.4 
 
Carrying value of auction rate security
$ 2.2 
 
Fair Value Measurements (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
$ 58,364 
$ 27,439 
Certificates of deposit [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
496 
525 
Money market funds [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
18,500 
12,778 
U.S. treasuries [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
10,136 
1,010 
Corporate bonds [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
11,501 
 
Government-sponsored enterprise securities [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
15,506 
7,198 
Auction rate securities [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
2,225 
5,928 
Level 1 [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
29,132 
14,313 
Level 1 [Member] |
Certificates of deposit [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
496 
525 
Level 1 [Member] |
Money market funds [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
18,500 
12,778 
Level 1 [Member] |
U.S. treasuries [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
10,136 
1,010 
Level 1 [Member] |
Corporate bonds [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
   
 
Level 1 [Member] |
Government-sponsored enterprise securities [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
   
   
Level 1 [Member] |
Auction rate securities [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
   
   
Level 2 [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
27,007 
7,198 
Level 2 [Member] |
Certificates of deposit [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
   
   
Level 2 [Member] |
Money market funds [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
   
   
Level 2 [Member] |
U.S. treasuries [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
   
   
Level 2 [Member] |
Corporate bonds [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
11,501 
 
Level 2 [Member] |
Government-sponsored enterprise securities [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
15,506 
7,198 
Level 2 [Member] |
Auction rate securities [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
   
   
Level 3 [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
2,225 
5,928 
Level 3 [Member] |
Certificates of deposit [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
   
   
Level 3 [Member] |
Money market funds [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
   
   
Level 3 [Member] |
U.S. treasuries [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
   
   
Level 3 [Member] |
Corporate bonds [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
   
 
Level 3 [Member] |
Government-sponsored enterprise securities [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
   
   
Level 3 [Member] |
Auction rate securities [Member]
 
 
Cash equivalents, marketable securities and long-term investments measured at fair value
 
 
Fair Value
$ 2,225 
$ 5,928 
Fair Value Measurements (Details 1) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Activity for assets measured at fair value using significant unobservable inputs
 
Beginning Balance
$ 5,928 
Total net realized gains included in earnings
(590)
Total net unrealized gains included in other comprehensive income
47 
Net transfers in and/out of Level 3
(3,160)
Ending Balance
2,225 
Amount of total gains or losses for the period included in net income attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2012
   
Fair Value Measurements (Details Textual) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2008
Fair Value Measurements (Textual) [Abstract]
 
 
 
 
Long-term investments in to level 3 category
$ 2,225,000 
$ 5,928,000 
 
 
Level 3 [Member]
 
 
 
 
Fair Value Measurements (Textual) [Abstract]
 
 
 
 
Long-term investments in to level 3 category
 
 
 
6,500,000 
Total unrealized losses related to level3 assets
500,000 
 
 
 
Unrealized losses
$ 0 
$ 0 
$ 0 
 
Other Balance Sheet Accounts (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Summary of Property and equipment
 
 
Total of Property and equipment
$ 27,652 
$ 27,139 
Less accumulated depreciation and amortization
(22,368)
(20,913)
Property and equipment, net
5,284 
6,226 
Equipment [Member]
 
 
Summary of Property and equipment
 
 
Total of Property and equipment
19,660 
19,147 
Leasehold Improvements [Member]
 
 
Summary of Property and equipment
 
 
Total of Property and equipment
$ 7,992 
$ 7,992 
Other Balance Sheet Accounts (Details 1) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Summary of Intangible assets
 
 
Total of Summary of Intangible assets
$ 10,435 
$ 10,108 
Net total of Intangible assets
2,813 
2,871 
Licensed Technology Rights [Member]
 
 
Summary of Intangible assets
 
 
Total of Summary of Intangible assets
4,015 
4,015 
Amortization costs
(3,931)
(3,906)
Patents [Member]
 
 
Summary of Intangible assets
 
 
Total of Summary of Intangible assets
6,420 
6,093 
Amortization costs
$ (3,691)
$ (3,331)
Other Balance Sheet Accounts (Details 2) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Summary of accounts payable and accrued expenses
 
 
Employee compensation
$ 3,858 
$ 3,653 
Clinical trial accruals
660 
1,681 
Accounts payable
377 
351 
Deferred rent
307 
247 
Other accrued liabilities
427 
430 
Total accounts payable and accrued expenses
$ 5,629 
$ 6,362 
Other Balance Sheet Accounts (Details Textual) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Other Balance Sheet Accounts (Textual) [Abstract]
 
 
 
Depreciation and amortization of equipment and leasehold improvements
$ 1.6 
$ 1.6 
$ 2.0 
Amortization of licensed technology rights and patent application costs
0.4 
0.7 
0.8 
Estimated annual amortization for these assets in 2013
0.4 
 
 
Estimated annual amortization for these assets in 2014
0.4 
 
 
Estimated annual amortization for these assets in 2015
0.3 
 
 
Estimated annual amortization for these assets in 2016
0.3 
 
 
Estimated annual amortization for these assets in 2017
$ 0.2 
 
 
Significant Contracts, Grants, License and Royalty Agreements (Details) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2008
Dec. 31, 2012
AnGes Research and Development Agreement [Member]
Dec. 31, 2011
AnGes Research and Development Agreement [Member]
Dec. 31, 2010
AnGes Research and Development Agreement [Member]
Dec. 31, 2010
Naval Medical Research Center [Member]
Dec. 31, 2010
US Navy [Member]
Dec. 31, 2010
IPPOX Foundation [Member]
Dec. 31, 2012
National Institute of Allergy And Infectious Diseases [Member]
Dec. 31, 2011
National Institute of Allergy And Infectious Diseases [Member]
Dec. 31, 2010
National Institute of Allergy And Infectious Diseases [Member]
Dec. 31, 2008
National Institute of Allergy And Infectious Diseases [Member]
Dec. 31, 2012
NIAID [Member]
Dec. 31, 2011
NIAID [Member]
Dec. 31, 2010
NIAID [Member]
Dec. 31, 2007
NIAID [Member]
Dec. 31, 2012
CytRx [Member]
Significant Contracts Grants License And Royalty Agreements [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total cash Installments
 
 
 
 
$ 11.8 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount related to the license fee and know-how recognized by company
10.7 
25.3 
 
 
0 
0 
2.0 
 
 
 
 
 
 
 
 
 
 
 
 
Contract with NMRC
 
 
 
 
 
 
 
1.3 
0.8 
2.4 
 
 
 
 
 
 
 
 
 
Revenue related to contract services delivered
3.9 
2.7 
 
 
 
 
 
0.7 
0.8 
2.4 
 
 
 
 
 
 
 
 
 
Amount of grants awarded
 
 
 
 
 
 
 
 
 
 
 
 
 
2.0 
 
 
 
6.0 
 
Period of grant
 
 
 
 
 
 
 
 
 
 
 
 
 
2 years 
 
 
 
3 years 
 
Revenue recognized from grants
 
 
 
 
 
 
 
 
 
 
0 
0.2 
0.7 
 
0 
0.9 
1.5 
 
 
Extended period of grant
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4 years 
 
 
 
 
License fees
2.6 
2.0 
0.1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.8 
Significant Contracts, Grants, License and Royalty Agreements (Textual) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Paid for Nonrefundable upfront license fee
25.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Milestone payment upon finalization of the trial design
10.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional cash payments for achievement through commercial launch
95.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue related to drug product delivered
1.8 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchases of restricted shares of the Company's common stock
10.85 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-refundable cash payments
11.8 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Excess amount of project cost
22.6 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity installment received by the company upon execution of the R&D Agreement
6.90 
 
 
3.95 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted common stock issued under stock purchase agreement for the first equity installment
1,061,538 
 
 
1,109,550 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share in exchange for the first installment
$ 6.50 
 
 
$ 3.56 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of initial upfront monetary payments
10.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional milestone payments related to in-license agreements
15.1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payments related to the Company's independent programs
$ 7.2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commitments and Contingencies (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Summary of future minimum rental payments due under the Company's facilities lease
 
2013
$ 3,372 
2014
3,440 
2015
3,509 
2016
3,579 
2017
2,417 
Thereafter
   
Total lease payments
$ 16,317 
Commitments and Contingencies (Details Textual) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
sqft
Dec. 31, 2011
Dec. 31, 2010
Commitments and Contingencies (Textual) [Abstract]
 
 
 
Area for leasing facility of manufacturing, research laboratory and office space
68,400 
 
 
Expiry date of lease
Aug. 01, 2017 
 
 
Renewal period for lease beyond its expiration
three additional five-year periods 
 
 
Base rent paid and the rent expensed recorded as deferred rent in balance sheet
$ 2.0 
 
 
Rent expense
$ 2.9 
$ 2.9 
$ 2.9 
Stockholders' Equity (Details) (USD $)
1 Months Ended 3 Months Ended 12 Months Ended
Nov. 30, 2012
Feb. 29, 2012
Jan. 31, 2012
Oct. 31, 2010
Sep. 30, 2010
Mar. 31, 2010
Dec. 31, 2009
Dec. 31, 2012
Dec. 31, 2010
Dec. 31, 2009
Stockholders' Equity (Textual) [Abstract]
 
 
 
 
 
 
 
 
 
 
Sale of common stock, preferred stock, debt securities and warrants
 
 
 
 
 
 
 
$ 150,000,000 
 
 
Maximum value of Common Stock Issuable Under Agreement
50,000,000 
 
 
 
 
 
 
 
 
 
Sale of Stock Compensation Percentage on Gross Proceeds Under Agreement
2.50% 
 
 
 
 
 
 
 
 
 
Number of shares of common stock sold in public offering
 
 
13,333,334 
 
15,000,000 
 
 
 
 
 
Number of shares of common stock sold in public pursuant to the exercise of the underwriters overallotment option
 
 
 
368,662 
 
 
 
 
 
 
Common stock, public offering price
 
 
$ 3.75 
$ 2.25 
$ 2.25 
 
 
 
 
 
Net proceeds from offering
 
 
48,700,000 
800,000 
31,500,000 
 
 
48,709,000 
32,179,000 
 
Investors exercised warrants to purchase common stock shares
 
 
 
 
 
2,365,644 
1,967,689 
 
 
 
Net proceeds of exercised warrants
 
 
 
 
 
 
 
 
$ 5,000,000 
$ 4,200,000 
Number of Common stock issued on partial exercise of underwriters overallotment option
 
576,358 
 
 
 
 
 
 
 
 
Common stock purchase price
 
$ 3.75 
 
 
 
 
 
 
 
 
Stock Based Compensation (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Stock-based compensation expense
 
 
 
Total stock-based compensation expense
$ 3,290 
$ 3,106 
$ 2,636 
Cash received from options exercised
221 
212 
35 
Research and development [Member]
 
 
 
Stock-based compensation expense
 
 
 
Total stock-based compensation expense
1,035 
947 
727 
Manufacturing and production [Member]
 
 
 
Stock-based compensation expense
 
 
 
Total stock-based compensation expense
207 
165 
281 
General and administrative [Member]
 
 
 
Stock-based compensation expense
 
 
 
Total stock-based compensation expense
$ 2,048 
$ 1,994 
$ 1,628 
Stock Based compensation (Details 1) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Summary of stock option transactions under the Company's stock incentive plans
 
 
 
Shares Outstanding, Beginning Balance
6,955,100 
5,186,105 
4,300,352 
Shares, Granted
1,687,257 
2,052,000 
1,722,204 
Shares, Exercised
(96,345)
(74,386)
(20,123)
Shares, Forfeited
(549,443)
(208,619)
(816,328)
Shares Outstanding, Ending Balance
7,996,569 
6,955,100 
5,186,105 
Shares Vested and unvested options expected to vest as of December 31, 2012
7,667,133 
 
 
Weighted Average Exercise Price, Beginning Balance
$ 3.51 
$ 4.06 
$ 5.67 
Weighted Average Exercise Price, Granted
$ 3.50 
$ 2.34 
$ 3.35 
Weighted Average Exercise Price, Exercised
$ 2.29 
$ 2.85 
$ 1.75 
Weighted Average Exercise Price, Forfeited
$ 5.94 
$ 5.77 
$ 11.10 
Weighted Average Exercise Price, Ending Balance
$ 3.36 
$ 3.51 
$ 4.06 
Weighted Average Exercise Price, Vested and unvested options expected to vest as of December 31, 2012
$ 3.37 
 
 
Stock Based Compensation (Details 2) (Restricted Stock Units (RSUs) [Member], USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Restricted Stock Units (RSUs) [Member]
 
 
 
Summary of the outstanding RSUs
 
 
 
Shares, Unvested, Beginning Balance
804,224 
 
 
Unvested, Granted
258,456 
545,780 
438,329 
Unvested, Vested
(423,457)
 
 
Unvested, Cancelled
(46,951)
 
 
Shares, Unvested, Ending Balance
592,272 
804,224 
 
Weighted Average Grant-Date Fair Value per Share, Unvested, Beginning Balance
$ 2.59 
 
 
Weighted Average Grant-Date Fair Value per Share, Granted
$ 3.53 
 
 
Weighted Average Grant-Date Fair Value per Share, Vested
$ 2.70 
 
 
Weighted Average Grant-Date Fair Value per Share, Cancelled
$ 2.74 
 
 
Weighted Average Grant-Date Fair Value per Share, Unvested, Ending Balance
$ 2.91 
$ 2.59 
 
Stock-Based Compensation (Details Textual) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Total stock-based compensation expense
$ 3,290,000 
$ 3,106,000 
$ 2,636,000 
Weighted average period
1 year 5 months 1 day 
 
 
Stock-Based Compensation (Textual) [Abstract]
 
 
 
Shares reserved for future issuance
13,702,618 
 
 
Common stock reserved
15,700,000 
 
 
Maximum term of options granted
10 years 
10 years 
 
Number of options granted
1,300,000 
 
 
Number of underlying shares exercisable
5,031,587 
3,895,520 
2,899,922 
Weighted average exercise price of options exercisable
$ 3.55 
$ 4.26 
$ 4.84 
Weighted average remaining contractual term of options outstanding
6 years 6 months 
 
 
Weighted average remaining contractual term of options exercisable
5 years 3 months 18 days 
 
 
Weighted average remaining contractual term of vested and unvested options expected to vest
6 years 4 months 24 days 
 
 
Aggregate intrinsic value of options outstanding
2,400,000 
 
 
Aggregate intrinsic value of options exercisable
1,600,000 
 
 
Unrecognized compensation cost related to unvested options
2,100,000 
 
 
Unvested stock-based awards expected to be recognized, weighted-average period
1 year 5 months 1 day 
 
 
Weighted average grant-date fair value of options granted
$ 1.88 
$ 1.21 
$ 1.73 
Total intrinsic value of options exercised
121,000 
124,000 
9,000 
Shares available for grant
4,742,239 
 
 
Weighted average period
1 year 5 months 1 day 
 
 
Aggregate grant-date fair value of RSUs Vested
1,100,000 
1,000,000 
500,000 
Common stock underlying RSUs that were fully vested
371,538 
 
 
Restricted Stock Units (RSUs) [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Percentage of options vested
25.00% 
 
 
Aggregate RSUs granted
258,456 
545,780 
438,329 
Total stock-based compensation expense
800,000 
1,100,000 
900,000 
Aggregate grant-date fair value of RSUs granted
900,000 
1,300,000 
1,500,000 
Total unrecognized compensation cost related to unvested RSUs
$ 900,000 
 
 
Weighted average period
1 year 9 months 18 days 
 
 
Stock-Based Compensation (Textual) [Abstract]
 
 
 
Unvested stock-based awards expected to be recognized, weighted-average period
1 year 9 months 18 days 
 
 
Weighted average period
1 year 9 months 18 days 
 
 
Income Taxes (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Summary of Deferred Tax Assets
 
 
Net operating losses
$ 76,152 
 
Credit carryovers
18,405 
 
Depreciation and amortization
8,210 
2,604 
Accruals and reserves
414 
366 
Capital loss carryover
45 
45 
Other
3,501 
3,182 
Total deferred tax assets
106,727 
6,197 
Less valuation allowance
(106,727)
(6,197)
Net deferred tax assets (1)
   
   
Income Taxes (Details 1) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Reconciliation between the provision for income taxes and income taxes
 
 
 
Computed "expected" tax benefit
$ (7,712)
$ (2,606)
$ (10,331)
State income taxes, net of federal benefit
451 
(545)
(2,117)
Tax effect of:
 
 
 
Change in valuation allowance
(37,179)
2,185 
12,987 
Expiration of prior year credits and net operating losses
45,382 
1,880 
1,838 
Research and development and other tax credits carryovers
(1,097)
(1,468)
(2,519)
Stock compensation
358 
297 
294 
Other
(203)
257 
(152)
Provision for income taxes
   
   
   
Income Taxes (Details Textual) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Income Taxes (Textual) [Abstract]
 
 
 
Net deferred tax assets
   
   
 
Cumulative change in ownership
More than 50% occurs within a three-year period 
 
 
Percentage of cumulative change in ownership
50.00% 
 
 
Deferred tax assets for net operating losses
76,152,000 
 
 
Tax credits
18,405,000 
 
 
Accrual for interest or penalties
0 
0 
 
Interest or penalties expense
0 
0 
0 
Valuation allowance
106,727,000 
6,197,000 
 
Net operating loss carryforwards related to windfall tax benefits
1,200,000 
 
 
Research Development and Investment Credit [Member]
 
 
 
Operating Loss Carry forwards [Line Items]
 
 
 
Federal research and development credit and orphan drug credit carryforwards
8,600,000 
8,100,000 
 
Domestic Country [Member]
 
 
 
Operating Loss Carry forwards [Line Items]
 
 
 
Net operating loss carry forwards
285,800,000 
265,000,000 
 
Federal research and development credit and orphan drug credit carryforwards
25,000,000 
23,700,000 
 
Research and development credits and other tax credits
12,600,000 
 
 
Operating loss carry forwards
101,200,000 
 
 
State and Local Jurisdiction [Member]
 
 
 
Operating Loss Carry forwards [Line Items]
 
 
 
Net operating loss carry forwards
261,600,000 
234,200,000 
 
Research and development credits and other tax credits
200,000 
 
 
Operating loss carry forwards
$ 33,300,000 
 
 
Employee Benefit Plan (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Employee Benefit Plan (Textual) [Abstract]
 
 
 
Company's Contributions towards employee benefit plan
$ 0.2 
$ 0.2 
$ 0.2 
Summary of Unaudited Quarterly Financial Information (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Summary of the Company's unaudited quarterly results of operations
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$ 2,319 
$ 2,175 
$ 1,565 
$ 11,460 
$ 1,932 
$ 26,619 
$ 818 
$ 649 
$ 17,519 
$ 30,018 
$ 8,711 
Total operating expenses
9,895 
9,955 
9,502 
11,600 
8,978 
10,227 
9,269 
9,366 
40,952 
37,840 
39,926 
Net income (loss)
$ (7,549)
$ (7,726)
$ (7,868)
$ 244 
$ (6,614)
$ 16,431 
$ (8,406)
$ (8,694)
$ (22,899)
$ (7,283)
$ (30,385)
Basic net income (loss) per share (1)
$ (0.09)
$ (0.09)
$ (0.09)
$ 0.00 
$ (0.09)
$ 0.23 
$ (0.12)
$ (0.12)
 
 
 
Diluted net income (loss) per share (1)
$ (0.09)
$ (0.09)
$ (0.09)
$ 0.00 
$ (0.09)
$ 0.22 
$ (0.12)
$ (0.12)