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1. | GENERAL |
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.
The unaudited financial statements at June 30, 2012, and for the three and six months ended June 30, 2012 and 2011, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC, and with accounting principles generally accepted in the United States applicable to interim financial statements. These unaudited financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of only normal recurring accruals, which in the opinion of management are necessary to present fairly the Company’s financial position as of the interim date and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year or future periods. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. These unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2011, included in its Annual Report on Form 10-K filed with the SEC.
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. 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
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 its primary facilities lease, which ends in August 2017. Under certain circumstances the Company may be able to eliminate the need for the letter of credit. As of June 30, 2012, and December 31, 2011, restricted cash of $3.0 million was pledged as collateral for this letter of credit.
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 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.
Multiple-element arrangements after January 1, 2011
Effective January 1, 2011, the Company follows the provisions of ASU No. 2009-13 “Multiple-Deliverable Revenue Arrangements” 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.
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.
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 net loss per share excludes any assumed exercise of stock options and warrants, and any assumed issuance of common stock under restricted stock units, or RSUs, as the effect would be antidilutive. Common stock equivalents of 1.1 million and 1.5 million for the three months ended June 30, 2012 and 2011, respectively, were excluded from the calculation because of their antidilutive effect. Common stock equivalents of 1.4 million and 1.1 million for the six months ended June 30, 2012 and 2011, respectively, were excluded from the calculation because of their antidilutive effect.
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.
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2. | STOCK-BASED COMPENSATION |
Total stock-based compensation expense was allocated to research and development, manufacturing and production and general and administrative expense as follows (in thousands):
Three Months Ended June 30, |
Six Months
Ended June 30, |
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2012 | 2011 | 2012 | 2011 | |||||||||||||
Research and development |
$ | 272 | $ | 240 | $ | 558 | $ | 498 | ||||||||
Manufacturing and production |
56 | 51 | 106 | 82 | ||||||||||||
General and administrative |
595 | 524 | 1,179 | 1,033 | ||||||||||||
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Total stock-based compensation expense |
$ | 923 | $ | 815 | $ | 1,843 | $ | 1,613 | ||||||||
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During the six months ended June 30, 2012 and 2011, the Company granted stock-based awards with a total estimated value of $3.9 million and $3.7 million, respectively. At June 30, 2012, total unrecognized estimated compensation expense related to unvested stock-based awards granted prior to that date was $4.5 million, which is expected to be recognized over a weighted-average period of 1.6 years. Stock-based awards granted during the six months ended June 30, 2012 and 2011, were equal to 2.2% and 3.5%, respectively, of outstanding shares of common stock at the end of the applicable period.
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3. | OTHER BALANCE SHEET ACCOUNTS |
Accounts payable and accrued expenses consisted of the following (in thousands):
June 30, 2012 |
December 31, 2011 |
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Clinical trial accruals |
$ | 1,217 | $ | 1,681 | ||||
Employee compensation |
2,660 | 3,653 | ||||||
Accounts payable |
487 | 351 | ||||||
Other accrued liabilities |
700 | 677 | ||||||
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Total accounts payable and accrued expenses |
$ | 5,064 | $ | 6,362 | ||||
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4. | MARKETABLE SECURITIES, AVAILABLE FOR SALE |
The following is a summary of available for sale marketable securities (in thousands):
June 30, 2012 |
Amortized Cost |
Unrealized Gain |
Unrealized Loss |
Market Value |
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U.S. treasuries |
$ | 6,009 | $ | — | $ | — | $ | 6,009 | ||||||||
Government-sponsored enterprise securities |
7,365 | — | 3 | 7,362 | ||||||||||||
Corporate bonds |
12,687 | — | 10 | 12,677 | ||||||||||||
Certificates of deposit |
51 | — | — | 51 | ||||||||||||
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$ | 26,112 | $ | — | $ | 13 | $ | 26,099 | |||||||||
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December 31, 2011 |
Amortized Cost |
Unrealized Gain |
Unrealized Loss |
Market Value |
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U.S. treasuries |
$ | 1,008 | $ | 2 | $ | — | $ | 1,010 | ||||||||
Government-sponsored enterprise securities |
7,200 | — | 2 | 7,198 | ||||||||||||
Certificates of deposit |
525 | — | — | 525 | ||||||||||||
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$ | 8,733 | $ | 2 | $ | 2 | $ | 8,733 | |||||||||
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At June 30, 2012, $4.0 million of these securities were scheduled to mature outside of one year. The Company did not realize any gains or losses on sales of available-for-sale securities for the six months ended June 30, 2012. As of June 30, 2012, none of the securities had been in a continuous unrealized loss position longer than one year.
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5. | LONG-TERM INVESTMENTS |
In March 2012, the Company sold two auction rate securities classified as long-term investments with a par value of $4.0 million. Included in interest and other income for the six months ended June 30, 2012 is a gain of $0.3 million related to the sale.
As of June 30, 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 June 30, 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, collateralization 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 June 30, 2012, none of which were realized during the three or six months ended June 30, 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 $59,000 and $0.1 million for the six months ended June 30, 2012 and 2011, respectively. As of June 30, 2012, the Company had recorded cumulative unrealized gains of $0.4 million. The resulting carrying value of the auction rate security at June 30, 2012, was $2.2 million. Any future decline in market value may result in additional losses being recognized.
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6. | FAIR VALUE MEASUREMENTS |
The Company measures fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements are based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
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Level 1: Observable inputs such as quoted prices in active markets; |
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Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
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Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Cash equivalents, marketable securities and long-term investments measured at fair value are classified in the table below in one of the three categories described above (in thousands):
Fair Value Measurements | ||||||||||||||||
June 30, 2012 |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Certificates of deposit |
51 | — | — | 51 | ||||||||||||
Money market funds |
40,592 | — | — | 40,592 | ||||||||||||
U.S. treasuries |
6,009 | — | — | 6,009 | ||||||||||||
Corporate bonds |
— | 12,677 | — | 12,677 | ||||||||||||
Government-sponsored enterprise securities |
— | 7,362 | — | 7,362 | ||||||||||||
Auction rate securities |
— | — | 2,198 | 2,198 | ||||||||||||
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$ | 46,652 | $ | 20,039 | $ | 2,198 | $ | 68,889 | |||||||||
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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 | ||||||||||||
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$ | 14,313 | $ | 7,198 | $ | 5,928 | $ | 27,439 | |||||||||
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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 June 30, 2012. The Company determines the fair value of corporate bonds and 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 independent third parties with respect to any of its level 2 securities at June 30, 2012. The Company did not reclassify any investments between level categories during the six months ended June 30, 2012. The valuation of the Company’s investments in auction rate securities are more fully described in Note 5.
Activity for assets measured at fair value using significant unobservable inputs (Level 3) is presented in the table below (in thousands):
Six
Months Ended June 30, 2012 |
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Balance at December 31, 2011 |
$ | 5,928 | ||
Total net realized gains included in earnings |
(590 | ) | ||
Total net unrealized gains included in other comprehensive income |
20 | |||
Sales of Level 3 securities |
(3,160 | ) | ||
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Balance at June 30, 2012 |
$ | 2,198 | ||
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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 the reporting date |
$ | — | ||
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7. | COMMITMENTS AND 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 patent enforcement actions, their 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.
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8. | STOCKHOLDERS’ EQUITY |
In January 2012, the Company sold 13,909,692 shares of its common stock in a public offering 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.
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9. | ASTELLAS AGREEMENTS |
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 terms of the license agreements, Astellas paid a nonrefundable upfront license fee of $25.0 million in 2011. The Company also received an additional $10.0 million milestone payment upon finalization of the general trial design for a Phase 3 registration trial of TransVax™ in hematopoietic stem cell transplant recipients which occurred in March of 2012. The Company recognized $10.2 million in license revenue under the Astellas agreements during the six months ended June 30, 2012, which included the aforementioned $10.0 million milestone.
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.
Under the terms of the agreements the Company is also performing research and development services which are being paid for by Astellas. During the three and six months ended June 30, 2012, the Company recognized $1.3 million and $2.3 million, respectively, of revenue related to these contract services.
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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.
Multiple-element arrangements after January 1, 2011
Effective January 1, 2011, the Company follows the provisions of ASU No. 2009-13 “Multiple-Deliverable Revenue Arrangements” 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.
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.
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. 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
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 its primary facilities lease, which ends in August 2017. Under certain circumstances the Company may be able to eliminate the need for the letter of credit. As of June 30, 2012, and December 31, 2011, restricted cash of $3.0 million was pledged as collateral for this letter of credit.
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.
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.
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 net loss per share excludes any assumed exercise of stock options and warrants, and any assumed issuance of common stock under restricted stock units, or RSUs, as the effect would be antidilutive. Common stock equivalents of 1.1 million and 1.5 million for the three months ended June 30, 2012 and 2011, respectively, were excluded from the calculation because of their antidilutive effect. Common stock equivalents of 1.4 million and 1.1 million for the six months ended June 30, 2012 and 2011, respectively, were excluded from the calculation because of their antidilutive effect.
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.
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Total stock-based compensation expense was allocated to research and development, manufacturing and production and general and administrative expense as follows (in thousands):
Three Months Ended June 30, |
Six Months
Ended June 30, |
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2012 | 2011 | 2012 | 2011 | |||||||||||||
Research and development |
$ | 272 | $ | 240 | $ | 558 | $ | 498 | ||||||||
Manufacturing and production |
56 | 51 | 106 | 82 | ||||||||||||
General and administrative |
595 | 524 | 1,179 | 1,033 | ||||||||||||
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Total stock-based compensation expense |
$ | 923 | $ | 815 | $ | 1,843 | $ | 1,613 | ||||||||
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Accounts payable and accrued expenses consisted of the following (in thousands):
June 30, 2012 |
December 31, 2011 |
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Clinical trial accruals |
$ | 1,217 | $ | 1,681 | ||||
Employee compensation |
2,660 | 3,653 | ||||||
Accounts payable |
487 | 351 | ||||||
Other accrued liabilities |
700 | 677 | ||||||
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Total accounts payable and accrued expenses |
$ | 5,064 | $ | 6,362 | ||||
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The following is a summary of available for sale marketable securities (in thousands):
June 30, 2012 |
Amortized Cost |
Unrealized Gain |
Unrealized Loss |
Market Value |
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U.S. treasuries |
$ | 6,009 | $ | — | $ | — | $ | 6,009 | ||||||||
Government-sponsored enterprise securities |
7,365 | — | 3 | 7,362 | ||||||||||||
Corporate bonds |
12,687 | — | 10 | 12,677 | ||||||||||||
Certificates of deposit |
51 | — | — | 51 | ||||||||||||
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$ | 26,112 | $ | — | $ | 13 | $ | 26,099 | |||||||||
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December 31, 2011 |
Amortized Cost |
Unrealized Gain |
Unrealized Loss |
Market Value |
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U.S. treasuries |
$ | 1,008 | $ | 2 | $ | — | $ | 1,010 | ||||||||
Government-sponsored enterprise securities |
7,200 | — | 2 | 7,198 | ||||||||||||
Certificates of deposit |
525 | — | — | 525 | ||||||||||||
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$ | 8,733 | $ | 2 | $ | 2 | $ | 8,733 | |||||||||
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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 | ||||||||||||||||
June 30, 2012 |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Certificates of deposit |
51 | — | — | 51 | ||||||||||||
Money market funds |
40,592 | — | — | 40,592 | ||||||||||||
U.S. treasuries |
6,009 | — | — | 6,009 | ||||||||||||
Corporate bonds |
— | 12,677 | — | 12,677 | ||||||||||||
Government-sponsored enterprise securities |
— | 7,362 | — | 7,362 | ||||||||||||
Auction rate securities |
— | — | 2,198 | 2,198 | ||||||||||||
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$ | 46,652 | $ | 20,039 | $ | 2,198 | $ | 68,889 | |||||||||
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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 | ||||||||||||
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$ | 14,313 | $ | 7,198 | $ | 5,928 | $ | 27,439 | |||||||||
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Activity for assets measured at fair value using significant unobservable inputs (Level 3) is presented in the table below (in thousands):
Six
Months Ended June 30, 2012 |
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Balance at December 31, 2011 |
$ | 5,928 | ||
Total net realized gains included in earnings |
(590 | ) | ||
Total net unrealized gains included in other comprehensive income |
20 | |||
Sales of Level 3 securities |
(3,160 | ) | ||
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Balance at June 30, 2012 |
$ | 2,198 | ||
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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 the reporting date |
$ | — | ||
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