ACORDA THERAPEUTICS INC, 10-Q filed on 5/9/2012
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2012
Apr. 30, 2012
Document and Entity Information
 
 
Entity Registrant Name
ACORDA THERAPEUTICS INC 
 
Entity Central Index Key
0001008848 
 
Document Type
10-Q 
 
Document Period End Date
Mar. 31, 2012 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--12-31 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
40,096,193 
Document Fiscal Year Focus
2012 
 
Document Fiscal Period Focus
Q1 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
Current assets:
 
 
Cash and cash equivalents
$ 55,300 
$ 57,954 
Restricted cash
303 
303 
Short-term investments
222,945 
237,953 
Trade accounts receivable, net of allowances of $909 and $879, as of March 31, 2012 and December 31, 2011, respectively
21,526 
22,828 
Prepaid expenses
8,201 
6,534 
Finished goods inventory held by the Company
27,614 
27,256 
Finished goods inventory held by others
1,045 
1,126 
Other current assets
10,780 
6,988 
Total current assets
347,714 
360,942 
Long-term investments
17,046 
 
Property and equipment, net of accumulated depreciation
6,521 
3,858 
Intangible assets, net of accumulated amortization
8,950 
8,769 
Non-current portion of deferred cost of license revenue
5,283 
5,442 
Other assets
538 
477 
Total assets
386,052 
379,488 
Current liabilities:
 
 
Accounts payable
20,010 
21,393 
Accrued expenses and other current liabilities
20,487 
24,149 
Deferred product revenue-Zanaflex tablets
9,959 
9,967 
Deferred product revenue-Zanaflex Capsules
20,196 
20,632 
Current portion of deferred license revenue
9,057 
9,057 
Current portion of revenue interest liability
1,204 
1,001 
Current portion of convertible notes payable
1,144 
1,144 
Total current liabilities
82,057 
87,343 
Non-current portion of deferred license revenue
75,478 
77,742 
Put/call liability
495 
1,030 
Non-current portion of revenue interest liability
1,908 
1,898 
Non-current portion of convertible notes payable
4,126 
5,230 
Other non-current liabilities
2,894 
1,036 
Commitments and contingencies
   
   
Stockholders' equity:
 
 
Common stock, $0.001 par value. Authorized 80,000,000 shares at March 31, 2012 and December 31, 2011; issued and outstanding 39,422,865 and 39,328,495 shares, including those held in treasury, as of March 31, 2012 and December 31, 2011, respectively
39 
39 
Treasury stock at cost (12,420 shares at March 31, 2012 and December 31, 2011)
(329)
(329)
Additional paid-in capital
621,053 
614,914 
Accumulated deficit
(401,635)
(409,481)
Accumulated other comprehensive income (loss)
(34)
66 
Total stockholders' equity
219,094 
205,209 
Total liabilities and stockholders' equity
$ 386,052 
$ 379,488 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
Consolidated Balance Sheets
 
 
Trade accounts receivable, allowances (in dollars)
$ 909 
$ 879 
Common stock, par value (in dollars per share)
$ 0.001 
$ 0.001 
Common stock, Authorized shares
80,000,000 
80,000,000 
Common stock, issued shares
39,422,865 
39,328,495 
Common stock, outstanding shares
39,422,865 
39,328,495 
Treasury stock at cost
12,420 
12,420 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Revenues:
 
 
Net product revenues
$ 65,673 
$ 58,925 
License revenue
2,265 
2,265 
Royalty revenues
3,310 
96 
Total net revenues
71,248 
61,286 
Costs and expenses:
 
 
Cost of sales
12,464 
12,050 
Cost of license revenue
159 
159 
Research and development
11,025 
10,708 
Selling, general and administrative
38,745 
37,928 
Total operating expenses
62,393 
60,845 
Operating income
8,855 
441 
Other expense (net):
 
 
Interest and amortization of debt discount expense
(766)
(1,136)
Interest income
129 
140 
Total other expense (net)
(637)
(996)
Income (loss) before taxes
8,218 
(555)
Provision for income taxes
(372)
(117)
Net income (loss)
$ 7,846 
$ (672)
Net income (loss) per share-basic (in dollars per share)
$ 0.20 
$ (0.02)
Net income (loss) per share-diluted (in dollars per share)
$ 0.19 
$ (0.02)
Weighted average common shares outstanding used in computing net income (loss) per share-basic (in shares)
39,340 
38,781 
Weighted average common shares outstanding used in computing net income (loss) per share-diluted (in shares)
40,407 
38,781 
Consolidated Statements of Comprehensive Income (Loss) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Net income (loss)
$ 7,846 
$ (672)
Other comprehensive income (loss):
 
 
Unrealized gains (losses) on available for sale securities
(100)
52 
Other comprehensive income (loss)
(100)
52 
Comprehensive income (loss)
$ 7,746 
$ (620)
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Cash flows from operating activities:
 
 
Net income (loss)
$ 7,846 
$ (672)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
Share-based compensation expense
4,191 
3,755 
Amortization of net premiums and discounts on investments
1,507 
1,863 
Amortization of revenue interest issuance cost
30 
36 
Depreciation and amortization expense
912 
1,139 
Gain on put/call liability
(535)
 
Changes in assets and liabilities:
 
 
Decrease (increase) in accounts receivable
1,302 
(1,523)
Increase in prepaid expenses and other current assets
(5,459)
(1,294)
Increase in inventory held by the Company
(357)
(6,363)
Decrease (increase) in inventory held by others
81 
(14)
Decrease in non-current portion of deferred cost of license revenue
159 
133 
Increase in other assets
(92)
 
Decrease in accounts payable, accrued expenses, other current liabilities
(6,144)
(7,216)
Increase in revenue interest liability interest payable
421 
659 
Decrease in current portion of deferred license revenue
 
(371)
Decrease in non-current portion of deferred license revenue
(2,264)
(1,893)
Increase in other non-current liabilities
1,858 
 
Increase (decrease) in deferred product revenue-Zanaflex tablets
(8)
168 
Decrease in deferred product revenue-Zanaflex Capsules
(436)
(529)
Net cash provided by (used in) operating activities
3,012 
(12,122)
Cash flows from investing activities:
 
 
Purchases of property and equipment
(3,104)
(743)
Purchases of intangible assets
(656)
(164)
Purchases of investments
(65,396)
(42,812)
Proceeds from maturities of investments
61,750 
99,500 
Net cash (used in) provided by investing activities
(7,406)
55,781 
Cash flows from financing activities:
 
 
Proceeds from issuance of common stock and option exercises
1,949 
392 
Repayments of revenue interest liability
(209)
(235)
Net cash provided by financing activities
1,740 
157 
Net (decrease) increase in cash and cash equivalents
(2,654)
43,816 
Cash and cash equivalents at beginning of period
57,954 
34,641 
Cash and cash equivalents at end of period
55,300 
78,457 
Supplemental disclosure:
 
 
Cash paid for interest
304 
429 
Cash paid for taxes
$ 165 
$ 102 
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 (SCI) and other disorders of the nervous system.

 

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

 

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company as of and for the year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K for such year, as filed with the Securities and Exchange Commission (the “SEC”).

Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

(2) Summary of Significant Accounting Policies

 

Principles of Consolidation

 

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

 

Use of Estimates

 

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

 

Investments

 

Both short-term and long-term investments consist of US Treasury bonds. The Company classifies marketable securities available to fund current operations as short-term investments in current assets on its consolidated balance sheets. Marketable securities are classified as long-term investments in long-term assets on the consolidated balance sheets if (i) they have been in an unrealized loss position for longer than one year and (ii) the Company has the ability and intent to hold them (a) until the carrying value is recovered and (b) such holding period may be longer than one year. The Company classifies its investments as available-for-sale. Available-for-sale securities are recorded at fair value of the investments based on quoted market prices.

 

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

 

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

 

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 ASD Specialty Healthcare, Inc. (an AmerisourceBergen affiliate), which is the exclusive specialty pharmacy distributor for Ampyra to 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 is itself in the form of estimates, and reflect other limitations. The Company’s sales and revenue recognition reflects the Company’s estimates of actual product prescribed to the end-user. The Company expects to be able to apply a more traditional revenue recognition policy such that revenue is recognized following shipment to the customer when it believes it has sufficient data to develop reasonable estimates of expected returns based upon historical returns and greater certainty regarding generic competition.

 

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

 

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, cash equivalents, restricted cash and accounts receivable. The Company maintains cash, cash equivalents, restricted cash, short-term and long-term investments 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.

 

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 products or product candidates. Accordingly, the Company does not prepare discrete financial information with respect to separate products or product candidates or by location and does not have separately reportable segments.

 

Reclassification

 

Certain prior period amounts have been reclassified to conform to current year presentation.

 

Recent Accounting Pronouncements

 

In June 2011, the FASB issued an accounting standards update regarding the presentation of comprehensive income in financial statements. 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 Company reports components of comprehensive income in two separate consecutive statements in accordance with the Financial Accounting Standard Board’s amended guidance on the presentation of comprehensive income. The new guidance was effective for the Company January 1, 2012.

 

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.  This accounting standard update did not have a material effect on the Company’s financial statements.

Share-based Compensation
Share-based Compensation

(3) Share-based Compensation

 

During the three-month periods ended March 31, 2012 and 2011, the Company recognized share-based compensation expense of $4.2 million and $3.8 million, respectively. Activity in options and restricted stock during the three-month period ended March 31, 2012 and related balances outstanding as of that date are reflected below. The weighted average fair value per share of options granted to employees for the three-month periods ended March 31, 2012 and 2011 were approximately $14.15 and $12.41, respectively.

 

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

 

 

 

For the three-month

 

 

 

period ended March 31,

 

(In millions)

 

2012

 

2011

 

 

 

 

 

 

 

Research and development

 

$

1.0

 

$

1.1

 

Selling, general and administrative

 

3.2

 

2.7

 

Total

 

$

4.2

 

$

3.8

 

 

A summary of share-based compensation activity for the three-month period ended March 31, 2012 is presented below:

 

Stock Option Activity

 

 

 

Number of Shares
(In thousands)

 

Weighted Average
Exercise Price

 

Weighted Average
Remaining
Contractual
Term

 

Intrinsic Value
(In thousands)

 

Balance at January 1, 2012

 

4,793

 

$

21.31

 

 

 

 

 

Granted

 

914

 

26.36

 

 

 

 

 

Cancelled

 

(22

)

28.61

 

 

 

 

 

Exercised

 

(94

)

20.65

 

 

 

 

 

Balance at March 31, 2012

 

5,591

 

$

22.12

 

7.1

 

$

31,867

 

Vested and expected to vest at March 31, 2012

 

5,499

 

$

22.06

 

7.1

 

$

31,733

 

Vested and exercisable at March 31, 2012

 

3,106

 

$

18.87

 

5.6

 

$

27,458

 

 

Restricted Stock Activity

 

(In thousands)
Restricted Stock

 

Number of Shares

 

Nonvested at January 1, 2012

 

377

 

Granted

 

290

 

Vested

 

 

Forfeited

 

(2

)

Nonvested at March 31, 2012

 

665

 

 

As of March 31, 2012, there was $48.5 million of total unrecognized compensation costs related to unvested options and restricted stock awards that the Company expects to recognize over a weighted average period of approximately 2.8 years.

Earnings Per Share
Earnings Per Share

(4) Earnings Per Share

 

The following table sets forth the computation of basic and diluted earnings per share for the three-month periods ended March 31, 2012 and 2011:

 

(In thousands, except per share data)

 

Three-month
period ended
March 31, 2012

 

Three-month
period ended
March 31, 2011

 

Basic and diluted

 

 

 

 

 

Net income (loss)

 

$

7,846

 

$

(672

)

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

 

39,340

 

38,781

 

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

 

1,067

 

 

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

 

40,407

 

38,781

 

Net income (loss) per share—basic

 

$

0.20

 

$

(0.02

)

Net income (loss) per share—diluted

 

$

0.19

 

$

(0.02

)

 

The difference between basic and diluted shares is that diluted shares include the dilutive effect 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)

 

Three-month
period ended
March 31, 2012

 

Three-month
period ended
March 31, 2011

 

Denominator

 

 

 

 

 

Dilutive stock options and restricted common shares

 

5,189

 

5,523

 

Convertible note

 

67

 

67

 

 

Income Taxes
Income Taxes

(5) Income Taxes

 

The Company had available federal net operating loss (NOL) carryforwards of approximately $215.6 million and $230.4 million and state NOL carryforwards of approximately $175.0 million and $205.9 million as of March 31, 2012 and December 31, 2011 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 2018 and 2030. The Company also has research and development tax credit carryforwards of approximately $4.0 million as of March 31, 2012, 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 carryforwards of $1.4 million and $1.1 million as of March 31, 2012 and December 31, 2011, respectively.  Such credits can be carried forward indefinitely and have no expiration date.

 

At March 31, 2012 and December 31, 2011, the Company had a deferred tax asset of $143.9 million and $147.6 million, respectively, offset by a full valuation allowance. Since inception, the Company has incurred substantial losses and may incur 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 carryforwards (following certain ownership changes, as defined by the Act) that could significantly limit the Company’s ability to utilize these carryforwards.  The Company has experienced various ownership changes as a result of past financings. Accordingly, the Company’s ability to utilize the aforementioned carryforwards may be limited. Additionally, because U.S. tax laws limit the time during which these carryforwards 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 March 31, 2012, management believes that it is more likely than not that the gross 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.

Fair Value Measurements
Fair Value Measurements

(6) Fair Value Measurements

 

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2012 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability. The Company’s Level 1 assets consist of time deposits and investments in a Treasury money market fund and high-quality government bonds and are valued using market prices on the active markets.  Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. The Company’s Level 3 liability represents our put/call liability related to the Paul Royalty Fund (PRF) transaction. No changes in valuation techniques or inputs occurred during the three months ended March 31, 2012. No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the three-month period ended March 31, 2012.

 

(In thousands)

 

Level 1

 

Level 2

 

Level 3

 

Assets Carried at Fair Value:

 

 

 

 

 

 

 

Cash equivalents

 

$

42,287

 

$

 

$

 

Short-term investments

 

222,945

 

 

 

Long-term investments

 

17,046

 

 

 

Liabilities Carried at Fair Value:

 

 

 

 

 

 

 

Put/call liability

 

 

 

495

 

 

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, 2011

 

Realized (gains)
losses included
in net loss

 

Unrealized
(gains) losses
included
in other
comprehensive
loss

 

Balance as of
March 31, 2012

 

Liabilities Carried at Fair Value:

 

 

 

 

 

 

 

 

 

Put/call liability

 

$

1,030

 

$

(535

)

$

 

$

495

 

 

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

Investments
Investments

(7) Investments

 

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

 

(In thousands)

 

Amortized
Cost

 

Gross
unrealized
gains

 

Gross
unrealized
losses

 

Estimated
fair
value

 

March 31, 2012

 

 

 

 

 

 

 

 

 

US Treasury bonds

 

$

240,027

 

$

9

 

$

(45

)

$

239,991

 

December 31, 2011

 

 

 

 

 

 

 

 

 

US Treasury bonds

 

237,887

 

72

 

(6

)

237,953

 

 

The contractual maturities of short-term available-for-sale debt securities at March 31, 2012 and December 31, 2011 are within one year. The contractual and intended maturities of long-term available-for-sale debt securities at March 31, 2012 and December 31, 2011 are greater than one year. The Company has determined that there were no other-than-temporary declines in the fair values of its investments as of March 31, 2012. Short-term investments with maturity of three months or less from date of purchase have been classified as cash equivalents, and amounted to $42.3 million and $38.3 million as of March 31, 2012 and December 31, 2011, respectively.

Collaborations, Alliances and Other Agreements
Collaborations, Alliances and Other Agreements

(8) Collaborations, Alliances, and Other Agreements

 

Biogen

 

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

 

Under the Collaboration Agreement, the Company was entitled to an upfront payment of $110.0 million as of June 30, 2009, which was received in July 2009, and a $25 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 $2.3 million in license revenue, a portion of the $110.0 million received from Biogen Idec, and $159,000 in cost of license revenue, a portion of the $7.7 million paid to Alkermes, during the three-month periods ended March 31, 2012 and 2011, 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 license revenue includes $159,000 in cost of license revenue, which represents the amortized portion of the $7.7 million paid to Alkermes in 2009, for the three-month periods ended March 31, 2012 and 2011, respectively.

 

Watson

 

The Company has an agreement with Watson Pharma, Inc., a subsidiary of Watson Pharmaceuticals, Inc., to market tizanidine hydrochloride capsules, an authorized generic version of Zanaflex Capsules, which was launched in February 2012.  In accordance with the Watson agreement, the Company receives a royalty based on Watson’s gross margin, as defined by the agreement, of the authorized generic product. During the three-month period ended March 31, 2012, the Company recognized royalty revenue of $1.5 million related to the gross margin of the Zanaflex Capsule authorized generic.  During the three-month period ended March 31, 2012, the Company also recognized revenue and a corresponding cost of sales of $1.1 million, respectively, related to the purchase and sale of the related Zanaflex Capsule authorized generic product to Watson, which is recorded in net product revenues and cost of sales.

 

Neuronex

 

In February 2012, the Company and its wholly-owned subsidiary ATI Development Corp. (ATI) entered into an agreement to acquire (the Agreement) Neuronex, Inc., a privately-held development stage pharmaceutical company (Neuronex).  Neuronex is developing Diazepam nasal spray, or DZNS, under Section 505(b)(2) of the Food, Drug and Cosmetic Act as a rescue treatment for certain seizures.

 

Under the terms of the Agreement, upon closing of the acquisition, Acorda would pay $6.8 million in cash, subject to adjustment in accordance with the provisions of the Agreement.  After closing, the former equity holders of Neuronex will be entitled to receive from Acorda up to an additional $18 million in contingent earnout payments upon the achievement of specified regulatory and manufacturing-related milestones with respect to the DZNS product, and up to $105 million upon the achievement of specified sales milestones with respect to the DZNS product.  The former equity holders of Neuronex will also be entitled to receive tiered royalty-like earnout payments, ranging from the upper single digits to lower double digits, on worldwide net sales of DZNS products.  These payments are payable on a country-by-country basis until the earlier to occur of ten years after the first commercial sale of a product in such country and the entry of generic competition in such country as defined in the Agreement.

 

Neuronex licenses the patent and other intellectual property and other rights relating to the DZNS product from SK Biopharmaceuticals Co., Ltd. (SK).  Pursuant to the SK license, which grants worldwide rights to Neuronex, except certain specified Asian countries, Neuronex is obligated to pay SK up to $8 million upon the achievement of specified development milestones with respect to the DZNS product and up to $3 million upon the achievement of specified sales milestones with respect to the DZNS product.  Also, Neuronex is obligated to pay SK a tiered, mid-single digit royalty on net sales of DZNS products.  Upon the potential closing of the acquisition, Acorda will be responsible for these milestone payments and royalties, in addition to the earnout payments described above.

 

Consummation of the acquisition is subject to certain conditions, including (i) Acorda’s receipt of the official minutes (the “FDA Minutes”) from a meeting contemplated by the Agreement to be held among Acorda, Neuronex, and the U.S. Food and Drug Administration with respect to the DZNS product and a contemplated filing of the New Drug Application for the product, (ii) consent of SK to the transactions contemplated by the Agreement, and (iii) other conditions customary for a transaction of this type.

 

Consummation of the acquisition is also subject to the parties not exercising their rights to terminate the Agreement.  Under the Agreement, (i) Acorda has the right to terminate the Agreement at any time prior to closing, even if the closing conditions have been satisfied, and Neuronex can terminate the Agreement after a specified time period has elapsed after receipt of the FDA Minutes, and (ii) both Acorda and Neuronex have termination rights in the event of certain breaches of representations or covenants by the other party.

 

Under the terms of the Agreement, the Company made an upfront payment of $2.0 million and paid $500,000 during the three-month period ended March 31, 2012 of the up to $1.2 million in research funding to prepare for the diazepam nasal spray pre-NDA meeting with the FDA.  Following the pre-NDA meeting, if the conditions described above have been met and termination rights are not exercised, the Company will complete the acquisition of Neuronex by paying the $6.8 million closing payment referred to above.

 

The Company evaluated the transaction based upon ASC 805, Business Combinations, and concluded that it will only acquire inputs and will not acquire processes. The Company will need to develop its own processes in order to produce an output. Therfore the Company expects to account for the transaction as an asset acquisition and accordingly the $2.0 million upfront payment and the $500,000 research funding were expensed as research and development expense during the three-month period ended March 31, 2012.

Commitments and Contingencies
Commitments and Contingencies

(9) Commitments and Contingencies

 

A summary of the Company’s commitments and contingencies was included in the Company’s Annual Report on Form 10-K for the twelve-month period ended December 31, 2011. The Company’s long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business.

 

The Company may be, from time to time, a party to various disputes and claims arising from normal business activities. The Company accrues for loss contingencies when information available indicates that it is probable that a liability has been incurred and the amount of such loss can be reasonably estimated. The Company believes that the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial condition or liquidity. However, adjustments, if any, to the Company’s estimates could be material to operating results for the periods in which adjustments to the liability are recorded. As of March 31, 2012, there have been no accruals for loss contingencies aside from payments related to litigation itself.

Summary of Significant Accounting Policies (Policies)

Principles of Consolidation

 

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

Use of Estimates

 

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

Investments

 

Both short-term and long-term investments consist of US Treasury bonds. The Company classifies marketable securities available to fund current operations as short-term investments in current assets on its consolidated balance sheets. Marketable securities are classified as long-term investments in long-term assets on the consolidated balance sheets if (i) they have been in an unrealized loss position for longer than one year and (ii) the Company has the ability and intent to hold them (a) until the carrying value is recovered and (b) such holding period may be longer than one year. The Company classifies its investments as available-for-sale. Available-for-sale securities are recorded at fair value of the investments based on quoted market prices.

 

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

 

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

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 ASD Specialty Healthcare, Inc. (an AmerisourceBergen affiliate), which is the exclusive specialty pharmacy distributor for Ampyra to 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 is itself in the form of estimates, and reflect other limitations. The Company’s sales and revenue recognition reflects the Company’s estimates of actual product prescribed to the end-user. The Company expects to be able to apply a more traditional revenue recognition policy such that revenue is recognized following shipment to the customer when it believes it has sufficient data to develop reasonable estimates of expected returns based upon historical returns and greater certainty regarding generic competition.

 

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

 

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, cash equivalents, restricted cash and accounts receivable. The Company maintains cash, cash equivalents, restricted cash, short-term and long-term investments 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.

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 products or product candidates. Accordingly, the Company does not prepare discrete financial information with respect to separate products or product candidates or by location and does not have separately reportable segments.

Reclassification

 

Certain prior period amounts have been reclassified to conform to current year presentation.

Recent Accounting Pronouncements

 

In June 2011, the FASB issued an accounting standards update regarding the presentation of comprehensive income in financial statements. 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 Company reports components of comprehensive income in two separate consecutive statements in accordance with the Financial Accounting Standard Board’s amended guidance on the presentation of comprehensive income. The new guidance was effective for the Company January 1, 2012.

 

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.  This accounting standard update did not have a material effect on the Company’s financial statements.

Share-based Compensation (Tables)

 

 

 

 

For the three-month

 

 

 

period ended March 31,

 

(In millions)

 

2012

 

2011

 

 

 

 

 

 

 

Research and development

 

$

1.0

 

$

1.1

 

Selling, general and administrative

 

3.2

 

2.7

 

Total

 

$

4.2

 

$

3.8

 

 

 

Stock Option Activity

 

 

 

Number of Shares
(In thousands)

 

Weighted Average
Exercise Price

 

Weighted Average
Remaining
Contractual
Term

 

Intrinsic Value
(In thousands)

 

Balance at January 1, 2012

 

4,793

 

$

21.31

 

 

 

 

 

Granted

 

914

 

26.36

 

 

 

 

 

Cancelled

 

(22

)

28.61

 

 

 

 

 

Exercised

 

(94

)

20.65

 

 

 

 

 

Balance at March 31, 2012

 

5,591

 

$

22.12

 

7.1

 

$

31,867

 

Vested and expected to vest at March 31, 2012

 

5,499

 

$

22.06

 

7.1

 

$

31,733

 

Vested and exercisable at March 31, 2012

 

3,106

 

$

18.87

 

5.6

 

$

27,458

 

 

Restricted Stock Activity

 

(In thousands)
Restricted Stock

 

Number of Shares

 

Nonvested at January 1, 2012

 

377

 

Granted

 

290

 

Vested

 

 

Forfeited

 

(2

)

Nonvested at March 31, 2012

 

665

 

Earnings Per Share (Tables)

 

 

(In thousands, except per share data)

 

Three-month
period ended
March 31, 2012

 

Three-month
period ended
March 31, 2011

 

Basic and diluted

 

 

 

 

 

Net income (loss)

 

$

7,846

 

$

(672

)

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

 

39,340

 

38,781

 

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

 

1,067

 

 

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

 

40,407

 

38,781

 

Net income (loss) per share—basic

 

$

0.20

 

$

(0.02

)

Net income (loss) per share—diluted

 

$

0.19

 

$

(0.02

 

 

(In thousands)

 

Three-month
period ended
March 31, 2012

 

Three-month
period ended
March 31, 2011

 

Denominator

 

 

 

 

 

Dilutive stock options and restricted common shares

 

5,189

 

5,523

 

Convertible note

 

67

 

67

 

Fair Value Measurements (Tables)

 

 

(In thousands)

 

Level 1

 

Level 2

 

Level 3

 

Assets Carried at Fair Value:

 

 

 

 

 

 

 

Cash equivalents

 

$

42,287

 

$

 

$

 

Short-term investments

 

222,945

 

 

 

Long-term investments

 

17,046

 

 

 

Liabilities Carried at Fair Value:

 

 

 

 

 

 

 

Put/call liability

 

 

 

495

 

 

 

(In thousands)

 

Balance as of
December 31, 2011

 

Realized (gains)
losses included
in net loss

 

Unrealized
(gains) losses
included
in other
comprehensive
loss

 

Balance as of
March 31, 2012

 

Liabilities Carried at Fair Value:

 

 

 

 

 

 

 

 

 

Put/call liability

 

$

1,030

 

$

(535

)

$

 

$

495

 

Investments (Tables)
Schedule of available-for-sale securities

 

 

(In thousands)

 

Amortized
Cost

 

Gross
unrealized
gains

 

Gross
unrealized
losses

 

Estimated
fair
value

 

March 31, 2012

 

 

 

 

 

 

 

 

 

US Treasury bonds

 

$

240,027

 

$

9

 

$

(45

)

$

239,991

 

December 31, 2011

 

 

 

 

 

 

 

 

 

US Treasury bonds

 

237,887

 

72

 

(6

)

237,953

 

Summary of Significant Accounting Policies (Details)
3 Months Ended
Mar. 31, 2012
business
Investments
 
Minimum period of marketable securities in unrealized loss position (in years)
1 year 
Minimum holding period of long-term investments (in years)
1 year 
Revenue Recognition
 
Specialty pharmacy providers and Kaiser, contractually obligated maximum inventory holdings (in days)
30 days 
Period before expiration date within which returns from Ampyra will be accepted (in months)
2 months 
Period after expiration date within which returns from Ampyra will be accepted (in months)
6 months 
Segment Information
 
Number of businesses in operation
Share-based Compensation (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Share-based compensation expense
 
 
Share-based compensation expense recognized
$ 4.2 
$ 3.8 
Weighted average fair value of options granted to employees (in dollars per share)
$ 14.15 
$ 12.41 
Research and development
 
 
Share-based compensation expense
 
 
Share-based compensation expense recognized
1.0 
1.1 
Selling, general, and administrative
 
 
Share-based compensation expense
 
 
Share-based compensation expense recognized
$ 3.2 
$ 2.7 
Share-based Compensation (Details 2) (USD $)
Share data in Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Share based compensation, other disclosures
 
Total unrecognized compensation costs related to unvested options and restricted stock awards that the company expects to recognize
$ 48,500,000 
Weighted average period (in years)
2 years 9 months 18 days 
Stock options
 
Stock Option Activity
 
Balance at the beginning of the period (in shares)
4,793 
Granted (in shares)
914 
Cancelled (in shares)
(22)
Exercised (in shares)
(94)
Balance at the end of the period (in shares)
5,591 
Vested and expected to vest at the end of the period (in shares)
5,499 
Vested and exercisable at the end of the period (in shares)
3,106 
Weighted Average Exercise Price
 
Balance at the beginning of the period (in dollars per share)
$ 21.31 
Granted (in dollars per share)
$ 26.36 
Cancelled (in dollars per share)
$ 28.61 
Exercised (in dollars per share)
$ 20.65 
Balance at the end of the period (in dollars per share)
$ 22.12 
Vested and expected to vest at the end of the period (in dollars per share)
$ 22.06 
Vested and exercisable at the end of the period (in dollars per share)
$ 18.87 
Weighted Average Remaining Contractual Term
 
Balance at the end of the period (in years)
7 years 1 month 5 days 
Vested and expected to vest at the end of the period (in years)
7 years 1 month 5 days 
Vested and exercisable at the end of the period (in years)
5 years 7 months 5 days 
Intrinsic Value
 
Balance at the end of the period
31,867,000 
Vested and expected to vest at the end of the period
31,733,000 
Vested and exercisable at the end of the period
$ 27,458,000 
Restricted Stock
 
Restricted Stock Activity
 
Nonvested at the beginning of the period (in shares)
377 
Granted (in shares)
290 
Forfeited (in shares)
(2)
Nonvested at the end of the period (in shares)
665 
Earnings Per Share (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Basic and diluted
 
 
Net income (loss)
$ 7,846 
$ (672)
Weighted average common shares outstanding used in computing net income (loss) per share-basic
39,340 
38,781 
Plus: net effect of dilutive stock options and restricted common shares
1,067 
 
Weighted average common shares outstanding used in computing net income (loss) per share-diluted
40,407 
38,781 
Net income (loss) per share-basic (in dollars per share)
$ 0.20 
$ (0.02)
Net income (loss) per share-diluted (in dollars per share)
$ 0.19 
$ (0.02)
Earnings Per Share (Details 2)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Dilutive stock options and restricted common shares
 
 
Antidilutive Securities
 
 
Anti-dilutive securities excluded from computation of earnings per share (in shares)
5,189 
5,523 
Convertible note
 
 
Antidilutive Securities
 
 
Anti-dilutive securities excluded from computation of earnings per share (in shares)
67 
67 
Income Taxes (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
Federal
 
 
Income taxes
 
 
Operating loss carryforwards
$ 215.6 
$ 230.4 
State
 
 
Income taxes
 
 
Operating loss carryforwards
$ 175.0 
$ 205.9 
Income Taxes (Details 2) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
Income taxes
 
 
Deferred tax asset, offset by a full valuation allowance
$ 143.9 
$ 147.6 
Research and development
 
 
Income taxes
 
 
Tax credit carry-forwards
4.0 
 
Alternative Minimum Tax
 
 
Income taxes
 
 
Tax credit carry-forwards
$ 1.4 
$ 1.1 
Fair Value Measurements (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
Assets Carried at Fair Value:
 
 
Short-term investments
$ 222,945 
$ 237,953 
Long-term investments
17,046 
 
Recurring basis |
Level 1
 
 
Assets Carried at Fair Value:
 
 
Cash equivalents
42,287 
 
Short-term investments
222,945 
 
Long-term investments
17,046 
 
Recurring basis |
Level 3
 
 
Liabilities Carried at Fair Value:
 
 
Put/call liability
$ 495 
 
Fair Value Measurements (Details 2) (Put/call liability, USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Put/call liability
 
Liabilities Carried at Fair Value:
 
Balance at the beginning of the period
$ 1,030 
Realized (gains) losses included in net loss
(535)
Balance at the end of the period
$ 495 
Investments (Details) (USD $)
3 Months Ended
Mar. 31, 2012
Dec. 31, 2011
Short-term Investments
 
 
Maximum maturity period of available-for-sale debt securities to be classified as short-term investments (in years)
1 year 
 
Minimum maturity period of available-for-sale debt securities to be classified as long-term securities (in years)
1 year 
 
Maximum maturity period of short-term investments to be classified as cash equivalents (in months)
3 months 
 
Short-term investments classified as cash and cash equivalents
$ 42,300,000 
$ 38,300,000 
US Treasury bonds
 
 
Short-term Investments
 
 
Amortized Cost
240,027,000 
237,887,000 
Gross unrealized gains
9,000 
72,000 
Gross unrealized losses
(45,000)
(6,000)
Estimated fair value
$ 239,991,000 
$ 237,953,000 
Collaborations, Alliances, and Other Agreements (Details) (USD $)
3 Months Ended
Mar. 31, 2012
Sep. 30, 2011
Mar. 31, 2011
Aug. 31, 2011
Jul. 7, 2009
Jul. 1, 2009
Jun. 30, 2009
Collaboration agreement
 
 
 
 
 
 
 
Revenue recognized
$ 65,673,000 
 
$ 58,925,000 
 
 
 
 
Royalty revenues
3,310,000 
 
96,000 
 
 
 
 
Cost of sales
12,464,000 
 
12,050,000 
 
 
 
 
Biogen Idec
 
 
 
 
 
 
 
Collaboration agreement
 
 
 
 
 
 
 
Deferred license revenue
 
 
 
 
 
 
110,000,000 
Cash received
 
 
 
 
 
110,000,000 
 
Milestone payment due upon approval of the product in the European Union
 
 
 
25,000,000 
 
 
 
Payment made to third party for cost of license
 
 
 
 
7,700,000 
 
 
License Revenue
2,300,000 
 
2,300,000 
 
 
 
 
Cost of license revenue
159,000 
 
159,000 
 
 
 
 
Change in amortization period by number of months
 
 
5 months 
 
 
 
 
Current estimate of license revenue recognition period (in years)
12 years 
 
 
 
 
 
 
Portion of milestone payment from Acorda to Alkermes (as a percent)
 
7.00% 
 
 
 
 
 
Biogen Idec |
Maximum
 
 
 
 
 
 
 
Collaboration agreement
 
 
 
 
 
 
 
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 
 
 
 
 
 
 
Watson |
Zanaflex Capsules
 
 
 
 
 
 
 
Collaboration agreement
 
 
 
 
 
 
 
Revenue recognized
1,100,000 
 
 
 
 
 
 
Royalty revenues
1,500,000 
 
 
 
 
 
 
Cost of sales
1,100,000 
 
 
 
 
 
 
Neuronex
 
 
 
 
 
 
 
Business Acquisition
 
 
 
 
 
 
 
Payments to complete the acquisition
6,800,000 
 
 
 
 
 
 
Neuronex |
DZNS
 
 
 
 
 
 
 
Business Acquisition
 
 
 
 
 
 
 
Royalty payment period
10 years 
 
 
 
 
 
 
Upfront payments recorded as research and development expense
2,000,000 
 
 
 
 
 
 
Advance payments recorded as research and development expense
500,000 
 
 
 
 
 
 
Neuronex |
DZNS |
Maximum
 
 
 
 
 
 
 
Business Acquisition
 
 
 
 
 
 
 
Additional payments upon successful achievement of future regulatory and manufacturing-related milestones
18,000,000 
 
 
 
 
 
 
Additional payments upon successful achievement of future sales milestones
105,000,000 
 
 
 
 
 
 
Amount of advances
1,200,000 
 
 
 
 
 
 
Neuronex |
DZNS |
SK |
Maximum
 
 
 
 
 
 
 
Collaboration agreement
 
 
 
 
 
 
 
Payments Neuronex is obligated to make to SK upon achievement of specified development milestones
8,000,000 
 
 
 
 
 
 
Entitlement of additional payments based on the successful achievement of future sales milestones
$ 3,000,000