ACORDA THERAPEUTICS INC, 10-Q filed on 11/7/2014
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2014
Oct. 31, 2014
Document and Entity Information
 
 
Entity Registrant Name
ACORDA THERAPEUTICS INC 
 
Entity Central Index Key
0001008848 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2014 
 
Amendment Flag
false 
 
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
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
41,947,992 
Document Fiscal Year Focus
2014 
 
Document Fiscal Period Focus
Q3 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Current assets:
 
 
Cash and cash equivalents
$ 53,341 
$ 48,037 
Restricted cash
194 
277 
Short-term investments
713,100 
225,891 
Trade accounts receivable, net of allowances of $1,330 and $698, as of September 30,2014 and December 31, 2013, respectively
24,792 
30,784 
Prepaid expenses
9,000 
8,398 
Finished goods inventory held by the Company
26,645 
25,535 
Finished goods inventory held by others
570 
637 
Deferred tax asset
5,873 
19,314 
Other current assets
10,374 
8,460 
Total current assets
843,889 
367,333 
Long-term investments
 
93,299 
Property and equipment, net of accumulated depreciation
17,089 
16,525 
Deferred tax asset
84,885 
107,985 
Intangible assets, net of accumulated amortization
16,865 
17,459 
Non-current portion of deferred cost of license revenue
3,698 
4,174 
Other assets
6,341 
352 
Total assets
972,767 
607,127 
Current liabilities:
 
 
Accounts payable
20,507 
15,922 
Accrued expenses and other current liabilities
39,785 
37,569 
Deferred product revenue-Zanaflex
29,515 
32,090 
Current portion of deferred license revenue
9,057 
9,057 
Current portion of revenue interest liability
913 
861 
Current portion of convertible notes payable
1,144 
1,144 
Total current liabilities
100,921 
96,643 
Convertible senior notes (due 2021)
285,825 
 
Non-current portion of deferred license revenue
52,835 
59,628 
Put/call liability
 
147 
Non-current portion of revenue interest liability
14 
493 
Non-current portion of convertible notes payable
2,159 
3,228 
Other non-current liabilities
8,100 
6,635 
Commitments and contingencies
   
   
Stockholders' equity:
 
 
Common stock, $0.001 par value. Authorized 80,000,000 shares at September 30, 2014 and December 31, 2013; issued and outstanding 41,236,633 and 40,896,355 shares, including those held in treasury, as of September 30, 2014 and December 31, 2013, respectively
41 
41 
Treasury stock at cost (12,420 shares at September 30, 2014 and December 31, 2013)
(329)
(329)
Additional paid-in capital
743,776 
678,686 
Accumulated deficit
(220,741)
(238,082)
Accumulated other comprehensive income
166 
37 
Total stockholders' equity
522,913 
440,353 
Total liabilities and stockholders' equity
$ 972,767 
$ 607,127 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Consolidated Balance Sheets
 
 
Trade accounts receivable, allowances (in dollars)
$ 1,330 
$ 698 
Common stock, par value (in dollars per share)
$ 0.001 
$ 0.001 
Common stock, Authorized shares
80,000,000 
80,000,000 
Common stock, issued shares
41,236,633 
40,896,355 
Common stock, outstanding shares
41,236,633 
40,896,355 
Treasury stock, shares
12,420 
12,420 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Revenues:
 
 
 
 
Net product revenues
$ 98,481 
$ 79,760 
$ 262,662 
$ 223,969 
Royalty revenues
5,216 
2,895 
14,153 
13,076 
License revenue
2,264 
2,264 
6,793 
6,793 
Total net revenues
105,961 
84,919 
283,608 
243,838 
Costs and expenses:
 
 
 
 
Cost of sales
20,575 
17,213 
55,004 
47,631 
Cost of license revenue
159 
159 
476 
476 
Research and development
16,578 
13,839 
47,548 
39,575 
Selling, general and administrative
47,820 
42,336 
145,357 
138,538 
Total operating expenses
85,132 
73,547 
248,385 
226,220 
Operating income
20,829 
11,372 
35,223 
17,618 
Other expense (net):
 
 
 
 
Interest and amortization of debt discount expense
(4,597)
(544)
(5,116)
(1,884)
Interest income
257 
162 
596 
501 
Total other expense (net)
(4,340)
(382)
(4,520)
(1,383)
Income before taxes
16,489 
10,990 
30,703 
16,235 
Provision for income taxes
(4,536)
(3,513)
(13,361)
(5,985)
Net income
$ 11,953 
$ 7,477 
$ 17,342 
$ 10,250 
Net income per share-basic (in dollars per share)
$ 0.29 
$ 0.19 
$ 0.42 
$ 0.26 
Net income per share-diluted (in dollars per share)
$ 0.28 
$ 0.18 
$ 0.41 
$ 0.25 
Weighted average common shares outstanding used in computing net income per share-basic (in shares)
41,094 
40,315 
41,022 
40,037 
Weighted average common shares outstanding used in computing net income per share-diluted (in shares)
42,365 
41,996 
42,346 
41,541 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Consolidated Statements of Comprehensive Income
 
 
 
 
Net income
$ 11,953 
$ 7,477 
$ 17,342 
$ 10,250 
Other comprehensive income (loss):
 
 
 
 
Unrealized gains (loss) on available for sale securities, net of tax
69 
44 
129 
36 
Other comprehensive income, net of tax
69 
44 
129 
36 
Comprehensive income
$ 12,022 
$ 7,521 
$ 17,471 
$ 10,286 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Cash flows from operating activities:
 
 
Net income
$ 17,342 
$ 10,250 
Adjustments to reconcile net income (loss) to net cash provided by/(used in) operating activities:
 
 
Share-based compensation expense
20,644 
18,001 
Amortization of net premiums and discounts on investments
3,099 
1,774 
Amortization of debt discount and debt issuance costs
2,226 
 
Amortization of revenue interest issuance cost
19 
37 
Depreciation and amortization expense
5,375 
4,623 
Gain on put/call liability
(147)
(329)
Deferred tax provision
13,441 
6,063 
Changes in assets and liabilities:
 
 
Decrease in accounts receivable
5,992 
1,328 
(Increase) decrease in prepaid expenses and other current assets
(2,515)
1,308 
Increase in inventory held by the Company
(1,111)
(5,308)
Decrease in inventory held by others
67 
111 
Decrease in non-current portion of deferred cost of license revenue
476 
476 
Decrease in other assets
25 
25 
Increase (decrease) in accounts payable, accrued expenses, other current liabilities
5,732 
(13,481)
Increase in revenue interest liability interest payable
25 
92 
Decrease in non-current portion of deferred license revenue
(6,793)
(6,793)
Increase (decrease) in other non-current liabilities
27 
(272)
(Decrease) increase in deferred product revenue-Zanaflex
(2,575)
1,946 
Decrease in restricted cash
83 
244 
Net cash provided by operating activities
61,432 
20,095 
Cash flows from investing activities:
 
 
Purchases of property and equipment
(2,330)
(3,663)
Purchases of intangible assets
(1,577)
(2,518)
Acquisition
 
(7,499)
Purchases of investments
(580,381)
(128,038)
Proceeds from maturities of investments
183,500 
114,500 
Net cash used in investing activities
(400,788)
(27,218)
Cash flows from financing activities:
 
 
Proceeds from issuance of convertible senior notes
345,000 
 
Debt issuance costs
(7,516)
 
Proceeds from issuance of common stock and option exercises
7,628 
12,183 
Repayments of revenue interest liability
(452)
(670)
Net cash provided by financing activities
344,660 
11,513 
Net increase in cash and cash equivalents
5,304 
4,390 
Cash and cash equivalents at beginning of period
48,037 
41,876 
Cash and cash equivalents at end of period
53,341 
46,266 
Supplemental disclosure:
 
 
Cash paid for interest
1,153 
1,695 
Cash paid for taxes
$ 1,829 
$ 1,742 
Organization and Business Activities
Organization and Business Activities

(1) Organization and Business Activities

 

Acorda Therapeutics, Inc. (“Acorda” or the “Company”) is a biopharmaceutical company dedicated to the identification, development and commercialization of novel therapies to improve the lives of people with neurological disorders.

 

The management of the Company is responsible for the accompanying unaudited interim consolidated financial statements and the related information included in the notes to the consolidated financial statements. In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments, including normal recurring adjustments necessary for the fair presentation of the Company’s financial position and results of operations and cash flows for the periods presented. Results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year.

 

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company as of and for the year ended December 31, 2013 included in the Company’s Annual Report on Form 10-K for such year, as filed with the Securities and Exchange Commission (the SEC).

Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

 

(2) Summary of Significant Accounting Policies

 

Principles of Consolidation

 

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and include the results of operations of the Company and its majority owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of the consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include share-based compensation accounting, which are largely dependent on the fair value of the Company’s equity securities. In addition, the Company recognizes Zanaflex revenue based on estimated prescriptions filled. The Company adjusts its Zanaflex inventory value based on an estimate of inventory that may be returned. Actual results could differ from those estimates.

 

Investments

 

Both short-term and long-term investments consist of US Treasury bonds. The Company classifies marketable securities available to fund current operations as short-term investments in current assets on its consolidated balance sheets. Marketable securities are classified as long-term investments in long-term assets on the consolidated balance sheets if the Company has the ability and intent to hold them and such holding period is longer than one year. The Company classifies its short-term and long-term investments as available-for-sale. Available-for-sale securities are recorded at fair value of the investments based on quoted market prices.

 

Unrealized holding gains and losses on available-for-sale securities, which are determined to be temporary, are excluded from earnings and are reported as a separate component of accumulated other comprehensive income (loss).

 

Premiums and discounts on investments are amortized over the life of the related available-for-sale security as an adjustment to yield using the effective-interest method. Dividend and interest income are recognized when earned. Amortized premiums and discounts, dividend and interest income and realized gains and losses are included in interest income.

 

Accumulated Other Comprehensive Income

 

The Company’s accumulated other comprehensive income is comprised of gains and losses on available for sale securities and is recorded and presented net of income tax.

 

Revenue Recognition

 

Ampyra

 

Ampyra is available only through a network of specialty pharmacy providers that provide the medication to patients by mail; Kaiser Permanente, which distributes Ampyra to patients through a closed network of on-site pharmacies; and ASD Specialty Healthcare, Inc. (an AmerisourceBergen affiliate), which distributes Ampyra to the U.S. Bureau of Prisons and the U.S. Department of Veterans Affairs (VA). Ampyra is not available in retail pharmacies. The Company does not recognize revenue from product sales until there is persuasive evidence of an arrangement, delivery has occurred, the price is fixed and determinable, the buyer is obligated to pay the Company, the obligation to pay is not contingent on resale of the product, the buyer has economic substance apart from the Company, the Company has no obligation to bring about the sale of the product, the amount of returns can be reasonably estimated and collectability is reasonably assured. The Company recognizes product sales of Ampyra following shipment of product to a network of specialty pharmacy providers, Kaiser Permanente, and the specialty distributor to the VA. The specialty pharmacy providers, Kaiser Permanente, and the specialty distributor to the VA are contractually obligated to hold no more than an agreed number of days of inventory, ranging from 10 to 30 days.

 

The Company’s net revenues represent total revenues less allowances for customer credits, including estimated discounts, rebates, and chargebacks. These allowances are recorded for cash consideration given by a vendor to a customer that is presumed to be a reduction of the selling prices of the vendor’s products or services and, therefore, are characterized as a reduction of revenue. At the time product is shipped to specialty pharmacies, Kaiser Permanente and the specialty distributor to the VA, an adjustment is recorded for estimated discounts, rebates, and chargebacks. These allowances are established by management as its best estimate based on available information and will be adjusted to reflect known changes in the factors that impact such allowances. Allowances for discounts, rebates, returns and chargebacks are established based on the contractual terms with customers, historical trends, communications with customers and the levels of inventory remaining in the distribution channel, as well as expectations about the market for the product and anticipated introduction of competitive products.  Product shipping and handling costs are included in cost of sales.  The Company does not accept returns of Ampyra with the exception of product damages that occur during shipping.

 

Zanaflex

 

The Company applies the revenue recognition guidance in Accounting Standards Codification (ASC) 605-15-25, which among other criteria requires that future returns can be reasonably estimated in order to recognize revenue. The amount of future tablet returns is uncertain due to generic competition and customer conversion to Zanaflex Capsules. The Company has accumulated some sales history with Zanaflex Capsules; however, due to existing and potential generic competition and customer conversion from Zanaflex tablets to Zanaflex Capsules, we do not believe we can reasonably determine a return rate at this time. As a result, the Company accounts for these product shipments using a deferred revenue recognition model. Under the deferred revenue model, the Company does not recognize revenue upon product shipment. For these product shipments, the Company invoices the wholesaler, records deferred revenue at gross invoice sales price, and classifies the cost basis of the product held by the wholesaler as a component of inventory. The Company recognizes revenue when prescribed to the end-user, on a first-in first-out (FIFO) basis. The Company’s revenue to be recognized is based on (1) the estimated prescription demand, based on pharmacy sales for its products; and (2) the Company’s analysis of third-party information, including third-party market research data. The Company’s estimates are subject to the inherent limitations of estimates that rely on third-party data, as certain third-party information is itself in the form of estimates, and reflect other limitations. The Company’s sales and revenue recognition reflects the Company’s estimates of actual product prescribed to the end-user. The Company expects to be able to apply a more traditional revenue recognition policy such that revenue is recognized following shipment to the customer when it believes it has sufficient data to develop reasonable estimates of expected returns based upon historical returns and greater certainty regarding generic competition.

 

The Company’s net revenues represent total revenues less allowances for customer credits, including estimated discounts, rebates, and chargebacks. These allowances are recorded for cash consideration given by a vendor to a customer that is presumed to be a reduction of the selling prices of the vendor’s products or services and, therefore, should be characterized as a reduction of revenue when recognized in the vendor’s statement of operations. Adjustments are recorded for estimated chargebacks, rebates, and discounts. These allowances are established by management as its best estimate based on available information and are adjusted to reflect known changes in the factors that impact such allowances. Allowances for chargebacks, rebates and discounts are established based on the contractual terms with customers, analysis of historical levels of discounts, chargebacks and rebates, communications with customers and the levels of inventory remaining in the distribution channel, as well as expectations about the market for each product and anticipated introduction of competitive products. In addition, the Company records a charge to cost of goods sold for the cost basis of the estimated product returns the Company believes may ultimately be realized at the time of product shipment to wholesalers. The Company has recognized this charge at the date of shipment since it is probable that it will receive a level of returned products; upon the return of such product it will be unable to resell the product considering its expiration dating; and it can reasonably estimate a range of returns. This charge represents the cost basis for the low end of the range of the Company’s estimated returns. Product shipping and handling costs are included in cost of sales.

 

Qutenza

 

Qutenza is distributed in the United States by Besse Medical, Inc., a specialty distributor that furnishes the medication to physician offices; and by ASD Specialty Healthcare, Inc., a specialty distributor that furnishes the medication to hospitals and clinics. The Company does not recognize revenue from product sales until there is persuasive evidence of an arrangement, delivery has occurred, the price is fixed and determinable, the buyer is obligated to pay the Company, the obligation to pay is not contingent on resale of the product, the buyer has economic substance apart from the Company, the Company has no obligation to bring about the sale of the product, and the amount of returns can be reasonably estimated and collectability is reasonably assured. This means that, for Qutenza, the Company recognizes product sales following shipment of product to its specialty distributors.

 

The Company’s net revenues represent total revenues less allowances for customer credits, including estimated rebates, chargebacks, and returns. These allowances are recorded for cash consideration given by a vendor to a customer that is presumed to be a reduction of the selling prices of the vendor’s products or services and, therefore, are characterized as a reduction of revenue. At the time product is shipped, an adjustment is recorded for estimated rebates, chargebacks, and returns. These allowances are established by management as its best estimate based on available information and will be adjusted to reflect known changes in the factors that impact such allowances. Allowances for rebates, chargebacks, and returns are established based on the contractual terms with customers, historical trends, as well as expectations about the market for the product and anticipated introduction of competitive products.  Product shipping and handling costs are included in cost of sales.

 

Milestones and royalties

 

In order to determine the revenue recognition for contingent milestones, the Company evaluates the contingent milestones using the criteria as provided by the Financial Accounting Standards Boards (FASB) guidance on the milestone method of revenue recognition. At the inception of a collaboration agreement the Company evaluates if payments are substantive.  The criteria requires that (i) the Company determines if the milestone is commensurate with either its performance to achieve the milestone or the enhancement of value resulting from the Company’s activities to achieve the milestone, (ii) the milestone be related to past performance, and (iii) the milestone be reasonable relative to all deliverable and payment terms of the collaboration arrangement.  If these criteria are met then the contingent milestones can be considered substantive milestones and will be recognized as revenue in the period that the milestone is achieved. Royalties are recognized as earned in accordance with the terms of various research and collaboration agreements.

 

In-Process Research and Development

 

The cost of in-process research and development (IPR&D) acquired directly in a transaction other than a business combination is capitalized if the projects will be further developed or have an alternative future use; otherwise they are expensed. The fair values of IPR&D projects acquired in business combinations are capitalized. Several methods may be used to determine the estimated fair value of the IPR&D acquired in a business combination. The Company utilizes the “income method,” and uses estimated future net cash flows that are derived from projected sales revenues and estimated costs. These projections are based on factors such as relevant market size, patent protection, historical pricing and expected industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. These assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time the assets are amortized over the remaining useful life or written off, as appropriate. IPR&D intangible assets which are determined to have had a drop in their fair value are adjusted downward and an expense recognized on the statement of operations. These are tested at least annually or sooner when a triggering event occurs that could indicate a potential impairment.

 

Collaborations

 

The Company recognizes collaboration revenues and expenses by analyzing each element of the agreement to determine if it shall be accounted for as a separate element or single unit of accounting. If an element shall be treated separately for revenue recognition purposes, the revenue recognition principles most appropriate for that element are applied to determine when revenue shall be recognized. If an element shall not be treated separately for revenue recognition purposes, the revenue recognition principles most appropriate for the bundled group of elements are applied to determine when revenue shall be recognized. Payments received in excess of revenues recognized are recorded as deferred revenue until such time as the revenue recognition criteria have been met.

 

Concentration of Credit Risk

 

The Company’s principal direct customers as of September 30, 2014 were a network of specialty pharmacies, Kaiser Permanente, and the specialty distributor to the VA for Ampyra, wholesale pharmaceutical distributors for Zanaflex Capsules and Zanaflex tablets, and two specialty distributors for Qutenza. The Company periodically assesses the financial strength of these customers and establishes allowances for anticipated losses, if necessary. Four customers individually accounted for more than 10% of the Company’s product revenue in 2014 and 2013. Five and three customers individually accounted for more than 10% of the Company’s accounts receivable as of September 30, 2014 and December 31, 2013, respectively. The Company’s net product revenues are generated in the United States.

 

Segment and Geographic Information

 

The Company is managed and operated as one business which is focused on the identification, development and commercialization of novel therapies that improve neurological function in people with MS, SCI, and other disorders of the central nervous system. The entire business is managed by a single management team that reports to the Chief Executive Officer. The Company does not operate separate lines of business with respect to any of its products or product candidates and the Company does not prepare discrete financial information with respect to separate products or product candidates or by location.  Accordingly, the Company views its business as one reportable operating segment. Net product revenues reported to date are derived from the sales of Ampyra, Zanaflex and Qutenza in the United States.

 

Subsequent Events

 

Subsequent events are defined as those events or transactions that occur after the balance sheet date, but before the financial statements are filed with the Securities and Exchange Commission. The Company completed an evaluation of the impact of any subsequent events through the date these financial statements were issued, and determined there were no subsequent events requiring disclosure in or requiring adjustment to these financial statements other than the subsequent event disclosed in Note 11 below.

 

Recent Accounting Pronouncements

 

In July 2013, the FASB issued Accounting Standards Update “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (ASU 2013-11). ASU 2013-11 requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (NOL) carryforward, or similar tax loss or tax credit carryforward, rather than as a liability when (1) the uncertain tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction and (2) the entity intends to use the deferred tax asset for that purpose. ASU 2013-11 is effective prospectively for fiscal years and interim periods within those years, beginning after December 15, 2013 for public entities. The adoption of ASU 2013-11 did not have a significant impact on the Company’s consolidated financial statements.

 

In May 2014, the FASB issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (ASU 2014-09), which requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.  The new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016.  The Company is currently evaluating the impact of the new standard.

 

In August 2014, the FASB issued Accounting Standards Update 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (ASU 2014-15), which defines management’s responsibility to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures if there is substantial doubt about its ability to continue as a going concern. The pronouncement is effective for annual reporting periods ending after December 15, 2016 with early adoption permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements.

Share-based Compensation
Common Stock Options and Restricted Stock

(3) Share-based Compensation

 

During the three-month periods ended September 30, 2014 and 2013, the Company recognized share-based compensation expense of $7.3 million and $6.5 million, respectively. During the nine-month periods ended September 30, 2014 and 2013, the Company recognized share-based compensation expense of $20.6 million and $18.0 million, respectively. Activity in options and restricted stock during the nine-month period ended September 30, 2014 and related balances outstanding as of that date are reflected below. The weighted average fair value per share of options granted to employees for the three-month periods ended September 30, 2014 and 2013 were approximately $14.88 and $18.02, respectively. The weighted average fair value per share of options granted to employees for the nine-month periods ended September 30, 2014 and 2013 were approximately $18.04 and $15.76, respectively.

 

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

 

 

 

For the three-month

 

For the nine-month

 

 

 

period ended September 30,

 

period ended September 30,

 

(In millions)

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

1.5 

 

$

1.5 

 

$

4.1 

 

$

4.2 

 

Selling, general and administrative

 

5.8 

 

5.0 

 

16.5 

 

13.8 

 

Total

 

$

7.3 

 

$

6.5 

 

$

20.6 

 

$

18.0 

 

 

A summary of share-based compensation activity for the nine-month period ended September 30, 2014 is presented below:

 

Stock Option Activity

 

 

 

Number of
Shares
(In thousands)

 

Weighted
Average
Exercise Price

 

Weighted
Average
Remaining
Contractual
Term

 

Intrinsic Value
(In thousands)

 

Balance at January 1, 2014

 

6,486

 

$

25.61

 

 

 

 

 

Granted

 

1,699

 

37.07

 

 

 

 

 

Cancelled

 

(226

)

31.90

 

 

 

 

 

Exercised

 

(336

)

22.74

 

 

 

 

 

Balance at September 30, 2014

 

7,623

 

$

28.11

 

6.8

 

$

51,194

 

Vested and expected to vest at September 30, 2014

 

7,542

 

$

28.04

 

6.7

 

$

51,053

 

Vested and exercisable at September 30, 2014

 

4,512

 

$

24.74

 

5.4

 

$

42,337

 

 

Restricted Stock Activity

 

(In thousands)
Restricted Stock

 

Number of Shares

 

Nonvested at January 1, 2014

 

421

 

Granted

 

286

 

Vested

 

(5

)

Forfeited

 

(37

)

Nonvested at September 30, 2014

 

665

 

 

Unrecognized compensation cost for unvested stock options and restricted stock awards as of September 30, 2014 totaled $60.3 million and is expected to be recognized over a weighted average period of approximately 2.6 years.

 

Earnings Per Share
Earnings Per Share

(4) Earnings Per Share

 

The following table sets forth the computation of basic and diluted earnings per share for the three and nine-month periods ended September 30, 2014 and 2013:

 

(In thousands, except per share data)

 

Three-month
period ended
September 30,
2014

 

Three-month
period ended
September 30,
2013

 

Nine-month
period ended
September 30,
2014

 

Nine-month
period ended
September 30,
2013

 

Basic and diluted

 

 

 

 

 

 

 

 

 

Net income

 

$

11,953 

 

$

7,477 

 

$

17,342 

 

$

10,250 

 

Weighted average common shares outstanding used in computing net income per share—basic

 

41,094 

 

40,315 

 

41,022 

 

40,037 

 

Plus: net effect of dilutive stock options and restricted common shares

 

1,271 

 

1,681 

 

1,324 

 

1,504 

 

Weighted average common shares outstanding used in computing net income per share—diluted

 

42,365 

 

41,996 

 

42,346 

 

41,541 

 

Net income per share—basic

 

$

0.29 

 

$

0.19 

 

$

0.42 

 

$

0.26 

 

Net income per share—diluted

 

$

0.28 

 

$

0.18 

 

$

0.41 

 

$

0.25 

 

 

The difference between basic and diluted shares is that diluted shares include the dilutive effect of the assumed exercise of outstanding securities. The Company’s stock options and unvested shares of restricted common stock could have the most significant impact on diluted shares.

 

Securities that could potentially be dilutive are excluded from the computation of diluted earnings per share when a loss from continuing operations exists or when the exercise price exceeds the average closing price of the Company’s common stock during the period, because their inclusion would result in an anti-dilutive effect on per share amounts.

 

In June 2014, the Company issued $345 million aggregate principal amount of 1.75% Convertible Senior Notes (the “Notes”), which aggregate principal amount includes the exercise of the underwriter’s over-allotment option.  See Note 8 — “Convertible Senior Notes”.  As the Company has a choice to settle the conversion obligation under the Notes in cash, shares or any combination of the two, the Company has determined that it intends to and has the ability to settle the accreted principal value of the Notes in cash and the excess conversion premium in shares. While the dilutive effect of the potential conversion premium will be considered in the calculation of diluted net income per share using the treasury stock method, the accreted principal value of the Notes will not be included in the calculation of diluted income per share, as we intend to settle this in cash.

 

The following amounts were not included in the calculation of net income per diluted share because their effects were anti-dilutive:

 

(In thousands)

 

Three-month
period ended
September 30,
2014

 

Three-month
period ended
September 30,
2013

 

Nine-month
period ended
September 30,
2014

 

Nine-month
period ended
September 30,
2013

 

Denominator

 

 

 

 

 

 

 

 

 

Stock options and restricted common shares

 

4,380 

 

1,558 

 

3,959 

 

2,786 

 

Convertible note — Saints Capital

 

29 

 

39 

 

29 

 

39 

 

 

Income Taxes
Income Taxes

(5) Income Taxes

 

For the three month periods ended September 30, 2014 and 2013, the Company recorded a provision for income taxes of $4.5 million and $3.5 million, respectively, based upon its estimated tax liability for the year. For the nine month periods ended September 30, 2014 and 2013, the Company recorded a provision for income taxes of $13.4 million and $6.0 million, respectively, based upon its estimated tax liability for the year. The provision for income taxes is based on federal, state and Puerto Rico income taxes. The effective income tax rates for the Company for the three-month periods ended September 30, 2014 and 2013 were 28% and 32%, respectively.  The effective income tax rates for the Company for the nine month periods ended September 30, 2014 and 2013 were 44% and 37%, respectively.  As a result of the Federal research and development tax credit not being extended during the three quarters of 2014, the Company was not able to receive a benefit in the effective tax rate for this in 2014.

 

The Company continues to evaluate the realizability of its deferred tax assets and liabilities on a periodic basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits and the regulatory approval of products currently under development. Any changes to the valuation allowance or deferred tax assets in the future would impact the Company’s income taxes.

 

Fair Value Measurements
Fair Value Measurements

(6) Fair Value Measurements

 

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2014 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability. The Company’s Level 1 assets consist of time deposits and investments in a Treasury money market fund and the Company’s Level 2 assets consist of high-quality government bonds and are valued using market prices on the active markets.  Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets and Level 2 assets are valued using quoted prices for similar assets and liabilities in active markets or other market observable inputs such as interest rates and yield curves. The Company’s Level 3 liabilities represent our put/call liability related to the Paul Royalty Fund (PRF) transaction and contingent consideration related to the NeurogesX acquisition. No changes in valuation techniques or inputs occurred during the three or nine months ended September 30, 2014.

 

(In thousands)

 

Level 1

 

Level 2

 

Level 3

 

September 30, 2014

 

 

 

 

 

 

 

Assets Carried at Fair Value:

 

 

 

 

 

 

 

Cash equivalents

 

$

30,881 

 

$

 

$

 

Short-term investments

 

 

713,100 

 

 

Long-term investments

 

 

 

 

Liabilities Carried at Fair Value:

 

 

 

 

 

 

 

Put/call liability

 

 

 

 

Contingent purchase price

 

 

 

263 

 

December 31, 2013

 

 

 

 

 

 

 

Assets Carried at Fair Value:

 

 

 

 

 

 

 

Cash equivalents

 

$

28,308 

 

$

 

$

 

Short-term investments

 

 

225,891 

 

 

Long-term investments

 

 

93,299 

 

 

Liabilities Carried at Fair Value:

 

 

 

 

 

 

 

Put/call liability

 

 

 

147 

 

Contingent purchase price

 

 

 

236 

 

 

The following tables present additional information about assets and/or liabilities measured at fair value on a recurring basis and for which the Company utilizes Level 3 inputs to determine fair value.

 

Put/call liability

 

(In thousands)

 

Three-month
period ended
September 30,
2014

 

Three-month
period ended
September 30,
2013

 

Nine-month
period ended
September 30,
2014

 

Nine-month
period ended
September 30,
2013

 

Put/call liability:

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

167

 

$

 

$

147

 

$

329

 

Total realized and unrealized gains included in selling, general and administrative expenses:

 

(167

)

 

(147

)

(329

)

Balance, end of period

 

$

 

$

 

$

 

$

 

 

The Company estimates the fair value of its put/call liability using a discounted cash flow valuation technique. Using this approach, historical and expected future cash flows are calculated over the expected life of the PRF agreement, are discounted, and then exercise scenario probabilities are applied. Some of the more significant assumptions made in the valuation include (i) the estimated Zanaflex revenue forecast and (ii) the likelihood of put/call exercise trigger events such as bankruptcy and change of control. The valuation is performed periodically when the significant assumptions change.  Realized gains and losses are included in selling, general and administrative expenses.

 

The put/call liability has been classified as a Level 3 liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market due to the lack of trading in the security. If different assumptions were used for the various inputs to the valuation approach including, but not limited to, assumptions involving the estimated Zanaflex revenue forecast and the likelihood of trigger events, the estimated fair value could be significantly higher or lower than the fair value we determined. The Company may be required to record losses in future periods, which may be significant.

 

Contingent purchase price

 

(In thousands)

 

Three-month
period ended
September 30,
2014

 

Three-month
period ended
September 30,
2013

 

Nine-month
period ended
September 30,
2014

 

Nine-month
period ended
September 30,
2013

 

Contingent purchase price:

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

254 

 

$

 

$

236 

 

$

 

Total losses included in selling, general and administrative expenses:

 

 

205 

 

27 

 

205 

 

Balance, end of period

 

$

263 

 

$

205 

 

$

263 

 

$

205 

 

 

The Company measures the fair value of the contingent purchase price related to the NeurogesX acquisition using a Monte Carlo simulation. Using this approach, the present value of each of the milestone payments is calculated using the probability of milestone achievement under various different scenarios. Some of the more significant assumptions used in the valuation include (i) the probability of FDA approval for NP-1998 and (ii) the variability in net sales for NP-1998 if FDA approval is achieved. The milestone achievement probabilities range from 0% to 10%, and the milestone payment outcomes range from $0 to $5.0 million. The valuation will be performed periodically when the significant assumptions change.  Realized gains and losses are included in selling, general and administrative expenses. There is no assurance that any of the conditions for the milestone payments will be met.

 

The contingent purchase price has been classified as a Level 3 liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market. If different assumptions were used for the various inputs to the valuation approach including, but not limited to, assumptions involving the probability of FDA approval for NP-1998 and the likelihood of trigger events, the estimated fair value could be significantly higher or lower than the fair value we determined. The Company may be required to record losses in future periods.

Investments
Investments

(7) Investments

 

The Company has determined that all of its investments are classified as available-for-sale. Available-for-sale securities are carried at fair value with interest on these securities included in interest income and are recorded based primarily on quoted market prices. Available-for-sale securities consisted of the following:

 

(In thousands)

 

Amortized
Cost

 

Gross
unrealized
gains

 

Gross
unrealized
losses

 

Estimated
fair
value

 

September 30, 2014

 

 

 

 

 

 

 

 

 

US Treasury bonds

 

$

712,825

 

$

275

 

$

 

$

713,100

 

December 31, 2013

 

 

 

 

 

 

 

 

 

US Treasury bonds

 

319,123

 

69

 

(2

)

319,190

 

 

The contractual maturities of short-term available-for-sale debt securities at December 31, 2013 are greater than 3 months but less than 1 year. The contractual maturities of $630.9 million of short-term available-for-sale debt securities at September 30, 2014 are greater than 3 months but less than 1 year.  Additionally, the Company has classified $82.2 million of available-for-sale debt securities with contractual maturities greater than 1 year as short-term investments at September 30, 2014, due to the Company’s intent and ability to hold these investments for a period of less than 1 year. There were no investments classified as long-term at September 30, 2014. The Company has determined that there were no other-than-temporary declines in the fair values of its investments as of September 30, 2014.

 

Short-term investments with maturity of three months or less from date of purchase have been classified as cash equivalents, and amounted to $30.9 million and $28.3 million as of September 30, 2014 and December 31, 2013, respectively.

 

The Company holds available-for-sale investment securities which are reported at fair value on the Company’s balance sheet. Unrealized holding gains and losses are reported within accumulated other comprehensive income (AOCI) in the statements of comprehensive (loss) income.  The changes in AOCI associated with the unrealized holding gain on available-for-sale investments during the nine months ended September 30, 2014, were as follows (in thousands):

 

(In thousands)

 

Net Unrealized
Gains on
Marketable
Securities, Net
of Tax

 

Balance at December 31, 2013

 

$

37 

 

Other comprehensive income before reclassifications:

 

129 

 

Amounts reclassified from accumulated other comprehensive income

 

 

Net current period other comprehensive income

 

129 

 

Balance at September 30, 2014

 

$

166 

 

 

Convertible Senior Notes
Debt

(8) Convertible Senior Notes

 

On June 17, 2014, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with J.P. Morgan Securities LLC (the “Underwriter”) relating to the issuance by the Company of $345 million aggregate principal amount of 1.75% Convertible Senior Notes due 2021 (the “Notes”) in an underwritten public offering pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-196803) (the “Registration Statement”) and a related preliminary and final prospectus supplement, filed with the Securities and Exchange Commission (the “Offering”). The principal amount of Notes includes $45 million aggregate principal amount of Notes that was purchased by the Underwriter pursuant to an option granted to the Underwriter in the Underwriting Agreement, which option was exercised in full. The net proceeds from the offering, after deducting the Underwriter’s discount and the offering expenses paid by the Company, were approximately $337.5 million.

 

The Notes are governed by the terms of an indenture, dated as of June 23, 2014 (the “Base Indenture”) and the first supplemental indenture, dated as of June 23, 2014 (the “Supplemental Indenture,” and together with the Base Indenture, the “Indenture”), each between the Company and Wilmington Trust, National Association, as trustee (the Trustee). The Notes will be convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, based on an initial conversion rate, subject to adjustment, of 23.4968 shares per $1,000 principal amount of Notes (which represents an initial conversion price of approximately $42.56 per share), only in the following circumstances and to the following extent: (1) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (2) during any calendar quarter commencing after the calendar quarter ending on September 30, 2014 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (3) if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; (4) upon the occurrence of specified events described in the Indenture; and (5) at any time on or after December 15, 2020 through the second scheduled trading day immediately preceding the maturity date.

 

The Company may not redeem the Notes prior to June 20, 2017. The Company may redeem for cash all or part of the Notes, at the Company’s option, on or after June 20, 2017 if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending within five trading days prior to the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

 

The Company will pay 1.75% interest per annum on the principal amount of the Notes, payable semiannually in arrears in cash on June 15 and December 15 of each year, beginning on December 15, 2014. The Notes will mature on June 15, 2021.

 

If the Company undergoes a “fundamental change” (as defined in the Indenture), subject to certain conditions, holders may require the Company to repurchase for cash all or part of their Notes in principal amounts of $1,000 or an integral multiple thereof. The fundamental change repurchase price will be equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. If a make-whole fundamental change, as described in the Indenture, occurs and a holder elects to convert its Notes in connection with such make-whole fundamental change, such holder may be entitled to an increase in the conversion rate as described in the Indenture.

 

The Indenture contains customary terms and covenants and events of default. If an event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding Notes by notice to the Company and the Trustee, may declare 100% of the principal of and accrued and unpaid interest, if any, on all the Notes to be due and payable. Upon such a declaration of acceleration, such principal and accrued and unpaid interest, if any, will be due and payable immediately. Upon the occurrence of certain events of bankruptcy, insolvency or reorganization involving the Company, 100% of the principal and accrued and unpaid interest, if any, on all of the Notes will become due and payable automatically. Notwithstanding the foregoing, the Indenture provides that, to the extent the Company elects and for up to 270 days, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right to receive additional interest on the Notes.

 

The Notes will be senior unsecured obligations and will rank equally with all of the Company’s existing and future senior debt and senior to any of the Company’s subordinated debt. The Notes will be structurally subordinated to all existing or future indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries and will be effectively subordinated to the Company’s existing or future secured indebtedness to the extent of the value of the collateral. The Indenture does not limit the amount of debt that the Company or its subsidiaries may incur.

 

In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Notes as a whole. The excess of the principal amount of the liability component over its carrying amount, referred to as the debt discount, is amortized to interest expense over the seven-year term of the Notes using the effective interest method. The equity component is not re-measured as long as it continues to meet the conditions for equity classification.

 

Our outstanding note balances as of September 30, 2014 consisted of the following:

 

(In thousands)

 

September 30,
2014

 

Liability component:

 

 

 

Principal

 

$

345,000

 

Less: debt discount, net

 

(59,175

)

Net carrying amount

 

$

285,825

 

Equity component

 

$

61,195

 

 

In connection with the issuance of the Notes, we incurred approximately $7.5 million of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees, and allocated these costs to the liability and equity components based on the allocation of the proceeds. Of the total $7.5 million of debt issuance costs, $1.3 million were allocated to the equity component and recorded as a reduction to additional paid-in capital and $6.2 million were allocated to the liability component and recorded as deferred financing costs included in other assets on the balance sheet. The portion allocated to the liability component is amortized to interest expense over the expected life of the Notes using the effective interest method.

 

We determined the expected life of the debt was equal to the seven year term on the Notes. The carrying amount of the Company’s borrowings of $285.8 million approximates fair value at September 30, 2014. As of September 30, 2014, the remaining contractual life of the Notes is approximately 6.8 years. The effective interest rate on the liability component was 4.8% for the period from the date of issuance through September 30, 2014. The following table sets forth total interest expense recognized related to the Notes during the three and nine-months ended September 30, 2014:

 

(In thousands)

 

Three-month
period ended
September 30,
2014

 

Nine-month
period ended
September 30,
2014

 

Contractual interest expense

 

$

1,522 

 

$

1,638 

 

Amortization of debt issuance costs

 

191 

 

205 

 

Amortization of debt discount

 

1,877 

 

2,020 

 

Total interest expense

 

$

3,590 

 

$

3,863 

 

 

Collaborations, Alliances, and Other Agreements
License, Research and Collaboration Agreements

(9) Collaborations, Alliances, and Other Agreements

 

Biogen

 

On June 30, 2009, the Company entered into an exclusive collaboration and license agreement with Biogen Idec International GmbH (Biogen Idec) to develop and commercialize Ampyra (known as Fampyra outside the U.S.) in markets outside the United States (the “Collaboration Agreement”). Under the Collaboration Agreement, Biogen Idec was granted the exclusive right to commercialize Ampyra and other products containing aminopyridines developed under that agreement in all countries outside of the United States, which grant includes a sublicense of the Company’s rights under an existing license agreement between the Company and Alkermes plc (Alkermes), formerly Elan Corporation, plc (Elan). Biogen Idec has responsibility for regulatory activities and future clinical development of Fampyra in ex-U.S. markets worldwide. The Company also entered into a related supply agreement with Biogen Idec (the “Supply Agreement”), pursuant to which the Company will supply Biogen Idec with its requirements for the licensed products through the Company’s existing supply agreement with Alkermes.

 

Under the Collaboration Agreement, the Company was entitled to an upfront payment of $110.0 million as of June 30, 2009, which was received in July 2009, and a $25.0 million milestone payment upon approval of the product in the European Union, which was received in August 2011. The Company is also entitled to receive additional payments of up to $10.0 million based on the successful achievement of future regulatory milestones and up to $365.0 million based on the successful achievement of future sales milestones. Due to the uncertainty surrounding the achievement of the future regulatory and sales milestones, these payments will not be recognized as revenue unless and until they are earned. The Company is not able to reasonably predict if and when the milestones will be achieved. Under the Collaboration Agreement, Biogen Idec will be required to make double-digit tiered royalty payments to the Company on ex-U.S. sales. In addition, the consideration that Biogen Idec will pay for licensed products under the Supply Agreement will reflect the price owed to the Company’s suppliers under its supply arrangements with Alkermes or other suppliers for ex-U.S. sales. The Company and Biogen Idec may also carry out future joint development activities regarding licensed product under a cost-sharing arrangement. Under the terms of the Collaboration Agreement, the Company, in part through its participation in joint committees with Biogen Idec, will participate in overseeing the development and commercialization of Ampyra and other licensed products in markets outside the United States pursuant to that agreement. Acorda will continue to develop and commercialize Ampyra independently in the United States.

 

As of June 30, 2009, the Company recorded a license receivable and deferred revenue of $110.0 million for the upfront payment due to the Company from Biogen Idec under the Collaboration Agreement. Also, as a result of such payment to Acorda, a payment of $7.7 million became payable by Acorda to Alkermes and was recorded as a cost of license payable and deferred expense. The payment of $110.0 million was received from Biogen Idec on July 1, 2009 and the payment of $7.7 million was made to Alkermes on July 7, 2009.

 

The Company considered the following deliverables with respect to the revenue recognition of the $110.0 million upfront payment:  (1) the license to use the Company’s technology, (2) the Collaboration Agreement to develop and commercialize licensed product in all countries outside the U.S., and (3) the Supply Agreement. Due to the inherent uncertainty in obtaining regulatory approval, the applicability of the Supply Agreement is outside the control of the Company and Biogen Idec. Accordingly, the Company has determined the Supply Agreement is a contingent deliverable at the onset of the agreement.  As a result, the Company has determined the Supply Agreement does not meet the definition of a deliverable that needs to be accounted for at the inception of the arrangement. The Company has also determined that there is no significant and incremental discount related to the supply agreement since Biogen Idec will pay the same amount for inventory that the Company would pay and the Company effectively acts as a middle man in the arrangement for which it adds no significant value due to various factors such as the Company does not have any manufacturing capabilities or other know how with respect to the manufacturing process.

 

The Company has determined that the identified non-contingent deliverables (deliverables 1 and 2 immediately preceding) would have no value on a standalone basis if they were sold separately by a vendor and the customer could not resell the delivered items on a standalone basis, nor does the Company have objective and reliable evidence of fair value for the deliverables. Accordingly, the non-contingent deliverables are treated as one unit of accounting.  As a result, the Company will recognize the non-refundable upfront payment from Biogen Idec as revenue and the associated payment to Alkermes as expense ratably over the estimated term of regulatory exclusivity for the licensed products under the Collaboration Agreement as the Company had determined this was the most probable expected benefit period. The Company recognized $2.3 million and $6.8 million in license revenue, a portion of the $110.0 million received from Biogen Idec, and $159,000 and $476,000 in cost of license revenue, a portion of the $7.7 million paid to Alkermes, during the three and nine-month periods ended September 30, 2014 and 2013, respectively.

 

On January 21, 2011 Biogen Idec announced that the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) decided against approval of Fampyra to improve walking ability in adult patients with multiple sclerosis.  Biogen Idec, working closely with the Company, filed a formal appeal of the decision.  In May 2011, the CHMP recommended conditional marketing authorization, and in July 2011 Biogen Idec received conditional approval from the European Commission for, Fampyra (prolonged-release fampridine tablets) for the improvement of walking in adult patients with MS with walking disability (Expanded Disability Status Scale of 4-7). The Company currently estimates the recognition period to be approximately 12 years from the date of the Collaboration Agreement. As part of its ex-U.S. license agreement, Biogen Idec owes Acorda royalties based on ex-U.S. net sales, and milestones based on ex-U.S. regulatory approval, new indications, and ex-U.S. net sales.  These milestones included a $25.0 million payment for approval of the product in the European Union which was recorded and paid in the three month period ended September 30, 2011. Based on Acorda’s worldwide license and supply agreement with Alkermes, Alkermes received 7% of this milestone payment from Acorda during the same period.  For revenue recognition purposes, the Company determined this milestone to be substantive in accordance with applicable accounting guidance related to milestone revenue.  Substantive uncertainty existed at the inception of the arrangement as to whether the milestone would be achieved because of the numerous variables, such as the high rate of failure inherent in the research and development of new products and the uncertainty involved with obtaining regulatory approval. Biogen Idec leveraged Acorda’s U.S. Ampyra study results that contributed to the regulatory approval process. Therefore, the milestone was achieved based in part on Acorda’s past performance.  The milestone was also reasonable relative to all deliverable and payment terms of the collaboration arrangement. Therefore, the payment was recognized in its entirety as revenue and the cost of the milestone revenue was recognized in its entirety as an expense during the three-month period ended September 30, 2011.

 

Actavis/Watson

 

The Company has an agreement with Watson Pharma, Inc., a subsidiary of Actavis, Inc. (formerly Watson Pharmaceuticals, Inc.), to market tizanidine hydrochloride capsules, an authorized generic version of Zanaflex Capsules which was launched in February 2012.  In accordance with the Watson agreement, the Company receives a royalty based on Watson’s gross margin, as defined by the agreement, of the authorized generic product. During the three-month periods ended September 30, 2014 and 2013, the Company recognized royalty revenue of $2.7 million and $0.9 million, respectively, related to the gross margin of the Zanaflex Capsule authorized generic.  During the three-month periods ended September 30, 2014 and 2013, the Company also recognized revenue and a corresponding cost of sales of $1.3 million and $1.0 million, respectively, related to the purchase and sale of the related Zanaflex Capsule authorized generic product to Watson, which is recorded in net product revenues and cost of sales.

 

During the nine-month periods ended September 30, 2014 and 2013, the Company recognized royalty revenue of $6.4 million and $6.0 million, respectively, related to the gross margin of the Zanaflex Capsule authorized generic.  During the nine-month periods ended September 30, 2014 and 2013, the Company also recognized revenue and a corresponding cost of sales of $3.4 million and $2.7 million, respectively, related to the purchase and sale of the related Zanaflex Capsule authorized generic product to Watson, which is recorded in net product revenues and cost of sales.

 

Neuronex

 

In December 2012, the Company acquired Neuronex, Inc., a privately-held development stage pharmaceutical company (Neuronex) developing Plumiaz (our trade name for Diazepam Nasal Spray).  Plumiaz is a proprietary nasal spray formulation of diazepam that we are developing under Section 505(b)(2) of the Food, Drug and Cosmetic Act as an acute treatment for selected, refractory patients with epilepsy, on stable regimens of antiepileptic drugs, or AEDs, who experience intermittent bouts of increased seizure activity also known as cluster seizures or acute repetitive seizures, or ARS.

 

Under the terms of the agreement, the Company made an upfront payment of $2.0 million in February 2012.  The Company also paid $1.5 million during the twelve month period ended December 31, 2012 pursuant to a commitment under the agreement to fund research to prepare for the Plumiaz pre-NDA meeting with the FDA.  In December 2012, the Company completed the acquisition by paying $6.8 million to former Neuronex shareholders less a $300,000 holdback provision.  After adjustment for Neuronex’s working capital upon closing of the acquisition, approximately $120,000 of the holdback amount was remaining as of December 31, 2013.  This balance was paid to the former equity holders of Neuronex pursuant to the merger agreement in February 2014.

 

The former equity holders of Neuronex are entitled to receive from Acorda up to an additional $18 million in contingent earnout payments upon the achievement of specified regulatory and manufacturing-related milestones with respect to Diazepam Nasal Spray products, and up to $105 million upon the achievement of specified sales milestones with respect to Diazepam Nasal Spray products.  The former equity holders of Neuronex will also be entitled to receive tiered royalty-like earnout payments, ranging from the upper single digits to lower double digits, on worldwide net sales of Diazepam Nasal Spray products.  These payments are payable on a country-by-country basis until the earlier to occur of ten years after the first commercial sale of a product in such country and the entry of generic competition in such country as defined in the Agreement.

 

The patent and other intellectual property and other rights relating to Diazepam Nasal Spray products are licensed from SK Biopharmaceuticals Co., Ltd. (SK).  Pursuant to the SK license, which granted worldwide rights to Neuronex, except certain specified Asian countries, the Company’s subsidiary Neuronex is obligated to pay SK up to $8 million upon the achievement of specified development milestones with respect to the Diazepam Nasal Spray product (including a $1 million payment that was triggered during the three-month period ending September 30, 2013 upon the FDA’s acceptance for review of the first NDA for Plumiaz and paid during the three-month period ending December 31, 2013), and up to $3 million upon the achievement of specified sales milestones with respect to the Diazepam Nasal Spray product.  Also, Neuronex is obligated to pay SK a tiered, mid-single digit royalty on net sales of Diazepam Nasal Spray products.

 

The Company evaluated the transaction based upon the guidance of ASC 805, Business Combinations, and concluded that it only acquired inputs and did not acquire any processes.  The Company needed to develop its own processes in order to produce an output. Therefore the Company accounted for the transaction as an asset acquisition and accordingly the $2.0 million upfront payment, $1.5 million in research funding and $6.8 million of closing consideration net of tangible net assets acquired of $3.7 million which were primarily the taxable amount of net operating loss carryforwards, were expensed as research and development expense during the twelve-month period ended December 31, 2012.

 

Commitments and Contingencies
Commitments and Contingencies

(10) Commitments and Contingencies

 

A summary of the Company’s commitments and contingencies was included in the Company’s Annual Report on Form 10-K for the twelve-month period ended December 31, 2013. The Company’s long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business.

 

In May 2014, we exercised our option to lease an additional 25,405 square feet of office space in Ardsley, New York under our current lease agreement with our landlord.  We anticipate occupying the new space during the three-month period ended December 31, 2014, subject to completion of certain tenant improvements to the space prior to our occupancy.

 

In June 2014, we issued $345 million aggregate principal amount of 1.75% Convertible Senior Notes (the “Notes”), which aggregate principal amount includes the exercise of the underwriter’s over-allotment option.  The Notes bear interest at the rate of 1.75% per annum, payable semiannually in arrears in cash on June 15 and December 15 of each year, beginning on December 15, 2014. The Notes are due on June 15, 2021, although they can be converted into cash and shares of our common stock prior to maturity if certain conditions are met.  Any conversion prior to maturity can result in repayment of the principal amount sooner than the scheduled repayment. See Note 8 — “Convertible Senior Notes”.

 

On September 24, 2014, the Company entered into an agreement to acquire Civitas Therapeutics, a privately-held biopharmaceutical company, for $525 million in cash. The Company will obtain worldwide rights to CVT-301, a Phase 3 treatment candidate for OFF episodes of Parkinson’s disease (PD). The acquisition also includes rights to Civitas’ proprietary ARCUS® pulmonary delivery technology and manufacturing facility with commercial-scale capabilities based in Chelsea, MA. See subsequent event footnote.

 

The Company accrues for amounts related to legal matters if it is probable that a liability has been incurred and the amount is reasonably estimable. While losses, if any, are possible, the Company is not able to estimate any ranges of losses as of September 30, 2014. Litigation expenses are expensed as incurred.

 

Subsequent Event
Subsequent Event

(11) Subsequent Event

 

On October 22, 2014, the Company completed the previously announced merger (the “Merger”) of Five A Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of Acorda (“Merger Sub”), with Civitas Therapeutics, Inc., a Delaware corporation (“Civitas”) in accordance with the Agreement and Plan of Merger, dated as of September 24, 2014 (the “Merger Agreement”), by and among Acorda, Merger Sub, Civitas and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the securityholder’s representative (“SRS”).  Pursuant to the terms of the Merger Agreement, Merger Sub has merged with and into Civitas, which is the surviving corporation in the Merger and which is continuing as a wholly-owned subsidiary of Acorda under the Civitas name.  Pursuant to the terms of the Merger Agreement, all outstanding shares of Civitas common stock and Civitas preferred stock, options to purchase shares of Civitas common stock and warrants to purchase shares of Civitas preferred stock, other than shares of Civitas common stock and Civitas preferred stock held by Civitas (which were cancelled as a result of the Merger) were converted into the right to receive $525.0 million in cash in the aggregate, without interest, less (i) $5.3 million due and payable under Civitas’ existing secured loan facility, consisting of $5.0 million in principal and $0.3 million in prepayment fees, (ii) $30.0 million due and payable to Alkermes, Inc. (“Alkermes”) in connection with the exercise by Civitas of its option to purchase manufacturing facility equipment from Alkermes and (iii) a portion of Civitas’ transaction expenses.  Also pursuant to the Merger Agreement, upon consummation of the Merger, $39.375 million of the aggregate consideration was deposited into escrow to secure the indemnification obligations of Civitas and Civitas’ securityholders, and an additional $0.5 million of the aggregate consideration was deposited with SRS for reimbursements payable to SRS under the terms of the Merger Agreement.

 

The Company will also pay approximately $15 million in Acorda and Civitas transactions costs associated with this acquisition.

 

The Company will account for the transaction as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Due to the limited time since the date of the acquisition, the initial disclosure for this business combination is incomplete as of the date of this filing.  As such, it is impracticable for the Company to make certain business combination disclosures at this time.  The Company is unable to present the acquisition date fair value of and information related to assets acquired and liabilities assumed. The Company will provide this information in its Annual Report on Form 10-K for the year ended December 31, 2014. There are $2.4 million in acquisition-related costs included in selling, general and administrative expenses for the three and nine-month periods ending September 30, 2014.

 

Summary of Significant Accounting Policies (Policies)

Principles of Consolidation

 

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and include the results of operations of the Company and its majority owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

 

The preparation of the consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include share-based compensation accounting, which are largely dependent on the fair value of the Company’s equity securities. In addition, the Company recognizes Zanaflex revenue based on estimated prescriptions filled. The Company adjusts its Zanaflex inventory value based on an estimate of inventory that may be returned. Actual results could differ from those estimates.

Investments

 

Both short-term and long-term investments consist of US Treasury bonds. The Company classifies marketable securities available to fund current operations as short-term investments in current assets on its consolidated balance sheets. Marketable securities are classified as long-term investments in long-term assets on the consolidated balance sheets if the Company has the ability and intent to hold them and such holding period is longer than one year. The Company classifies its short-term and long-term investments as available-for-sale. Available-for-sale securities are recorded at fair value of the investments based on quoted market prices.

 

Unrealized holding gains and losses on available-for-sale securities, which are determined to be temporary, are excluded from earnings and are reported as a separate component of accumulated other comprehensive income (loss).

 

Premiums and discounts on investments are amortized over the life of the related available-for-sale security as an adjustment to yield using the effective-interest method. Dividend and interest income are recognized when earned. Amortized premiums and discounts, dividend and interest income and realized gains and losses are included in interest income.

Accumulated Other Comprehensive Income

 

The Company’s accumulated other comprehensive income is comprised of gains and losses on available for sale securities and is recorded and presented net of income tax.

 

Revenue Recognition

 

Ampyra

 

Ampyra is available only through a network of specialty pharmacy providers that provide the medication to patients by mail; Kaiser Permanente, which distributes Ampyra to patients through a closed network of on-site pharmacies; and ASD Specialty Healthcare, Inc. (an AmerisourceBergen affiliate), which distributes Ampyra to the U.S. Bureau of Prisons and the U.S. Department of Veterans Affairs (VA). Ampyra is not available in retail pharmacies. The Company does not recognize revenue from product sales until there is persuasive evidence of an arrangement, delivery has occurred, the price is fixed and determinable, the buyer is obligated to pay the Company, the obligation to pay is not contingent on resale of the product, the buyer has economic substance apart from the Company, the Company has no obligation to bring about the sale of the product, the amount of returns can be reasonably estimated and collectability is reasonably assured. The Company recognizes product sales of Ampyra following shipment of product to a network of specialty pharmacy providers, Kaiser Permanente, and the specialty distributor to the VA. The specialty pharmacy providers, Kaiser Permanente, and the specialty distributor to the VA are contractually obligated to hold no more than an agreed number of days of inventory, ranging from 10 to 30 days.

 

The Company’s net revenues represent total revenues less allowances for customer credits, including estimated discounts, rebates, and chargebacks. These allowances are recorded for cash consideration given by a vendor to a customer that is presumed to be a reduction of the selling prices of the vendor’s products or services and, therefore, are characterized as a reduction of revenue. At the time product is shipped to specialty pharmacies, Kaiser Permanente and the specialty distributor to the VA, an adjustment is recorded for estimated discounts, rebates, and chargebacks. These allowances are established by management as its best estimate based on available information and will be adjusted to reflect known changes in the factors that impact such allowances. Allowances for discounts, rebates, returns and chargebacks are established based on the contractual terms with customers, historical trends, communications with customers and the levels of inventory remaining in the distribution channel, as well as expectations about the market for the product and anticipated introduction of competitive products.  Product shipping and handling costs are included in cost of sales.  The Company does not accept returns of Ampyra with the exception of product damages that occur during shipping.

 

Zanaflex

 

The Company applies the revenue recognition guidance in Accounting Standards Codification (ASC) 605-15-25, which among other criteria requires that future returns can be reasonably estimated in order to recognize revenue. The amount of future tablet returns is uncertain due to generic competition and customer conversion to Zanaflex Capsules. The Company has accumulated some sales history with Zanaflex Capsules; however, due to existing and potential generic competition and customer conversion from Zanaflex tablets to Zanaflex Capsules, we do not believe we can reasonably determine a return rate at this time. As a result, the Company accounts for these product shipments using a deferred revenue recognition model. Under the deferred revenue model, the Company does not recognize revenue upon product shipment. For these product shipments, the Company invoices the wholesaler, records deferred revenue at gross invoice sales price, and classifies the cost basis of the product held by the wholesaler as a component of inventory. The Company recognizes revenue when prescribed to the end-user, on a first-in first-out (FIFO) basis. The Company’s revenue to be recognized is based on (1) the estimated prescription demand, based on pharmacy sales for its products; and (2) the Company’s analysis of third-party information, including third-party market research data. The Company’s estimates are subject to the inherent limitations of estimates that rely on third-party data, as certain third-party information is itself in the form of estimates, and reflect other limitations. The Company’s sales and revenue recognition reflects the Company’s estimates of actual product prescribed to the end-user. The Company expects to be able to apply a more traditional revenue recognition policy such that revenue is recognized following shipment to the customer when it believes it has sufficient data to develop reasonable estimates of expected returns based upon historical returns and greater certainty regarding generic competition.

 

The Company’s net revenues represent total revenues less allowances for customer credits, including estimated discounts, rebates, and chargebacks. These allowances are recorded for cash consideration given by a vendor to a customer that is presumed to be a reduction of the selling prices of the vendor’s products or services and, therefore, should be characterized as a reduction of revenue when recognized in the vendor’s statement of operations. Adjustments are recorded for estimated chargebacks, rebates, and discounts. These allowances are established by management as its best estimate based on available information and are adjusted to reflect known changes in the factors that impact such allowances. Allowances for chargebacks, rebates and discounts are established based on the contractual terms with customers, analysis of historical levels of discounts, chargebacks and rebates, communications with customers and the levels of inventory remaining in the distribution channel, as well as expectations about the market for each product and anticipated introduction of competitive products. In addition, the Company records a charge to cost of goods sold for the cost basis of the estimated product returns the Company believes may ultimately be realized at the time of product shipment to wholesalers. The Company has recognized this charge at the date of shipment since it is probable that it will receive a level of returned products; upon the return of such product it will be unable to resell the product considering its expiration dating; and it can reasonably estimate a range of returns. This charge represents the cost basis for the low end of the range of the Company’s estimated returns. Product shipping and handling costs are included in cost of sales.

 

Qutenza

 

Qutenza is distributed in the United States by Besse Medical, Inc., a specialty distributor that furnishes the medication to physician offices; and by ASD Specialty Healthcare, Inc., a specialty distributor that furnishes the medication to hospitals and clinics. The Company does not recognize revenue from product sales until there is persuasive evidence of an arrangement, delivery has occurred, the price is fixed and determinable, the buyer is obligated to pay the Company, the obligation to pay is not contingent on resale of the product, the buyer has economic substance apart from the Company, the Company has no obligation to bring about the sale of the product, and the amount of returns can be reasonably estimated and collectability is reasonably assured. This means that, for Qutenza, the Company recognizes product sales following shipment of product to its specialty distributors.

 

The Company’s net revenues represent total revenues less allowances for customer credits, including estimated rebates, chargebacks, and returns. These allowances are recorded for cash consideration given by a vendor to a customer that is presumed to be a reduction of the selling prices of the vendor’s products or services and, therefore, are characterized as a reduction of revenue. At the time product is shipped, an adjustment is recorded for estimated rebates, chargebacks, and returns. These allowances are established by management as its best estimate based on available information and will be adjusted to reflect known changes in the factors that impact such allowances. Allowances for rebates, chargebacks, and returns are established based on the contractual terms with customers, historical trends, as well as expectations about the market for the product and anticipated introduction of competitive products.  Product shipping and handling costs are included in cost of sales.

 

Milestones and royalties

 

In order to determine the revenue recognition for contingent milestones, the Company evaluates the contingent milestones using the criteria as provided by the Financial Accounting Standards Boards (FASB) guidance on the milestone method of revenue recognition. At the inception of a collaboration agreement the Company evaluates if payments are substantive.  The criteria requires that (i) the Company determines if the milestone is commensurate with either its performance to achieve the milestone or the enhancement of value resulting from the Company’s activities to achieve the milestone, (ii) the milestone be related to past performance, and (iii) the milestone be reasonable relative to all deliverable and payment terms of the collaboration arrangement.  If these criteria are met then the contingent milestones can be considered substantive milestones and will be recognized as revenue in the period that the milestone is achieved. Royalties are recognized as earned in accordance with the terms of various research and collaboration agreements.

In-Process Research and Development

 

The cost of in-process research and development (IPR&D) acquired directly in a transaction other than a business combination is capitalized if the projects will be further developed or have an alternative future use; otherwise they are expensed. The fair values of IPR&D projects acquired in business combinations are capitalized. Several methods may be used to determine the estimated fair value of the IPR&D acquired in a business combination. The Company utilizes the “income method,” and uses estimated future net cash flows that are derived from projected sales revenues and estimated costs. These projections are based on factors such as relevant market size, patent protection, historical pricing and expected industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. These assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time the assets are amortized over the remaining useful life or written off, as appropriate. IPR&D intangible assets which are determined to have had a drop in their fair value are adjusted downward and an expense recognized on the statement of operations. These are tested at least annually or sooner when a triggering event occurs that could indicate a potential impairment.

Collaborations

 

The Company recognizes collaboration revenues and expenses by analyzing each element of the agreement to determine if it shall be accounted for as a separate element or single unit of accounting. If an element shall be treated separately for revenue recognition purposes, the revenue recognition principles most appropriate for that element are applied to determine when revenue shall be recognized. If an element shall not be treated separately for revenue recognition purposes, the revenue recognition principles most appropriate for the bundled group of elements are applied to determine when revenue shall be recognized. Payments received in excess of revenues recognized are recorded as deferred revenue until such time as the revenue recognition criteria have been met.

Concentration of Credit Risk

 

The Company’s principal direct customers as of September 30, 2014 were a network of specialty pharmacies, Kaiser Permanente, and the specialty distributor to the VA for Ampyra, wholesale pharmaceutical distributors for Zanaflex Capsules and Zanaflex tablets, and two specialty distributors for Qutenza. The Company periodically assesses the financial strength of these customers and establishes allowances for anticipated losses, if necessary. Four customers individually accounted for more than 10% of the Company’s product revenue in 2014 and 2013. Five and three customers individually accounted for more than 10% of the Company’s accounts receivable as of September 30, 2014 and December 31, 2013, respectively. The Company’s net product revenues are generated in the United States.

Segment and Geographic Information

 

The Company is managed and operated as one business which is focused on the identification, development and commercialization of novel therapies that improve neurological function in people with MS, SCI, and other disorders of the central nervous system. The entire business is managed by a single management team that reports to the Chief Executive Officer. The Company does not operate separate lines of business with respect to any of its products or product candidates and the Company does not prepare discrete financial information with respect to separate products or product candidates or by location.  Accordingly, the Company views its business as one reportable operating segment. Net product revenues reported to date are derived from the sales of Ampyra, Zanaflex and Qutenza in the United States.

 

Subsequent Events

 

Subsequent events are defined as those events or transactions that occur after the balance sheet date, but before the financial statements are filed with the Securities and Exchange Commission. The Company completed an evaluation of the impact of any subsequent events through the date these financial statements were issued, and determined there were no subsequent events requiring disclosure in or requiring adjustment to these financial statements other than the subsequent event disclosed in Note 11 below.

 

Recent Accounting Pronouncements

 

In July 2013, the FASB issued Accounting Standards Update “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (ASU 2013-11). ASU 2013-11 requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (NOL) carryforward, or similar tax loss or tax credit carryforward, rather than as a liability when (1) the uncertain tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction and (2) the entity intends to use the deferred tax asset for that purpose. ASU 2013-11 is effective prospectively for fiscal years and interim periods within those years, beginning after December 15, 2013 for public entities. The adoption of ASU 2013-11 did not have a significant impact on the Company’s consolidated financial statements.

 

In May 2014, the FASB issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (ASU 2014-09), which requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.  The new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016.  The Company is currently evaluating the impact of the new standard.

 

In August 2014, the FASB issued Accounting Standards Update 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (ASU 2014-15), which defines management’s responsibility to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures if there is substantial doubt about its ability to continue as a going concern. The pronouncement is effective for annual reporting periods ending after December 15, 2016 with early adoption permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements.

 

Share-based Compensation (Tables)

 

 

 

For the three-month

 

For the nine-month

 

 

 

period ended September 30,

 

period ended September 30,

 

(In millions)

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

1.5 

 

$

1.5 

 

$

4.1 

 

$

4.2 

 

Selling, general and administrative

 

5.8 

 

5.0 

 

16.5 

 

13.8 

 

Total

 

$

7.3 

 

$

6.5 

 

$

20.6 

 

$

18.0 

 

 

 

 

 

Number of
Shares
(In thousands)

 

Weighted
Average
Exercise Price

 

Weighted
Average
Remaining
Contractual
Term

 

Intrinsic Value
(In thousands)

 

Balance at January 1, 2014

 

6,486

 

$

25.61

 

 

 

 

 

Granted

 

1,699

 

37.07

 

 

 

 

 

Cancelled

 

(226

)

31.90

 

 

 

 

 

Exercised

 

(336

)

22.74

 

 

 

 

 

Balance at September 30, 2014

 

7,623

 

$

28.11

 

6.8

 

$

51,194

 

Vested and expected to vest at September 30, 2014

 

7,542

 

$

28.04

 

6.7

 

$

51,053

 

Vested and exercisable at September 30, 2014

 

4,512

 

$

24.74

 

5.4

 

$

42,337

 

 

 

(In thousands)
Restricted Stock

 

Number of Shares

 

Nonvested at January 1, 2014

 

421

 

Granted

 

286

 

Vested

 

(5

)

Forfeited

 

(37

)

Nonvested at September 30, 2014

 

665

 

 

Earnings Per Share (Tables)

 

(In thousands, except per share data)

 

Three-month
period ended
September 30,
2014

 

Three-month
period ended
September 30,
2013

 

Nine-month
period ended
September 30,
2014

 

Nine-month
period ended
September 30,
2013

 

Basic and diluted

 

 

 

 

 

 

 

 

 

Net income

 

$

11,953 

 

$

7,477 

 

$

17,342 

 

$

10,250 

 

Weighted average common shares outstanding used in computing net income per share—basic

 

41,094 

 

40,315 

 

41,022 

 

40,037 

 

Plus: net effect of dilutive stock options and restricted common shares

 

1,271 

 

1,681 

 

1,324 

 

1,504 

 

Weighted average common shares outstanding used in computing net income per share—diluted

 

42,365 

 

41,996 

 

42,346 

 

41,541 

 

Net income per share—basic

 

$

0.29 

 

$

0.19 

 

$

0.42 

 

$

0.26 

 

Net income per share—diluted

 

$

0.28 

 

$

0.18 

 

$

0.41 

 

$

0.25 

 

 

 

(In thousands)

 

Three-month
period ended
September 30,
2014

 

Three-month
period ended
September 30,
2013

 

Nine-month
period ended
September 30,
2014

 

Nine-month
period ended
September 30,
2013

 

Denominator

 

 

 

 

 

 

 

 

 

Stock options and restricted common shares

 

4,380 

 

1,558 

 

3,959 

 

2,786 

 

Convertible note — Saints Capital

 

29 

 

39 

 

29 

 

39 

 

 

Fair Value Measurements (Tables)

 

(In thousands)

 

Level 1

 

Level 2

 

Level 3

 

September 30, 2014

 

 

 

 

 

 

 

Assets Carried at Fair Value:

 

 

 

 

 

 

 

Cash equivalents

 

$

30,881 

 

$

 

$

 

Short-term investments

 

 

713,100 

 

 

Long-term investments

 

 

 

 

Liabilities Carried at Fair Value:

 

 

 

 

 

 

 

Put/call liability

 

 

 

 

Contingent purchase price

 

 

 

263 

 

December 31, 2013

 

 

 

 

 

 

 

Assets Carried at Fair Value:

 

 

 

 

 

 

 

Cash equivalents

 

$

28,308 

 

$

 

$

 

Short-term investments

 

 

225,891 

 

 

Long-term investments

 

 

93,299 

 

 

Liabilities Carried at Fair Value:

 

 

 

 

 

 

 

Put/call liability

 

 

 

147 

 

Contingent purchase price

 

 

 

236 

 

 

 

(In thousands)

 

Three-month
period ended
September 30,
2014

 

Three-month
period ended
September 30,
2013

 

Nine-month
period ended
September 30,
2014

 

Nine-month
period ended
September 30,
2013

 

Put/call liability:

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

167

 

$

 

$

147

 

$

329

 

Total realized and unrealized gains included in selling, general and administrative expenses:

 

(167

)

 

(147

)

(329

)

Balance, end of period

 

$

 

$

 

$

 

$

 

 

 

(In thousands)

 

Three-month
period ended
September 30,
2014

 

Three-month
period ended
September 30,
2013

 

Nine-month
period ended
September 30,
2014

 

Nine-month
period ended
September 30,
2013

 

Contingent purchase price:

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

254 

 

$

 

$

236 

 

$

 

Total losses included in selling, general and administrative expenses:

 

 

205 

 

27 

 

205 

 

Balance, end of period

 

$

263 

 

$

205 

 

$

263 

 

$

205 

 

 

Investments (Tables)

 

(In thousands)

 

Amortized
Cost

 

Gross
unrealized
gains

 

Gross
unrealized
losses

 

Estimated
fair
value

 

September 30, 2014

 

 

 

 

 

 

 

 

 

US Treasury bonds

 

$

712,825

 

$

275

 

$

 

$

713,100

 

December 31, 2013

 

 

 

 

 

 

 

 

 

US Treasury bonds

 

319,123

 

69

 

(2

)

319,190

 

 

 

(In thousands)

 

Net Unrealized
Gains on
Marketable
Securities, Net
of Tax

 

Balance at December 31, 2013

 

$

37 

 

Other comprehensive income before reclassifications:

 

129 

 

Amounts reclassified from accumulated other comprehensive income

 

 

Net current period other comprehensive income

 

129 

 

Balance at September 30, 2014

 

$

166 

 

 

Convertible Senior Notes (Tables)

 

(In thousands)

 

September 30,
2014

 

Liability component:

 

 

 

Principal

 

$

345,000

 

Less: debt discount, net

 

(59,175

)

Net carrying amount

 

$

285,825

 

Equity component

 

$

61,195

 

 

 

(In thousands)

 

Three-month
period ended
September 30,
2014

 

Nine-month
period ended
September 30,
2014

 

Contractual interest expense

 

$

1,522 

 

$

1,638 

 

Amortization of debt issuance costs

 

191 

 

205 

 

Amortization of debt discount

 

1,877 

 

2,020 

 

Total interest expense

 

$

3,590 

 

$

3,863 

 

 

Summary of Significant Accounting Policies (Details) (Ampyra)
9 Months Ended
Sep. 30, 2014
Minimum
 
Revenue Recognition
 
Contractually obligated inventory holdings period
10 days 
Maximum
 
Revenue Recognition
 
Contractually obligated inventory holdings period
30 days 
Summary of Significant Accounting Policies (Details 2)
9 Months Ended 12 Months Ended
Sep. 30, 2014
customer
Dec. 31, 2013
customer
Concentration of Risk
 
 
Number of specialty distributors for Qutenza
 
Segment and Geographic Information
 
 
Number of reportable operating segments
 
Product revenue
 
 
Concentration of Risk
 
 
Number of customers
Accounts receivable
 
 
Concentration of Risk
 
 
Number of customers
Share-based Compensation (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Share-based compensation expense
 
 
 
 
Share-based compensation expense recognized
$ 7.3 
$ 6.5 
$ 20.6 
$ 18.0 
Weighted average fair value of options granted (in dollars per share)
$ 14.88 
$ 18.02 
$ 18.04 
$ 15.76 
Research and development.
 
 
 
 
Share-based compensation expense
 
 
 
 
Share-based compensation expense recognized
1.5 
1.5 
4.1 
4.2 
Selling, general, and administrative
 
 
 
 
Share-based compensation expense
 
 
 
 
Share-based compensation expense recognized
$ 5.8 
$ 5.0 
$ 16.5 
$ 13.8 
Share-based Compensation (Detail 2) (USD $)
Share data in Thousands, except Per Share data, unless otherwise specified
9 Months Ended
Sep. 30, 2014
Share based compensation, other disclosures
 
Total unrecognized compensation costs related to unvested stock options and restricted stock awards that the company expects to recognize
$ 60,300,000 
Weighted average period
2 years 7 months 6 days 
Stock Options
 
Common Stock Options and Restricted Stock
 
Options granted (in shares)
1,699 
Stock Option Activity
 
Beginning balance (in shares)
6,486 
Granted (in shares)
1,699 
Forfeited and expired (in shares)
(226)
Exercised (in shares)
(336)
Ending balance (in shares)
7,623 
Vested and expected to vest at end of period (in shares)
7,542 
Vested and exercisable at end of period (in shares)
4,512 
Weighted Average Exercise Price
 
Balance at the beginning of the period (in dollars per share)
$ 25.61 
Granted (in dollars per share)
$ 37.07 
Forfeited and expired (in dollars per share)
$ 31.90 
Exercised (in dollars per share)
$ 22.74 
Balance at the end of the period (in dollars per share)
$ 28.11 
Vested and expected to vest at the end of the period (in dollars per share)
$ 28.04 
Vested and exercisable at the end of the period (in dollars per share)
$ 24.74 
Weighted Average Remaining Contractual Term
 
Balance at the end of the period
6 years 9 months 18 days 
Vested and expected to vest at the end of the period
6 years 8 months 12 days 
Vested and exercisable at the end of the period
5 years 4 months 24 days 
Intrinsic Value
 
Balance at the end of the period
51,194,000 
Vested and expected to vest at the end of the period
51,053,000 
Vested and exercisable at the end of the period
$ 42,337,000 
Restricted Stock
 
Restricted Stock Activity
 
Nonvested at the beginning of the period (in shares)
421 
Granted (in shares)
286 
Vested (in shares)
(5)
Forfeited (in shares)
(37)
Nonvested at the end of the period (in shares)
665 
Earnings Per Share (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Basic and diluted
 
 
 
 
Net income (in dollars)
$ 11,953 
$ 7,477 
$ 17,342 
$ 10,250 
Weighted average common shares outstanding used in computing net income per share-basic
41,094 
40,315 
41,022 
40,037 
Plus: net effect of dilutive stock options and restricted common shares
1,271 
1,681 
1,324 
1,504 
Weighted average common shares outstanding used in computing net income per share-diluted
42,365 
41,996 
42,346 
41,541 
Net income per share-basic (in dollars per share)
$ 0.29 
$ 0.19 
$ 0.42 
$ 0.26 
Net income per share-diluted (in dollars per share)
$ 0.28 
$ 0.18 
$ 0.41 
$ 0.25 
Earnings Per Share (Details 2) (USD $)
Share data in Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Jun. 30, 2014
Sep. 30, 2014
Stock options and restricted common shares
Sep. 30, 2013
Stock options and restricted common shares
Sep. 30, 2014
Stock options and restricted common shares
Sep. 30, 2013
Stock options and restricted common shares
Sep. 30, 2014
Convertible note
Sep. 30, 2013
Convertible note
Sep. 30, 2014
Convertible note
Sep. 30, 2013
Convertible note
Antidilutive Securities
 
 
 
 
 
 
 
 
 
Aggregate principal amount
$ 345,000,000 
 
 
 
 
 
 
 
 
Interest rate (as a percent)
1.75% 
 
 
 
 
 
 
 
 
Anti-dilutive securities excluded from computation of earnings per share (in shares)
 
4,380 
1,558 
3,959 
2,786 
29 
39 
29 
39 
Income Taxes (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Reconciliation of statutory federal income tax rate to effective income tax rate
 
 
 
 
Income tax provision
$ 4,536 
$ 3,513 
$ 13,361 
$ 5,985 
Effective income tax rate (as a percent)
28.00% 
32.00% 
44.00% 
37.00% 
Fair Value Measurements (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Assets Carried at Fair Value:
 
 
Short-term investments
$ 713,100 
$ 225,891 
Long-term investments
 
93,299 
Recurring basis |
Level 1
 
 
Assets Carried at Fair Value:
 
 
Cash equivalents
30,881 
28,308 
Recurring basis |
Level 2
 
 
Assets Carried at Fair Value:
 
 
Short-term investments
713,100 
225,891 
Long-term investments
 
93,299 
Recurring basis |
Level 3
 
 
Liabilities Carried at Fair Value:
 
 
Put/call liability
 
147 
Contingent purchase price
$ 263 
$ 236 
Fair Value Measurements (Details 2) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Put/call liability
 
 
 
 
Assets and liabilities measured at fair value on a recurring basis utilizing Level 3 inputs
 
 
 
 
Balance, beginning of period
$ 167,000 
 
$ 147,000 
$ 329,000 
Total gains (losses) included in selling, general and administrative expenses
167,000 
 
147,000 
329,000 
Contingent purchase price
 
 
 
 
Assets and liabilities measured at fair value on a recurring basis utilizing Level 3 inputs
 
 
 
 
Balance, beginning of period
254,000 
 
236,000 
 
Total gains (losses) included in selling, general and administrative expenses
(9,000)
(205,000)
(27,000)
(205,000)
Balance, end of period
263,000 
205,000 
263,000 
205,000 
Milestone payment, minimum (as a percent)
0.00% 
 
0.00% 
 
Milestone payment, maximum (as a percent)
10.00% 
 
10.00% 
 
Milestone payment, minimum
 
 
Milestone payment, maximum
$ 5,000,000 
 
$ 5,000,000 
 
Investments (Details) (USD $)
9 Months Ended 12 Months Ended
Sep. 30, 2014
Dec. 31, 2013
Investments
 
 
Long-term Investments
$ 0 
 
Other-than-temporary declines in the fair values of investments
 
Short-term investments classified as cash and cash equivalents
30,900,000 
28,300,000 
Short-term investments with maturities greater than 1 year
 
93,299,000 
Minimum
 
 
Investments
 
 
Short-term investments maturity term
3 months 
3 months 
Maximum
 
 
Investments
 
 
Short-term investments maturity term
1 year 
1 year 
Short-term investments
 
 
Investments
 
 
Estimated fair value
630,900,000 
 
Short-term investments with maturities greater than 1 year
82,200,000 
 
US Treasury bonds
 
 
Investments
 
 
Amortized Cost
712,825,000 
319,123,000 
Gross unrealized gains
275,000 
69,000 
Gross unrealized losses
 
(2,000)
Estimated fair value
$ 713,100,000 
$ 319,190,000 
Investments (Details 2) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Changes in accumulated other comprehensive income
 
 
 
 
Balance at the beginning of the period
 
 
$ 37 
 
Other comprehensive income, net of tax
69 
44 
129 
36 
Balance at the end of the period
166 
 
166 
 
Net Unrealized Gains on Marketable Securities
 
 
 
 
Changes in accumulated other comprehensive income
 
 
 
 
Balance at the beginning of the period
 
 
37 
 
Other comprehensive income before reclassifications
 
 
129 
 
Other comprehensive income, net of tax
 
 
129 
 
Balance at the end of the period
$ 166 
 
$ 166 
 
Convertible Senior Notes (Details) (USD $)
3 Months Ended 9 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Jun. 30, 2014
Jun. 17, 2014
Notes
Sep. 30, 2014
Notes
Sep. 30, 2014
Notes
item
Jun. 17, 2014
Notes
Sep. 30, 2014
Notes
Debt Conversion Terms upon Occurrence of Certain Fundamental Company Changes
Sep. 30, 2014
Notes
Debt Conversion Event Term
Sep. 30, 2014
Notes
Convertible Debt Holder
item
Sep. 30, 2014
Notes
Convertible Debt Holder
Minimum
item
Convertible senior notes
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate (as a percent)
 
 
 
 
1.75% 
 
1.75% 
1.75% 
 
 
 
 
 
Principal amount of Notes purchased by Underwriter
 
 
 
 
 
 
$ 45,000,000 
$ 45,000,000 
 
 
 
 
 
Net proceeds from offering, after deducting Underwriter's discount and estimated offering expenses payable
 
 
 
 
 
 
 
337,500,000 
 
 
 
 
 
Initial conversion rate of common stock
 
 
 
 
 
 
 
 
 
 
 
0.0234968 
 
Initial conversion price of convertible notes into common stock (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
$ 42.56 
 
Number of trading days in the measurement period that the entity's common stock closing price to conversion price must exceed a specified percentage of conversion price to trigger conversion feature of notes
 
 
 
 
 
 
 
20 
 
 
 
20 
Number of trading days triggering conversion of redemption feature
 
 
 
 
 
 
 
30 days 
 
 
 
 
30 days 
Ratio of closing share price to conversion price as a condition for conversion of Convertible Notes (as a percent)
 
 
 
 
 
 
 
 
 
 
 
98.00% 
 
Target ratio of closing share price to conversion price as a condition for conversion or redemption of Convertible Notes (as a percent)
 
 
 
 
 
 
 
 
 
 
 
130.00% 
130.00% 
Number of trading days within which redemption condition is to be met prior to provision of notice
 
 
 
 
 
 
 
 
 
 
 
5 days 
 
Redemption price of debt (as a percent)
 
 
 
 
 
 
 
100.00% 
 
 
 
 
 
Principal amount of Notes or an integral multiple thereof in which holder may repurchase the Notes
 
 
 
 
 
 
 
 
 
1,000 
 
1,000,000 
 
Redemption price as percentage of principal amount of notes plus accrued and unpaid interest
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
Minimum percentage of aggregate principal amount held by bondholders to declare notes due and payable
 
 
 
 
 
 
 
 
 
 
25.00% 
 
 
In event of default arising out of certain bankruptcy events, percentage of principal amount due and payable
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
Period to comply with covenants
 
 
 
 
 
 
 
270 days 
 
 
 
 
 
Aggregate principal amount
 
 
 
 
345,000,000 
 
345,000,000 
345,000,000 
345,000,000 
 
 
 
 
Less: debt discount, net
 
 
 
 
 
 
(59,175,000)
(59,175,000)
 
 
 
 
 
Net carrying amount
 
 
 
 
 
 
285,825,000 
285,825,000 
 
 
 
 
 
Equity component
 
 
 
 
 
 
61,195,000 
61,195,000 
 
 
 
 
 
Debt issuance costs
 
 
 
 
 
 
7,500,000 
7,500,000 
 
 
 
 
 
Debt issuance costs allocated to equity component
 
 
 
 
 
 
 
1,300,000 
 
 
 
 
 
Debt issuance costs allocated to liability component
 
 
 
 
 
 
 
6,200,000 
 
 
 
 
 
Term of debt
 
 
 
 
 
 
 
7 years 
 
 
 
 
 
Debt fair value amount
285,800,000 
 
285,800,000 
 
 
 
 
 
 
 
 
 
 
Remaining contractual life
 
 
 
 
 
6 years 9 months 18 days 
 
 
 
 
 
 
 
Effective interest rate on liability component (as a percent)
 
 
 
 
 
 
 
4.80% 
 
 
 
 
 
Contractual interest expense
 
 
 
 
 
 
1,522,000 
1,638,000 
 
 
 
 
 
Amortization of debt issuance costs
 
 
19,000 
37,000 
 
 
191,000 
205,000 
 
 
 
 
 
Amortization of debt discount
 
 
3,099,000 
1,774,000 
 
 
1,877,000 
2,020,000 
 
 
 
 
 
Total interest expense
$ 4,597,000 
$ 544,000 
$ 5,116,000 
$ 1,884,000 
 
 
$ 3,590,000 
$ 3,863,000 
 
 
 
 
 
Collaborations, Alliances, and Other Agreements (Details) (USD $)
3 Months Ended 9 Months Ended 1 Months Ended 1 Months Ended 9 Months Ended 12 Months Ended 0 Months Ended 1 Months Ended 3 Months Ended 9 Months Ended 0 Months Ended 3 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Dec. 31, 2012
Neuronex Acquisition
Dec. 31, 2013
Neuronex Acquisition
Feb. 29, 2012
DZNS
Neuronex Acquisition
Sep. 30, 2014
DZNS
Neuronex Acquisition
Dec. 31, 2012
DZNS
Neuronex Acquisition
Sep. 30, 2014
DZNS
Neuronex Acquisition
Achievement of Manufacturing and Regulatory Milestones
Sep. 30, 2014
DZNS
Neuronex Acquisition
Achievement of Sales Milestones
Jun. 30, 2009
Biogen Idec
Jul. 1, 2009
Biogen Idec
Aug. 31, 2011
Biogen Idec
Sep. 30, 2014
Biogen Idec
Sep. 30, 2013
Biogen Idec
Sep. 30, 2014
Biogen Idec
Sep. 30, 2013
Biogen Idec
Jun. 30, 2009
Biogen Idec
Jun. 30, 2009
Biogen Idec
Maximum
Jun. 30, 2009
Biogen Idec
Maximum
Up to and including $30.0 million
Jul. 7, 2009
Alkermes License Agreement
Sep. 30, 2011
Alkermes License Agreement
Sep. 30, 2014
Alkermes License Agreement
Sep. 30, 2013
Alkermes License Agreement
Jun. 30, 2009
Alkermes License Agreement
Sep. 30, 2014
Actavis/Watson
Zanaflex Capsules
Sep. 30, 2013
Actavis/Watson
Zanaflex Capsules
Sep. 30, 2014
Actavis/Watson
Zanaflex Capsules
Sep. 30, 2013
Actavis/Watson
Zanaflex Capsules
Sep. 30, 2013
SK
DZNS
Neuronex Acquisition
Achievement of Manufacturing and Regulatory Milestones
Sep. 30, 2014
SK
DZNS
Neuronex Acquisition
Achievement of Manufacturing and Regulatory Milestones
Sep. 30, 2014
SK
DZNS
Neuronex Acquisition
Achievement of Sales Milestones
Dec. 31, 2013
Neuronex
Collaboration agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional payments based on the successful achievement of future regulatory or sales milestones
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 25,000,000 
 
 
 
 
 
$ 10,000,000 
$ 365,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortized license revenue
 
 
 
 
 
 
 
 
 
 
 
110,000,000 
 
 
2,300,000 
2,300,000 
6,800,000 
6,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
110,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash received
 
 
 
 
 
 
 
 
 
 
 
 
110,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of license payable
 
 
 
 
 
 
 
 
 
 
 </