ACORDA THERAPEUTICS INC, 10-K filed on 2/28/2012
Annual Report
Document And Entity Information (USD $)
12 Months Ended
Dec. 31, 2011
Feb. 15, 2012
Jun. 30, 2011
Entity Registrant Name
ACORDA THERAPEUTICS INC  
 
 
Entity Central Index Key
0001008848 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
$ 736,447,807 
Entity Common Stock, Shares Outstanding
 
39,701,072 
 
Document Fiscal Year Focus
2011 
 
 
Document Fiscal Period Focus
FY 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Dec. 31, 2011 
 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Current assets:
 
 
Cash and cash equivalents
$ 57,954 
$ 34,641 
Restricted cash
303 
302 
Short-term investments
237,953 
205,389 
Trade accounts receivable, net of allowances of $879 and $289, as of December 31, 2011 and 2010, respectively
22,828 
22,272 
Prepaid expenses
6,534 
6,413 
Finished goods inventory held by the Company
27,256 
36,232 
Finished goods inventory held by others
1,126 
2,186 
Other current assets
6,988 
3,734 
Total current assets
360,942 
311,169 
Property and equipment, net of accumulated depreciation
3,858 
3,203 
Intangible assets, net of accumulated amortization
8,769 
21,336 
Non-current portion of deferred cost of license revenue
5,442 
6,050 
Other assets
477 
343 
Total assets
379,488 
342,101 
Current liabilities:
 
 
Accounts payable
21,393 
16,961 
Accrued expenses and other current liabilities
24,149 
33,769 
Deferred product revenue-Zanaflex tablets
9,967 
9,526 
Deferred product revenue-Zanaflex Capsules
20,632 
21,770 
Current portion of deferred license revenue
9,057 
9,429 
Current portion of revenue interest liability
1,001 
1,297 
Current portion of convertible notes payable
1,144 
1,144 
Total current liabilities
87,343 
93,896 
Non-current portion of deferred license revenue
77,742 
86,429 
Put/call liability
1,030 
391 
Non-current portion of revenue interest liability
1,898 
3,586 
Non-current portion of long-term convertible notes payable
5,230 
6,185 
Other non-current liabilities
1,036 
353 
Commitments and contingencies
   
 
Stockholders' equity:
 
 
Common stock, $0.001 par value. Authorized 80,000,000 shares at December 31, 2011 and 2010; issued and outstanding 39,328,495 and 38,779,370 shares, including those held in treasury, as of December 31, 2011 and 2010, respectively
39 
39 
Treasury stock at cost (12,420 shares)
(329)
(329)
Additional paid-in capital
614,914 
591,649 
Accumulated deficit
(409,481)
(440,086)
Accumulated other comprehensive (loss) income
66 
(12)
Total stockholders' equity
205,209 
151,261 
Total liabilities and stockholders' equity
$ 379,488 
$ 342,101 
Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2011
Dec. 31, 2010
Liabilities and Stockholders' Equity
 
 
Common stock, par value (in dollars per share)
$ 0.001 
$ 0.001 
Common stock, Authorized (in shares)
80,000,000 
80,000,000 
Common stock, issued (in shares)
39,328,495 
38,779,370 
Common stock, outstanding (in shares)
39,328,495 
38,779,370 
Treasury stock at cost (in shares)
12,420 
12,420 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Revenues:
 
 
 
Net revenue
$ 256,271 
$ 181,545 
$ 49,959 
Milestone revenue
25,000 
0 
0 
License revenue
9,057 
9,428 
4,714 
Royalty revenue
1,909 
32 
0 
Total net revenues
292,237 
191,005 
54,673 
Costs and expenses:
 
 
 
Cost of Sales
64,183 
35,518 
11,059 
Cost of milestone and license revenue
2,384 
660 
330 
Research and development
42,108 
30,600 
34,611 
Selling, general and administrative
148,508 
132,657 
89,930 
Total operating expenses
257,183 
199,435 
135,930 
Operating income (loss)
35,054 
(8,430)
(81,257)
Other expense:
 
 
 
Interest and amortization of debt discount expense
(3,570)
(3,922)
(4,415)
Interest income
552 
575 
1,750 
Other income (expense)
(18)
8 
(18)
Total other expense
(3,036)
(3,339)
(2,683)
Income (loss) before taxes
32,018 
(11,769)
(83,940)
Provision for income taxes
(1,413)
0 
0 
Net income (loss)
$ 30,605 
$ (11,769)
$ (83,940)
Net income (loss) per share-basic (in dollars per share)
$ 0.78 
$ (0.31)
$ (2.22)
Net income (loss) per share-diluted (in dollars per share)
$ 0.76 
$ (0.31)
$ (2.22)
Weighted average common shares outstanding used in computing net income (loss) per share-basic (in shares)
39,000 
38,355 
37,735 
Weighted average common shares outstanding used in computing net income (loss) per share-diluted (in shares)
40,064 
38,355 
37,735 
Consolidated Statements of Changes in Stockholders' Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Common Stock [Member]
Treasury Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Total
Balance at Dec. 31, 2008
$ 38 
$ 0 
$ 550,683 
$ (344,377)
$ 813 
$ 207,157 
Balance at beginning of period (in shares) at Dec. 31, 2008
37,613,000 
 
 
 
 
 
Compensation expense for issuance of stock options to employees
0 
0 
9,690 
0 
0 
9,690 
Compensation expense for issuance of restricted stock to employees
0 
0 
2,588 
0 
0 
2,588 
Compensation expense for issuance of restricted stock to employees (in shares)
128,000 
 
 
 
 
 
Exercise of stock options
0 
0 
2,542 
0 
0 
2,542 
Exercise of stock options (in shares)
194,000 
 
 
 
 
 
Comprehensive loss
 
 
 
 
 
 
Unrealized gain (loss) on investment securities
0 
0 
0 
0 
(704)
(704)
Net income (loss)
0 
0 
0 
(83,940)
0 
(83,940)
Total comprehensive income (loss)
 
 
 
 
 
(84,644)
Balance at Dec. 31, 2009
38 
0 
565,503 
(428,317)
109 
137,333 
Balance at end of period (in shares) at Dec. 31, 2009
37,935,000 
 
 
 
 
 
Compensation expense for issuance of stock options to employees
0 
0 
12,464 
0 
0 
12,464 
Compensation expense for issuance of restricted stock to employees
0 
(329)
5,313 
0 
0 
4,984 
Compensation expense for issuance of restricted stock to employees (in shares)
196,000 
 
 
 
 
 
Exercise of stock options
1 
0 
8,369 
0 
0 
8,370 
Exercise of stock options (in shares)
648,000 
 
 
 
 
 
Comprehensive loss
 
 
 
 
 
 
Unrealized gain (loss) on investment securities
0 
0 
0 
0 
(121)
(121)
Net income (loss)
0 
0 
0 
(11,769)
0 
(11,769)
Total comprehensive income (loss)
 
 
 
 
 
(11,890)
Balance at Dec. 31, 2010
39 
(329)
591,649 
(440,086)
(12)
151,261 
Balance at end of period (in shares) at Dec. 31, 2010
38,779,000 
 
 
 
 
38,779,370 
Compensation expense for issuance of stock options to employees
0 
0 
13,675 
0 
0 
13,675 
Compensation expense for issuance of restricted stock to employees
0 
0 
5,628 
0 
0 
5,628 
Compensation expense for issuance of restricted stock to employees (in shares)
220,000 
 
 
 
 
 
Exercise of stock options
0 
0 
3,962 
0 
0 
3,962 
Exercise of stock options (in shares)
329,000 
 
 
 
 
 
Comprehensive loss
 
 
 
 
 
 
Unrealized gain (loss) on investment securities
0 
0 
0 
0 
78 
78 
Net income (loss)
0 
0 
0 
30,605 
0 
30,605 
Total comprehensive income (loss)
 
 
 
 
 
30,683 
Balance at Dec. 31, 2011
$ 39 
$ (329)
$ 614,914 
$ (409,481)
$ 66 
$ 205,209 
Balance at end of period (in shares) at Dec. 31, 2011
39,328,000 
 
 
 
 
39,328,495 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Cash flows from operating activities:
 
 
 
Net income (loss)
$ 30,605 
$ (11,769)
$ (83,940)
Adjustments to reconcile net loss to net cash provided by/(used in) operating activities:
 
 
 
Share-based compensation expense
19,303 
17,777 
12,278 
Amortization of net premiums and discounts on short-term investments
6,750 
4,473 
4,931 
Amortization of revenue interest issuance cost
104 
96 
93 
Depreciation and amortization expense
4,625 
3,951 
2,762 
Intangible Asset Impairment
13,038 
0 
0 
(Gain) loss on put/call liability
639 
(246)
300 
Gain on disposal of property and equipment
0 
0 
(15)
Changes in assets and liabilities:
 
 
 
Increase in accounts receivable
(556)
(16,533)
(1,116)
Increase in prepaid expenses and other current assets
(3,375)
(1,892)
(3,320)
Decrease (increase) in inventory held by the Company
8,976 
(31,735)
(619)
Decrease in inventory held by others
1,060 
209 
78 
Decrease (increase) in non-current portion of deferred cost of license revenue
608 
660 
(6,710)
(Decrease) increase in other assets
(237)
1 
6 
(Decrease) increase in accounts payable, accrued expenses, other current liabilities
(6,108)
24,706 
2,024 
(Decrease) increase in revenue interest liability interest payable
(23)
(76)
200 
(Decrease) increase in current portion of deferred license revenue
(371)
0 
9,428 
(Decrease) increase in non-current portion of deferred license revenue
(8,686)
(9,428)
95,857 
Increase in other non-current liabilities
682 
0 
0 
Increase in deferred product revenue-Zanaflex tablets
441 
311 
1,348 
(Decrease) increase in deferred product revenue-Zanaflex Capsules
(1,138)
281 
5,053 
Restricted cash
(1)
(1)
(4)
Net cash (used in)/provided by operating activities
66,336 
(19,215)
38,634 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(2,192)
(2,446)
(1,148)
Purchases of intangible assets
(3,595)
(6,998)
(1,279)
Purchases of short-term investments
(266,736)
(310,955)
(310,378)
Proceeds from maturities of short-term investments
227,500 
325,750 
296,400 
Net cash (used in)/provided by investing activities
(45,023)
5,351 
(16,405)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of common stock and option and warrant exercises
3,962 
8,370 
2,542 
Purchase of treasury stock
0 
(329)
0 
Repayments of revenue interest liability
(1,962)
(6,850)
(7,070)
Net cash provided by/(used in) financing activities
2,000 
1,191 
(4,528)
Net increase (decrease) in cash and cash equivalents
23,313 
(12,673)
17,701 
Cash and cash equivalents at beginning of period
34,641 
47,314 
29,613 
Cash and cash equivalents at end of period
57,954 
34,641 
47,314 
Supplemental disclosure:
 
 
 
Cash paid for interest
3,404 
3,781 
4,040 
Cash paid for taxes
$ 1,176 
$ 0 
$ 0 
Organization and Business Activities
Organization and Business Activities
(1) Organization and Business Activities
 
Acorda Therapeutics, Inc. (“Acorda” or the “Company”) is a commercial stage biopharmaceutical company dedicated to the identification, development and commercialization of novel therapies that improve neurological function in people with multiple sclerosis (MS), spinal cord injury and other disorders of the central nervous system.
 
The management of the Company is responsible for the accompanying audited consolidated financial statements and the related information included in the notes to the consolidated financial statements. In the opinion of management, the audited 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.
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.
 
Cash and Cash Equivalents
 
The Company considers all highly liquid debt instruments with original maturities of three months or less from date of purchase to be cash equivalents. All cash and cash equivalents are held in highly rated securities including a Treasury money market fund and US Treasury bonds, which are unrestricted as to withdrawal or use. To date, the Company has not experienced any losses on its cash and cash equivalents. The carrying amount of cash and cash equivalents approximates its fair value due to its short-term and liquid nature.
 
Restricted Cash
 
Restricted cash represents a certificate of deposit placed by the Company with a bank for issuance of a letter of credit to the Company's lessor for office space.
 
Short-Term Investments
 
Short-term investments consist of US Treasury bonds with maturities greater than three months. The Company classifies its short-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.
 
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.
 
Inventory
 
Inventory is stated at the lower of cost or market value and includes amounts for Ampyra, Zanaflex tablet and Zanaflex Capsule inventories and is recorded at its net realizable value. Inventories consist of finished goods inventory. Cost is determined using the first-in, first-out method (FIFO) for all inventories. The Company adjusts its inventory value based on an estimate of inventory that may be returned or not sold based on sales projections and establishes reserves as necessary for obsolescence and excess inventory.
 
Ampyra
 
Prior to regulatory approval of Ampyra, the Company incurred expenses for the manufacture of bulk, unpackaged product of Ampyra that ultimately became available to support the commercial launch of this drug candidate. Until the necessary initial regulatory approval was received, we charged all such amounts to research and development expenses as there was no alternative future use prior to regulatory approval. As a result, our initial sales of Ampyra resulted in higher gross margins than if the inventory costs had not previously been expensed. Upon regulatory approval of Ampyra, the Company began capitalizing the commercial inventory costs associated with manufacturing with Alkermes plc (Alkermes), formerly Elan Corporation, plc (Elan) and its second manufacturer, Patheon.
 
The cost of Ampyra inventory manufactured by Alkermes is based on specified prices calculated as a percentage of net product sales of the product shipped by Alkermes to Acorda. In the event Alkermes does not manufacture the products, Alkermes is entitled to a compensating payment for the quantities of product provided by the alternative manufacturer. This compensating payment is included in the Company's inventory balances.
 
 
Property and Equipment
 
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed on the straight-line basis over the estimated useful lives of the assets, which ranges from three to five years. Leasehold improvements are recorded at cost, less accumulated amortization, which is computed on the straight-line basis over the shorter of the useful lives of the assets or the remaining lease term. Expenditures for maintenance and repairs are charged to expense as incurred.
 
Intangible Assets
 
The Company has recorded intangible assets related to milestones for Ampyra and for certain website development costs. These intangible assets are amortized on a straight line basis over the period in which the Company expects to receive economic benefit and are reviewed for impairment when facts and circumstances indicate that the carrying value of the asset may not be recoverable. The determination of the expected life will be dependent upon the use and underlying characteristics of the intangible asset. In the Company's evaluation of the intangible assets, it considers the term of the underlying asset life and the expected life of the related product line. If the carrying value is not recoverable, impairment is measured as the amount by which the carrying value exceeds its estimated fair value. Fair value is generally estimated based on either appraised value or other valuation techniques.
 
Impairment of Long-Lived Assets
 
The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful life of its long-lived assets may warrant revision or that the carrying value of these assets may be impaired. The Company evaluates the realizability of its long-lived assets based on profitability and cash flow expectations for the related assets. Any write-downs are treated as permanent reductions in the carrying amount of the assets. Based on this evaluation, the Company believes that, as of each of the balance sheet dates presented, none of the Company's long-lived assets were impaired.
 
Patent Costs
 
Patent application and maintenance costs are expensed as incurred.
 
Research and Development
 
Research and development expenses include the costs associated with the Company's internal research and development activities, including salaries and benefits, occupancy costs, and research and development conducted for it by third parties, such as contract research organizations (CROs), sponsored university-based research, clinical trials, contract manufacturing for its research and development programs, and regulatory expenses.  In addition, research and development expenses include the cost of clinical trial drug supply shipped to the Company's clinical study vendors. For those studies that the Company administers itself, the Company accounts for its clinical study costs by estimating the patient cost per visit in each clinical trial and recognizes this cost as visits occur, beginning when the patient enrolls in the trial. This estimated cost includes payments to the trial site and patient-related costs, including laboratory costs related to the conduct of the trial. Cost per patient varies based on the type of clinical trial, the site of the clinical trial, and the length of the treatment period for each patient. For those studies for which the Company uses a CRO, the Company accounts for its clinical study costs according to the terms of the CRO contract. These costs include upfront, milestone and monthly expenses as well as reimbursement for pass through costs. As actual costs become known to the Company, it adjusts the accrual; such changes in estimate may be a material change in its clinical study accrual, which could also materially affect its results of operations. All research and development costs are expensed as incurred except when accounting for nonrefundable advance payments for goods or services to be used in future research and development activities.  These payments are capitalized at the time of payment and expensed ratably over the period the research and development activity is performed.
 
Accounting for Income Taxes
 
Income taxes are accounted for under the asset and liability method with deferred tax assets and liabilities recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be reversed or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance for the amounts of any tax benefits which, more likely than not, will not be realized.
 
In determining whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits, a two-step process is utilized whereby the threshold for recognition is a more likely-than-not test that the tax position will be sustained upon examination and the tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company has no reserves for uncertain tax positions.

Revenue Recognition
 
Ampyra
 
Ampyra is available only through a network of specialty pharmacy providers that provide the medication to patients by mail; Kaiser Permanente (Kaiser), which distributes Ampyra to patients through a closed network of on-site pharmacies; and Amerisource Specialty Distribution Healthcare, which is the exclusive specialty pharmacy distributor for 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, and the specialty distributor to the VA. The specialty pharmacy providers, Kaiser, and the specialty distributor to the VA are contractually obligated to hold no more than 30 days of inventory.
 
The Company's net revenues represent total revenues less allowances for customer credits, including estimated rebates, discounts 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 to specialty pharmacies, Kaiser and the specialty distributor to the VA, an adjustment is recorded for estimated rebates, discounts 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, discounts and returns are established based on the contractual terms with customers, 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.
 
Based on the Company's specialty distribution model where it sells to only specialty pharmacies, Kaiser and the specialty distributor to the VA, the inventory and prescription data it receives from these distributors, and returns experience of other specialty products with similar selling models, the Company has been able to make a reasonable estimate for product returns. The Company will accept returns of Ampyra for two months prior to and six months after the product expiration date. The Company will provide a credit for such returns to customers with whom we have a direct relationship. Once product is prescribed, it cannot be returned. The Company does not exchange product from inventory for the returned product.
 
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 was 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.
 
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 as 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.
 
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 Risk
 
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of investments in cash and cash equivalents, restricted cash and accounts receivable. The Company maintains cash and cash equivalents and restricted cash with approved financial institutions. The Company is exposed to credit risks and liquidity in the event of default by the financial institutions or issuers of investments in excess of FDIC insured limits. The Company performs periodic evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any institution.
 
The Company is substantially dependent upon Alkermes for several activities related to the development and commercialization of Ampyra. The Company and Alkermes rely on a single third-party manufacturer to supply dalfampridine, the active pharmaceutical ingredient in Ampyra. Under the Company's supply agreement with Alkermes, the Company is obligated to purchase at least 75% of its yearly supply of Ampyra from Alkermes, and the Company is required to make compensatory payments if it does not purchase 100% of its requirements from Alkermes, subject to certain exceptions. The Company and Alkermes have agreed that it may purchase up to 25% of its annual requirements from Patheon, a mutually agreed-upon second manufacturing source, with compensatory payment.
 
The Company currently relies on Alkermes to supply it with Zanaflex Capsules (and for the supply of its authorized generic Zanaflex capsules being marketed by Watson Pharma) under its 2004 Supply Agreement. The initial term of the agreement expired in 2009, but is subject to two automatic two-year renewal terms. Either party may terminate the agreement by notifying the other party at least 12 months prior to the expiration of the initial term or any renewal term. In addition, either party may terminate the agreement if the other party commits a material breach that remains uncured. If a failure to supply occurs under the agreement, other than a force majeure event, or if the Company terminates the supply agreement for cause, Alkermes must use commercially reasonable efforts to assist the Company in transferring production of Zanaflex Capsules to it or a third-party manufacturer, provided that such third party is not a technological competitor of Alkermes. If the Company needs to transfer production, Alkermes has agreed to grant it a royalty-free, fully paid-up license of its manufacturing know-how and other information and rights related to the production of Zanaflex Capsules, including a license to use its proprietary technology for specified purposes. The Company has the right to sublicense this know-how to a third party manufacturer, provided that this third party is not a technological competitor of Alkermes. In the event of termination of the supply agreement due to a force majeure event that continues for more than three months, Alkermes has agreed to enter into negotiations with the Company to preserve the continuity of supply of products, including the possibility of transferring manufacturing of Zanaflex Capsules to it or a third party manufacturer.  Patheon manufactures Zanaflex tablets for us.
 
Farmak a.s. is the Company's supplier of tizanidine hydrochloride, the active pharmaceutical ingredient, or API, in Zanaflex Capsules.  Also, in June 2011, the Company received FDA approval for Farmak to also be its supplier of tizanidine hydrochloride for Zanaflex tablets.
 
If Alkermes, Patheon or Farmak experiences any disruption in their operations, a delay or interruption in the supply of its Zanaflex products could result until the affected supplier cures the problem or the Company locates an alternate source of supply. The Company may not be able to enter into alternative supply arrangements on terms that are commercially favorable, if at all. Any new supplier would also be required to qualify under applicable regulatory requirements. The Company could experience substantial delays before it is able to qualify any new supplier and transfer the required manufacturing technology to that supplier.  If the Company cannot manufacture enough of its Zanaflex products to meet demand, its sales would suffer.
 
The Company's principal direct customers as of December 31, 2011 were a network of specialty pharmacies, Kaiser, and the specialty distributor to the VA for Ampyra and wholesale pharmaceutical distributors for Zanaflex Capsules and Zanaflex tablets. The Company periodically assesses the financial strength of these customers and establishes allowances for anticipated losses, if necessary.
 
Allowance for Cash Discounts
 
An allowance for cash discounts are accrued based on historical usage rates at the time of product shipment.  The Company adjusts accruals based on actual activity as necessary.  Cash discounts are typically settled with customers within 30 days after the end of each calendar month.  The Company has cash discount allowances of $3.4 million and $2.6 million for the years ended December 31, 2011 and 2010, respectively.  The Company's accruals for cash discount allowances were $303,000 and $324,000 as of December 31, 2011 and 2010 respectively.
 
Allowance for Doubtful Accounts
 
A portion of the Company's accounts receivable may not be collected due principally to customer disputes and sales returns. The Company provides reserves for these situations based on the evaluation of the aging of its trade receivable portfolio and an analysis of high-risk customers. The Company has not historically experienced losses related to credit risk.  The Company has recognized an allowance related to one customer of approximately $600,000 as of December 31, 2011.  The Company did not recognize an allowance as of December 31, 2010, as management believed all outstanding accounts receivable were fully collectible as of that date.
 
Fair Value of Financial Instruments
 
The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Significant differences can arise between the fair value and carrying amounts of financial instruments that are recognized at historical cost amounts. The Company considers that fair value should be based on the assumptions market participants would use when pricing the asset or liability.
 
The following methods are used to estimate the Company's financial instruments:
 
 
(a)
Cash equivalents, grants receivables, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term nature of these instruments;
 
 
(b)
Available-for-sale securities are recorded based primarily on quoted market prices;
 
 
(c)
Put/call liability's fair value is based on revenue projections and business, general economic and market conditions that could be reasonably evaluated as of the valuation date;
 
It is not practical for the Company to estimate the fair value of the convertible notes payable due to the specific provisions of these notes. The terms of these notes are disclosed at Note 9. See Note 14 for discussion on fair value measurements.
 
Earnings per Share
 
Net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding. The difference between basic and diluted shares is that diluted shares include the dilutive effect of the assumed exercise of outstanding securities. The Company has certain common share equivalents, which are described more fully in Note 7, which have not been used in the calculation of diluted net income (loss) per share for prior years because to do so would be anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net income (loss) per share for prior years are equal.
 
 
Share-based Compensation
 
The Company has various share-based employee and non-employee compensation plans, which are described more fully in Note 6.
 
The Company accounts for stock options and restricted stock granted to employees and non-employees by recognizing the costs resulting from all share-based payment transactions in the consolidated financial statements at their fair values. The Company estimates the fair value of each option on the date of grant using the Black-Scholes closed-form option-pricing model based on assumptions for the expected term of the stock options, expected volatility of its common stock, prevailing interest rates, and an estimated forfeiture rate.
 
Segment Information
 
The Company is managed and operated as one business. 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 product candidates. Accordingly, the Company does not prepare discrete financial information with respect to separate product candidates or by location and does not have separately reportable segments.
 
Comprehensive Income
 
Unrealized gains (losses) from the Company's investment securities are included in accumulated other comprehensive income (loss) within the consolidated balance sheet.
 
Reclassification
 
Certain prior period amounts have been reclassified to conform to current year presentation.
 
Recent Accounting Pronouncements
 
In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” (ASU 2011-05). The provisions of this standard provide an option to present the components of net income and other comprehensive income either as one continuous statement of comprehensive income or as two separate but consecutive statements. The provisions of this new disclosure standard are effective January 1, 2012.  The Company does not believe this accounting standard update will have a material effect on its financial statements.
 
In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (ASU 2011-04). This newly issued accounting standard clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. The provisions of this new disclosure standard are effective January 1, 2012.  The Company does not believe this accounting standard update will have a material effect on its financial statements.
 
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 those disclosed in Note 15.
 
Short-Term Investments
Short-Term Investments
 (3) Short-Term Investments
 
The Company has determined that all of its short-term 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
December 31, 2011
             
US Treasury bonds
$237,887
 
$72
 
$(6)
 
$237,953
December 31, 2010
             
US Treasury bonds
$205,401
 
$6
 
$(18)
 
$205,389

 
The Company's short-term investments consist of US Treasury bonds with original maturities greater than three months and less than one year. A decline in the market value of any available-for-sale security below cost that is deemed to be other-than-temporary results in a reduction in carrying amount to fair value. The impairment would be charged to earnings for the difference between the investment's cost and fair value at such date and a new cost basis for the security established. Factors evaluated to determine if an investment is other-than-temporarily impaired include significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the issuer; adverse changes in the general market condition in which the issuer operates; the intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment; and, issues that raise concerns about the issuer's ability to continue as a going concern. The Company has determined that there were no other-than-temporary declines in the fair values of its short term investments as of December 31, 2011.
 
Short-term investments with maturity of three months or less from date of purchase have been classified as cash and cash equivalents, and amounted to $38.3 million and $23.5 million as of December 31, 2011 and 2010, respectively.
Property and Equipment
Property and Equipment
(4) Property and Equipment
 
Property and equipment consisted of the following:
 
(In thousands)
December 31,
2011
 
December 31,
2010
 
Estimated
useful lives used
Leasehold improvements
$3,240
 
$3,178
 
Remaining lease term
Computer equipment
5,859
 
4,699
 
3 years
Laboratory equipment
2,534
 
2,223
 
5 years
Furniture and fixtures
760
 
760
 
5 years
Capital in Progress
1,093
 
449
 
3 years
 
13,486
 
11,309
   
Less accumulated depreciation
(9,628)
 
(8,106)
   
 
$3,858
 
$3,203
   

 
Depreciation and amortization expense on property and equipment was $1.5 million and $1.1 million for the years ended December 31, 2011 and 2010, respectively.
Accrued Expenses and Other Current Liabilities
Accrued Expenses and Other Current Liabilities
(5) Accrued Expenses and Other Current Liabilities
 
Accrued expenses and other current liabilities consisted of the following:
 
(In thousands)
December 31,
2011
 
December 31,
2010
Bonus payable
$4,725
 
$4,291
Ampyra and Zanaflex discount and allowances accruals
4,680
 
4,426
Ampyra milestone
2,500
 
-
Accrued inventory
2,464
 
9,665
Royalties payable
1,977
 
2,066
Sales force commissions and incentive payments payable
1,893
 
6,717
Commercial and marketing expense accruals
1,811
 
721
Vacation accrual
1,171
 
1,220
Legal accruals
898
 
1,024
Research and development expense accruals
640
 
1,880
Other accrued expenses
1,390
 
1,759
 
$24,149
 
$33,769
Common Stock Options and Restricted Stock
Common Stock Options and Restricted Stock
(6) Common Stock Options and Restricted Stock
 
On June 18, 1999, the Company's board of directors approved the adoption of the Acorda Therapeutics, Inc. 1999 Employee Stock Option Plan (the 1999 Plan). All employees of the Company were eligible to participate in the 1999 Plan, including executive officers, as well as directors, independent contractors, and agents of the Company. The number of shares authorized for issuance under the 1999 Plan was 2,481,334.
 
On January 12, 2006, the Company's board of directors approved the adoption of the Acorda Therapeutics, Inc. 2006 Employee Incentive Plan (the 2006 Plan). This 2006 Plan serves as the successor to the Company's 1999 Plan, as amended, and no further option grants or stock issuances shall be made under the 1999 Plan after the effective date, as determined under Section 14 of the 2006 Plan. All employees of the Company are eligible to participate in the 2006 Plan, including executive officers, as well as directors, independent contractors, and agents of the Company. The 2006 Plan also covers the issuance of restricted stock. The 2006 Plan is administered by the Compensation Committee of the Board of Directors, which selects the individuals to be granted options and restricted stock, determines the time or times at which options and restricted stock shall be granted under the 2006 Plan, determines the number of shares to be granted subject to any option or restricted stock under the 2006 Plan and the duration of each option and restricted stock, and makes any other determinations necessary, advisable, and/or appropriate to administer the 2006 Plan. Under the 2006 Plan, each option granted expires no later than the tenth anniversary of the date of its grant. The number of shares of common stock reserved for issuance pursuant to awards made under the 2006 Plan as of December 31, 2011 is 8,366,663 shares of stock. The total number of shares of common stock available for issuance under this 2006 Plan, including shares of common stock subject to the then outstanding awards, shall automatically increase on January 1 of each year during the term of this plan, beginning 2007, by a number of shares of common stock equal to 4% of the outstanding shares of common stock on that date, unless otherwise determined by the Board of Directors. The Board approved the automatic increases of 4% for 2011, 2010 and 2009. Upon the exercise of options in the future, the Company intends to issue new shares.
 
The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
 
 
Year ended December 31,
 
2011
 
2010
 
2009
Employees and directors:
         
Estimated volatility
62.80%
 
66.31%
 
75.96%
Expected life in years
5.47
 
5.50
 
5.56
Risk free interest rate
2.23%
 
2.57%
 
2.15%
Dividend yield
-
 
-
 
-

 
The Company estimated volatility for purposes of computing compensation expense on its employee and non-employee options using a combination of the volatility of the Company's stock price since October 1, 2006 and the volatility of public companies that the Company considered comparable. As we aquire more historical data for our stock's volatility over the expected term of the options, we will weight our stock's volatility heavier versus our peers in the expected volatility assumption. The expected life used to estimate the fair value of employee options is 5.47 years. The Company based this assumption on the historical life of our options in 2011. Prior to 2011 this assumption was based on the 50th percentile of comparable peer companies' choices for expected lives.
 
The weighted average fair value per share of options granted to employees and directors for the years ended December 31, 2011, 2010 and 2009 amounted to approximately $13.02, $19.29, and $14.33, respectively. No options were granted to non-employees for the years ended December 31, 2011, 2010 and 2009.
 
During the year ended December 31, 2011, the Company granted 1,540,550 stock options and restricted stock awards to employees and directors under the 2006 Plan. These stock options were issued with a weighted average exercise price of $23.62 per share. 1,000 of these options vested immediately, 85,000 of these options vest over a one-year vesting schedule and 1,152,930 will vest over a four-year vesting schedule. 25,000 of the restricted stock awards granted in 2011 vest over a three-year vesting schedule, 276,620 restricted stock awards vest over a four-year vesting schedule. As a result of these grants the total compensation charge to be recognized over the service period is $20.5 million, of which $5.1 million was recognized during the year ended December 31, 2011.
 
Compensation costs for options and restricted stock granted to employees and directors amounted to $19.3 million, $17.8 million, and $12.3 million, for the years ended December 31, 2011, 2010 and 2009, respectively. There were no compensation costs capitalized in inventory balances. Compensation expense for options and restricted stock granted to employees and directors are classified between research and development, sales and marketing and general and administrative expense based on employee job function.
 
The following table summarizes share-based compensation expense included within our consolidated statements of operations:
 
   
Year ended December 31,
 
(In thousands)
 
2011
  
2010
  
2009
 
           
Research and development
 $5,801  $5,247  $3,662 
Selling, general and administrative
  13,502   12,530   8,616 
 
 Total
 $19,303  $17,777  $12,278 

A summary of share-based compensation activity for the year ended December 31, 2011 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 December 31, 2008
3,284
 
$13.55
       
Granted
826
 
21.97
       
Forfeited and expired
(205)
 
16.94
       
Exercised
(193)
 
13.15
       
Balance at December 31, 2009
3,712
 
15.25
       
Granted
1,136
 
32.49
       
Forfeited and expired
(116)
 
25.09
       
Exercised
(648)
 
13.00
       
Balance at December 31, 2010
4,084
 
20.13
       
Granted
1,239
 
23.52
       
Forfeited and expired
(201)
 
25.97
       
Exercised
(329)
 
12.06
       
Balance at December 31, 2011
4,793
 
$21.31
 
6.7
 
$23,129
Vested and expected to vest at December 31, 2011
4,713
 
$21.25
 
6.7
 
$23,032
Vested and exercisable at December 31, 2011
2,987
 
$18.45
 
5.6
 
$21,043

 
Options Outstanding
 
Options Exercisable
Range of exercise price
Outstanding
as of
December 31,
2011 (In thousands)
 
Weighted-
average
remaining
contractual life
 
Weighted-
average
exercise price
 
Exercisable
as of
December 31,
2011 (In thousands)
 
Weighted-
average
exercise price
$2.45-$16.88
1,064
 
3.42
 
$    7.45
 
1,064
 
$    7.45
$17.52-$21.52
1,008
 
6.49
 
20.17
 
737
 
19.97
$21.61-$22.13
1,062
 
8.11
 
22.07
 
418
 
22.09
$22.24-$31.67
966
 
8.01
 
28.00
 
483
 
28.07
$31.71-$37.48
693
 
8.23
 
33.80
 
285
 
33.89
 
4,793
 
6.73
 
$21.31
 
2,987
 
$18.45

 
Unrecognized compensation cost for unvested stock options and restricted stock awards as of December 31, 2011 totaled $32.1 million and is expected to be recognized over a weighted average period of approximately 2.4 years.
 
Restricted Stock Activity
 
Restricted Stock
 
Number of Shares (In thousands)
Nonvested at December 31, 2008
150
Granted
208
Vested
(128)
Forfeited
(26)
Nonvested at December 31, 2009
204
Granted
334
Vested
(196)
Forfeited
(18)
Nonvested at December 31, 2010
324
Granted
302
Vested
(221)
Forfeited
(28)
Nonvested at December 31, 2011
377
Earnings Per Share
Earnings Per Share
(7) Earnings Per Share
 
 
The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31, 2011, 2010 and 2009:
 
(In thousands, except per share data)
Year ended
December 31,
2011
 
Year ended
December 31,
2010
 
Year ended
December 31,
2009
Basic and diluted
         
Net income (loss)
$30,605
 
$(11,769)
 
$(83,940)
Weighted average common shares outstanding used in computing net income (loss) per share-basic
39,000
 
38,355
 
37,735
Plus: net effect of dilutive stock options and restricted common shares
1,064
 
-
 
-
Weighted average common shares outstanding used in computing net income (loss) per share-diluted
40,064
 
38,355
 
37,735
Net income (loss) per share-basic
$0.78
 
$(0.31)
 
$(2.22)
Net income (loss) per share-diluted
$0.76
 
$(0.31)
 
$(2.22)

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

 
(In thousands)
Year ended
December 31,
2011
 
Year ended
December 31,
2010
 
Year ended
December 31,
2009
Denominator
         
Dilutive stock options and restricted common shares
4,106
 
4,408
 
3,916
Convertible note
67
 
67
 
67
Income Taxes
Income Taxes
(8) Income Taxes
 
The Company had available federal net operating loss (NOL) carry-forwards of approximately $230.4 million and $266.9 million and state NOL carry-forwards of approximately $205.9 million and $261.0 million as of December 31, 2011 and 2010, respectively, which may be available to offset future taxable income, if any. The federal losses are expected to expire between 2022 and 2030 while the state losses are expected to expire between 2012 and 2030. The Company also has research and development tax credit carry-forwards of approximately $4.0 million and $3.7 million as of December 31, 2011 and 2010, for federal income tax reporting purposes that may be available to reduce federal income taxes, if any, and expire in future years beginning in 2019.  The Company is no longer subject to federal or state income tax audits for tax years prior to 2006 however, such taxing authorities can review any net operating losses utilized by the Company in years subsequent to 1999. The Company also has Alternative Minimum Tax credit carry-forwards of $1.1 and $0.2 million as of December 31, 2011 and 2010, respectively.  Such credits can be carried forward indefinitely and have no expiration date.
 
The difference between tax expense and the amount computed by applying the statutory federal income tax rate (35% for 2011 and 34% for 2010 and 2009) to income before income taxes is as follows:
 
(In thousands)
December 31,
2011
 
December 31,
2010
 
December 31,
2009
Statutory rate applied to pre-tax income (loss)
$11,206
 
$(4,017)
 
$(28,448)
Add (deduct):
         
Meals and entertainment
274
 
254
 
232
Stock options and restricted stock
278
 
(154)
 
2,064
State tax
325
 
(387)
 
(1,361)
Other
214
 
(163)
 
(233)
Increase (decrease) to valuation allowance (net)
(6,479)
 
6,627
 
27,746
Increase in statutory tax rate
(4,118)
 
-
 
-
Research and development credit
(287)
 
(2,160)
 
-
Income taxes
$1,413
 
$-
 
$-

 
 
The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2011 and 2010 are presented below:
 
(In thousands)
December 31,
2011
 
December 31,
2010
Net operating loss carry-forwards
$74,774
 
$82,914
State NOL net of federal benefit
942
 
1,601
Research and development tax credit
4,025
 
3,738
Property and equipment
(532)
 
146
Intellectual property
7,399
 
2,608
Stock options and restricted stock
13,910
 
13,134
Deferred revenue
38,958
 
40,248
Revenue interest liability
1,504
 
1,939
Medtronic acquisition
1,110
 
-
NRI acquisition
760
 
795
Other temporary differences
4,746
 
6,703
 
147,596
 
153,826
Less valuation allowance
(147,596)
 
(153,826)
Net deferred tax assets
$-
 
$-

 
Changes in the valuation allowance for the years ended December 31, 2011 and 2010 amounted to approximately a $6.2 million decrease and a $6.6 million increase, respectively. A tax benefit of $5.9 million associated with the exercise of stock options will be recorded in additional paid-in capital when the associated net operating loss is recognized. Since inception, the Company has incurred substantial losses and may incur substantial losses in future periods. The Tax Reform Act of 1986 (the Act) provides for a limitation of the annual use of NOL and research and development tax credit carry-forwards (following certain ownership changes, as defined by the Act) that could significantly limit the Company's ability to utilize these carry-forwards. The Company has experienced various ownership changes, as a result of past financings. Accordingly, the Company's ability to utilize the aforementioned carry-forwards may be limited. Additionally, because U.S. tax laws limit the time during which these carry-forwards may be applied against future taxes, the Company may not be able to take full advantage of these attributes for federal income tax purposes. Because of the above mentioned factors, the Company has not recognized its gross deferred tax assets as of and for all periods presented. As of December 31, 2011, management believes that it is more likely than not that the net deferred tax assets will not be realized based on future operations and reversal of deferred tax liabilities. Accordingly, the Company has provided a full valuation allowance against its gross deferred tax assets and no tax benefit has been recognized relative to its pretax losses.
 
 
On January 1, 2007, the Company adopted FIN 48, which was later superseded by ASC 740-10, which clarifies the accounting for income taxes by prescribing the minimum threshold a tax position is required to meet before being recognized in the financial statements as well as guidance on de-recognition, measurement, classification and disclosure of tax positions.  There were no uncertain tax positions at December 31, 2011.
License and Research and Collaboration Agreements
License and Research and Collaboration Agreements
(9) License and Research and Collaboration Agreements
 
Alkermes plc, formerly Elan plc
 
The Company has entered into agreements with Elan Corporation plc, including those described immediately below and elsewhere in these financial statements.  In September 2011, Alkermes plc acquired Elan's Drug Technologies business and Elan transferred our agreements to Alkermes as part of that transaction.  Throughout this report, references to “Alkermes” include Alkermes plc and also, as the context may require, Elan Corporation plc as the predecessor to Alkermes plc under our agreements.
 
The Company is a party to a 2003 amended and restated license agreement and a 2003 supply agreement with Alkermes for Ampyra, which replaced two prior license and supply agreements for Ampyra. Under the license agreement, the Company has exclusive worldwide rights to Ampyra, as well as Alkermes' formulation for any other mono or di-aminopyridines, for all indications, including multiple sclerosis and spinal cord injury. The Company is obligated to pay Alkermes milestone payments and royalties based on a percentage of net product sales and the quantity of product shipped by Alkermes to Acorda.
 
Subject to early termination provisions, the Alkermes license terminates on a country by country basis on the latter to occur of fifteen years from the date of the agreement, the expiration of the last to expire Alkermes patent or the existence of competition in that country.
 
Under the supply agreement, Alkermes has the right to manufacture for the Company, subject to certain exceptions, Ampyra and other products covered by these agreements at specified prices calculated as a percentage of net product sales of the product shipped by Alkermes to Acorda. In the event Alkermes does not manufacture the products, it is entitled to a compensating payment for the quantities of product provided by the alternative manufacturer.
 
Convertible Note
 
Under the Agreement, Alkermes also loaned to the Company an aggregate of $7.5 million pursuant to two convertible promissory notes. On December 23, 2005, Alkermes transferred these promissory notes to funds affiliated with Saints Capital. One promissory note in the amount of $5.0 million bears interest at a rate of 3% beginning on the first anniversary of the issuance of the note. The unpaid principal is convertible into 67,476 shares of common stock. Principal and interest are repayable, if not converted, ratably over a seven-year period beginning one year after the Company receives certain regulatory approval for the products to be developed, subject to limitations related to gross margin on product sales. The $5.0 million promissory note restricts the Company's ability to incur indebtedness that is senior to the notes, subject to certain exceptions, including for the Company's revenue interest assignment arrangement (See Note 13).
 
The second promissory note was in the amount of $2.5 million and was non-interest bearing. In December 2006, Saints Capital exercised the conversion of this note into 210,863 shares of common stock.
 
On January 22, 2010, the Company received regulatory approval for the product under development that was subject to this convertible note payable. Saints Capital held the option to convert the outstanding principal into common stock until the first anniversary of regulatory approval or January 22, 2011. Saints Capital did not convert by the first anniversary date, therefore the Company is obligated to pay the outstanding principal sum on the promissory note, together with all accrued and unpaid interest, subject to limitations related to gross margin on product sales, in seven equal installments, the first of which was paid on the maturity date, and the balance shall be paid on the six successive anniversaries of the maturity date. The Company, at its option, may at any time prepay in whole or in part, without penalty, the principal balance together with accrued interest to the date of payment, by giving Saints Capital written notice at least thirty days prior to the date of prepayment.
 
Interest on this convertible promissory note has been recorded using 3% on the $5 million note.
 
Supply Agreement
 
The Company is a party to a 2003 supply agreement with Alkermes relating to the manufacture and supply of Ampyra by Alkermes. The Company is obligated to purchase at least 75% of its annual requirements of Ampyra from Alkermes, unless Alkermes is unable or unwilling to meet its requirements, for a percentage of net product sales and the quantity of product shipped by Alkermes to Acorda. In those circumstances, where the Company elects to purchase less than 100% of its requirements from Alkermes, the Company is obligated to make certain compensatory payments to Alkermes. Alkermes is required to assist the Company in qualifying a second manufacturer to manufacture and supply the Company with Ampyra subject to its obligations to Alkermes.
 
As permitted by the agreement with Alkermes, the Company has designated Patheon, Inc. (Patheon) as a qualified second manufacturing source of Ampyra. In connection with that designation, Alkermes assisted the Company in transferring manufacturing technology to Patheon. The Company and Alkermes have agreed that a purchase of up to 25% of annual requirements from Patheon is allowed if compensatory payments are made to Alkermes. In addition, Patheon may supply the Company with Ampyra if Alkermes is unable or unwilling to meet the Company's requirements.
 
Biogen Idec
 
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. 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 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 million based on the successful achievement of future regulatory milestones and up to $365 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 knowhow 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 $9.1 million and $9.4 million in license revenue, a portion of the $110.0 million received from Biogen Idec, and $634,000 and $660,000 in cost of license revenue, a portion of the $7.7 million paid to Alkermes, during the twelve-month periods ended December 31, 2011 and 2010, 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 changed the amortization period on a prospective basis during the three-month period ended March 31, 2011 by five months and 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 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 has 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 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.
 
Cost of milestone and license revenue includes $634,000 and $660,000 in cost of license revenue, which represents the amortized portion of the $7.7 million paid to Alkermes in 2009, for the twelve-month periods ended  December 31, 2011 and 2010, respectively.  It also includes $1.8 million in cost of milestone revenue, which represents the 7% Alkermes portion of the $25 million milestone paid during the three-month period ended September 30, 2011.
 
Employee Benefit Plan
Employee Benefit Plan
 (10) Employee Benefit Plan
 
Effective September 1, 1999, the Company adopted a defined contribution 401(k) savings plan (the 401(k) plan) covering all employees of the Company. Participants may elect to defer a percentage of their annual pretax compensation to the 401(k) plan, subject to defined limitations. Effective January 1, 2007, the Company amended the plan to include an employer match contribution to employee deferrals. For each dollar an employee invests up to 6% of his or her earnings, the Company will contribute an additional 50 cents into the funds. The Company's expense related to the plan was $1.1 million, $1.0 million and $757,000 for the years ended December 31, 2011, 2010, and 2009, respectively.
Commitments and Contingencies
Commitments and Contingencies
(11) Commitments and Contingencies
 
 
During 1998, the Company entered into a lease agreement for its corporate office. During November 2000, May 2001, February 2007, July 2008 and February 2009, the Company entered into amendments of the lease for its facility. Under the amendments, the Company increased the total leased space and extended the lease term for its original leased space. The lease for this facility was previously scheduled to expire in December 2012.  However, in connection with the Company entering into a lease for a new headquarters facility, it exercised its right to accelerate the termination date to June 2012. In June 2011, the Company entered into a 15 year lease for an aggregate of approximately 138,000 square feet of laboratory and office space in Ardsley, New York.  The Company anticipates taking possession of the new space in June 2012, subject to completion of certain improvements to the facility prior to its occupancy.  The commencement of the term would be deferred in the case of certain delays in the completion of those improvements.  The Company has options to extend the term of the lease for three additional five-year periods, and it has an option to terminate the lease after 10 years subject to payment of an early termination fee.  Also, the Company has rights to lease up to approximately 120,000 additional square feet of space in additional buildings at the same location.  Our extension, early termination, and expansion rights are subject to specified terms and conditions, including specified time periods when they must be exercised, and are also subject to limitations including that we not be in default under the lease.  The lease provides for monthly payments of rent during the term. These payments consist of base rent, which takes into account the costs of the facility improvements being funded by the facility owner prior to our occupancy, and additional rent covering customary items such as charges for utilities, taxes, operating expenses, and other facility fees and charges.  The base rent will initially be $3.4 million per year, and will be subject to a 2.5% annual increase.
 
Future minimum commitments under all non-cancelable leases required subsequent to December 31, 2011 are as follows:
 
(In thousands)
 
2012
$2,275
2013
3,443
2014
3,529
2015
3,617
2016
3,707
Later years
25,994
 
$42,565
 
Rent expense under these operating leases during the years ended December 31, 2011, 2010 and 2009 was $1.1 million, $1.1 million, and $1.0 million, respectively.
 
Under the Company's Ampyra license agreement with Alkermes, the Company is obligated to make milestone payments to Alkermes of up to $15.0 million over the life of the contract and royalty payments as a percentage of net product sales and the quantity of product shipped by Alkermes to Acorda. In addition, under the Company's various other research, license and collaboration agreements with other parties, it is obligated to make milestone payments of up to an aggregate of approximately $53 million over the life of the contracts. The FDA approval of Ampyra triggered a milestone of $2.5 million to Alkermes that was paid during the quarter ended June 30, 2010. An additional milestone payment to Alkermes was accrued at December 31, 2011 with an additional $2.5 million recorded as an intangible asset.  Further milestone amounts are payable in connection with additional indications.
 
Under the Company's Ampyra supply agreement with Alkermes, payments for product manufactured by Alkermes are calculated as a percentage of net product sales and the quantity of product shipped by Alkermes to Acorda. Under this agreement, Acorda also has the option to purchase an agreed to quantity of product from a second source provided Acorda makes a compensating payment to Alkermes for the quantities of product provided by the second source.
 
Under the Company's license agreement with Rush-Presbyterian-St. Luke's Medical Center, it is obligated to make royalty payments as a percentage of net sales in the United States and in countries other than the United States.
 
Under the Company's supply agreement with Alkermes, it provides Alkermes with monthly written 18-month forecasts, and with annual written five-year forecasts for its supply requirements of Ampyra and two-year forecasts for its supply requirements of Zanaflex Capsules. In each of the five months for Zanaflex and three months for Ampyra following the submission of our written 18-month forecast the Company is obligated to purchase the quantity specified in the forecast, even if its actual requirements are greater or less.
 
The Company has an employment agreement with its Chief Executive Officer under which the Chief Executive Officer is entitled to severance and other payments if his employment is terminated under certain circumstances. The employment agreement was amended in 2011.  Under the employment agreement as amended, if the Company terminates the Chief Executive Officer for reasons other than cause or if the Chief Executive Officer terminates his employment for good reason, the Company must pay (i) an amount equal to the base salary the chief executive officer would have received during the 24 month period immediately following the date of termination, plus (ii) bonus equal to the Chief Executive Officer's last annual bonus, prorated based on the number of days in the calendar year elapsed as of the termination date.  If the termination occurs after a change in control, then the bonus is an amount equal to two (2) times the larger of the Chief Executive Officer's (x) prior year annual bonus and (y) target annual bonus for the year of termination.  The Chief Executive Officers is also entitled to COBRA premium payments for the 24 month severance period.
 
The Company also has employment agreements with some of its other executive officers, including the Company's Chief Scientific Officer, Chief, Strategic Development and General Counsel and Chief Financial Officer, that govern the terms and conditions of their employment.  These agreements were amended during 2011.  Under these agreements as amended, if the Company terminates the employment of any of the executive officers for reasons other than cause, or if any of the executive officers terminates his or her employment for good reason, the Company must (i) make severance payments equal to the base salary the executive would have received during the twelve month period immediately following the date of termination, plus (ii) a bonus equal to the executive officer's target cash bonus for the year of termination, prorated based on the number of days in the calendar year elapsed as of the termination date.  If the termination occurs within 18 months after a change in control, then the severance payment is 24 months of base salary and is paid in a lump sum, and the bonus is an amount equal to two (2) times the executive officer's target cash bonus for the year of termination.  The executive officers are also entitled to COBRA premium payments for the relevant severance period.
 
The Company also has a change in control agreement with its Chief Medical Officer.  Under this agreement, if the Company terminates the employment of the Chief Medical Officer for reasons other than cause within twelve months following a change in control, or if the Chief Medical Officer terminates his or her employment for good reason within six months following a change in control, the Company must pay the Chief Medical Officer (i) a lump sum equal to the base salary the Chief Medical Officer would have received during the 24 month period immediately following the date of termination, plus (ii) a bonus equal to two times the Chief Medical Officer's target cash bonus for the year of termination.  The Chief Medical Officer is also entitled to COBRA premium payments for the severance period.
 
The Company had sued Apotex Corp. and Apotex Inc. (collectively, “Apotex”) for patent infringement related to Apotex Inc.'s submission of an ANDA to the FDA seeking marketing approval for generic versions of Zanaflex Capsules. On September 7, 2011, the Company announced that the U.S. District Court for the District of New Jersey had ruled against it in that litigation.  The Court held that the claims of U.S. Patent No. 6,455,557 covering use of multiparticulate tizanidine compositions are invalid as not enabled and not infringed by Apotex.  The Company is appealing the decision.
 
On December 2, 2011, Apotex filed suit against the Company in the U.S. District Court for the Southern District of New York.   Apotex characterized the suit in its complaint as a “civil antitrust action” and “an action for false advertising” relating to Acorda's Zanaflex Capsules.  Among other allegations, Apotex claims Acorda's filing of a citizen petition with the U.S. Food and Drug Administration has “delayed FDA approval of Apotex's generic tizanidine capsules”.   Apotex is seeking monetary damages, disgorgement of Acorda profits, recovery of litigation costs, injunctive relief, and such other relief as the Court deems proper.  The Company intends to defend itself vigorously.  However, we cannot be sure that we will prevail in our defense, as the outcome of litigation is inherently uncertain, and an adverse determination could harm us.  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. As of December 31, 2011 there have been no accruals for legal matters aside from payments related to the litigation itself.
Intangible Assets
Intangible Assets
(12) Intangible Assets
 
The Company acquired all of Alkermes' U.S. sales, marketing and distribution rights to Zanaflex Capsules and Zanaflex tablets in July 2004 for $2.0 million plus $675,000 for finished goods inventory. The Company was also responsible for up to $19.5 million in future contingent milestone payments based on cumulative gross sales of Zanaflex tablets and Zanaflex Capsules. As of December 31, 2009, the Company made $19.5 million of these milestone payments which were recorded as intangible assets in the consolidated financial statements.
 
In connection with this transaction, the Company acquired the rights to the trade name “Zanaflex®”, one issued U.S. patent and two patent applications related to Zanaflex Capsules, and the remaining tablet inventory on hand with Alkermes. Additionally, the Company assumed Alkermes' existing contract with Novartis to manufacture Zanaflex tablets and entered into a separate contract with Alkermes to manufacture Zanaflex Capsules. The Company separately launched Zanaflex Capsules in April 2005. The Company did not acquire any receivables, employees, facilities or fixed assets. The Company allocated, on a relative fair value basis, the initial and milestone payments made to Alkermes to the assets acquired, principally the Zanaflex trade name and the capsulation patent. There is no expected residual value of these intangible assets. The Company amortizes the allocated fair value of the trade name and patent over their estimated future economic benefit to be achieved.  The Zanaflex trade name was fully amortized as of December 31, 2008.
 
The Company had sued Apotex Corp. and Apotex Inc. (collectively, “Apotex”) for patent infringement related to Apotex Inc.'s submission of an ANDA to the FDA seeking marketing approval for generic versions of Zanaflex Capsules.  On September 7, 2011, the Company announced that the U.S. District Court for the District of New Jersey had ruled against it in that litigation. The Court held that the claims of U.S. Patent No. 6,455,557 covering use of multiparticulate tizanidine compositions are invalid as not enabled and not infringed by Apotex.  The Company is appealing the decision.    The Company believes that the intangible asset associated with Zanaflex Capsules was fully impaired based on estimated undiscounted cash flows and the associated fair value of this asset and therefore the Company recorded an asset impairment charge of approximately $13.0 million to write-off the remaining carrying value of this asset during the three-month period ended September 30, 2011 to cost of sales. See Note 14.
 
On January 22, 2010, the Company received marketing approval from the FDA for Ampyra triggering two milestone payments of $2.5 million to Alkermes, $750,000 to Rush-Presbyterian St. Luke's Medical Center (Rush) and an additional $2.5 million payable to Alkermes two years from date of approval.  The Company made milestone payments totaling $3.25 million which were recorded as intangible assets in the consolidated financial statements during the three-month period ended March 31, 2010. An additional milestone payment to Alkermes was accrued at December 31, 2011 with an additional $2.5 million recorded as an intangible asset.
 
In 1990, Alkermes licensed from Rush know-how relating to dalfampridine (4-aminopyridine, 4-AP, the formulation used in Ampyra), for the treatment of MS. The Company subsequently licensed this know-how from Alkermes. In September 2003, the Company entered into an agreement with Rush and Alkermes terminating the Rush license to Alkermes and providing for mutual releases. The Company also entered into a license agreement with Rush in 2003 in which Rush granted the Company an exclusive worldwide license to its know-how relating to dalfampridine for the treatment of MS. Rush has also assigned to the Company its Orphan Drug Designation for dalfampridine for the relief of symptoms of MS.
 
The Company agreed to pay Rush a license fee, milestone payments of up to $850,000 and royalties based on net sales of the product for neurological indications. The FDA approval of Ampyra triggered the final milestone of $750,000 which was paid during the three-months ended March 31, 2010.  As of December 31, 2010, the Company had made an aggregate of $850,000 in milestone payments under this agreement.  As of December 31, 2011, the Company made or accrued royalty payments totaling $6.9 million.
 
In August 2003, the Company entered into an Amended and Restated License Agreement with the Canadian Spinal Research Organization (CSRO). Under this agreement, the Company was granted an exclusive and worldwide license under certain patent assets and know-how of CSRO relating to the use of dalfampridine in the reduction of chronic pain and spasticity in a spinal cord injured subject.  The agreement required the Company to pay to CSRO royalties based on a percentage of net sales of any product incorporating the licensed rights, including royalties on the sale of Ampyra and on the sale of dalfampridine for any other indication. During the three-month period ended March 31, 2010, the Company purchased CSRO's rights to all royalty payments under the agreement with CSRO for $3.0 million.  This payment was recorded as an intangible asset in the consolidated financial statements.
 
On April 19, 2011 the Company announced the United States Patent and Trademark Office (USPTO) allowed U.S. Patent Application No. 11/010,828 entitled “Sustained Release Aminopyridine Composition.”  The claims of the patent application relate to methods to improve walking in patients with multiple sclerosis (MS) by administering 10 mg of sustained release 4-aminopyridine (dalfampridine) twice daily. The patent that issued from this application, described below, was accorded an initial patent term adjustment by the USPTO of 298 days, initially extending its term to early October 2025.  The Company re-evaluated the useful life of the Ampyra milestones and Ampyra CSRO royalty buyout intangible assets during the three-month period ended June 30, 2011 and the revised estimated remaining useful lives of the assets are presented in the table below.
 
On August 30, 2011 the United States Patent and Trademark Office (USPTO) issued the Company's Patent Application No. 11/010,828 as U.S. Patent No. US 8,007,826 entitled “Sustained Release Aminopyridine Composition.”   The patent, which is eligible for listing in the FDA Orange Book, is now expected to expire in May 2027, including patent term adjustment. The final patent life issuance did not have a material impact on the amortization expense for the current or future periods.
 
Intangible assets also include certain website development costs which have been capitalized. The Company has developed several websites, each with its own purpose, including the general corporate website, product information websites and websites focused on the MS community.
 
The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful life of its intangible assets may warrant revision or that the carrying value of these assets may be impaired. As noted above, the Company evaluated the value and remaining useful lives of the Zanaflex Capsule patents as of September 30, 2011 and recorded a charge of approximately $13.0 million to fully impair this asset. As of December 31, 2011, the Company does not believe that there are any facts or circumstances that would indicate a need for changing the estimated remaining useful life of the Company's intangible assets related to Ampyra.
 
Intangible assets consisted of the following:
 
(In thousands)
December 31,
2011
 
December 31,
2010
 
Estimated
remaining
useful lives as of
December 31,
2011
Zanaflex Capsule patents
$19,350
 
$19,350
 
0 years
Zanaflex trade name
2,150
 
2,150
 
0 years
Ampyra milestones
5,750
 
3,250
 
15 years
CSRO royalty buyout
3,000
 
3,000
 
 8 years
Website development costs
4,028
 
2,975
 
0-3 years
Website development costs – in process
42
 
-
 
3 years
 
34,320
 
30,725
   
Less accumulated amortization
25,551
 
9,389
   
 
$8,769
 
$21,336
   
 
The Company recorded $16.2 million and $2.8 million in amortization expense related to these intangible assets in the years ended December 31, 2011 and 2010, respectively.  The expense recorded in 2011 includes $13.0 million for Zanaflex Capsule intangible asset impairment recorded during the three-month period ended September 30, 2011 due to the trial court decision of the Apotex patent infringement lawsuit.
 
Estimated future amortization expense for intangible assets subsequent to December 31, 2011 for the next five years is as follows:
 
(In thousands)
 
2012
$1,579
2013
1,136
2014
870
2015
588
2016
588
 
$4,761
 
Debt
Debt
(13) Debt
 
Convertible Note
 
The Company is a party to an amended and restated license agreement and a supply agreement with Alkermes, which replaced two prior license and supply agreements for Ampyra.  Under the license agreement, Alkermes also loaned to the Company an aggregate of $7.5 million pursuant to two convertible promissory notes. On December 23, 2005, Alkermes transferred these promissory notes to funds affiliated with Saints Capital. One promissory note remains outstanding in the amount of $5.0 million bears interest at a rate of 3% beginning on the first anniversary of the issuance of the note (See Note 9).
 
Sale of Revenue Interest
 
On December 23, 2005, the Company entered into an agreement with an affiliate of Paul Royalty Fund (PRF), under which the Company received $15 million in cash. In exchange the Company has assigned PRF revenue interest in Zanaflex Capsules, Zanaflex tablets and any future Zanaflex products. The agreement covers all Zanaflex net revenues (as defined in the agreement) generated from October 1, 2005 through and including December 31, 2015, unless the agreement terminates earlier. In November 2006, the Company entered into an amendment to the revenue interest assignment agreement with PRF. Under the terms of the amendment, PRF paid the Company $5.0 million in November 2006. An additional $5.0 million was due to the Company if net revenues during the fiscal year 2006 equaled or exceeded $25.0 million. This milestone was met and the receivable was reflected in the Company's December 31, 2006 financial statements. Under the terms of the amendment, the Company repaid PRF $5.0 million on December 1, 2009 and an additional $5.0 million on December 1, 2010 since the net revenues milestone was met. Under the agreement and the amendment to the agreement, PRF is entitled to the following portion of Zanaflex net revenues:
 
 
•
with respect to Zanaflex net revenues up to and including $30.0 million for each fiscal year during the term of the agreement, 15% of such net revenues;
 
 
•
with respect to Zanaflex net revenues in excess of $30.0 million but less than and including $60.0 million for each fiscal year during the term of the agreement, 6% of such net revenues; and
 
 
•
with respect to Zanaflex net revenues in excess of $60.0 million for each fiscal year during the term of the agreement, 1% of such net revenues.
 
Notwithstanding the foregoing, once PRF has received and retained payments under the amended agreement that are at least 2.1 times the aggregate amount PRF has paid the Company under the agreement, PRF will only be entitled to 1% of Zanaflex net revenues. If PRF is entitled to 15% of net revenues as described above, the Company will remit 8% of cash payments received from wholesalers to PRF on a daily basis, with a quarterly reconciliation and settlement.
 
In connection with the transaction, the Company recorded a liability, referred to as the revenue interest liability. The Company imputes interest expense associated with this liability using the effective interest rate method and records a corresponding accrued interest liability. The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the life of the arrangement. The interest rate on this liability may vary during the term of the agreement depending on a number of factors, including the level of Zanaflex sales. The Company currently estimates that the imputed interest rate associated with this liability will be approximately 5.7%. Payments made to PRF as a result of Zanaflex sales levels will reduce the accrued interest liability and the principal amount of the revenue interest liability. The Company recorded approximately $3.4 million, $3.8 million and $4.2 million in interest expense related to this agreement in 2011, 2010 and 2009, respectively. Through December 31, 2011, $43.3 million in payments have been made to PRF as a result of Zanaflex sales levels and milestones reached.
 
The agreement also contains put and call options whereby the Company may repurchase the revenue interest at its option or can be required by PRF to repurchase the revenue interest, contingent upon certain events. If the Company experiences a change of control, undergoes certain bankruptcy events, transfers any of their interests in Zanaflex (other than pursuant to a license agreement, development, commercialization, co-promotion, collaboration, partnering or similar agreement), transfers all or substantially all of its assets, or breaches certain of the covenants, representations or warranties made under the agreement, PRF has the right, which the Company refers to as PRF's put option, to require the Company to repurchase the rights sold to PRF at the “put/call price” in effect on the date such right is exercised. If the Company experiences a change of control it has the right, which the Company refers to as the Company's call option, to repurchase the rights sold to PRF at the “put/call price” in effect on the date such right is exercised. If the Company's call option becomes exercisable as a result of this trigger, the Company will have a period of 180 days during which to exercise the option. The Company does not currently intend to exercise its call option if it becomes exercisable as a result of such a transaction but may reevaluate whether it would exercise the option during the 180-day period. The put/call price on a given date is the greater of (i) 150% of all payments made by PRF as of such date, less all payments received by PRF as of such date, and (ii) an amount that would generate an internal rate of return to PRF of 25% on all payments made by PRF as of such date, taking into account the amount and timing of all payments received by PRF as of such date. The Company has determined that PRF's put option and the Company's call option meet the criteria to be considered an embedded derivative and should be accounted for as such. The Company recorded a net liability of $1.0 million as of December 31, 2011 related to the put/call option to reflect its current estimated fair value. This liability is revalued as needed to reflect any changes in the fair value and any gain or loss resulting from the revaluation is recorded in earnings. For the year ended December 31, 2011, a loss of $639,000 has been recorded as a result of the change in the fair value of the net put/call liability balance from December 31, 2010.
 
Fair Value Measurements
Fair Value Measurements
(14) Fair Value Measurements
 
The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The Company bases fair value on the assumptions market participants would use when pricing the asset or liability.
 
The Company utilizes a fair value hierarchy which requires it to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company primarily applies the market approach for recurring fair value measurements. The standard describes three levels of inputs that may be used to measure fair value:
 
 
•
Level 1 Quoted prices in active markets for identical assets or liabilities.
 
 
•
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
 
•
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
Recurring
 
The following table presents information about the Company's assets and liabilities measured at fair value on a recurring basis as of December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.
 
(In thousands)
 
Level 1
 
Level 2
 
Level 3
2011
           
Assets Carried at Fair Value:
           
Cash equivalents
 
$38,340
 
$-
 
$-
Short-term investments
 
237,953
 
-
 
-
Liabilities Carried at Fair Value:
           
Put/call liability
 
-
 
-
 
1,030
2010
           
Assets Carried at Fair Value:
           
Cash equivalents
 
$23,529
 
$-
 
$-
Short-term investments
 
205,389
 
-
 
-
Liabilities Carried at Fair Value:
           
Put/call liability
 
-
 
-
 
391
 
The following table presents 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.
 
(In thousands)
Balance as of
December 31,
2010
 
Realized loss
included
in net income
 
Unrealized
gains included
in other
comprehensive
income/loss
 
Balance as of
December 31,
2011
Liabilities Carried at Fair Value:
             
Put/call liability
$391
 
$639
 
$-
 
$1,030
 
 
The Company estimates the fair value of its put/call liability using a discounted cash flow valuation technique. Using this approach, expected future cash flows are calculated over the expected life of the PRF agreement, are discounted to a single present value and then exercise scenario probabilities are applied. Some of the more significant assumptions made in the present value calculations include (i) the estimated Zanaflex revenue forecast and (ii) the likelihood of put/call exercise trigger events. Realized gains and losses are included in sales, general and administrative expenses.
 
The put/call liability has been classified as a Level 3 asset 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 of these investments 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.
 
Assets Measured and Recorded at Fair Value on a Nonrecurring Basis
 
Our non-financial assets, such as intangible assets and property, plant and equipment are only recorded at fair value if an impairment charge is recognized. The table below presents non-financial assets that were measured and recorded at fair value on a nonrecurring basis and the total impairment losses recorded during 2011.  There were no non-financial assets that were measured and recorded at fair value on a non-recurring basis in 2010 or 2009.

(in thousands)
Net Carrying Value as of
 
Fair Value Measured and Recorded Using
 
Impairment Losses
December 31,
           
December 31,
2011
Level 1
 
Level 2
 
Level 3
 
2011
Zanaflex intangible asset (1)
$-
 
$-
 
$-
 
$-
 
$13,038
                   
Total impairment losses
               
$13,038

(1)  
$962,000 in intangible amortization recorded during the nine-month period ended September 30, 2011.
 
The Company had sued Apotex Corp. and Apotex Inc. (collectively, “Apotex”) for patent infringement related to Apotex Inc.'s submission of an ANDA to the FDA seeking marketing approval for generic versions of Zanaflex Capsules.  On September 7, 2011, the Company announced that the U.S. District Court for the District of New Jersey had ruled against it in that litigation. The Court held that the claims of U.S. Patent No. 6,455,557 covering use of multiparticulate tizanidine compositions are invalid as not enabled and not infringed by Apotex.  The Company is appealing the decision.  The Company believes that the intangible asset associated with Zanaflex Capsules was fully impaired based on estimated undiscounted cash flows and the associated fair value of this asset and therefore the Company recorded an asset impairment charge of approximately $13.0 million to write-off the remaining carrying value of this asset during the three-month period ended September 30, 2011. See Note 12.
 
The Company estimated the fair value of its Zanaflex intangible asset using judgment. Based on what a market participant would pay, the Company made the significant assumption that since the Apotex trial court decision ruled that the underlying Zanaflex patent was invalid as not enabled, there is no market to sell the intangible asset and that the fair value is zero. The realized loss is included in cost of sales. This has been classified as a Level 3 asset 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, the estimated fair value of these investments could be significantly higher than the fair value we determined.
 
Subsequent Events
Subsequent Events
(15) Subsequent Events
 
 
Apotex received FDA approval of its ANDA and launched generic tizanidine hydrochloride capsules in February 2012.  Also, the Company has entered into an agreement with Watson Pharma, Inc., a subsidiary of Watson Pharmaceuticals, Inc., to market tizanidine hydrochloride capsules, an authorized generic version of Zanaflex Capsules in February 2012.  The launch of generic tizanidine hydrochloride capsules into the marketplace will likely cause the Company's net revenue from Zanaflex Capsules to decline significantly.
 
 
On February 15, 2012, we entered into a merger agreement with Neuronex, Inc., a privately-held development stage pharmaceutical company.  Neuronex is preparing a 505(b)(2) type New Drug Application, or NDA, for a proprietary nasal spray formulation of Diazepam, or DZNS, as a rescue treatment for certain epilepsy patients. Under the terms of the merger agreement, we made an upfront payment of $2.0 million and paid $500,000 of up to $1.2 million in research funding to prepare for diazepam nasal spray pre-NDA meeting with the U.S. Food and Drug Administration, or FDA.  Following the pre-NDA meeting, we can, at our option, complete the acquisition by paying an additional $6.8 million.  If the acquisition is completed, we will assume oversight and financial responsibility for all future development and regulatory programs for diazepam nasal spray.  There are potential payments to Neuronex and other parties of $1 million for the completion and acceptance of an NDA by the FDA, and up to $25 million following regulatory approvals in the U.S. and Europe.  If we complete the acquisition and the medication is approved by the FDA, the former owners of Neuronex will also be entitled to receive milestone and royalty-like earnout payments from us based on net sales.
Quarterly Consolidated Financial Data (unaudited)
Quarterly Consolidated Financial Data (unaudited)
16) Quarterly Consolidated Financial Data (unaudited)
 
(In thousands, except per share amounts)
2011
 
March 31
 
June 30
 
September 30
 
December 31
Total net revenues
$61,286
 
$65,276
 
$93,031
 
$72,644
Gross profit
49,236
 
53,228
 
66,380
 
59,210
Net income (loss)-basic and diluted
(672)
 
(285)
 
18,867
 
12,694
Net income (loss) per share-basic
$(0.02)
 
$(0.01)
 
$0. 48
 
$0.32
Net income (loss) per share-diluted
(0.02)
 
(0.01)
 
0.47
 
0.32
 

 
 
2010
 
March 31
 
June 30
 
September 30
 
December 31
Total net revenues
$17,747
 
$42,836
 
$63,622
 
$66,800
Gross profit
14,671
 
35,004
 
51,956
 
53,856
Net income (loss)-basic and diluted
(21,115)
 
(6,763)
 
12,437
 
3,671
Net income (loss) per share-basic
$(0.56)
 
$(0.18)
 
$0.32
 
$0.10
Net income (loss) per share-diluted
(0.56)
 
(0.18)
 
0.31
 
0.09
 
Summary of Significant Accounting Policies (Policies)
Principles of Consolidation 
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 
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 inventory value based on an estimate of Zanaflex inventory value based on an estimate of inventory that may be returned. Actual results could differ from those estimates.
Cash and Cash Equivalents 
Cash and Cash Equivalents
 
The Company considers all highly liquid debt instruments with original maturities of three months or less from date of purchase to be cash equivalents. All cash and cash equivalents are held in highly rated securities including a Treasury money market fund and US Treasury bonds, which are unrestricted as to withdrawal or use. To date, the Company has not experienced any losses on its cash and cash equivalents. The carrying amount of cash and cash equivalents approximates its fair value due to its short-term and liquid nature.
Restricted Cash 
Restricted Cash
 
Restricted cash represents a certificate of deposit placed by the Company with a bank for issuance of a letter of credit to the Company's lessor for office space.
Short-Term Investments 
Short-Term Investments
 
Short-term investments consist of US Treasury bonds with maturities greater than three months. The Company classifies its short-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.
 
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.
Inventory 
Inventory
 
Inventory is stated at the lower of cost or market value and includes amounts for Ampyra, Zanaflex tablet and Zanaflex Capsule inventories and is recorded at its net realizable value. Inventories consist of finished goods inventory. Cost is determined using the first-in, first-out method (FIFO) for all inventories. The Company adjusts its inventory value based on an estimate of inventory that may be returned or not sold based on sales projections and establishes reserves as necessary for obsolescence and excess inventory.
 
Ampyra
 
Prior to regulatory approval of Ampyra, the Company incurred expenses for the manufacture of bulk, unpackaged product of Ampyra that ultimately became available to support the commercial launch of this drug candidate. Until the necessary initial regulatory approval was received, we charged all such amounts to research and development expenses as there was no alternative future use prior to regulatory approval. As a result, our initial sales of Ampyra resulted in higher gross margins than if the inventory costs had not previously been expensed. Upon regulatory approval of Ampyra, the Company began capitalizing the commercial inventory costs associated with manufacturing with Alkermes plc (Alkermes), formerly Elan Corporation, plc (Elan) and its second manufacturer, Patheon.
 
The cost of Ampyra inventory manufactured by Alkermes is based on specified prices calculated as a percentage of net product sales of the product shipped by Alkermes to Acorda. In the event Alkermes does not manufacture the products, Alkermes is entitled to a compensating payment for the quantities of product provided by the alternative manufacturer. This compensating payment is included in the Company's inventory balances.
 
Property and Equipment 
Property and Equipment
 
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed on the straight-line basis over the estimated useful lives of the assets, which ranges from three to five years. Leasehold improvements are recorded at cost, less accumulated amortization, which is computed on the straight-line basis over the shorter of the useful lives of the assets or the remaining lease term. Expenditures for maintenance and repairs are charged to expense as incurred.
Intangible Assets 
Intangible Assets
 
The Company has recorded intangible assets related to milestones for Ampyra and for certain website development costs. These intangible assets are amortized on a straight line basis over the period in which the Company expects to receive economic benefit and are reviewed for impairment when facts and circumstances indicate that the carrying value of the asset may not be recoverable. The determination of the expected life will be dependent upon the use and underlying characteristics of the intangible asset. In the Company's evaluation of the intangible assets, it considers the term of the underlying asset life and the expected life of the related product line. If the carrying value is not recoverable, impairment is measured as the amount by which the carrying value exceeds its estimated fair value. Fair value is generally estimated based on either appraised value or other valuation techniques.
Impairment of Long-Lived Assets 
Impairment of Long-Lived Assets
 
The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful life of its long-lived assets may warrant revision or that the carrying value of these assets may be impaired. The Company evaluates the realizability of its long-lived assets based on profitability and cash flow expectations for the related assets. Any write-downs are treated as permanent reductions in the carrying amount of the assets. Based on this evaluation, the Company believes that, as of each of the balance sheet dates presented, none of the Company's long-lived assets were impaired.
 
Patent Costs 
Patent Costs
 
Patent application and maintenance costs are expensed as incurred.
Research and Development 
Research and Development
 
Research and development expenses include the costs associated with the Company's internal research and development activities, including salaries and benefits, occupancy costs, and research and development conducted for it by third parties, such as contract research organizations (CROs), sponsored university-based research, clinical trials, contract manufacturing for its research and development programs, and regulatory expenses.  In addition, research and development expenses include the cost of clinical trial drug supply shipped to the Company's clinical study vendors. For those studies that the Company administers itself, the Company accounts for its clinical study costs by estimating the patient cost per visit in each clinical trial and recognizes this cost as visits occur, beginning when the patient enrolls in the trial. This estimated cost includes payments to the trial site and patient-related costs, including laboratory costs related to the conduct of the trial. Cost per patient varies based on the type of clinical trial, the site of the clinical trial, and the length of the treatment period for each patient. For those studies for which the Company uses a CRO, the Company accounts for its clinical study costs according to the terms of the CRO contract. These costs include upfront, milestone and monthly expenses as well as reimbursement for pass through costs. As actual costs become known to the Company, it adjusts the accrual; such changes in estimate may be a material change in its clinical study accrual, which could also materially affect its results of operations. All research and development costs are expensed as incurred except when accounting for nonrefundable advance payments for goods or services to be used in future research and development activities.  These payments are capitalized at the time of payment and expensed ratably over the period the research and development activity is performed.
 
Accounting for Income Taxes 
Accounting for Income Taxes
 
Income taxes are accounted for under the asset and liability method with deferred tax assets and liabilities recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be reversed or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance for the amounts of any tax benefits which, more likely than not, will not be realized.
 
In determining whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits, a two-step process is utilized whereby the threshold for recognition is a more likely-than-not test that the tax position will be sustained upon examination and the tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company has no reserves for uncertain tax positions.

Revenue Recognition 
Revenue Recognition
 
Ampyra
 
Ampyra is available only through a network of specialty pharmacy providers that provide the medication to patients by mail; Kaiser Permanente (Kaiser), which distributes Ampyra to patients through a closed network of on-site pharmacies; and Amerisource Specialty Distribution Healthcare, which is the exclusive specialty pharmacy distributor for 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, and the specialty distributor to the VA. The specialty pharmacy providers, Kaiser, and the specialty distributor to the VA are contractually obligated to hold no more than 30 days of inventory.
 
The Company's net revenues represent total revenues less allowances for customer credits, including estimated rebates, discounts 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 to specialty pharmacies, Kaiser and the specialty distributor to the VA, an adjustment is recorded for estimated rebates, discounts 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, discounts and returns are established based on the contractual terms with customers, 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.
 
Based on the Company's specialty distribution model where it sells to only specialty pharmacies, Kaiser and the specialty distributor to the VA, the inventory and prescription data it receives from these distributors, and returns experience of other specialty products with similar selling models, the Company has been able to make a reasonable estimate for product returns. The Company will accept returns of Ampyra for two months prior to and six months after the product expiration date. The Company will provide a credit for such returns to customers with whom we have a direct relationship. Once product is prescribed, it cannot be returned. The Company does not exchange product from inventory for the returned product.
 
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 was 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.
 
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 as 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.
 
Collaborations 
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 Risk 
Concentration of Risk
 
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of investments in cash and cash equivalents, restricted cash and accounts receivable. The Company maintains cash and cash equivalents and restricted cash with approved financial institutions. The Company is exposed to credit risks and liquidity in the event of default by the financial institutions or issuers of investments in excess of FDIC insured limits. The Company performs periodic evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any institution.
 
The Company is substantially dependent upon Alkermes for several activities related to the development and commercialization of Ampyra. The Company and Alkermes rely on a single third-party manufacturer to supply dalfampridine, the active pharmaceutical ingredient in Ampyra. Under the Company's supply agreement with Alkermes, the Company is obligated to purchase at least 75% of its yearly supply of Ampyra from Alkermes, and the Company is required to make compensatory payments if it does not purchase 100% of its requirements from Alkermes, subject to certain exceptions. The Company and Alkermes have agreed that it may purchase up to 25% of its annual requirements from Patheon, a mutually agreed-upon second manufacturing source, with compensatory payment.
 
The Company currently relies on Alkermes to supply it with Zanaflex Capsules (and for the supply of its authorized generic Zanaflex capsules being marketed by Watson Pharma) under its 2004 Supply Agreement. The initial term of the agreement expired in 2009, but is subject to two automatic two-year renewal terms. Either party may terminate the agreement by notifying the other party at least 12 months prior to the expiration of the initial term or any renewal term. In addition, either party may terminate the agreement if the other party commits a material breach that remains uncured. If a failure to supply occurs under the agreement, other than a force majeure event, or if the Company terminates the supply agreement for cause, Alkermes must use commercially reasonable efforts to assist the Company in transferring production of Zanaflex Capsules to it or a third-party manufacturer, provided that such third party is not a technological competitor of Alkermes. If the Company needs to transfer production, Alkermes has agreed to grant it a royalty-free, fully paid-up license of its manufacturing know-how and other information and rights related to the production of Zanaflex Capsules, including a license to use its proprietary technology for specified purposes. The Company has the right to sublicense this know-how to a third party manufacturer, provided that this third party is not a technological competitor of Alkermes. In the event of termination of the supply agreement due to a force majeure event that continues for more than three months, Alkermes has agreed to enter into negotiations with the Company to preserve the continuity of supply of products, including the possibility of transferring manufacturing of Zanaflex Capsules to it or a third party manufacturer.  Patheon manufactures Zanaflex tablets for us.
 
Farmak a.s. is the Company's supplier of tizanidine hydrochloride, the active pharmaceutical ingredient, or API, in Zanaflex Capsules.  Also, in June 2011, the Company received FDA approval for Farmak to also be its supplier of tizanidine hydrochloride for Zanaflex tablets.
 
If Alkermes, Patheon or Farmak experiences any disruption in their operations, a delay or interruption in the supply of its Zanaflex products could result until the affected supplier cures the problem or the Company locates an alternate source of supply. The Company may not be able to enter into alternative supply arrangements on terms that are commercially favorable, if at all. Any new supplier would also be required to qualify under applicable regulatory requirements. The Company could experience substantial delays before it is able to qualify any new supplier and transfer the required manufacturing technology to that supplier.  If the Company cannot manufacture enough of its Zanaflex products to meet demand, its sales would suffer.
 
The Company's principal direct customers as of December 31, 2011 were a network of specialty pharmacies, Kaiser, and the specialty distributor to the VA for Ampyra and wholesale pharmaceutical distributors for Zanaflex Capsules and Zanaflex tablets. The Company periodically assesses the financial strength of these customers and establishes allowances for anticipated losses, if necessary.
 
Allowance for Cash Discounts 
Allowance for Cash Discounts
 
An allowance for cash discounts are accrued based on historical usage rates at the time of product shipment.  The Company adjusts accruals based on actual activity as necessary.  Cash discounts are typically settled with customers within 30 days after the end of each calendar month.  The Company has cash discount allowances of $3.4 million and $2.6 million for the years ended December 31, 2011 and 2010, respectively.  The Company's accruals for cash discount allowances were $303,000 and $324,000 as of December 31, 2011 and 2010 respectively.
 
Allowance for Doubtful Accounts 
Allowance for Doubtful Accounts
 
A portion of the Company's accounts receivable may not be collected due principally to customer disputes and sales returns. The Company provides reserves for these situations based on the evaluation of the aging of its trade receivable portfolio and an analysis of high-risk customers. The Company has not historically experienced losses related to credit risk.  The Company has recognized an allowance related to one customer of approximately $600,000 as of December 31, 2011.  The Company did not recognize an allowance as of December 31, 2010, as management believed all outstanding accounts receivable were fully collectible as of that date.
 
Fair Value of Financial Instruments 
Fair Value of Financial Instruments
 
The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Significant differences can arise between the fair value and carrying amounts of financial instruments that are recognized at historical cost amounts. The Company considers that fair value should be based on the assumptions market participants would use when pricing the asset or liability.
 
The following methods are used to estimate the Company's financial instruments:
 
 
(a)
Cash equivalents, grants receivables, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term nature of these instruments;
 
 
(b)
Available-for-sale securities are recorded based primarily on quoted market prices;
 
 
(c)
Put/call liability's fair value is based on revenue projections and business, general economic and market conditions that could be reasonably evaluated as of the valuation date;
 
It is not practical for the Company to estimate the fair value of the convertible notes payable due to the specific provisions of these notes. The terms of these notes are disclosed at Note 9. See Note 14 for discussion on fair value measurements.
 
Earnings per Share 
Earnings per Share
 
Net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding. The difference between basic and diluted shares is that diluted shares include the dilutive effect of the assumed exercise of outstanding securities. The Company has certain common share equivalents, which are described more fully in Note 7, which have not been used in the calculation of diluted net income (loss) per share for prior years because to do so would be anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net income (loss) per share for prior years are equal.
 
Share-based Compensation 
Share-based Compensation
 
The Company has various share-based employee and non-employee compensation plans, which are described more fully in Note 6.
 
The Company accounts for stock options and restricted stock granted to employees and non-employees by recognizing the costs resulting from all share-based payment transactions in the consolidated financial statements at their fair values. The Company estimates the fair value of each option on the date of grant using the Black-Scholes closed-form option-pricing model based on assumptions for the expected term of the stock options, expected volatility of its common stock, prevailing interest rates, and an estimated forfeiture rate.
 
Segment Information 
Segment Information
 
The Company is managed and operated as one business. 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 product candidates. Accordingly, the Company does not prepare discrete financial information with respect to separate product candidates or by location and does not have separately reportable segments.
Comprehensive Income 
Comprehensive Income
 
Unrealized gains (losses) from the Company's investment securities are included in accumulated other comprehensive income (loss) within the consolidated balance sheet.
 
Reclassification 
Reclassification
 
Certain prior period amounts have been reclassified to conform to current year presentation.
 
Recent Accounting Pronouncements 
Recent Accounting Pronouncements
 
In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” (ASU 2011-05). The provisions of this standard provide an option to present the components of net income and other comprehensive income either as one continuous statement of comprehensive income or as two separate but consecutive statements. The provisions of this new disclosure standard are effective January 1, 2012.  The Company does not believe this accounting standard update will have a material effect on its financial statements.
 
In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (ASU 2011-04). This newly issued accounting standard clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. The provisions of this new disclosure standard are effective January 1, 2012.  The Company does not believe this accounting standard update will have a material effect on its financial statements.
 
Subsequent Events 
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 those disclosed in Note 15.
 
Short-Term Investments (Tables)
Short Term Investments
Available-for-sale securities consisted of the following:
 
(In thousands)
Amortized
Cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair
value
December 31, 2011
             
US Treasury bonds
$237,887
 
$72
 
$(6)
 
$237,953
December 31, 2010
             
US Treasury bonds
$205,401
 
$6
 
$(18)
 
$205,389
Property and Equipment (Tables)
Property and Equipment
Property and equipment consisted of the following:
 
(In thousands)
December 31,
2011
 
December 31,
2010
 
Estimated
useful lives used
Leasehold improvements
$3,240
 
$3,178
 
Remaining lease term
Computer equipment
5,859
 
4,699
 
3 years
Laboratory equipment
2,534
 
2,223
 
5 years
Furniture and fixtures
760
 
760
 
5 years
Capital in Progress
1,093
 
449
 
3 years
 
13,486
 
11,309
   
Less accumulated depreciation
(9,628)
 
(8,106)
   
 
$3,858
 
$3,203
   
Accrued Expenses and Other Current Liabilities (Tables)
Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consisted of the following:
 
(In thousands)
December 31,
2011
 
December 31,
2010
Bonus payable
$4,725
 
$4,291
Ampyra and Zanaflex discount and allowances accruals
4,680
 
4,426
Ampyra milestone
2,500
 
-
Accrued inventory
2,464
 
9,665
Royalties payable
1,977
 
2,066
Sales force commissions and incentive payments payable
1,893
 
6,717
Commercial and marketing expense accruals
1,811
 
721
Vacation accrual
1,171
 
1,220
Legal accruals
898
 
1,024
Research and development expense accruals
640
 
1,880
Other accrued expenses
1,390
 
1,759
 
$24,149
 
$33,769
Common Stock Options and Restricted Stock (Tables)
Black-Scholes option pricing model weighted average assumptions 
The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
 
 
Year ended December 31,
 
2011
 
2010
 
2009
Employees and directors:
         
Estimated volatility
62.80%
 
66.31%
 
75.96%
Expected life in years
5.47
 
5.50
 
5.56
Risk free interest rate
2.23%
 
2.57%
 
2.15%
Dividend yield
-
 
-
 
-
Share based compensation expense 
The following table summarizes share-based compensation expense included within our consolidated statements of operations:
 
   
Year ended December 31,
 
(In thousands)
 
2011
  
2010
  
2009
 
           
Research and development
 $5,801  $5,247  $3,662 
Selling, general and administrative
  13,502   12,530   8,616 
 
 Total
 $19,303  $17,777  $12,278 
Stock Option Activity 
Stock Option Activity
 
 
Number
of Shares (In thousands)
 
Weighted Average
Exercise Price
 
Weighted Average
Remaining
Contractual Term
 
Intrinsic
Value (In thousands)
Balance at December 31, 2008
3,284
 
$13.55
       
Granted
826
 
21.97
       
Forfeited and expired
(205)
 
16.94
       
Exercised
(193)
 
13.15
       
Balance at December 31, 2009
3,712
 
15.25
       
Granted
1,136
 
32.49
       
Forfeited and expired
(116)
 
25.09
       
Exercised
(648)
 
13.00
       
Balance at December 31, 2010
4,084
 
20.13
       
Granted
1,239
 
23.52
       
Forfeited and expired
(201)
 
25.97
       
Exercised
(329)
 
12.06
       
Balance at December 31, 2011
4,793
 
$21.31
 
6.7
 
$23,129
Vested and expected to vest at December 31, 2011
4,713
 
$21.25
 
6.7
 
$23,032
Vested and exercisable at December 31, 2011
2,987
 
$18.45
 
5.6
 
$21,043
Stock Options Activity, By Exercise Price Range 
 
Options Outstanding
 
Options Exercisable
Range of exercise price
Outstanding
as of
December 31,
2011 (In thousands)
 
Weighted-
average
remaining
contractual life
 
Weighted-
average
exercise price
 
Exercisable
as of
December 31,
2011 (In thousands)
 
Weighted-
average
exercise price
$2.45-$16.88
1,064
 
3.42
 
$    7.45
 
1,064
 
$    7.45
$17.52-$21.52
1,008
 
6.49
 
20.17
 
737
 
19.97
$21.61-$22.13
1,062
 
8.11
 
22.07
 
418
 
22.09
$22.24-$31.67
966
 
8.01
 
28.00
 
483
 
28.07
$31.71-$37.48
693
 
8.23
 
33.80
 
285
 
33.89
 
4,793
 
6.73
 
$21.31
 
2,987
 
$18.45
Restricted Stock Activity 
Restricted Stock Activity
 
Restricted Stock
 
Number of Shares (In thousands)
Nonvested at December 31, 2008
150
Granted
208
Vested
(128)
Forfeited
(26)
Nonvested at December 31, 2009
204
Granted
334
Vested
(196)
Forfeited
(18)
Nonvested at December 31, 2010
324
Granted
302
Vested
(221)
Forfeited
(28)
Nonvested at December 31, 2011
377
Earnings Per Share (Tables)
Computation of basic and diluted earnings per share 
The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31, 2011, 2010 and 2009:
 
(In thousands, except per share data)
Year ended
December 31,
2011
 
Year ended
December 31,
2010
 
Year ended
December 31,
2009
Basic and diluted
         
Net income (loss)
$30,605
 
$(11,769)
 
$(83,940)
Weighted average common shares outstanding used in computing net income (loss) per share-basic
39,000
 
38,355
 
37,735
Plus: net effect of dilutive stock options and restricted common shares
1,064
 
-
 
-
Weighted average common shares outstanding used in computing net income (loss) per share-diluted
40,064
 
38,355
 
37,735
Net income (loss) per share-basic
$0.78
 
$(0.31)
 
$(2.22)
Net income (loss) per share-diluted
$0.76
 
$(0.31)
 
$(2.22)
Schedule of antidilutive securities excluded from computation of earnings per share 
The following amounts were not included in the calculation of net income per diluted share because their effects were anti-dilutive:
 

 
(In thousands)
Year ended
December 31,
2011
 
Year ended
December 31,
2010
 
Year ended
December 31,
2009
Denominator
         
Dilutive stock options and restricted common shares
4,106
 
4,408
 
3,916
Convertible note
67
 
67
 
67
Income Taxes (Tables)
Schedule of effective income tax rate reconciliation 
The difference between tax expense and the amount computed by applying the statutory federal income tax rate (35% for 2011 and 34% for 2010 and 2009) to income before income taxes is as follows:
 
(In thousands)
December 31,
2011
 
December 31,
2010
 
December 31,
2009
Statutory rate applied to pre-tax income (loss)
$11,206
 
$(4,017)
 
$(28,448)
Add (deduct):
         
Meals and entertainment
274
 
254
 
232
Stock options and restricted stock
278
 
(154)
 
2,064
State tax
325
 
(387)
 
(1,361)
Other
214
 
(163)
 
(233)
Increase (decrease) to valuation allowance (net)
(6,479)
 
6,627
 
27,746
Increase in statutory tax rate
(4,118)
 
-
 
-
Research and development credit
(287)
 
(2,160)
 
-
Income taxes
$1,413
 
$-
 
$-
Schedule of deferred tax assets and liabilities 
The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2011 and 2010 are presented below:
 
(In thousands)
December 31,
2011
 
December 31,
2010
Net operating loss carry-forwards
$74,774
 
$82,914
State NOL net of federal benefit
942
 
1,601
Research and development tax credit
4,025
 
3,738
Property and equipment
(532)
 
146
Intellectual property
7,399
 
2,608
Stock options and restricted stock
13,910
 
13,134
Deferred revenue
38,958
 
40,248
Revenue interest liability
1,504
 
1,939
Medtronic acquisition
1,110
 
-
NRI acquisition
760
 
795
Other temporary differences
4,746
 
6,703
 
147,596
 
153,826
Less valuation allowance
(147,596)
 
(153,826)
Net deferred tax assets
$-
 
$-
Commitments and Contingencies (Tables)
Future minimum commitments under all non-cancelable leases
Future minimum commitments under all non-cancelable leases required subsequent to December 31, 2011 are as follows:
 
(In thousands)
 
2012
$2,275
2013
3,443
2014
3,529
2015
3,617
2016
3,707
Later years
25,994
 
$42,565
Intangible Assets (Tables)
Schedule of intangible assets 
Intangible assets consisted of the following:
 
(In thousands)
December 31,
2011
 
December 31,
2010
 
Estimated
remaining
useful lives as of
December 31,
2011
Zanaflex Capsule patents
$19,350
 
$19,350
 
0 years
Zanaflex trade name
2,150
 
2,150
 
0 years
Ampyra milestones
5,750
 
3,250
 
15 years
CSRO royalty buyout
3,000
 
3,000
 
 8 years
Website development costs
4,028
 
2,975
 
0-3 years
Website development costs – in process
42
 
-
 
3 years
 
34,320
 
30,725
   
Less accumulated amortization
25,551
 
9,389
   
 
$8,769
 
$21,336
   
Schedule of future amortization expense for intangible assets 
Estimated future amortization expense for intangible assets subsequent to December 31, 2011 for the next five years is as follows:
 
(In thousands)
 
2012
$1,579
2013
1,136
2014
870
2015
588
2016
588
 
$4,761
Fair Value Measurements (Tables)
Assets and liabilities carried at fair value 
The following table presents information about the Company's assets and liabilities measured at fair value on a recurring basis as of December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.
 
(In thousands)
 
Level 1
 
Level 2
 
Level 3
2011
           
Assets Carried at Fair Value:
           
Cash equivalents
 
$38,340
 
$-
 
$-
Short-term investments
 
237,953
 
-
 
-
Liabilities Carried at Fair Value:
           
Put/call liability
 
-
 
-
 
1,030
2010
           
Assets Carried at Fair Value:
           
Cash equivalents
 
$23,529
 
$-
 
$-
Short-term investments
 
205,389
 
-
 
-
Liabilities Carried at Fair Value:
           
Put/call liability
 
-
 
-
 
391
Assets and liabilities measured at fair value on a recurring basis utilizing Level 3 inputs 
The following table presents 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.
 
(In thousands)
Balance as of
December 31,
2010
 
Realized loss
included
in net income
 
Unrealized
gains included
in other
comprehensive
income/loss
 
Balance as of
December 31,
2011
Liabilities Carried at Fair Value:
             
Put/call liability
$391
 
$639
 
$-
 
$1,030
Assets and/or liabilities measured at fair value on a recurring basis 
The table below presents non-financial assets that were measured and recorded at fair value on a nonrecurring basis and the total impairment losses recorded during 2011.  There were no non-financial assets that were measured and recorded at fair value on a non-recurring basis in 2010 or 2009.

(in thousands)
Net Carrying Value as of
 
Fair Value Measured and Recorded Using
 
Impairment Losses
December 31,
           
December 31,
2011
Level 1
 
Level 2
 
Level 3
 
2011
Zanaflex intangible asset (1)
$-
 
$-
 
$-
 
$-
 
$13,038
                   
Total impairment losses
               
$13,038

(1)  
$962,000 in intangible amortization recorded during the nine-month period ended September 30, 2011.
Quarterly Consolidated Financial Data (unaudited) (Tables)
Quarterly Consolidated Financial Data (unaudited)
(In thousands, except per share amounts)
2011
 
March 31
 
June 30
 
September 30
 
December 31
Total net revenues
$61,286
 
$65,276
 
$93,031
 
$72,644
Gross profit
49,236
 
53,228
 
66,380
 
59,210
Net income (loss)-basic and diluted
(672)
 
(285)
 
18,867
 
12,694
Net income (loss) per share-basic
$(0.02)
 
$(0.01)
 
$0. 48
 
$0.32
Net income (loss) per share-diluted
(0.02)
 
(0.01)
 
0.47
 
0.32
 

 
 
2010
 
March 31
 
June 30
 
September 30
 
December 31
Total net revenues
$17,747
 
$42,836
 
$63,622
 
$66,800
Gross profit
14,671
 
35,004
 
51,956
 
53,856
Net income (loss)-basic and diluted
(21,115)
 
(6,763)
 
12,437
 
3,671
Net income (loss) per share-basic
$(0.56)
 
$(0.18)
 
$0.32
 
$0.10
Net income (loss) per share-diluted
(0.56)
 
(0.18)
 
0.31
 
0.09
 
Summary of Significant Accounting Policies (Details)
12 Months Ended
Dec. 31, 2011
Summary of Significant Accounting Policies [Abstract]
 
Maximum time period for highly liquid investments to be considered cash equivalents (in months)
Three months 
Minimum time period for investments to be considered short term (in months)
Three months 
Property and Equipment, useful life, minimum
3 
Property and Equipment, useful life, maximum
5 
Threshold for tax position likely to be realized upon ultimate settlement, minimum (in hundredths)
50.00% 
Specialty pharmacy providers and Kaiser, contractually obligated maximum inventory holdings
30 days 
Returns policy for Ampyra, minimum compared to expiration date
Two months prior 
Returns policy for Ampyra, maximum compared to expiration date
Six months 
Company obligation to purchase yearly Ampyra supply from Alkermes, minimum (in hundredths)
75.00% 
Company obligation to purchase yearly Ampyra supply from Alkermes, maximum (in hundredths)
100.00% 
Company agreed terms with Elan on purchase of yearly Alkermes supply from Patheon, maximum (in hundredths)
25.00% 
Supply agreement for Zanafllex capsules with Elan, terms
Two automatic two-year renewal terms 
Zanaflex Capsules supply agreement termination terms, minimum period before expiration of initial term or renewal term (in months)
12M 
Force majeure event, minimum period (in months)
Three months 
Number of businesses in operation
1 
Short-Term Investments (Details) (USD $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Schedule of Trading Securities and Other Trading Assets [Line Items]
 
 
Available for sale securities, debt maturity, date range, low
Three months 
 
US Treasury bonds [Member]
 
 
Schedule of Trading Securities and Other Trading Assets [Line Items]
 
 
Amortized cost
$ 237,887,000 
$ 205,401,000 
Gross unrealized gains
72,000 
6,000 
Gross unrealized losses
(6,000)
(18,000)
Estimated fair value
237,953,000 
205,389,000 
Available for sale securities, debt maturity, date range, low
3M 
 
Available for sale securities, debt maturity, date range, high
1Y 
 
Short-term investments with maturity of three months or less from date of purchase classified as cash and cash equivalents
$ 38,300,000 
$ 23,500,000 
Property and Equipment (Details) (USD $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Property, Plant and Equipment [Line Items]
 
 
Cost
$ 13,486,000 
$ 11,309,000 
Less accumulated depreciation
(9,628,000)
(8,106,000)
Property and equipment, net of accumulated depreciation
3,858,000 
3,203,000 
Depreciation and amortization expense on property and equipment
1,500,000 
1,100,000 
Leasehold improvements [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Cost
3,240,000 1
3,178,000 1
Estimated useful lives used
Remaining lease term 1
 
Computer equipment [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Cost
5,859,000 
4,699,000 
Estimated useful lives used
3 years 
 
Laboratory equipment [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Cost
2,534,000 
2,223,000 
Estimated useful lives used
5 years 
 
Furniture and fixtures [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Cost
760,000 
760,000 
Estimated useful lives used
5 years 
 
Capital in Progress [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Cost
$ 1,093,000 
$ 449,000 
Estimated useful lives used
3 years 
 
Accrued Expenses and Other Current Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Accrued Expenses and Other Current Liabilities [Abstract]
 
 
Bonus payable
$ 4,725 
$ 4,291 
Ampyra and Zanaflex discount and allowances accruals
4,680 
4,426 
Ampyra milestone
2,500 
0 
Accrued inventory
2,464 
9,665 
Royalties payable
1,977 
2,066 
Sales force commissions and incentive payments payable
1,893 
6,717 
Commercial and marketing expense accruals
1,811 
721 
Vacation accrual
1,171 
1,220 
Legal accruals
898 
1,024 
Research and development expense accruals
640 
1,880 
Other accrued expenses
1,390 
1,759 
Total accrued expenses and other current liabilities
$ 24,149 
$ 33,769 
Common Stock Options and Restricted Stock (Details) (USD $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Weighted average exercise price (in dollars per share)
$ 23.62 
 
 
Share based compensation expense
$ 19,303,000 
$ 17,777,000 
$ 12,278,000 
Stock Option Activity [Abstract]
 
 
 
Weighted average exercise price, exercised options (dollars per share)
$ 23.62 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Share based compensation expense
13,675,000 
12,464,000 
9,690,000 
Options Outstanding [Abstract]
 
 
 
Outstanding ending balance (in shares)
4,793 
 
 
Weighted- average remaining contractual life (in years)
6.73 
 
 
Weighted- average exercise price (in dollars per share)
$ 21.31 
 
 
Options Exercisable [Abstract]
 
 
 
Exercisable ending balance (in shares)
2,987 
 
 
Weighted- average exercise price In dollars per share)
$ 18.45 
 
 
2.45-16.88 [Member]
 
 
 
Range of Exercise Price [Abstract]
 
 
 
Stock option, exercise price range, lower limit (in dollars per share)
$ 2.45 
 
 
Stock option, exercise price range, upper limit (in dollars per share)
$ 16.88 
 
 
Options Outstanding [Abstract]
 
 
 
Outstanding ending balance (in shares)
1,064 
 
 
Weighted- average remaining contractual life (in years)
3.42 
 
 
Weighted- average exercise price (in dollars per share)
$ 7.45 
 
 
Options Exercisable [Abstract]
 
 
 
Exercisable ending balance (in shares)
1,064 
 
 
Weighted- average exercise price In dollars per share)
$ 7.45 
 
 
31.71-37.48 [Member]
 
 
 
Range of Exercise Price [Abstract]
 
 
 
Stock option, exercise price range, lower limit (in dollars per share)
$ 31.71 
 
 
Stock option, exercise price range, upper limit (in dollars per share)
$ 37.48 
 
 
Options Outstanding [Abstract]
 
 
 
Outstanding ending balance (in shares)
693 
 
 
Weighted- average remaining contractual life (in years)
8.23 
 
 
Weighted- average exercise price (in dollars per share)
$ 33.80 
 
 
Options Exercisable [Abstract]
 
 
 
Exercisable ending balance (in shares)
285 
 
 
Weighted- average exercise price In dollars per share)
$ 33.89 
 
 
17.52-21.52 [Member]
 
 
 
Range of Exercise Price [Abstract]
 
 
 
Stock option, exercise price range, lower limit (in dollars per share)
$ 17.52 
 
 
Stock option, exercise price range, upper limit (in dollars per share)
$ 21.52 
 
 
Options Outstanding [Abstract]
 
 
 
Outstanding ending balance (in shares)
1,008 
 
 
Weighted- average remaining contractual life (in years)
6.49 
 
 
Weighted- average exercise price (in dollars per share)
$ 20.17 
 
 
Options Exercisable [Abstract]
 
 
 
Exercisable ending balance (in shares)
737 
 
 
Weighted- average exercise price In dollars per share)
$ 19.97 
 
 
21.61-22.13 [Member]
 
 
 
Range of Exercise Price [Abstract]
 
 
 
Stock option, exercise price range, lower limit (in dollars per share)
$ 21.61 
 
 
Stock option, exercise price range, upper limit (in dollars per share)
$ 22.13 
 
 
Options Outstanding [Abstract]
 
 
 
Outstanding ending balance (in shares)
1,062 
 
 
Weighted- average remaining contractual life (in years)
8.11 
 
 
Weighted- average exercise price (in dollars per share)
$ 22.07 
 
 
Options Exercisable [Abstract]
 
 
 
Exercisable ending balance (in shares)
418 
 
 
Weighted- average exercise price In dollars per share)
$ 22.09 
 
 
22.24-31.67 [Member]
 
 
 
Range of Exercise Price [Abstract]
 
 
 
Stock option, exercise price range, lower limit (in dollars per share)
$ 22.24 
 
 
Stock option, exercise price range, upper limit (in dollars per share)
$ 31.67 
 
 
Options Outstanding [Abstract]
 
 
 
Outstanding ending balance (in shares)
966 
 
 
Weighted- average remaining contractual life (in years)
8.01 
 
 
Weighted- average exercise price (in dollars per share)
$ 28.00 
 
 
Options Exercisable [Abstract]
 
 
 
Exercisable ending balance (in shares)
483 
 
 
Weighted- average exercise price In dollars per share)
$ 28.07 
 
 
Research and development [Member]
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Share based compensation expense
5,801,000 
5,247,000 
3,662,000 
Selling, General and Administrative [Member]
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Share based compensation expense
13,502,000 
12,530,000 
8,616,000 
Stock Options [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Estimated volatility (in hundredths)
62.80% 
66.31% 
75.96% 
Expected life in years
5.47 
5.50 
5.56 
Risk free interest rate (in hundredths)
2.23% 
2.57% 
2.15% 
Dividend yield (in hundredths)
0.00% 
0.00% 
0.00% 
Number of stock options vested immediately (in shares)
1,000 
 
 
Number of stock options vesting over one-year vesting schedule (in shares)
85,000 
 
 
Number of stock options vesting over four-year vesting schedule (in shares)
1,152,930 
 
 
Weighted average exercise price (in dollars per share)
$ 12.06 
$ 13.00 
$ 13.15 
Stock options vesting period, trench 1
One-year vesting schedule 
 
 
Stock options vesting period, trench 2
Four-year vesting schedule 
 
 
Stock Option Activity [Abstract]
 
 
 
Number of shares, beginning balance (in shares)
4,084,000 
3,712,000 
3,284,000 
Number of shares, granted (in shares)
1,239,000 
1,136,000 
826,000 
Number of shares, forfeited and expired (in shares)
(201,000)
(116,000)
(205,000)
Number of shares, exercised (in shares)
(329,000)
(648,000)
(193,000)
Number of shares, ending balance (in shares)
4,793,000 
4,084,000 
3,712,000 
Number of shares, vested and expected to vest at end of period (in shares)
4,713,000 
 
 
Number of shares, vested and exercisable at end of period (in shares)
2,987,000 
 
 
Weighted average exercise price, beginning of period (in dollars per shares)
$ 20.13 
$ 15.25 
$ 13.55 
Weighted average exercise price, granted options (dollars per share)
$ 23.52 
$ 32.49 
$ 21.97 
Weighted average exercise price, forfeited and expired options (dollars per share)
$ 25.97 
$ 25.09 
$ 16.94 
Weighted average exercise price, exercised options (dollars per share)
$ 12.06 
$ 13.00 
$ 13.15 
Weighted average exercise price, end of period (dollars per share)
$ 21.31 
$ 20.13 
$ 15.25 
Weighted average exercise price, vested and expected to vest at end of period (dollars per share)
$ 21.25 
 
 
Weighted average exercise price, vested and exercisable at end of period (dollars per share)
$ 18.45 
 
 
Weighted average remaining contractual term, balance at end of period (in years)
6.7 
 
 
Weighted average remaining contractual term, vested and expected at end of period (in years)
6.7 
 
 
Weighted average remaining contractual term, vested and exercisable at end of period (in years)
5.6 
 
 
Intrinsic value, end of period
23,129,000 
 
 
Intrinsic value vested and expected to vest at end of period
23,032,000 
 
 
Intrinsic value vested and exercisable at end of period
21,043,000 
 
 
1999 Employee Stock Option Plan
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Number of shares authorized for issuance (in shares)
2,481,334 
 
 
Restricted Stock [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Restricted stock vesting over three-year vesting schedule (in shares)
25,000 
 
 
Restricted stock vesting over four-year vesting schedule (in shares)
276,620 
 
 
Restricted stock vesting period, trench 1
Three-year vesting schedule 
 
 
Restricted stock vesting period, trench 2
Four-year vesting schedule 
 
 
Stock Option Activity [Abstract]
 
 
 
Nonvested at beginning of period (in shares)
324,000 
204,000 
150,000 
Granted (in shares)
302,000 
334,000 
208,000 
Vested (in shares)
(221,000)
(196,000)
(128,000)
Forfeited (in shares)
(28,000)
(18,000)
(26,000)
Nonvested at end of period (in shares)
377,000 
324,000 
204,000 
2006 Employee Incentive Plan
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Number of shares authorized for issuance (in shares)
8,366,663 
 
 
Annual automatic increase in common stock available for issuance (in hundredths)
4.00% 
 
 
Board approval of automatic increases in common stock available for issuance (in hundredths)
4.00% 
4.00% 
4.00% 
Basis for calculating expected life used to estimate fair value of employee options
50th percentile of 10 peer companies' 
 
 
Stock options and restricted stock awards granted during period (in shares)
1,540,550 
 
 
Stock Options and Restricted Stock Awards [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Total share based compensation charge to be recognized over the service period
20,500,000 
 
 
Share based compensation charge recognized during the period
5,100,000 
 
 
Share based compensation expense
19,300,000 
17,800,000 
12,300,000 
Stock Option Activity [Abstract]
 
 
 
Weighted average period to recognize unrecognized compensation costs (in years)
2.4 
 
 
Total unrecognized compensation costs related to unvested options and restricted stock awards that the Company expects to recognize
$ 32,100,000 
 
 
Employees and Directors [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Weighted average fair value options granted (in dollars per share)
$ 13.02 
$ 19.29 
$ 14.33 
Earnings Per Share (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Earnings Per Share [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
$ 12,694 
$ 18,867 
$ (285)
$ (672)
$ 3,671 
$ 12,437 
$ (6,763)
$ (21,115)
$ 30,605 
$ (11,769)
$ (83,940)
Weighted average common shares outstanding used in computing net income (loss) per share-basic (in shares)
 
 
 
 
 
 
 
 
39,000,000 
38,355,000 
37,735,000 
Plus: net effect of dilutive stock options and restricted common shares (in shares)
 
 
 
 
 
 
 
 
1,064,000 
0 
0 
Weighted average common shares outstanding used in computing net income (loss) per share-diluted (in shares)
 
 
 
 
 
 
 
 
40,064,000 
38,355,000 
37,735,000 
Net income (loss) per share-basic (in dollars per share)
$ 0.32 
$ 0.48 
$ (0.01)
$ (0.02)
$ 0.10 
$ 0.32 
$ (0.18)
$ (0.56)
$ 0.78 
$ (0.31)
$ (2.22)
Net income (loss) per share-diluted (in dollars per share)
$ 0.32 
$ 0.47 
$ (0.01)
$ (0.02)
$ 0.09 
$ 0.31 
$ (0.18)
$ (0.56)
$ 0.76 
$ (0.31)
$ (2.22)
Stock options and restricted common shares [Member]
 
 
 
 
 
 
 
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Antidilutive securities excluded from computation of earnings per share
 
 
 
 
 
 
 
 
4,106 
4,408 
3,916 
Convertible note [Member]
 
 
 
 
 
 
 
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Antidilutive securities excluded from computation of earnings per share
 
 
 
 
 
 
 
 
67 
67 
67 
Income Taxes (Details) (USD $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Tax Credit Carryforward [Line Items]
 
 
 
Statutory rate applied to pre-tax income (loss)
$ 11,206,000 
$ (4,017,000)
$ (28,448,000)
Add (deduct):
 
 
 
Meals and entertainment
274,000 
254,000 
232,000 
Stock options and restricted stock
278,000 
(154,000)
2,064,000 
State tax
325,000 
(387,000)
(1,361,000)
Other
214,000 
(163,000)
(233,000)
Increase (decrease) to valuation allowance (net)
(6,479,000)
6,627,000 
27,746,000 
Increase in statutory tax rate
(4,118,000)
0 
0 
Research and development credit
(287,000)
(2,160,000)
0 
Income taxes
1,413,000 
0 
0 
Statutory federal income tax rate
35.00% 
34.00% 
 
Net operating loss carry-forwards
74,774,000 
82,914,000 
 
State NOL net of federal benefit
942,000 
1,601,000 
 
Research and development tax credit
4,025,000 
3,738,000 
 
Property and equipment
(532,000)
146,000 
 
Intellectual property
7,399,000 
2,608,000 
 
Stock options and restricted stock
13,910,000 
13,134,000 
 
Deferred revenue
38,958,000 
40,248,000 
 
Revenue interest liability
1,504,000 
1,939,000 
 
Medtronic acquisition
1,110,000 
0 
 
NRI acquisition
760,000 
795,000 
 
Other temporary differences
4,746,000 
6,703,000 
 
Deferred Tax Assets Total
147,596,000 
153,826,000 
 
Less valuation allowance
(147,596,000)
(153,826,000)
 
Net deferred tax assets
0 
0 
 
Changes in the valuation allowance
6,200,000 
6,600,000 
 
Tax benefit associated with the exercise of stock options
 
5,900,000 
 
Research [Member]
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
Operating Loss Carryforwards, Total
4,000,000 
3,700,000 
 
Alternative Minimum Tax [Member]
 
 
 
Tax Credit Carryforward [Line Items]
 
 
 
Alternative Minimum Tax credit carry-forwards
1,100,000 
200,000 
 
Domestic Country [Member]
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
Operating Loss Carryforwards, Total
230,400,000 
266,900,000 
 
Period during which federal and state losses or gains are expected to expire
expire between 2022 and 2030 
 
 
State and Local Jurisdiction [Member]
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
Operating Loss Carryforwards, Total
$ 205,900,000 
$ 261,000,000 
 
Period during which federal and state losses or gains are expected to expire
expire between 2012 and 2030 
 
 
License and Research and Collaboration Agreements (Details) (USD $)
12 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2011
Alkermes interest bearing note [Member]
Dec. 31, 2011
Alkermes non interest bearing note [Member]
Dec. 31, 2011
Alkermes aggregate notes [Member]
Dec. 23, 2005
Alkermes aggregate notes [Member]
Sep. 30, 2003
Alkermes aggregate notes [Member]
Dec. 31, 2011
loc_Elan Supply and Manufacturing Commitment [Member]
Dec. 31, 2011
Biogen Idec International Gmbh License Agreement [Member]
Dec. 31, 2010
Biogen Idec International Gmbh License Agreement [Member]
Dec. 31, 2009
Biogen Idec International Gmbh License Agreement [Member]
Dec. 31, 2011
Patheon Inc Second Manufacturing agreement [Member]
Dec. 31, 2011
Alkermes License Agreement [Member]
Commitment and Contingencies [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Elan license termination period
 
 
 
 
 
 
 
 
 
 
 
fifteen years 
Supply Agreement [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
Company obligation to purchase yearly Ampyra supply from Alkermes, minimum (in hundredths)
75.00% 
 
 
 
 
 
75.00% 
 
 
 
 
 
Company obligation to purchase yearly Ampyra supply from Alkermes, maximum (in hundredths)
100.00% 
 
 
 
 
 
100.00% 
 
 
 
 
 
Company agreed terms with Alkermes on purchase of yearly Ampyra supply from Patheon, maximum (in hundredths)
25.00% 
 
 
 
 
 
 
 
 
 
25.00% 
 
Deferred license revenue
 
 
 
 
 
 
 
$ 110,000,000 
$ 110,000,000 
 
 
 
Payment made to third party for cost of license
 
 
 
 
 
 
 
7,700,000 
7,700,000 
 
 
 
Recognized license revenue
 
 
 
 
 
 
 
9,100,000 
9,400,000 
 
 
 
Cost of license revenue
 
 
 
 
 
 
 
634,000 
660,000 
 
 
 
Current estimate of license revenue recognition period (in years)
 
 
 
 
 
 
 
12Y 
12Y 
 
 
 
Milestone payment due upon approval of the product in the European Union
 
 
 
 
 
 
 
25,000,000 
 
 
 
 
Additional payments based on the successful achievement of future regulatory milestones
 
 
 
 
 
 
 
10,000,000 
 
 
 
 
Contingent receivable based on the successful achievement of future sales milestones
 
 
 
 
 
 
 
365,000,000 
 
 
 
 
Percent portion of milestone payment from Acorda to Alkermes (in hundredths)
7.00% 
 
 
 
 
 
 
 
 
 
 
 
Milestone payment from Acorda to Alkermes
1,800,000 
 
 
 
 
 
 
 
 
 
 
 
Entitlement of additional payments based on the successful achievement of future regulatory and sales milestones
25,000,000 
 
 
 
 
 
 
 
 
365,000,000 
 
 
Payment received on deferred license collaboration agreement
 
 
 
 
 
 
 
 
110,000,000 
 
 
 
Convertible Note [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
Convertible promissory notes
 
$ 5,000,000 
$ 2,500,000 
$ 7,500,000 
 
$ 7,500,000 
 
 
 
 
 
 
Percentage Rate (in hundredths)
 
3.00% 
 
 
3.00% 
 
 
 
 
 
 
 
Number of shares of common stock note can be converted into (in shares)
 
67,476 
 
 
 
 
 
 
 
 
 
 
Converted Principal into shares of common stock (in shares)
 
 
210,863 
 
 
 
 
 
 
 
 
 
Debt instrument payment terms
 
Ratably over a seven-year period. 
 
 
 
 
 
 
 
 
 
 
Debt payment installments
 
Six successive anniversaries of the maturity date. 
 
 
 
 
 
 
 
 
 
 
Early prepayment written notice term
 
Thirty days prior notice to the date of prepayment 
 
 
 
 
 
 
 
 
 
 
Employee Benefit Plan (Details) (401 (k) Plan [Member], USD $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
401 (k) Plan [Member]
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
Maximum percentage of employee earnings eligible for additional company contribution (in hundredths)
6.00% 
 
 
Additional company contribution for each dollar of employee contribution
0.50 
 
 
Company expense related to the defined contribution plan
$ 1,100,000 
$ 1,000,000 
$ 757,000 
Commitments and Contingencies (Details) (USD $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Jun. 30, 2011
Commitments and Contingencies [Abstract]
 
 
 
 
2012
 
 
 
$ 2,275,000 
2013
 
 
 
3,443,000 
2014
 
 
 
3,529,000 
2015
 
 
 
3,617,000 
2016
 
 
 
3,707,000 
Later years
 
 
 
25,994,000 
Total rent payments
 
 
 
42,565,000 
Rent expense under operating leases
1,100,000 
1,100,000 
1,000,000 
 
Commitment and Contingencies [Line Items]
 
 
 
 
Written forecasts for supply requirements and agreements
 
18-month 
 
 
Lease Term (in years)
15Y 
 
 
 
Total approximate rented space (in square feet)
138,000 
 
 
 
Lease options duration (in years)
5Y 
 
 
 
Termination option period (in years)
10Y 
 
 
 
Additional lease option rights (in square feet)
120,000 
 
 
 
Base rent
3,400,000 
 
 
 
Annual rent increase percentage (in hundredths)
2.50% 
 
 
 
Chief Executive Officer [Member]
 
 
 
 
Commitment and Contingencies [Line Items]
 
 
 
 
Early termination base salary
 
24 month 
 
 
Severance calculation denominator used in employment agreement termination
 
365 
 
 
Chief Scientific Officer [Member]
 
 
 
 
Commitment and Contingencies [Line Items]
 
 
 
 
Early termination base salary
 
twelve month 
 
 
Severance calculation denominator used in employment agreement termination
 
365 
 
 
Chief Medical Officer [Member]
 
 
 
 
Commitment and Contingencies [Line Items]
 
 
 
 
Early termination base salary
 
24 month 
 
 
Severance calculation denominator used in employment agreement termination
 
365 
 
 
Ampyra supply requirements [Member]
 
 
 
 
Commitment and Contingencies [Line Items]
 
 
 
 
Written forecasts for supply requirements and agreements
 
five-year 
 
 
Time period after submission of forecast the company is obligated to purchase product per the forecast
 
three months 
 
 
Zanaflex supply requirements [Member]
 
 
 
 
Commitment and Contingencies [Line Items]
 
 
 
 
Written forecasts for supply requirements and agreements
 
two-year 
 
 
Time period after submission of forecast the company is obligated to purchase product per the forecast
 
five months 
 
 
Alkermes License Agreement [Member]
 
 
 
 
Commitment and Contingencies [Line Items]
 
 
 
 
Milestone payments obligation
 
15,000,000 
 
 
Milestone payment triggered by FDA approval
 
$ 2,500,000 
 
 
Intangible Assets (Details) (USD $)
3 Months Ended 12 Months Ended
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Aug. 28, 2004
Zanaflex tablets and capsules [Abstract]
 
 
 
 
 
Zanaflex Capsules and Zanaflex tablets sales, marketing and distribution rights acquired
 
 
 
 
$ 2,000,000 
Zanaflex Capsules and Zanaflex tablets finished goods inventory acquired
 
 
 
 
675,000 
Zanaflex Capsules and Zanaflex tablets contingent milestone payments
19,500,000 
 
 
 
 
Milestone payments made to future contingent milestone payments related to revenues of Zanaflex Capsules and Zanaflex tablets
 
 
 
19,500,000 
 
Ampyra [Abstract]
 
 
 
 
 
Number of patents acquired related Zanaflex Capsules
 
 
1 
 
 
Number of milestone payments for Ampyra
 
 
2 
 
 
Number of patent applications acquired related to Zanaflex Capsules
 
 
2 
 
 
Ampyra milestone payment to Elan
2,500,000 
 
 
 
 
Ampyra milestone payment to Rush-Presbyterian St. Luke's Medical Center
750,000 
 
 
 
 
Total amount of Ampyra milestone payments made
3,250,000 
 
 
 
 
Milestone payments to be paid for Dalfampridine
 
 
850,000 
 
 
Aggregate milestone payments made to Rush under agreement
 
 
 
850,000 
 
Total accrued Ampyra royalty payments
 
 
6,900,000 
 
 
Canadian Spinal Research Organization (CSRO) [Abstract]
 
 
 
 
 
Amount paid to purchase CSRO's rights to royalty payments
3,000,000 
 
 
 
 
Amortization expense
 
16,200,000 
2,800,000 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Intangible asset amount
 
34,320,000 
30,725,000 
 
 
Accumulated amortization
 
25,551,000 
9,389,000 
 
 
Intangible assets, net of accumulated amortization
 
8,769,000 
21,336,000 
 
 
Estimated Future Amortization Expense [Abstract]
 
 
 
 
 
2012
 
1,579,000 
 
 
 
2013
 
1,136,000 
 
 
 
2014
 
870,000 
 
 
 
2015
 
588,000 
 
 
 
2016
 
588,000 
 
 
 
Total
 
4,761,000 
 
 
 
Impairment charge
 
13,038,000 
0 
0 
 
Zanaflex Capsule patents [Member]
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Intangible asset amount
 
19,350,000 
19,350,000 
 
 
Estimated remaining useful lives (in years)
 
0 
 
 
 
Zanaflex trade name [Member]
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Intangible asset amount
 
2,150,000 
2,150,000 
 
 
Estimated remaining useful lives (in years)
 
0 
 
 
 
Ampyra milestones [Member]
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Intangible asset amount
 
5,750,000 
3,250,000 
 
 
Estimated remaining useful lives (in years)
 
15 
 
 
 
CSRO royalty buyout [Member]
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Intangible asset amount
 
3,000,000 
3,000,000 
 
 
Estimated remaining useful lives (in years)
 
8 
 
 
 
Website development costs [Member]
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Intangible asset amount
 
4,028,000 
2,975,000 
 
 
Estimated remaining useful lives (in years) minimum
 
0 
 
 
 
Estimated remaining useful lives (in years) maximum
 
3 
 
 
 
Website development costs - in process [Member]
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Intangible asset amount
 
$ 42,000 
$ 0 
 
 
Estimated remaining useful lives (in years) maximum
 
3 
 
 
 
Debt (Details) (USD $)
1 Months Ended 12 Months Ended 1 Months Ended
Nov. 30, 2006
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2005
Dec. 31, 2006
Sep. 30, 2003
Alkermes aggregate notes [Member]
Dec. 31, 2011
Alkermes aggregate notes [Member]
Dec. 23, 2005
Alkermes aggregate notes [Member]
Dec. 31, 2011
Alkermes interest bearing note [Member]
Dec. 23, 2005
Alkermes interest bearing note [Member]
Convertible Note [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Number of prior license and supply agreements
 
 
 
 
 
 
2 
 
 
 
 
Loan from third party
 
 
 
 
 
 
$ 7,500,000 
$ 7,500,000 
 
$ 5,000,000 
 
Number of convertible promissory notes
 
 
 
 
 
 
2 
 
 
 
 
Number of promissory notes outstanding
 
 
 
 
 
 
 
 
1 
 
 
Amount of promissory note outstanding
 
 
 
 
 
 
 
 
 
 
5,000,000 
Interest rate (in hundredths)
 
 
 
 
 
 
 
 
3.00% 
3.00% 
 
Sale of Revenue Interest [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Amount of cash received from assignment of revenue interest
5,000,000 
 
5,000,000 
5,000,000 
15,000,000 
 
 
 
 
 
 
Additional amount due if certain milestones are met
5,000,000 
 
 
 
 
 
 
 
 
 
 
Threshold of interest revenue for additional milestone payments
 
 
 
 
 
25,000,000 
 
 
 
 
 
Amount of third party net revenues threshold (maximum)
 
 
30,000,000 
 
 
 
 
 
 
 
 
Related royalty rate for $30 million threshold (maximum) (in hundredths)
 
 
15.00% 
 
 
 
 
 
 
 
 
Amount of third party net revenues threshold 2 (minimum)
 
 
30,000,000 
 
 
 
 
 
 
 
 
Amount of third party net revenues threshold 2 (maximum)
 
 
60,000,000 
 
 
 
 
 
 
 
 
Related royalty rate for $30 to $60 million threshold (maximum) (in hundredths)
 
 
6.00% 
 
 
 
 
 
 
 
 
Amount of third party net revenues threshold 3 (minimum)
 
 
60,000,000 
 
 
 
 
 
 
 
 
Related royalty rate for $60 million threshold (minimum) (in hundredths)
 
 
1.00% 
 
 
 
 
 
 
 
 
Number of times the third party has to be paid to receive a 1 percent royalty
 
 
2.1 
 
 
 
 
 
 
 
 
Maximum percentage PRF will be entitled to once it has received and retained payments of 2.1 times under the agreement ( in hundredths)
 
 
1.00% 
 
 
 
 
 
 
 
 
Percentage of cash payments received from wholesalers (in hundredths)
 
 
8.00% 
 
 
 
 
 
 
 
 
Imputed interest rate (in hundredths)
 
 
5.70% 
 
 
 
 
 
 
 
 
Interest expense
 
3,400,000 
3,800,000 
4,200,000 
 
 
 
 
 
 
 
Cumulative payments made as a result of sales levels and milestones reached
 
43,300,000 
 
 
 
 
 
 
 
 
 
Number of days allowed to exercise the call option (in days)
 
 
180D 
 
 
 
 
 
 
 
 
Terms of the put/call agreement
 
 
(The put/call price on a given date is the greater of i 150 of all payments made by PRF as of such date, less all payments received by PRF as of such date, and ii an amount that would generate an internal rate of return to PRF of 25 on all payments made by PRF as of such date,) 
 
 
 
 
 
 
 
 
Net liability related to the put/call option to reflect its current estimated fair value
 
1,000,000 
 
 
 
 
 
 
 
 
 
Loss recorded as a result of the change in the fair value of the net put/call liability balance
 
$ 639,000 
 
 
 
 
 
 
 
 
 
Fair Value Measurements (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2011
Put/call [Member]
Dec. 31, 2011
Fair Value, Inputs, Level 1 [Member]
Fair Value, Measurements, Recurring [Member]
Dec. 31, 2010
Fair Value, Inputs, Level 1 [Member]
Fair Value, Measurements, Recurring [Member]
Dec. 31, 2011
Fair Value, Inputs, Level 2 [Member]
Fair Value, Measurements, Recurring [Member]
Dec. 31, 2010
Fair Value, Inputs, Level 2 [Member]
Fair Value, Measurements, Recurring [Member]
Dec. 31, 2011
Fair Value, Inputs, Level 3 [Member]
Fair Value, Measurements, Recurring [Member]
Dec. 31, 2010
Fair Value, Inputs, Level 3 [Member]
Fair Value, Measurements, Recurring [Member]
Assets Carried at Fair Value [Abstract]
 
 
 
 
 
 
 
 
Cash equivalents
 
 
$ 38,340 
$ 23,529 
$ 0 
$ 0 
$ 0 
$ 0 
Short-term investments
 
 
237,953 
205,389 
0 
0 
0 
0 
Liabilities Carried at Fair Value [Abstract]
 
 
 
 
 
 
 
 
Put/call liability
 
 
0 
0 
0 
0 
1,030 
391 
Liabilities carried at fair value [Roll forward]
 
 
 
 
 
 
 
 
Beginning balance
 
391 
 
 
 
 
 
 
Realized gains (losses) included in net loss
 
639 
 
 
 
 
 
 
Unrealized gains (losses) included in other comprehensive loss
 
0 
 
 
 
 
 
 
Ending balance
 
1,030 
 
 
 
 
 
 
Total impairment losses
$ 13,038 
 
 
 
 
 
 
 
Subsequent Events (Details) (USD $)
1 Months Ended
Feb. 29, 2012
Feb. 15, 2012
Subsequent Events [Abstract]
 
 
Date of merger agreement with Neuronex, Inc
2012-02-15 
 
Upfront payment
 
$ 2,000,000 
Research funding
 
500,000 
Expected research cost, maximum
 
1,200,000 
Expected total payments to Neuronex
 
1,000,000 
Expected payments to Neuronex following regulatory approvals
 
25,000,000 
Complete the acquisition by paying an additional
 
$ 6,800,000 
Quarterly Consolidated Financial Data (unaudited) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Quarterly Consolidated Financial Data (unaudited) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Net revenue
$ 72,644 
$ 93,031 
$ 65,276 
$ 61,286 
$ 66,800 
$ 63,622 
$ 42,836 
$ 17,747 
$ 256,271 
$ 181,545 
$ 49,959 
Gross profit
59,210 
66,380 
53,228 
49,236 
53,856 
51,956 
35,004 
14,671 
 
 
 
Net income (loss)-basic and diluted
$ 12,694 
$ 18,867 
$ (285)
$ (672)
$ 3,671 
$ 12,437 
$ (6,763)
$ (21,115)
$ 30,605 
$ (11,769)
$ (83,940)
Net income (loss) per share -basic (in dollars per share)
$ 0.32 
$ 0.48 
$ (0.01)
$ (0.02)
$ 0.10 
$ 0.32 
$ (0.18)
$ (0.56)
$ 0.78 
$ (0.31)
$ (2.22)
Net income (loss) per share-diluted (in dollars per share)
$ 0.32 
$ 0.47 
$ (0.01)
$ (0.02)
$ 0.09 
$ 0.31 
$ (0.18)
$ (0.56)
$ 0.76 
$ (0.31)
$ (2.22)