CERUS CORP, 10-Q filed on 8/5/2016
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2016
Jul. 28, 2016
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Jun. 30, 2016 
 
Document Fiscal Year Focus
2016 
 
Document Fiscal Period Focus
Q2 
 
Trading Symbol
CERS 
 
Entity Registrant Name
CERUS CORP 
 
Entity Central Index Key
0001020214 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
102,709,344 
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Current assets:
 
 
Cash and cash equivalents
$ 7,704 
$ 71,018 
Short-term investments
76,350 
25,698 
Investment in marketable equity securities
4,487 
11,163 
Accounts receivable
5,149 
5,794 
Inventories
12,111 
10,812 
Prepaid expenses
1,066 
1,166 
Other current assets
5,345 
4,755 
Total current assets
112,212 
130,406 
Non-current assets:
 
 
Property and equipment, net
3,216 
3,549 
Goodwill
1,316 
1,316 
Intangible assets, net
839 
940 
Restricted cash
575 
612 
Other assets
2,293 
2,579 
Total assets
120,451 
139,402 
Current liabilities:
 
 
Accounts payable
7,190 
5,217 
Accrued liabilities
9,439 
9,853 
Manufacturing and development obligations - current
2,221 
3,282 
Debt - current
6,127 
2,956 
Deferred revenue - current
767 
554 
Total current liabilities
25,744 
21,862 
Non-current liabilities:
 
 
Debt - non-current
13,726 
16,848 
Deferred income taxes
140 
122 
Manufacturing and development obligations - non-current
4,844 
4,542 
Other non-current liabilities
1,356 
1,263 
Total liabilities
45,810 
44,637 
Commitments and contingencies
   
   
Stockholders' equity:
 
 
Common stock
102 
99 
Additional paid-in capital
704,402 
685,189 
Accumulated other comprehensive income
2,978 
7,289 
Accumulated deficit
(632,841)
(597,812)
Total stockholders' equity
74,641 
94,765 
Total liabilities and stockholders' equity
$ 120,451 
$ 139,402 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Income Statement [Abstract]
 
 
 
 
Revenue
$ 9,251 
$ 8,830 
$ 16,883 
$ 16,522 
Cost of revenue
4,976 
7,028 
9,239 
11,742 
Gross profit
4,275 
1,802 
7,644 
4,780 
Operating expenses:
 
 
 
 
Research and development
8,557 
5,213 
15,474 
10,794 
Selling, general and administrative
12,406 
12,063 
24,153 
23,781 
Amortization of intangible assets
51 
51 
101 
101 
Total operating expenses
21,014 
17,327 
39,728 
34,676 
Loss from operations
(16,739)
(15,525)
(32,084)
(29,896)
Non-operating (expense) income, net:
 
 
 
 
(Loss) gain from revaluation of warrant liability
 
(2,707)
 
3,589 
Foreign exchange gain (loss)
101 
499 
(16)
(614)
Interest expense
(658)
(301)
(1,313)
(556)
Other income, net
113 
27 
179 
29 
Total non-operating (expense) income, net
(444)
(2,482)
(1,150)
2,448 
Loss before income taxes
(17,183)
(18,007)
(33,234)
(27,448)
Provision (benefit) for income taxes
983 
(2,035)
1,795 
(2,016)
Net loss
$ (18,166)
$ (15,972)
$ (35,029)
$ (25,432)
Net loss per share:
 
 
 
 
Basic
$ (0.18)
$ (0.17)
$ (0.35)
$ (0.27)
Diluted
$ (0.18)
$ (0.17)
$ (0.35)
$ (0.30)
Weighted average shares outstanding used for calculating net loss per share:
 
 
 
 
Basic
101,563 
95,728 
100,517 
94,576 
Diluted
101,563 
95,728 
100,517 
95,682 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
 
Net loss
$ (18,166)
$ (15,972)
$ (35,029)
$ (25,432)
Other comprehensive (loss) income:
 
 
 
 
Unrealized (losses) gains on available-for-sale investments, net of taxes of $(205) and $4,552 for the three months ended June 30, 2016 and 2015, respectively, and $(2,263) and $4,552 for the six months ended June 30, 2016 and 2015, respectively
(389)
7,493 
(4,311)
7,512 
Comprehensive loss
$ (18,555)
$ (8,479)
$ (39,340)
$ (17,920)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Parenthetical) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
 
Unrealized (losses) gains on available-for-sale investments, taxes
$ (205)
$ 4,552 
$ (2,263)
$ 4,552 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Operating activities
 
 
Net loss
$ (35,029)
$ (25,432)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation and amortization
964 
835 
Stock-based compensation
3,862 
3,179 
Changes in valuation of warrant liability
 
(3,589)
Non-cash interest expense
603 
139 
Deferred income taxes
18 
Non-cash tax expense (benefit) from other unrealized loss on available-for-sale securities
1,702 
(2,085)
Changes in operating assets and liabilities:
 
 
Accounts receivable
645 
69 
Inventories
(1,318)
1,112 
Other assets
435 
739 
Accounts payable
1,902 
(4,176)
Accrued liabilities
(458)
(1,538)
Manufacturing and development obligations
(1,082)
 
Deferred revenue
189 
256 
Net cash used in operating activities
(27,567)
(30,484)
Investing activities
 
 
Capital expenditures
(118)
(325)
Purchases of investments
(70,560)
(69,983)
Proceeds from maturities of investments
19,500 
22,444 
Restricted cash
37 
(114)
Net cash used in investing activities
(51,141)
(47,978)
Financing activities
 
 
Net proceeds from equity incentives and warrants
907 
5,472 
Net proceeds from public offering
14,547 
75,324 
Proceeds from loans
 
10,000 
Repayment of debt
(60)
(56)
Net cash provided by financing activities
15,394 
90,740 
Net (decrease) increase in cash and cash equivalents
(63,314)
12,278 
Cash and cash equivalents, beginning of period
71,018 
22,781 
Cash and cash equivalents, end of period
$ 7,704 
$ 35,059 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

Note 1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include those of Cerus Corporation and its subsidiary, Cerus Europe B.V. (together with Cerus Corporation, hereinafter “Cerus” or the “Company”) after elimination of all intercompany accounts and transactions. These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring entries, considered necessary for a fair presentation have been made. Operating results for the three and six months ended June 30, 2016, are not necessarily indicative of the results that may be expected for the year ending December 31, 2016, or for any future periods.

These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2015, which were included in the Company’s 2015 Annual Report on Form 10-K, filed with the SEC on March 9, 2016. The accompanying condensed consolidated balance sheet as of December 31, 2015, has been derived from the Company’s audited consolidated financial statements as of that date, except as described in the New Accounting Pronouncement section below related to the adoption of Accounting Standards Update (“ASU”) No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.

Use of Estimates

The preparation of financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, which are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates under different assumptions or conditions.

Revenue

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 605-25, “Revenue Recognition – Arrangements with Multiple Deliverables,” as applicable. Revenue is recognized when (i) persuasive evidence of the arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) pricing is fixed or determinable; and (iv) collectability is reasonably assured. The Company’s main sources of revenues for the three and six months ended June 30, 2016 and 2015 were product revenue from sales of the INTERCEPT Blood System for platelets and plasma (“platelet and plasma systems” or “disposable kits”) and UVA illumination devices (“illuminators”).

Revenue related to product sales is generally recognized when the Company fulfills its obligations for each element of an agreement. For all sales of the Company’s INTERCEPT Blood System products, the Company uses a binding purchase order or signed sales contract as evidence of an arrangement. The Company sells its platelet and plasma systems directly to blood banks, hospitals, universities, government agencies, as well as to distributors in certain regions. Generally, the Company’s contracts with its customers do not provide for open return rights, except within a reasonable time after receipt of goods in the case of defective or non-conforming product. Deliverables and the units of accounting vary according to the provisions of each purchase order or sales contract. For revenue arrangements with multiple elements, the Company determines whether the delivered elements meet the criteria as separate units of accounting. Such criteria require that the deliverable have stand-alone value to the customer and that if a general right of return exists relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. Once the Company determines if the deliverable meets the criteria for a separate unit of accounting, the Company must determine how the consideration should be allocated between the deliverables and how the separate units of accounting should be recognized as revenue. Consideration received is allocated to elements that are identified as discrete units of accounting. Because the Company has no vendor specific objective evidence or third party evidence for its systems due to the Company’s variability in its pricing across the regions into which it sells its products, the allocation of revenue is based on best estimated selling price for the products sold. The objective of best estimated selling price is to determine the price at which the Company would transact a sale, had the product been sold on a stand-alone basis. The Company determines best estimated selling price for its systems by considering multiple factors. The Company regularly reviews best estimated selling price.

The Company receives reimbursement under certain U.S. government contracts or grants that support research and development of defined projects. These contracts or grants generally provide for reimbursement of approved costs incurred as defined in the various grants. Funds received are non-refundable. Revenue related to the cost reimbursement provisions under U.S. government contracts or grants are recognized as the qualified direct and indirect costs on the projects are incurred. Costs incurred related to services performed under these contracts are included as a component of research and development expenses in the Company’s consolidated statements of operations. The Company’s use of estimates in recording accrued liabilities for R&D activities (see “Use of Estimates” above) affects the revenue recorded from development funding and government contracts or grants. Actual results may differ from those estimates under different assumptions or conditions.

Freight costs charged to customers are recorded as a component of revenue. Taxes that the Company invoices to its customers and remits to governments are recorded on a net basis, which excludes such tax from product revenue.

Research and Development Expenses

In accordance with ASC Topic 730, “Accounting for Research and Development Expenses,” research and development (“R&D”) expenses are charged to expense when incurred, including cost incurred under each grant that has been awarded to the Company by the U.S. government or development contracts. Research and development expenses include salaries and related expenses for scientific and regulatory personnel, payments to consultants, supplies and chemicals used in in-house laboratories, costs of R&D facilities, depreciation of equipment and external contract research expenses, including clinical trials, preclinical safety studies, other laboratory studies, process development and product manufacturing for research use.

The Company’s use of estimates in recording accrued liabilities for R&D activities (see “Use of Estimates” above) affects the amounts of R&D expenses recorded from development funding and government contracts or grants. Actual results may differ from those estimates under different assumptions or conditions.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be classified as cash equivalents. These investments primarily consist of money market instruments, and are classified as available-for-sale.

Investments

Investments with original maturities of greater than three months primarily include corporate debt, U.S. government agency securities and marketable equity securities of Aduro Biotech, Inc. (“Aduro”), and are designated as available-for-sale and classified as short-term investments or investment in marketable equity securities, in accordance with ASC Topic 320, “Accounting for Certain Investments in Debt and Equity Securities”. Available-for-sale securities are carried at estimated fair value. The Company views its available-for-sale portfolio as available for use in its current operations. Unrealized gains and losses derived by changes in the estimated fair value of available-for-sale securities were recorded in “Net unrealized (losses) gains on available-for-sale investments, net of taxes” on the Company’s unaudited condensed consolidated statements of comprehensive loss. Realized gains (losses) from the sale of available-for-sale investments were recorded in “Other income, net” on the Company’s unaudited condensed consolidated statements of operations. The costs of securities sold are based on the specific identification method, if applicable. The Company reported the amortization of any premium and accretion of any discount resulting from the purchase of debt securities as a component of interest income.

The Company also reviews its available-for-sale securities on a regular basis to evaluate whether any security has experienced an other-than-temporary decline in fair value. Other-than-temporary declines in market value, if any, are recorded in “Other income, net” on the Company’s unaudited condensed consolidated statements of operations.

Restricted Cash

The Company holds a certificate of deposit with a domestic bank for any potential decommissioning resulting from the Company’s possession of radioactive material. The certificate of deposit is held to satisfy the financial surety requirements of the California Department of Health Services and is recorded in “Other assets” on the Company’s unaudited condensed consolidated balance sheets. The Company also has certain non-U.S. dollar denominated deposits recorded as “Restricted cash” in compliance with certain foreign contractual requirements.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, available-for-sale securities and accounts receivable.

Pursuant to the Company’s investment policy, substantially all of the Company’s cash, cash equivalents and available-for-sale securities are maintained at major financial institutions of high credit standing. The Company monitors the financial credit worthiness of the issuers of its investments and limits the concentration in individual securities and types of investments that exist within its investment portfolio. Generally, all of the Company’s investments carry high credit quality ratings, which is in accordance with its investment policy. At June 30, 2016, the fair value of the Company’s marketable equity securities of Aduro is subject to the underlying volatility of Aduro’s stock price. At June 30, 2016, the Company does not believe there is significant financial risk from non-performance by the issuers of the Company’s cash equivalents and short-term investments.

Concentrations of credit risk with respect to trade receivables exist. On a regular basis, including at the time of sale, the Company performs credit evaluations of its significant customers that it expects to sell to on credit terms. Generally, the Company does not require collateral from its customers to secure accounts receivable. To the extent that the Company determines specific invoices or customer accounts may be uncollectible, the Company establishes an allowance for doubtful accounts against the accounts receivable on its unaudited condensed consolidated balance sheets and records a charge on its unaudited condensed consolidated statements of operations as a component of selling, general and administrative expenses.

The Company had three customers that accounted for more than 10% of the Company’s outstanding trade receivables at June 30, 2016 and December 31, 2015. These customers cumulatively represented approximately 37% and 49% of the Company’s outstanding trade receivables at June 30, 2016 and December 31, 2015, respectively. To date, the Company has not experienced collection difficulties from these customers.

Inventories

At June 30, 2016 and December 31, 2015, inventory consisted of work-in-process and finished goods only. Finished goods include INTERCEPT disposable kits, illuminators, and certain replacement parts for the illuminators. Platelet and plasma systems’ disposable kits generally have a two-year life from the date of manufacture. Illuminators and replacement parts do not have regulated expiration dates. Work-in-process includes certain components that are manufactured over a protracted length of time before being sold to, and ultimately incorporated and assembled by Fresenius Kabi Deutschland GmbH or Fresenius, Inc. (with their affiliates, “Fresenius”) into the finished INTERCEPT disposable kits. The Company maintains an inventory balance based on its current sales projections, and at each reporting period, the Company evaluates whether its work-in-process inventory would be sold to Fresenius for production of finished units in order to sell to existing and prospective customers within the next twelve-month period. It is not customary for the Company’s production cycle for inventory to exceed twelve months. Instead, the Company uses its best judgment to factor in lead times for the production of its work-in-process and finished units to meet the Company’s forecasted demands. If actual results differ from those estimates, work-in-process inventory could potentially accumulate for periods exceeding one year. At June 30, 2016 and December 31, 2015, the Company classified its work-in-process inventory as a current asset on its consolidated balance sheets based on its evaluation that the work-in-process inventory would be sold to Fresenius for finished disposable kit production within each respective subsequent twelve-month period.

Inventory is recorded at the lower of cost, determined on a first-in, first-out basis, or net realizable value. The Company uses significant judgment to analyze and determine if the composition of its inventory is obsolete, slow-moving or unsalable and frequently reviews such determinations. The Company writes down specifically identified unusable, obsolete, slow-moving, or known unsalable inventory that has no alternative use in the period that it is first recognized by using a number of factors including product expiration dates, open and unfulfilled orders, and sales forecasts. Any write-down of its inventory to net realizable value establishes a new cost basis and will be maintained even if certain circumstances suggest that the inventory is recoverable in subsequent periods. Costs associated with the write-down of inventory are recorded in “Cost of revenue” on the Company’s consolidated statements of operations. At June 30, 2016 and December 31, 2015, the Company had $1.6 million and $1.8 million, respectively, recorded for potential obsolete, expiring or unsalable product.

Property and Equipment, net

Property and equipment is comprised of furniture, equipment, leasehold improvements, information technology hardware and software and is recorded at cost. At the time the property and equipment is ready for its intended use, it is depreciated on a straight-line basis over the estimated useful lives of the assets (generally three to five years). Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful lives of the improvements.

Capitalization of Software Costs

The Company capitalizes certain significant costs incurred in the acquisition and development of software for internal use, including the costs of the software, materials, and consultants during the application development stage. Costs incurred prior to the application development stage, costs incurred once the application is substantially complete and ready for its intended use, and other costs not qualifying for capitalization, including training and maintenance costs, are charged to expense as incurred. The capitalized costs associated with the enterprise resource planning system are being amortized over the estimated useful life of five years.

Goodwill and Intangible Assets, net

Intangible assets, net, which include a license for the right to commercialize the INTERCEPT Blood System in Asia, are subject to ratable amortization over the original estimated useful life of ten years. The amortization of the Company’s intangible assets, net, is recorded in “Amortization of intangible assets” on the Company’s consolidated statements of operations. Goodwill is not amortized but instead is subject to an impairment test performed on an annual basis, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Such impairment analysis is performed on August 31 of each fiscal year, or more frequently if indicators of impairment exist. The test for goodwill impairment may be assessed using qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than the carrying amount, the Company must then proceed with performing the quantitative two-step process to test goodwill for impairment; otherwise, goodwill is not considered impaired and no further testing is warranted. The Company may choose not to perform the qualitative assessment to test goodwill for impairment and proceed directly to the quantitative two-step process; however, the Company may revert to the qualitative assessment to test goodwill for impairment in any subsequent period. The first step of the two-step process compares the fair value of each reporting unit with its respective carrying amount, including goodwill. The Company has determined that it operates in one reporting unit and estimates the fair value of its one reporting unit using the enterprise approach under which it considers the quoted market capitalization of the Company as reported on the Nasdaq Global Market. The Company considers quoted market prices that are available in active markets to be the best evidence of fair value. The Company also considers other factors, which include future forecasted results, the economic environment and overall market conditions. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and, therefore, the second step of the impairment test is unnecessary. The second step of the two-step process, which is used to measure the amount of impairment loss, compares the implied fair value of each reporting unit’s goodwill, based on the present value of future cash flows, with the respective carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The Company performs an impairment test on its intangible assets, in accordance ASC Topic 360-10, “Property, Plant and Equipment,” if certain events or changes in circumstances occur which indicate that the carrying amounts of its intangible assets may not be recoverable. If the intangible assets are not recoverable, an impairment loss would be recognized by the Company based on the excess amount of the carrying value of the intangible assets over its fair value. For further details regarding the impairment analysis, reference is made to the section below under “Long-lived Assets.” See Note 5 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding the Company’s impairment analysis and the valuation of goodwill and intangible assets, net.

Long-lived Assets

The Company evaluates its long-lived assets for impairment by continually monitoring events and changes in circumstances that could indicate carrying amounts of its long-lived assets may not be recoverable. When such events or changes in circumstances occur, the Company assesses recoverability by determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows. If the expected undiscounted future cash flows are less than the carrying amount of these assets, the Company then measures the amount of the impairment loss based on the excess of the carrying amount over the fair value of the assets. The Company did not recognize impairment charges related to its long-lived assets during the three and six months ended June 30, 2016 and 2015.

Foreign Currency Remeasurement

The functional currency of the Company’s foreign subsidiary is the U.S. dollar. Monetary assets and liabilities denominated in foreign currencies are remeasured in U.S. dollars using the exchange rates at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are remeasured in U.S. dollars using historical exchange rates. Revenues and expenses are remeasured using average exchange rates prevailing during the period. Remeasurements are recorded in the Company’s consolidated statements of operations.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation - Stock Compensation. Stock-based compensation expense is measured at the grant-date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period, and is adjusted for estimated forfeitures. To the extent that stock options contain performance criteria for vesting, stock-based compensation is recognized once the performance criteria are probable of being achieved.

For stock-based awards issued to non-employees, the Company follows ASC Topic 505-50, Equity Based Payment to Non-Employees and considers the measurement date at which the fair value of the stock-based award is measured to be the earlier of (i) the date at which a commitment for performance by the grantee to earn the equity instrument is reached or (ii) the date at which the grantee’s performance is complete. The Company recognizes stock-based compensation expense for the fair value of the vested portion of the non-employee stock-based awards in its consolidated statements of operations.

See Note 11 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding the Company’s stock-based compensation expenses.

Income Taxes

The Company accounts for income taxes using an asset and liability approach in accordance with ASC Topic 740, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. ASC Topic 740 requires derecognition of tax positions that do not have a greater than 50% likelihood of being recognized upon review by a taxing authority having full knowledge of all relevant information. Use of a valuation allowance as described in ASC Topic 740 is not an appropriate substitute for derecognition of a tax position. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in its income tax expense. To date, the Company has not recognized any interest and penalties in its unaudited condensed consolidated statements of operations, nor has it accrued for or made payments for interest and penalties. Although the Company believes it more likely than not that a taxing authority would agree with its current tax positions, there can be no assurance that the tax positions the Company has taken will be substantiated by a taxing authority if reviewed. The Company’s U.S. federal and California tax years through 2015 remain subject to examination by the taxing jurisdictions due to unutilized net operating losses and research credits. The Company continues to carry a full valuation allowance on all of its net deferred tax assets, except for its indefinite lived intangibles.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share gives effect to all potentially dilutive common shares outstanding for the period. The potentially dilutive securities include stock options, employee stock purchase plan rights, warrants and restricted stock units, which are calculated using the treasury stock method. Diluted net loss per share also gives effect to potential adjustments to the numerator for gains resulting from the revaluation of warrants to fair value for the period, even if the Company is in a net loss position if the effect would result in more dilution.

Certain potential dilutive securities were excluded from the dilution calculation for the three and six months ended June 30, 2016 and 2015, as their inclusion would have been anti-dilutive.

The following table sets forth the reconciliation of the numerator and denominator used in the computation of basic and diluted net loss per share for the three and six months ended June 30, 2016 and 2015 (in thousands, except per share amounts):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Numerator for Basic and Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss used for basic calculation

 

$

(18,166

)

 

$

(15,972

)

 

$

(35,029

)

 

$

(25,432

)

Effect of revaluation of warrant liability

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,589

)

Adjusted net loss used for diluted calculation

 

$

(18,166

)

 

$

(15,972

)

 

$

(35,029

)

 

$

(29,021

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average number of shares outstanding

 

 

101,563

 

 

 

95,728

 

 

 

100,517

 

 

 

94,576

 

Effect of dilutive potential shares

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,106

 

Diluted weighted average number of shares outstanding

 

 

101,563

 

 

 

95,728

 

 

 

100,517

 

 

 

95,682

 

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.18

)

 

$

(0.17

)

 

$

(0.35

)

 

$

(0.27

)

Diluted

 

$

(0.18

)

 

$

(0.17

)

 

$

(0.35

)

 

$

(0.30

)

 

The table below presents shares underlying stock options, restricted stock units and/or warrants that were excluded from the calculation of the weighted average number of shares outstanding used for the calculation of diluted net loss per share. These are excluded from the calculation due to their anti-dilutive effect for the three and six months ended June 30, 2016 and 2015 (shares in thousands):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Weighted average number of anti-dilutive potential shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

15,891

 

 

 

14,015

 

 

 

15,331

 

 

 

13,102

 

Restricted stock units

 

 

640

 

 

 

-

 

 

 

428

 

 

 

-

 

Warrants

 

 

-

 

 

 

2,985

 

 

 

-

 

 

 

-

 

Total

 

 

16,531

 

 

 

17,000

 

 

 

15,759

 

 

 

13,102

 

 

Guarantee and Indemnification Arrangements

The Company recognizes the fair value for guarantee and indemnification arrangements issued or modified by the Company. In addition, the Company monitors the conditions that are subject to the guarantees and indemnifications in order to identify if a loss has occurred. If the Company determines it is probable that a loss has occurred, then any such estimable loss would be recognized under those guarantees and indemnifications. Some of the agreements that the Company is a party to contain provisions that indemnify the counter party from damages and costs resulting from claims that the Company’s technology infringes the intellectual property rights of a third party or claims that the sale or use of the Company’s products have caused personal injury or other damage or loss. The Company has not received any such requests for indemnification under these provisions and has not been required to make material payments pursuant to these provisions.

The Company generally provides for a one-year warranty on certain of its INTERCEPT blood-safety products covering defects in materials and workmanship. The Company accrues costs associated with warranty obligations when claims become known and are estimable. The Company has not experienced significant or systemic warranty claims nor is it aware of any existing current warranty claims. Accordingly, the Company had not accrued for any future warranty costs for its products at June 30, 2016 and December 31, 2015.

Fair Value of Financial Instruments

The Company applies the provisions of fair value relating to its financial assets and liabilities. The carrying amounts of accounts receivables, accounts payable, and other accrued liabilities approximate their fair value due to the relative short-term maturities. Based on the borrowing rates currently available to the Company for loans with similar terms, the Company believes the fair value of its debt approximates their carrying amounts. The Company measures and records certain financial assets and liabilities at fair value on a recurring basis, including its available-for-sale securities and warrant liability prior to the expiration and exercise of the warrants in November 2015. The Company classifies instruments within Level 1 if quoted prices are available in active markets for identical assets, which include the Company’s cash accounts and money market funds. The Company classifies instruments in Level 2 if the instruments are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. These instruments include the Company’s corporate debt and U.S. government agency securities holdings. The available-for-sale securities are held by a custodian who obtains investment prices from a third party pricing provider that uses standard inputs (observable in the market) to models which vary by asset class. The Company classifies instruments in Level 3 if one or more significant inputs or significant value drivers are unobservable. The Company assesses any transfers among fair value measurement levels at the end of each reporting period.

See Notes 2 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding the Company’s valuation of financial instruments.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606), Deferral of the Effective Date, which defers by one year the effective date of ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017 (including interim periods within those periods). Early adoption is permitted to the original effective date of December 15, 2016 (including interim periods within those periods). In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies how to identify the unit of accounting for the principal versus agent evaluation and how to apply the control principle to certain types of arrangements. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies the implementation guidance on identifying performance obligations and licensing. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which addresses certain issues on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. These ASUs will be effective for the Company in the first quarter of fiscal year 2018, using one of two retrospective application methods. The Company has not selected a transition method and is currently assessing the potential effects of this ASU on the Company’s condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and provide related disclosures. The standard is effective for annual periods beginning after December 15, 2016, and interim periods thereafter, with early application permitted. The adoption of this ASU is not expected to have a material impact on the Company’s condensed consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the corresponding debt liability rather than as an asset. The Company has adopted this ASU effective January 1, 2016 under the retrospective application method. To conform to the current period presentation, the Company reclassified $32,000 and $36,000, which were previously included in Other current assets and Other assets, respectively, in the Company’s condensed consolidated balance sheet as of December 31, 2015, as a reduction of Debt-current and Debt-non-current, respectively. As a result of the reclassifications, Other current assets and Debt-current decreased by $32,000, and Other assets and Debt- non-current decreased by $36,000, in the Company’s condensed consolidated balance sheet as of December 31, 2015.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10), which requires all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, this ASU eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. The standard is effective for annual periods beginning after December 15, 2017, and interim periods thereafter, with early application permitted. The Company is currently assessing the future impact of this ASU on the Company’s condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The standard is effective for annual periods beginning after December 15, 2018, and interim periods thereafter, with early application permitted. The Company is currently assessing the future impact of this ASU on its consolidated financial statements and anticipates the new guidance will significantly impact the Company’s condensed consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting, which requires entities to record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement when awards vest or are settled, and eliminates additional paid-in capital (APIC) pools. The ASU also changes the accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation, and the accounting for forfeitures, and provides two practical expedients for nonpublic entities. The standard is effective for annual periods beginning after December 15, 2016, and interim periods thereafter, with early application permitted. The Company is currently assessing the future impact of this ASU on the Company’s condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. The standard is effective for annual periods beginning after December 15, 2019, and interim periods thereafter, with early application permitted. The Company is currently assessing the future impact of this ASU on the Company’s condensed consolidated financial statements.

 

Fair Value on Financial Instruments
Fair Value on Financial Instruments

Note 2. Fair Value on Financial Instruments

The Company uses certain assumptions that market participants would use to determine the fair value of an asset or liability in pricing the asset or liability in an orderly transaction between market participants at the measurement date. The identification of market participant assumptions provides a basis for determining what inputs are to be used for pricing each asset or liability. A fair value hierarchy has been established which gives precedence to fair value measurements calculated using observable inputs over those using unobservable inputs. This hierarchy prioritized the inputs into three broad levels as follows:

·

Level 1: Quoted prices in active markets for identical instruments

·

Level 2: Other significant observable inputs (including quoted prices in active markets for similar instruments)

·

Level 3: Significant unobservable inputs (including assumptions in determining the fair value of certain investments)

Money market funds are highly liquid investments and are actively traded. The pricing information on these investment instruments are readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

To estimate the fair value of Level 2 debt securities as of June 30, 2016, the Company’s primary service relies on inputs from multiple industry-recognized pricing sources to determine the price for each investment. Corporate debt and U.S. government agency securities are systematically priced by this service as of the close of business each business day. If the primary pricing service does not price a specific asset a secondary pricing service is utilized.

The fair values of the Company’s financial assets and liabilities were determined using the following inputs at June 30, 2016 (in thousands):

 

 

 

Balance sheet

 

 

 

 

 

Quoted

Prices in

Active

Markets for Identical

Assets

 

 

Significant

Other

Observable

Inputs

 

 

Significant Unobservable Inputs

 

 

 

classification

 

Total

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Money market funds

 

Cash and cash equivalents

 

$

105

 

 

$

105

 

 

$

-

 

 

$

-

 

United States government agency securities

 

Short-term investments

 

 

18,982

 

 

 

-

 

 

 

18,982

 

 

 

-

 

Corporate debt securities

 

Short-term investments

 

 

57,368

 

 

 

-

 

 

 

57,368

 

 

 

-

 

Marketable equity securities

 

Marketable equity securities

 

 

4,487

 

 

 

4,487

 

 

 

-

 

 

 

-

 

Total financial assets

 

 

 

$

80,942

 

 

$

4,592

 

 

$

76,350

 

 

$

-

 

 

The fair values of the Company’s financial assets and liabilities were determined using the following inputs at December 31, 2015 (in thousands):

 

 

 

Balance sheet

 

 

 

 

 

Quoted

Prices in

Active

Markets for Identical

Assets

 

 

Significant

Other

Observable

Inputs

 

 

Significant Unobservable Inputs

 

 

 

classification

 

Total

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Money market funds

 

Cash and cash equivalents

 

$

59,302

 

 

$

59,302

 

 

$

-

 

 

$

-

 

Corporate debt securities

 

Short-term investments

 

 

25,698

 

 

 

-

 

 

 

25,698

 

 

 

-

 

Marketable equity securities

 

Marketable equity securities

 

 

11,163

 

 

 

11,163

 

 

 

-

 

 

 

-

 

Total financial assets

 

 

 

$

96,163

 

 

$

70,465

 

 

$

25,698

 

 

$

-

 

 

The Company did not have any transfers among fair value measurement levels during the three and six months ended June 30, 2016 or the year ended December 31, 2015. The Company did not have any financial assets or liabilities classified as level 3 financial instruments at June 30, 2016 and December 31, 2015.

Available-for-sale Securities
Available-for-sale Securities

Note 3. Available-for-sale Securities

The following is a summary of available-for-sale securities at June 30, 2016 (in thousands):

 

 

 

June 30, 2016

 

 

 

Amortized Cost

 

 

Gross

Unrealized Gain

 

 

Gross

Unrealized Loss

 

 

Fair Value

 

Money market funds

 

$

105

 

 

$

-

 

 

$

-

 

 

$

105

 

United States government agency securities

 

 

18,974

 

 

 

8

 

 

 

-

 

 

 

18,982

 

Corporate debt securities

 

 

57,323

 

 

 

57

 

 

 

(12

)

 

 

57,368

 

Marketable equity securities

 

 

-

 

 

 

4,487

 

 

 

-

 

 

 

4,487

 

Total available-for-sale securities

 

$

76,402

 

 

$

4,552

 

 

$

(12

)

 

$

80,942

 

 

The following is a summary of available-for-sale securities at December 31, 2015 (in thousands):

 

 

 

December 31, 2015

 

 

 

Amortized Cost

 

 

Gross

Unrealized Gain

 

 

Gross

Unrealized Loss

 

 

Fair Value

 

Money market funds

 

$

59,302

 

 

$

-

 

 

$

-

 

 

$

59,302

 

Corporate debt securities

 

 

25,747

 

 

 

-

 

 

 

(49

)

 

 

25,698

 

Marketable equity securities

 

 

-

 

 

 

11,163

 

 

 

-

 

 

 

11,163

 

Total available-for-sale securities

 

$

85,049

 

 

$

11,163

 

 

$

(49

)

 

$

96,163

 

 

Available-for-sale securities at June 30, 2016 and December 31, 2015, consisted of the following by contractual maturity (in thousands):

 

 

 

June 30, 2016

 

 

December 31, 2015

 

 

 

Amortized Cost

 

 

Fair Value

 

 

Amortized Cost

 

 

Fair Value

 

One year or less

 

$

66,291

 

 

$

66,311

 

 

$

85,049

 

 

$

85,000

 

Marketable equity securities

 

 

-

 

 

 

4,487

 

 

 

-

 

 

 

11,163

 

Greater than one year and less than five years

 

 

10,111

 

 

 

10,144

 

 

 

-

 

 

 

-

 

Total available-for-sale securities

 

$

76,402

 

 

$

80,942

 

 

$

85,049

 

 

$

96,163

 

 

The following tables show all available-for-sale marketable securities in an unrealized loss position for which an other-than-temporary impairment has not been recognized and the related gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

 

 

 

June 30, 2016

 

 

 

Less than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Fair Value

 

 

Unrealized

Loss

 

 

Fair Value

 

 

Unrealized

Loss

 

 

Fair Value

 

 

Unrealized

Loss

 

Corporate debt securities

 

$

20,114

 

 

$

(12

)

 

$

-

 

 

$

-

 

 

$

20,114

 

 

$

(12

)

Total available-for-sale securities

 

$

20,114

 

 

$

(12

)

 

$

-

 

 

$

-

 

 

$

20,114

 

 

$

(12

)

 

 

 

December 31, 2015

 

 

 

Less than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Fair Value

 

 

Unrealized

Loss

 

 

Fair Value

 

 

Unrealized

Loss

 

 

Fair Value

 

 

Unrealized

Loss

 

Corporate debt securities

 

$

20,170

 

 

$

(46

)

 

$

5,528

 

 

$

(3

)

 

$

25,698

 

 

$

(49

)

Total available-for-sale securities

 

$

20,170

 

 

$

(46

)

 

$

5,528

 

 

$

(3

)

 

$

25,698

 

 

$

(49

)

 

As of June 30, 2016, the Company considered the declines in market value of its marketable securities investment portfolio to be temporary in nature and did not consider any of its investments other-than-temporarily impaired. The Company typically invests in highly-rated securities, and its investment policy limits the amount of credit exposure to any one issuer. The policy generally requires investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss. Fair values were determined for each individual security in the investment portfolio. When evaluating an investment for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, changes in market interest rates, and the Company’s intent to sell, or whether it is more likely than not it will be required to sell, the investment before recovery of the investment’s cost basis. During the three and six months ended June 30, 2016 and 2015, the Company did not recognize any other-than-temporary impairment loss. The Company has no current requirement or intent to sell the securities in an unrealized loss position. The Company expects to recover up to (or beyond) the initial cost of investment for securities held.

The Company did not record any gross realized gains from the sale or maturity of available-for-sale investments during the three and six months ended June 30, 2016 and 2015. The Company did not record any gross realized losses from the sale or maturity of available-for-sale investments during the three and six months ended June 30, 2016 and 2015.

Inventories
Inventories

Note 4. Inventories

Inventories at June 30, 2016 and December 31, 2015, consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2016

 

 

2015

 

Work-in-process

 

$

3,354

 

 

$

3,187

 

Finished goods

 

 

8,757

 

 

 

7,625

 

Total inventories

 

$

12,111

 

 

$

10,812

 

 

Goodwill and Intangible Assets, net
Goodwill and Intangible Assets, net

 

Note 5. Goodwill and Intangible Assets, net

Goodwill

During the three and six months ended June 30, 2016, the Company did not dispose of or recognize additional goodwill. The Company expects to perform its annual review of goodwill on August 31, 2016, unless indicators of impairment are identified prior to that date. As of June 30, 2016, the Company has not identified any indicators of goodwill impairment.

Intangible Assets, net

The following is a summary of intangible assets, net at June 30, 2016 (in thousands):

 

 

 

June 30, 2016

 

 

 

Gross

Carrying

Amount

 

 

Accumulated Amortization

 

 

Net

Carrying

Amount

 

Acquisition-related intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

Reacquired license - INTERCEPT Asia

 

$

2,017

 

 

$

(1,178

)

 

$

839

 

Total intangible assets

 

$

2,017

 

 

$

(1,178

)

 

$

839

 

 

The following is a summary of intangible assets, net at December 31, 2015 (in thousands):

 

 

 

December 31, 2015

 

 

 

Gross

Carrying

Amount

 

 

Accumulated Amortization

 

 

Net

Carrying

Amount

 

Acquisition-related intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

Reacquired license - INTERCEPT Asia

 

$

2,017

 

 

$

(1,077

)

 

$

940

 

Total intangible assets

 

$

2,017

 

 

$

(1,077

)

 

$

940

 

 

The Company recognized $0.05 million and $0.1 million in amortization expense related to intangible assets for each of the three and six months ended June 30, 2016 and 2015. During the three and six months ended June 30, 2016 and 2015, there were no impairment charges recognized related to the acquired intangible assets.

At June 30, 2016, the expected amortization expense of the intangible assets, net is $0.1 million for the remaining six months of 2016, $0.2 million annually beginning with the year ending December 31, 2017, through the year ending December 31, 2019, and $0.1 million for the year ending December 31, 2020.

Marketable Equity Investments
Marketable Equity Investments

Note 6. Marketable Equity Investments

The Company held an investment in preferred shares of Aduro which it had historically accounted for under the cost method of accounting with a net carrying value of zero. In April 2015, Aduro’s common stock began trading on the NASDAQ Global Select Market, under the symbol “ADRO”. At the time of Aduro’s initial public offering (“IPO”), the Company’s preferred shares in Aduro converted to 396,700 shares of common stock, and the fair value of the Company’s investment became readily determinable and, as a result became a marketable equity security. Therefore, the Company no longer accounts for the investment in Aduro under the cost basis of accounting. The Company now reflects the investment in Aduro as an available-for-sale security included in investment in marketable equity securities on the Company’s unaudited condensed consolidated balance sheet (Note 2) and will adjust the carrying value of this investment to fair value each quarterly reporting period, with changes in fair value recorded within other comprehensive income (loss), net of tax.

 

Accrued Liabilities
Accrued Liabilities

Note 7. Accrued Liabilities

Accrued liabilities at June 30, 2016 and December 31, 2015, consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2016

 

 

2015

 

Accrued compensation and related costs

 

$

5,074

 

 

$

5,198

 

Accrued professional services

 

 

3,294

 

 

 

2,337

 

Accrued customer costs

 

 

482

 

 

 

987

 

Accrued insurance premiums

 

 

-

 

 

 

438

 

Other accrued expenses

 

 

589

 

 

 

893

 

Total accrued liabilities

 

$

9,439

 

 

$

9,853

 

 

Debt
Debt

Note 8. Debt

 

Debt consisted of the following (in thousands):

 

 

 

June 30, 2016

 

 

 

Principal

 

 

Unamortized Discount

 

 

Total

 

Loan and Security Agreement

 

$

20,000

 

 

$

(147

)

 

$

19,853

 

Less: debt - current

 

 

(6,208

)

 

 

81

 

 

 

(6,127

)

Debt - non-current

 

$

13,792

 

 

$

(66

)

 

$

13,726

 

 

 

 

December 31, 2015

 

 

 

Principal

 

 

Unamortized Discount

 

 

Net Carrying

Value

 

Loan and Security Agreement

 

$

20,000

 

 

$

(196

)

 

$

19,804

 

Less: debt - current

 

 

(3,050

)

 

 

94

 

 

 

(2,956

)

Debt - non-current

 

$

16,950

 

 

$

(102

)

 

$

16,848

 

 

Principal and interest payments on debt at June 30, 2016, are expected to be as follows (in thousands):

 

Year ended December 31,

 

Principal

 

 

Interest

 

 

Total

 

2016

 

$

3,050

 

 

$

654

 

 

$

3,704

 

2017

 

 

6,428

 

 

 

980

 

 

 

7,408

 

2018

 

 

6,892

 

 

 

517

 

 

 

7,409

 

2019

 

 

3,630

 

 

 

1,474

 

 

 

5,104

 

Total

 

$

20,000

 

 

$

3,625

 

 

$

23,625

 

 

Loan and Security Agreement

On June 30, 2014, the Company entered into a five year loan and security agreement with Oxford Finance LLC (the “Term Loan Agreement”) to borrow up to $30.0 million in term loans in three equal tranches (the “Term Loans”). On June 30, 2014, the Company received $10.0 million from the first tranche (“Term Loan A”). The second tranche of $10.0 million (“Term Loan B”) was drawn on June 15, 2015. On September 29, 2015, the Term Loan Agreement was amended to extend (i) the period in which the third tranche of $10.0 million (“Term Loan C”) can be drawn and (ii) the interest-only period for all advances under the Term Loan Agreement. The Company determined that the amendment to the Term Loan Agreement resulted in a modification. As a result, the Term Loan will continue to be accounted for by using the effective interest method, with a new effective interest rate based on revised cash flows calculated on a prospective basis upon the execution of the amendment to the Term Loan Agreement. As amended, the availability of Term Loan C was subject to the Company achieving consolidated trailing six months’ revenue at a specified threshold (the “Revenue Event”) no later than June 30, 2016. The Company did not achieve the Revenue Event by June 30, 2016, and therefore Term Loan C was not available to be drawn. Term Loan A bears an interest rate of 6.95%. Term Loan B bears an interest rate of 7.01%. All of the Term Loans mature on June 1, 2019. The Company was required to make interest only payments through June 2016, followed by thirty-six months of equal principal and interest payments thereafter. The Company is also required to make a final payment equal to 7% of the principal amounts of the Term Loans drawn payable on the earlier to occur of maturity or prepayment. The costs associated with the final payment are recognized as interest expense over the life of the Term Loans. The Company may prepay at any time the Term Loans subject to declining prepayment fees over the term of the Term Loan Agreement. The Company pledged all current and future assets, excluding its intellectual property and 35% of the Company’s investment in its subsidiary, Cerus Europe B.V., as security for borrowings under the Term Loan Agreement. The Term Loan Agreement contains certain nonfinancial covenants, with which the Company was in compliance at June 30, 2016. See Note 15 regarding the amendment of the July 28, 2016 Term Loan Agreement to include an additional interest-only period for all advances under the Term Loan Agreement.

Commitments and Contingencies
Commitments and Contingencies

Note 9. Commitments and Contingencies

Operating Leases

The Company leases its office facilities, located in Concord, California and Amersfoort, the Netherlands, and certain equipment under non-cancelable operating leases with initial terms in excess of one year that require the Company to pay operating costs, property taxes, insurance and maintenance. The operating leases expire at various dates through 2020, with certain of the leases providing for renewal options, provisions for adjusting future lease payments based on the consumer price index, and the right to terminate the lease early. The Company’s leased facilities qualify as operating leases under ASC Topic 840, “Leases” and as such, are not included on its consolidated balance sheets.

Financed Leasehold Improvements

In 2010, the Company financed $1.1 million of leasehold improvements. The Company pays for the financed leasehold improvements as a component of rent and is required to reimburse its landlord over the remaining life of the respective leases. At June 30, 2016, the Company had an outstanding liability of $0.4 million related to these leasehold improvements, of which $0.1 million was reflected in “Accrued liabilities” and $0.3 million was reflected in “Other non-current liabilities” on the Company’s consolidated balance sheets.

Purchase Commitments

The Company is party to agreements with certain suppliers for certain components of the INTERCEPT Blood System. Certain of these agreements require minimum purchase commitments from the Company.

Stockholders' Equity
Stockholders' Equity

Note 10. Stockholders’ Equity

Sales Agreement

On May 5, 2016, the Company entered into Amendment No. 2 to the Controlled Equity OfferingSM Sales Agreement, dated August 31, 2012, as previously amended on March 21, 2014, (together, the “Amended Cantor Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) that provides for the issuance and sale of shares of the Company’s common stock over the term of the Amended Cantor Agreement having an aggregate offering price of up to $132.2 million through Cantor. As a result of Amendment No. 2, at May 5, 2016, the Company had $70 million of common stock available to be sold under the Amended Cantor Agreement. Under the Amended Cantor Agreement, Cantor also acts as the Company’s sales agent and receives compensation based on an aggregate of 2% of the gross proceeds on the sale price per share of its common stock. The issuance and sale of these shares by the Company pursuant to the Amended Cantor Agreement are deemed an “at-the-market” offering and are registered under the Securities Act of 1933, as amended. During the six months ended June 30, 2016, 2.4 million shares of the Company’s common stock were sold under the Amended Cantor Agreement for net proceeds of $14.5 million. At June 30, 2016, the Company had $70 million of common stock available to be sold under the Amended Cantor Agreement.

Stock-Based Compensation
Stock-Based Compensation

Note 11. Stock-Based Compensation

Employee Stock Purchase Plan

The Company maintains an Employee Stock Purchase Plan (the “Purchase Plan”), which is intended to qualify as an employee stock purchase plan within the meaning of Section 423(b) of the Internal Revenue Code. Under the Purchase Plan, the Company’s Board of Directors may authorize participation by eligible employees, including officers, in periodic offerings. Under the Purchase Plan eligible employee participants may purchase shares of common stock of the Company at a purchase price equal to 85% of the lower of the fair market value per share on the start date of the offering period or the fair market value per share on the purchase date. The Purchase Plan consists of a fixed offering period of 12 months with two purchase periods within each offering period. The Purchase Plan was authorized to issue an aggregate of 1,320,500 shares. On June 10, 2015, the Company’s stockholders approved an amendment and restatement of the Purchase Plan that increased the aggregate number of shares of common stock authorized for issuance under the Purchase Plan by 1,500,000 shares. At June 30, 2016, the Company had 1,551,390 shares available for future issuance.

2008 Equity Incentive Plan

The Company also maintains an equity compensation plan to provide long-term incentives for employees, contractors, and members of its Board of Directors. The Company currently grants equity awards from one plan, the 2008 Equity Incentive Plan (the “2008 Plan”). The 2008 Plan allows for the issuance of non-statutory and incentive stock options, restricted stock, restricted stock units, stock appreciation rights, other stock-related awards, and performance awards which may be settled in cash, stock, or other property. On June 6, 2012 and June 12, 2013, the stockholders approved amendments to the Amended 2008 Plan (collectively the “Amended 2008 Plan”) such that the Amended 2008 Plan had reserved for issuance an amount not to exceed 19,540,940 shares. On June 10, 2015, the Company’s stockholders approved an amendment and restatement of the 2008 Plan that increased the aggregate number of shares of common stock authorized for issuance under the 2008 Plan by 5,000,000 shares. Awards under the Amended 2008 Plan generally have a maximum term of 10 years from the date of the award. The Amended 2008 Plan generally requires options to be granted at 100% of the fair market value of the Company’s common stock subject to the option on the date of grant. Options granted by the Company to employees generally vest over four years. Restricted stock units (RSUs) are measured based on the fair market value of the underlying stock on the date of grant and will generally vest over three years. Performance-based stock or cash awards granted under the Amended 2008 Plan are limited to either 500,000 shares of common stock or $1.0 million per recipient per calendar year. The attainment of any performance-based awards granted shall be conclusively determined by a committee designated by the Company’s Board of Directors. At June 30, 2016, no performance-based stock options were outstanding.

At June 30, 2016, the Company had an aggregate of approximately 20.9 million shares of its common stock subject to outstanding options or RSUs, or remaining available for future issuance under the Amended 2008 Plan, of which approximately 15.9 million shares and 0.7 million shares were subject to outstanding options and outstanding RSUs, respectively, and approximately 4.4 million shares were available for future issuance under the Amended 2008 Plan. The Company’s policy is to issue new shares of common stock upon the exercise of options or vesting of RSUs.

Activity under the Company’s equity incentive plans related to stock options is set forth below (in thousands except per share amounts):

 

 

 

Number of

Options Outstanding

 

 

Weighted

Average

Exercise

Price per

Share

 

Balances at December 31, 2015

 

 

14,119

 

 

$

4.21

 

Granted

 

 

2,225

 

 

 

5.15

 

Forfeited

 

 

(63

)

 

 

6.11

 

Expired

 

 

(232

)

 

 

6.81

 

Exercised

 

 

(196

)

 

 

2.58

 

Balances at June 30, 2016

 

 

15,853

 

 

$

4.32

 

 

Activity under the Company’s equity incentive plans related to RSUs is set forth below (in thousands except per share amounts):

 

 

 

Number of

Shares

Outstanding

 

 

Weighted

Average

Grant Date

Fair Value

per Share

 

Balances at December 31, 2015

 

 

-

 

 

$

-

 

Granted

 

 

687

 

 

 

5.14

 

Forfeited

 

 

(12

)

 

 

5.06

 

Vested

 

 

-

 

 

 

-

 

Balances at June 30, 2016

 

 

675

 

 

$

5.14

 

 

The Company uses the Black-Scholes option pricing model to determine the grant-date fair value of stock options and employee stock purchase plan rights. The Black-Scholes option pricing model is affected by the Company’s stock price, as well as assumptions regarding a number of complex and subjective variables, which include the expected term of the grants, actual and projected employee stock option exercise behaviors, including forfeitures, the Company’s expected stock price volatility, the risk-free interest rate and expected dividends. The Company recognizes the grant-date fair value of the stock award as stock-based compensation expense on a straight-line basis over the requisite service period, which is the vesting period, and is adjusted for estimated forfeitures.

Income Taxes
Income Taxes

Note 12. Income Taxes

Intraperiod tax allocation rules require the Company to allocate the provision for income taxes between continuing operations and other categories of earnings, such as other comprehensive income. In periods in which the Company has a year-to-date pre-tax loss from continuing operations and pre-tax items in other categories of earnings, such as other comprehensive income, the Company must allocate the tax provision to the other categories of earnings. The Company then records a related tax effect in continuing operations. During the three and six months ended June 30, 2016, the Company recorded unrealized losses of $0.4 million and $4.3 million, net of taxes, on its investments in available-for-sale securities in other comprehensive income. As a result, the Company recorded tax expense of $1.0 million and $1.8 million for the three and six months ended June, 2016, respectively.

Development and License Agreements
Development and License Agreements

Note 13. Development and License Agreements

Agreements with Fresenius

Fresenius manufactures and supplies the platelet and plasma systems to the Company under a supply agreement. Under the previous agreements with Fresenius, the Company was required to pay royalties on INTERCEPT Blood System product sales at royalty rates that varied by product. In addition, Fresenius was obligated to sell, and the Company was obligated to purchase, up to a certain specified annual volume of finished disposable kits for the platelet and plasma systems from Fresenius for both clinical and commercial use. The pricing was fixed for finished kits with successive decreasing pricing tiers at various annual production volumes. Fresenius was also obligated to purchase and maintain specified inventory levels of the Company’s proprietary inactivation compounds and adsorption media from the Company at fixed prices.

In October 2015, the Company entered into an Amended and Restated Manufacturing and Supply Agreement (the “2015 Agreement”) with Fresenius, which amended and restated its previous agreements. Under the 2015 Agreement, Fresenius continues to be obligated to sell and the Company is obligated to purchase finished disposable kits for the Company’s platelet and plasma systems and the Company’s red blood cell system product candidate (the “RBC Sets”). The 2015 Agreement permits the Company to purchase platelet and plasma systems and RBC Sets from third parties to the extent necessary to maintain supply qualifications with such third parties or where local or regional manufacturing is needed to obtain product registrations or sales. Pricing terms per unit are initially fixed and decline at specified annual production levels, and are subject to certain adjustments after the initial pricing term. Under the 2015 Agreement, the Company is no longer required to make royalty payments to Fresenius for the sale of products after June 30, 2015. Under the 2015 Agreement, the Company maintains the amounts due from the components sold to Fresenius as a current asset on its accompanying consolidated balance sheets until such time as the Company purchases finished disposable kits using those components.

The 2015 Agreement also requires the Company to make certain payments totaling €8.6 million (“Manufacturing and Development Payments”) to Fresenius in 2016 and on December 31 of the earlier of (a) the year of achievement of certain production volumes or (b) 2022. Because these payments represent unconditional payment obligations, the Company recognized its liability for these payments at their net present value at discount rate of 9.72% based on the Company’s effective borrowing rate. The Manufacturing and Development Payments liability is accreted through interest expense based on the estimated timing of its ultimate settlement. As of June 30, 2016, the Company had paid $1.2 million (€1.1 million) and accrued $7.0 million (€6.4 million) related to the Manufacturing and Development Payments, of which $2.2 million (€2.0 million) was included in “Manufacturing and development obligations - current”, and $4.8 million (€4.4 million) was included in “Manufacturing and development obligations - non-current” on the Company’s Consolidated Balance Sheets.

As of December 31, 2015, the Company had accrued $7.8 million (€7.2 million) related to the Manufacturing and Development Payments, of which $3.3 million (€3.0 million) was included in “Manufacturing and development obligations - current”, and $4.5 million (€4.2 million) was included in “Manufacturing and development obligations - non-current” on the Company’s Consolidated Balance Sheets.

The Manufacturing and Development Payments will be made to support certain projects Fresenius will perform on behalf of the Company related to R&D activities and manufacturing efficiency activities. The Company allocated $4.8 million to R&D activities and $2.4 million to manufacturing efficiency activities based on their market value in October 2015. The prepaid asset related to amounts paid up front for the R&D activities to be conducted by Fresenius on behalf of the Company is expensed over the period which such activities occur. The manufacturing efficiency asset is expensed on a straight line basis over the life of the 2015 Agreement. As of June 30, 2016 and December 31, 2015, the prepaid asset related to amounts paid up front for the R&D activities to be conducted by Fresenius on behalf of the Company was included in “Other current assets” on the Company’s Consolidated Balance Sheets at $3.3 million and $4.1 million, respectively. As of June 30, 2016 and December 31, 2015, the manufacturing efficiency asset was included in “Other assets” on the Company’s Consolidated Balance Sheets at $2.2 million and $2.4 million, respectively.

The initial term of the 2015 Agreement extends through July 1, 2025 (the “Initial Term”) and is automatically renewed thereafter for additional two year terms (each, a “Renewal Term”), subject to termination by either party upon (i) two years written notice prior to the expiration of the Initial Term or (ii) one year written notice prior to the expiration of any Renewal Term. Under the 2015 Agreement, the Company has the right, but not the obligation, to purchase certain assets and assume certain liabilities from Fresenius.

The Company made payments to Fresenius of $3.5 million and $4.7 million relating to the manufacturing of the Company’s products during the three months ended June 30, 2016 and 2015, respectively, and $7.0 million and $9.4 million during the six months ended June 30, 2016 and 2015, respectively. At June 30, 2016 and December 31, 2015, the Company owed Fresenius $2.8 million and $2.5 million, respectively, for platelet and plasma system disposable kits manufactured. At June 30, 2016 and December 31, 2015, amounts due from Fresenius were $0.9 million and $0.2 million, respectively.

Agreement with BARDA

In June 2016, the Company entered into an agreement with the Biomedical Advanced Research and Development Authority (“BARDA”) to support the Company’s clinical development of the INTERCEPT Blood System for red blood cells (the “red blood cell system”) for pathogen reduction of red blood cell components.

The five-year agreement with BARDA includes a base period with funding of up to $30.8 million (the “Base Period”), and subsequent option periods (each an “Option Period”) that, if exercised by BARDA and completed, would bring the total funding opportunity to $180.5 million over the five-year contract period. If exercised by BARDA, subsequent options would fund activities related to broader implementation of the platelet and plasma system or the red blood cell system in areas of Zika virus risk, clinical and regulatory development programs in support of the potential licensure of the red blood cell system in the U.S., and development, manufacturing and scale-up activities for the red blood cell system. The Company could be responsible for co-investment of up to $14.5 million. BARDA will make periodic assessments of the Company’s progress and the continuation of the agreement is based on the Company’s success in completing the required tasks under the Base Period and each Option Period (if and to the extent any Option Periods are exercised by BARDA). BARDA has rights under certain contract clauses to terminate the agreement, including the ability to terminate the agreement for convenience at any time.

Under the contract, the Company is reimbursed and recognizes revenue as allowable direct contract costs are incurred plus allowable indirect costs, based on approved provisional indirect billing rates, which permit recovery of fringe benefits, overhead and general and administrative expenses. The Company did not recognize revenue under the BARDA agreement during the three and six months ended June 30, 2016 and 2015.

Segment, Customer and Geographic Information
Segment, Customer and Geographic Information

Note 14. Segment, Customer and Geographic Information

The Company continues to operate in only one segment, blood safety. The Company’s chief executive officer is the chief operating decision maker who evaluates performance based on the net revenues and operating loss of the blood safety segment. The Company considers the sale of all of its INTERCEPT Blood System products to be similar in nature and function, and any revenue earned from services is minimal.

The Company’s operations outside of the U.S. include a wholly-owned subsidiary headquartered in Europe. The Company’s operations in the U.S. are responsible for the R&D and global and domestic commercialization of the INTERCEPT Blood System, while operations in Europe are responsible for the commercialization efforts of the platelet and plasma systems in Europe, the Commonwealth of Independent States and the Middle East. Product revenues are attributed to each region based on the location of the customer, and in the case of non-product revenues, on the location of the collaboration partner.

The Company had the following significant customers that accounted for more than 10% of the Company’s total revenue, each of which operates in a country outside of the U.S., during the three and six months ended June 30, 2016 and 2015 (in percentages):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

2015

 

 

2016

 

 

2015

 

Etablissement Francais du Sang

 

*

 

 

25

%

 

*

 

 

 

25

%

Rode Kruis Vlaanderen

 

*

 

*

 

 

 

10

%

 

*

 

 

*

Represents an amount less than 10% of product revenue.

Subsequent Event
Subsequent Event

Note 15. Subsequent Event

 

On July 28, 2016, the Oxford Term Loan Agreement was amended to include an additional interest-only period for all advances under the Term Loan Agreement. As amended, the Company is required to make interest only payments from August 2016 through January 2017 followed by twenty-nine months of equal principal and interest payments thereafter.

Summary of Significant Accounting Policies (Policies)

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include those of Cerus Corporation and its subsidiary, Cerus Europe B.V. (together with Cerus Corporation, hereinafter “Cerus” or the “Company”) after elimination of all intercompany accounts and transactions. These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring entries, considered necessary for a fair presentation have been made. Operating results for the three and six months ended June 30, 2016, are not necessarily indicative of the results that may be expected for the year ending December 31, 2016, or for any future periods.

These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2015, which were included in the Company’s 2015 Annual Report on Form 10-K, filed with the SEC on March 9, 2016. The accompanying condensed consolidated balance sheet as of December 31, 2015, has been derived from the Company’s audited consolidated financial statements as of that date, except as described in the New Accounting Pronouncement section below related to the adoption of Accounting Standards Update (“ASU”) No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.

Use of Estimates

The preparation of financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, which are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates under different assumptions or conditions.

Revenue

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 605-25, “Revenue Recognition – Arrangements with Multiple Deliverables,” as applicable. Revenue is recognized when (i) persuasive evidence of the arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) pricing is fixed or determinable; and (iv) collectability is reasonably assured. The Company’s main sources of revenues for the three and six months ended June 30, 2016 and 2015 were product revenue from sales of the INTERCEPT Blood System for platelets and plasma (“platelet and plasma systems” or “disposable kits”) and UVA illumination devices (“illuminators”).

Revenue related to product sales is generally recognized when the Company fulfills its obligations for each element of an agreement. For all sales of the Company’s INTERCEPT Blood System products, the Company uses a binding purchase order or signed sales contract as evidence of an arrangement. The Company sells its platelet and plasma systems directly to blood banks, hospitals, universities, government agencies, as well as to distributors in certain regions. Generally, the Company’s contracts with its customers do not provide for open return rights, except within a reasonable time after receipt of goods in the case of defective or non-conforming product. Deliverables and the units of accounting vary according to the provisions of each purchase order or sales contract. For revenue arrangements with multiple elements, the Company determines whether the delivered elements meet the criteria as separate units of accounting. Such criteria require that the deliverable have stand-alone value to the customer and that if a general right of return exists relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. Once the Company determines if the deliverable meets the criteria for a separate unit of accounting, the Company must determine how the consideration should be allocated between the deliverables and how the separate units of accounting should be recognized as revenue. Consideration received is allocated to elements that are identified as discrete units of accounting. Because the Company has no vendor specific objective evidence or third party evidence for its systems due to the Company’s variability in its pricing across the regions into which it sells its products, the allocation of revenue is based on best estimated selling price for the products sold. The objective of best estimated selling price is to determine the price at which the Company would transact a sale, had the product been sold on a stand-alone basis. The Company determines best estimated selling price for its systems by considering multiple factors. The Company regularly reviews best estimated selling price.

The Company receives reimbursement under certain U.S. government contracts or grants that support research and development of defined projects. These contracts or grants generally provide for reimbursement of approved costs incurred as defined in the various grants. Funds received are non-refundable. Revenue related to the cost reimbursement provisions under U.S. government contracts or grants are recognized as the qualified direct and indirect costs on the projects are incurred. Costs incurred related to services performed under these contracts are included as a component of research and development expenses in the Company’s consolidated statements of operations. The Company’s use of estimates in recording accrued liabilities for R&D activities (see “Use of Estimates” above) affects the revenue recorded from development funding and government contracts or grants. Actual results may differ from those estimates under different assumptions or conditions.

Freight costs charged to customers are recorded as a component of revenue. Taxes that the Company invoices to its customers and remits to governments are recorded on a net basis, which excludes such tax from product revenue.

Research and Development Expenses

In accordance with ASC Topic 730, “Accounting for Research and Development Expenses,” research and development (“R&D”) expenses are charged to expense when incurred, including cost incurred under each grant that has been awarded to the Company by the U.S. government or development contracts. Research and development expenses include salaries and related expenses for scientific and regulatory personnel, payments to consultants, supplies and chemicals used in in-house laboratories, costs of R&D facilities, depreciation of equipment and external contract research expenses, including clinical trials, preclinical safety studies, other laboratory studies, process development and product manufacturing for research use.

The Company’s use of estimates in recording accrued liabilities for R&D activities (see “Use of Estimates” above) affects the amounts of R&D expenses recorded from development funding and government contracts or grants. Actual results may differ from those estimates under different assumptions or conditions.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be classified as cash equivalents. These investments primarily consist of money market instruments, and are classified as available-for-sale.

Investments

Investments with original maturities of greater than three months primarily include corporate debt, U.S. government agency securities and marketable equity securities of Aduro Biotech, Inc. (“Aduro”), and are designated as available-for-sale and classified as short-term investments or investment in marketable equity securities, in accordance with ASC Topic 320, “Accounting for Certain Investments in Debt and Equity Securities”. Available-for-sale securities are carried at estimated fair value. The Company views its available-for-sale portfolio as available for use in its current operations. Unrealized gains and losses derived by changes in the estimated fair value of available-for-sale securities were recorded in “Net unrealized (losses) gains on available-for-sale investments, net of taxes” on the Company’s unaudited condensed consolidated statements of comprehensive loss. Realized gains (losses) from the sale of available-for-sale investments were recorded in “Other income, net” on the Company’s unaudited condensed consolidated statements of operations. The costs of securities sold are based on the specific identification method, if applicable. The Company reported the amortization of any premium and accretion of any discount resulting from the purchase of debt securities as a component of interest income.

The Company also reviews its available-for-sale securities on a regular basis to evaluate whether any security has experienced an other-than-temporary decline in fair value. Other-than-temporary declines in market value, if any, are recorded in “Other income, net” on the Company’s unaudited condensed consolidated statements of operations.

Restricted Cash

The Company holds a certificate of deposit with a domestic bank for any potential decommissioning resulting from the Company’s possession of radioactive material. The certificate of deposit is held to satisfy the financial surety requirements of the California Department of Health Services and is recorded in “Other assets” on the Company’s unaudited condensed consolidated balance sheets. The Company also has certain non-U.S. dollar denominated deposits recorded as “Restricted cash” in compliance with certain foreign contractual requirements.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, available-for-sale securities and accounts receivable.

Pursuant to the Company’s investment policy, substantially all of the Company’s cash, cash equivalents and available-for-sale securities are maintained at major financial institutions of high credit standing. The Company monitors the financial credit worthiness of the issuers of its investments and limits the concentration in individual securities and types of investments that exist within its investment portfolio. Generally, all of the Company’s investments carry high credit quality ratings, which is in accordance with its investment policy. At June 30, 2016, the fair value of the Company’s marketable equity securities of Aduro is subject to the underlying volatility of Aduro’s stock price. At June 30, 2016, the Company does not believe there is significant financial risk from non-performance by the issuers of the Company’s cash equivalents and short-term investments.

Concentrations of credit risk with respect to trade receivables exist. On a regular basis, including at the time of sale, the Company performs credit evaluations of its significant customers that it expects to sell to on credit terms. Generally, the Company does not require collateral from its customers to secure accounts receivable. To the extent that the Company determines specific invoices or customer accounts may be uncollectible, the Company establishes an allowance for doubtful accounts against the accounts receivable on its unaudited condensed consolidated balance sheets and records a charge on its unaudited condensed consolidated statements of operations as a component of selling, general and administrative expenses.

The Company had three customers that accounted for more than 10% of the Company’s outstanding trade receivables at June 30, 2016 and December 31, 2015. These customers cumulatively represented approximately 37% and 49% of the Company’s outstanding trade receivables at June 30, 2016 and December 31, 2015, respectively. To date, the Company has not experienced collection difficulties from these customers.

Inventories

At June 30, 2016 and December 31, 2015, inventory consisted of work-in-process and finished goods only. Finished goods include INTERCEPT disposable kits, illuminators, and certain replacement parts for the illuminators. Platelet and plasma systems’ disposable kits generally have a two-year life from the date of manufacture. Illuminators and replacement parts do not have regulated expiration dates. Work-in-process includes certain components that are manufactured over a protracted length of time before being sold to, and ultimately incorporated and assembled by Fresenius Kabi Deutschland GmbH or Fresenius, Inc. (with their affiliates, “Fresenius”) into the finished INTERCEPT disposable kits. The Company maintains an inventory balance based on its current sales projections, and at each reporting period, the Company evaluates whether its work-in-process inventory would be sold to Fresenius for production of finished units in order to sell to existing and prospective customers within the next twelve-month period. It is not customary for the Company’s production cycle for inventory to exceed twelve months. Instead, the Company uses its best judgment to factor in lead times for the production of its work-in-process and finished units to meet the Company’s forecasted demands. If actual results differ from those estimates, work-in-process inventory could potentially accumulate for periods exceeding one year. At June 30, 2016 and December 31, 2015, the Company classified its work-in-process inventory as a current asset on its consolidated balance sheets based on its evaluation that the work-in-process inventory would be sold to Fresenius for finished disposable kit production within each respective subsequent twelve-month period.

Inventory is recorded at the lower of cost, determined on a first-in, first-out basis, or net realizable value. The Company uses significant judgment to analyze and determine if the composition of its inventory is obsolete, slow-moving or unsalable and frequently reviews such determinations. The Company writes down specifically identified unusable, obsolete, slow-moving, or known unsalable inventory that has no alternative use in the period that it is first recognized by using a number of factors including product expiration dates, open and unfulfilled orders, and sales forecasts. Any write-down of its inventory to net realizable value establishes a new cost basis and will be maintained even if certain circumstances suggest that the inventory is recoverable in subsequent periods. Costs associated with the write-down of inventory are recorded in “Cost of revenue” on the Company’s consolidated statements of operations. At June 30, 2016 and December 31, 2015, the Company had $1.6 million and $1.8 million, respectively, recorded for potential obsolete, expiring or unsalable product.

Property and Equipment, net

Property and equipment is comprised of furniture, equipment, leasehold improvements, information technology hardware and software and is recorded at cost. At the time the property and equipment is ready for its intended use, it is depreciated on a straight-line basis over the estimated useful lives of the assets (generally three to five years). Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful lives of the improvements.

Capitalization of Software Costs

The Company capitalizes certain significant costs incurred in the acquisition and development of software for internal use, including the costs of the software, materials, and consultants during the application development stage. Costs incurred prior to the application development stage, costs incurred once the application is substantially complete and ready for its intended use, and other costs not qualifying for capitalization, including training and maintenance costs, are charged to expense as incurred. The capitalized costs associated with the enterprise resource planning system are being amortized over the estimated useful life of five years.

Goodwill and Intangible Assets, net

Intangible assets, net, which include a license for the right to commercialize the INTERCEPT Blood System in Asia, are subject to ratable amortization over the original estimated useful life of ten years. The amortization of the Company’s intangible assets, net, is recorded in “Amortization of intangible assets” on the Company’s consolidated statements of operations. Goodwill is not amortized but instead is subject to an impairment test performed on an annual basis, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Such impairment analysis is performed on August 31 of each fiscal year, or more frequently if indicators of impairment exist. The test for goodwill impairment may be assessed using qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than the carrying amount, the Company must then proceed with performing the quantitative two-step process to test goodwill for impairment; otherwise, goodwill is not considered impaired and no further testing is warranted. The Company may choose not to perform the qualitative assessment to test goodwill for impairment and proceed directly to the quantitative two-step process; however, the Company may revert to the qualitative assessment to test goodwill for impairment in any subsequent period. The first step of the two-step process compares the fair value of each reporting unit with its respective carrying amount, including goodwill. The Company has determined that it operates in one reporting unit and estimates the fair value of its one reporting unit using the enterprise approach under which it considers the quoted market capitalization of the Company as reported on the Nasdaq Global Market. The Company considers quoted market prices that are available in active markets to be the best evidence of fair value. The Company also considers other factors, which include future forecasted results, the economic environment and overall market conditions. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and, therefore, the second step of the impairment test is unnecessary. The second step of the two-step process, which is used to measure the amount of impairment loss, compares the implied fair value of each reporting unit’s goodwill, based on the present value of future cash flows, with the respective carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The Company performs an impairment test on its intangible assets, in accordance ASC Topic 360-10, “Property, Plant and Equipment,” if certain events or changes in circumstances occur which indicate that the carrying amounts of its intangible assets may not be recoverable. If the intangible assets are not recoverable, an impairment loss would be recognized by the Company based on the excess amount of the carrying value of the intangible assets over its fair value. For further details regarding the impairment analysis, reference is made to the section below under “Long-lived Assets.” See Note 5 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding the Company’s impairment analysis and the valuation of goodwill and intangible assets, net.

Long-lived Assets

The Company evaluates its long-lived assets for impairment by continually monitoring events and changes in circumstances that could indicate carrying amounts of its long-lived assets may not be recoverable. When such events or changes in circumstances occur, the Company assesses recoverability by determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows. If the expected undiscounted future cash flows are less than the carrying amount of these assets, the Company then measures the amount of the impairment loss based on the excess of the carrying amount over the fair value of the assets. The Company did not recognize impairment charges related to its long-lived assets during the three and six months ended June 30, 2016 and 2015.

Foreign Currency Remeasurement

The functional currency of the Company’s foreign subsidiary is the U.S. dollar. Monetary assets and liabilities denominated in foreign currencies are remeasured in U.S. dollars using the exchange rates at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are remeasured in U.S. dollars using historical exchange rates. Revenues and expenses are remeasured using average exchange rates prevailing during the period. Remeasurements are recorded in the Company’s consolidated statements of operations.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation - Stock Compensation. Stock-based compensation expense is measured at the grant-date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period, and is adjusted for estimated forfeitures. To the extent that stock options contain performance criteria for vesting, stock-based compensation is recognized once the performance criteria are probable of being achieved.

For stock-based awards issued to non-employees, the Company follows ASC Topic 505-50, Equity Based Payment to Non-Employees and considers the measurement date at which the fair value of the stock-based award is measured to be the earlier of (i) the date at which a commitment for performance by the grantee to earn the equity instrument is reached or (ii) the date at which the grantee’s performance is complete. The Company recognizes stock-based compensation expense for the fair value of the vested portion of the non-employee stock-based awards in its consolidated statements of operations.

See Note 11 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding the Company’s stock-based compensation expenses.

Income Taxes

The Company accounts for income taxes using an asset and liability approach in accordance with ASC Topic 740, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. ASC Topic 740 requires derecognition of tax positions that do not have a greater than 50% likelihood of being recognized upon review by a taxing authority having full knowledge of all relevant information. Use of a valuation allowance as described in ASC Topic 740 is not an appropriate substitute for derecognition of a tax position. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in its income tax expense. To date, the Company has not recognized any interest and penalties in its unaudited condensed consolidated statements of operations, nor has it accrued for or made payments for interest and penalties. Although the Company believes it more likely than not that a taxing authority would agree with its current tax positions, there can be no assurance that the tax positions the Company has taken will be substantiated by a taxing authority if reviewed. The Company’s U.S. federal and California tax years through 2015 remain subject to examination by the taxing jurisdictions due to unutilized net operating losses and research credits. The Company continues to carry a full valuation allowance on all of its net deferred tax assets, except for its indefinite lived intangibles.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share gives effect to all potentially dilutive common shares outstanding for the period. The potentially dilutive securities include stock options, employee stock purchase plan rights, warrants and restricted stock units, which are calculated using the treasury stock method. Diluted net loss per share also gives effect to potential adjustments to the numerator for gains resulting from the revaluation of warrants to fair value for the period, even if the Company is in a net loss position if the effect would result in more dilution.

Certain potential dilutive securities were excluded from the dilution calculation for the three and six months ended June 30, 2016 and 2015, as their inclusion would have been anti-dilutive.

The following table sets forth the reconciliation of the numerator and denominator used in the computation of basic and diluted net loss per share for the three and six months ended June 30, 2016 and 2015 (in thousands, except per share amounts):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Numerator for Basic and Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss used for basic calculation

 

$

(18,166

)

 

$

(15,972

)

 

$

(35,029

)

 

$

(25,432

)

Effect of revaluation of warrant liability

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,589

)

Adjusted net loss used for diluted calculation

 

$

(18,166

)

 

$

(15,972

)

 

$

(35,029

)

 

$

(29,021

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average number of shares outstanding

 

 

101,563

 

 

 

95,728

 

 

 

100,517

 

 

 

94,576

 

Effect of dilutive potential shares

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,106

 

Diluted weighted average number of shares outstanding

 

 

101,563

 

 

 

95,728

 

 

 

100,517

 

 

 

95,682

 

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.18

)

 

$

(0.17

)

 

$

(0.35

)

 

$

(0.27

)

Diluted

 

$

(0.18

)

 

$

(0.17

)

 

$

(0.35

)

 

$

(0.30

)

 

The table below presents shares underlying stock options, restricted stock units and/or warrants that were excluded from the calculation of the weighted average number of shares outstanding used for the calculation of diluted net loss per share. These are excluded from the calculation due to their anti-dilutive effect for the three and six months ended June 30, 2016 and 2015 (shares in thousands):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Weighted average number of anti-dilutive potential shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

15,891

 

 

 

14,015

 

 

 

15,331

 

 

 

13,102

 

Restricted stock units

 

 

640

 

 

 

-

 

 

 

428

 

 

 

-

 

Warrants

 

 

-

 

 

 

2,985

 

 

 

-

 

 

 

-

 

Total

 

 

16,531

 

 

 

17,000

 

 

 

15,759

 

 

 

13,102

 

 

Guarantee and Indemnification Arrangements

The Company recognizes the fair value for guarantee and indemnification arrangements issued or modified by the Company. In addition, the Company monitors the conditions that are subject to the guarantees and indemnifications in order to identify if a loss has occurred. If the Company determines it is probable that a loss has occurred, then any such estimable loss would be recognized under those guarantees and indemnifications. Some of the agreements that the Company is a party to contain provisions that indemnify the counter party from damages and costs resulting from claims that the Company’s technology infringes the intellectual property rights of a third party or claims that the sale or use of the Company’s products have caused personal injury or other damage or loss. The Company has not received any such requests for indemnification under these provisions and has not been required to make material payments pursuant to these provisions.

The Company generally provides for a one-year warranty on certain of its INTERCEPT blood-safety products covering defects in materials and workmanship. The Company accrues costs associated with warranty obligations when claims become known and are estimable. The Company has not experienced significant or systemic warranty claims nor is it aware of any existing current warranty claims. Accordingly, the Company had not accrued for any future warranty costs for its products at June 30, 2016 and December 31, 2015.

Fair Value of Financial Instruments

The Company applies the provisions of fair value relating to its financial assets and liabilities. The carrying amounts of accounts receivables, accounts payable, and other accrued liabilities approximate their fair value due to the relative short-term maturities. Based on the borrowing rates currently available to the Company for loans with similar terms, the Company believes the fair value of its debt approximates their carrying amounts. The Company measures and records certain financial assets and liabilities at fair value on a recurring basis, including its available-for-sale securities and warrant liability prior to the expiration and exercise of the warrants in November 2015. The Company classifies instruments within Level 1 if quoted prices are available in active markets for identical assets, which include the Company’s cash accounts and money market funds. The Company classifies instruments in Level 2 if the instruments are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. These instruments include the Company’s corporate debt and U.S. government agency securities holdings. The available-for-sale securities are held by a custodian who obtains investment prices from a third party pricing provider that uses standard inputs (observable in the market) to models which vary by asset class. The Company classifies instruments in Level 3 if one or more significant inputs or significant value drivers are unobservable. The Company assesses any transfers among fair value measurement levels at the end of each reporting period.

See Notes 2 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding the Company’s valuation of financial instruments.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606), Deferral of the Effective Date, which defers by one year the effective date of ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017 (including interim periods within those periods). Early adoption is permitted to the original effective date of December 15, 2016 (including interim periods within those periods). In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies how to identify the unit of accounting for the principal versus agent evaluation and how to apply the control principle to certain types of arrangements. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies the implementation guidance on identifying performance obligations and licensing. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which addresses certain issues on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. These ASUs will be effective for the Company in the first quarter of fiscal year 2018, using one of two retrospective application methods. The Company has not selected a transition method and is currently assessing the potential effects of this ASU on the Company’s condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and provide related disclosures. The standard is effective for annual periods beginning after December 15, 2016, and interim periods thereafter, with early application permitted. The adoption of this ASU is not expected to have a material impact on the Company’s condensed consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the corresponding debt liability rather than as an asset. The Company has adopted this ASU effective January 1, 2016 under the retrospective application method. To conform to the current period presentation, the Company reclassified $32,000 and $36,000, which were previously included in Other current assets and Other assets, respectively, in the Company’s condensed consolidated balance sheet as of December 31, 2015, as a reduction of Debt-current and Debt-non-current, respectively. As a result of the reclassifications, Other current assets and Debt-current decreased by $32,000, and Other assets and Debt- non-current decreased by $36,000, in the Company’s condensed consolidated balance sheet as of December 31, 2015.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10), which requires all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, this ASU eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. The standard is effective for annual periods beginning after December 15, 2017, and interim periods thereafter, with early application permitted. The Company is currently assessing the future impact of this ASU on the Company’s condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The standard is effective for annual periods beginning after December 15, 2018, and interim periods thereafter, with early application permitted. The Company is currently assessing the future impact of this ASU on its consolidated financial statements and anticipates the new guidance will significantly impact the Company’s condensed consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting, which requires entities to record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement when awards vest or are settled, and eliminates additional paid-in capital (APIC) pools. The ASU also changes the accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation, and the accounting for forfeitures, and provides two practical expedients for nonpublic entities. The standard is effective for annual periods beginning after December 15, 2016, and interim periods thereafter, with early application permitted. The Company is currently assessing the future impact of this ASU on the Company’s condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. The standard is effective for annual periods beginning after December 15, 2019, and interim periods thereafter, with early application permitted. The Company is currently assessing the future impact of this ASU on the Company’s condensed consolidated financial statements.

Summary of Significant Accounting Policies (Tables)

The following table sets forth the reconciliation of the numerator and denominator used in the computation of basic and diluted net loss per share for the three and six months ended June 30, 2016 and 2015 (in thousands, except per share amounts):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Numerator for Basic and Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss used for basic calculation

 

$

(18,166

)

 

$

(15,972

)

 

$

(35,029

)

 

$

(25,432

)

Effect of revaluation of warrant liability

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,589

)

Adjusted net loss used for diluted calculation

 

$

(18,166

)

 

$

(15,972

)

 

$

(35,029

)

 

$

(29,021

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average number of shares outstanding

 

 

101,563

 

 

 

95,728

 

 

 

100,517

 

 

 

94,576

 

Effect of dilutive potential shares

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,106

 

Diluted weighted average number of shares outstanding

 

 

101,563

 

 

 

95,728

 

 

 

100,517

 

 

 

95,682

 

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.18

)

 

$

(0.17

)

 

$

(0.35

)

 

$

(0.27

)

Diluted

 

$

(0.18

)

 

$

(0.17

)

 

$

(0.35

)

 

$

(0.30

)

 

The table below presents shares underlying stock options, restricted stock units and/or warrants that were excluded from the calculation of the weighted average number of shares outstanding used for the calculation of diluted net loss per share. These are excluded from the calculation due to their anti-dilutive effect for the three and six months ended June 30, 2016 and 2015 (shares in thousands):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Weighted average number of anti-dilutive potential shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

15,891

 

 

 

14,015

 

 

 

15,331

 

 

 

13,102

 

Restricted stock units

 

 

640

 

 

 

-

 

 

 

428

 

 

 

-

 

Warrants

 

 

-

 

 

 

2,985

 

 

 

-

 

 

 

-

 

Total

 

 

16,531

 

 

 

17,000

 

 

 

15,759

 

 

 

13,102

 

 

Fair Value on Financial Instruments (Tables)
Fair Values of Financial Assets and Liabilities

The fair values of the Company’s financial assets and liabilities were determined using the following inputs at June 30, 2016 (in thousands):

 

 

 

Balance sheet

 

 

 

 

 

Quoted

Prices in

Active

Markets for Identical

Assets

 

 

Significant

Other

Observable

Inputs

 

 

Significant Unobservable Inputs

 

 

 

classification

 

Total

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Money market funds

 

Cash and cash equivalents

 

$

105

 

 

$

105

 

 

$

-

 

 

$

-

 

United States government agency securities

 

Short-term investments

 

 

18,982

 

 

 

-

 

 

 

18,982

 

 

 

-

 

Corporate debt securities

 

Short-term investments

 

 

57,368

 

 

 

-

 

 

 

57,368

 

 

 

-

 

Marketable equity securities

 

Marketable equity securities

 

 

4,487

 

 

 

4,487

 

 

 

-

 

 

 

-

 

Total financial assets

 

 

 

$

80,942

 

 

$

4,592

 

 

$

76,350

 

 

$

-

 

 

The fair values of the Company’s financial assets and liabilities were determined using the following inputs at December 31, 2015 (in thousands):

 

 

 

Balance sheet

 

 

 

 

 

Quoted

Prices in

Active

Markets for Identical

Assets

 

 

Significant

Other

Observable

Inputs

 

 

Significant Unobservable Inputs

 

 

 

classification

 

Total

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Money market funds

 

Cash and cash equivalents

 

$

59,302

 

 

$

59,302

 

 

$

-

 

 

$

-

 

Corporate debt securities

 

Short-term investments

 

 

25,698

 

 

 

-

 

 

 

25,698

 

 

 

-

 

Marketable equity securities

 

Marketable equity securities

 

 

11,163

 

 

 

11,163

 

 

 

-

 

 

 

-

 

Total financial assets

 

 

 

$

96,163

 

 

$

70,465

 

 

$

25,698

 

 

$

-

 

 

Available-for-sale Securities (Tables)

The following is a summary of available-for-sale securities at June 30, 2016 (in thousands):

 

 

 

June 30, 2016

 

 

 

Amortized Cost

 

 

Gross

Unrealized Gain

 

 

Gross

Unrealized Loss

 

 

Fair Value

 

Money market funds

 

$

105

 

 

$

-

 

 

$

-

 

 

$

105

 

United States government agency securities

 

 

18,974

 

 

 

8

 

 

 

-

 

 

 

18,982

 

Corporate debt securities

 

 

57,323

 

 

 

57

 

 

 

(12

)

 

 

57,368

 

Marketable equity securities

 

 

-

 

 

 

4,487

 

 

 

-

 

 

 

4,487

 

Total available-for-sale securities

 

$

76,402

 

 

$

4,552

 

 

$

(12

)

 

$

80,942

 

 

The following is a summary of available-for-sale securities at December 31, 2015 (in thousands):

 

 

 

December 31, 2015

 

 

 

Amortized Cost

 

 

Gross

Unrealized Gain

 

 

Gross

Unrealized Loss

 

 

Fair Value

 

Money market funds

 

$

59,302

 

 

$

-

 

 

$

-

 

 

$

59,302

 

Corporate debt securities

 

 

25,747

 

 

 

-

 

 

 

(49

)

 

 

25,698

 

Marketable equity securities

 

 

-

 

 

 

11,163

 

 

 

-

 

 

 

11,163

 

Total available-for-sale securities

 

$

85,049

 

 

$

11,163

 

 

$

(49

)

 

$

96,163

 

 

Available-for-sale securities at June 30, 2016 and December 31, 2015, consisted of the following by contractual maturity (in thousands):

 

 

 

June 30, 2016

 

 

December 31, 2015

 

 

 

Amortized Cost

 

 

Fair Value

 

 

Amortized Cost

 

 

Fair Value

 

One year or less

 

$

66,291

 

 

$

66,311

 

 

$

85,049

 

 

$

85,000

 

Marketable equity securities

 

 

-

 

 

 

4,487

 

 

 

-

 

 

 

11,163

 

Greater than one year and less than five years

 

 

10,111

 

 

 

10,144

 

 

 

-

 

 

 

-

 

Total available-for-sale securities

 

$

76,402

 

 

$

80,942

 

 

$

85,049

 

 

$

96,163

 

 

The following tables show all available-for-sale marketable securities in an unrealized loss position for which an other-than-temporary impairment has not been recognized and the related gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

 

 

 

June 30, 2016

 

 

 

Less than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Fair Value

 

 

Unrealized

Loss

 

 

Fair Value

 

 

Unrealized

Loss

 

 

Fair Value

 

 

Unrealized

Loss

 

Corporate debt securities

 

$

20,114

 

 

$

(12

)

 

$

-

 

 

$

-

 

 

$

20,114

 

 

$

(12

)

Total available-for-sale securities

 

$

20,114

 

 

$

(12

)

 

$

-

 

 

$

-

 

 

$

20,114

 

 

$

(12

)

 

 

 

December 31, 2015

 

 

 

Less than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Fair Value

 

 

Unrealized

Loss

 

 

Fair Value

 

 

Unrealized

Loss

 

 

Fair Value

 

 

Unrealized

Loss

 

Corporate debt securities

 

$

20,170

 

 

$

(46

)

 

$

5,528

 

 

$

(3

)

 

$

25,698

 

 

$

(49

)

Total available-for-sale securities

 

$

20,170

 

 

$

(46

)

 

$

5,528

 

 

$

(3

)

 

$

25,698

 

 

$

(49

)

 

Inventories (Tables)
Inventories

Inventories at June 30, 2016 and December 31, 2015, consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2016

 

 

2015

 

Work-in-process

 

$

3,354

 

 

$

3,187

 

Finished goods

 

 

8,757

 

 

 

7,625

 

Total inventories

 

$

12,111

 

 

$

10,812

 

 

Goodwill and Intangible Assets, net (Tables)
Summary of Intangible Assets

The following is a summary of intangible assets, net at June 30, 2016 (in thousands):

 

 

 

June 30, 2016

 

 

 

Gross

Carrying

Amount

 

 

Accumulated Amortization

 

 

Net

Carrying

Amount

 

Acquisition-related intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

Reacquired license - INTERCEPT Asia

 

$

2,017

 

 

$

(1,178

)

 

$

839

 

Total intangible assets

 

$

2,017

 

 

$

(1,178

)

 

$

839

 

 

The following is a summary of intangible assets, net at December 31, 2015 (in thousands):

 

 

 

December 31, 2015

 

 

 

Gross

Carrying

Amount

 

 

Accumulated Amortization

 

 

Net

Carrying

Amount

 

Acquisition-related intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

Reacquired license - INTERCEPT Asia

 

$

2,017

 

 

$

(1,077

)

 

$

940

 

Total intangible assets

 

$

2,017

 

 

$

(1,077

)

 

$

940

 

 

Accrued Liabilities (Tables)
Accrued Liabilities

Accrued liabilities at June 30, 2016 and December 31, 2015, consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2016

 

 

2015

 

Accrued compensation and related costs

 

$

5,074

 

 

$

5,198

 

Accrued professional services

 

 

3,294

 

 

 

2,337

 

Accrued customer costs

 

 

482

 

 

 

987

 

Accrued insurance premiums

 

 

-

 

 

 

438

 

Other accrued expenses

 

 

589

 

 

 

893

 

Total accrued liabilities

 

$

9,439

 

 

$

9,853

 

 

Debt (Tables)

Debt consisted of the following (in thousands):

 

 

 

June 30, 2016

 

 

 

Principal

 

 

Unamortized Discount

 

 

Total

 

Loan and Security Agreement

 

$

20,000

 

 

$

(147

)

 

$

19,853

 

Less: debt - current

 

 

(6,208

)

 

 

81

 

 

 

(6,127

)

Debt - non-current

 

$

13,792

 

 

$

(66

)

 

$

13,726

 

 

 

 

December 31, 2015

 

 

 

Principal

 

 

Unamortized Discount

 

 

Net Carrying

Value

 

Loan and Security Agreement

 

$

20,000

 

 

$

(196

)

 

$

19,804

 

Less: debt - current

 

 

(3,050

)

 

 

94

 

 

 

(2,956

)

Debt - non-current

 

$

16,950

 

 

$

(102

)

 

$

16,848

 

 

Principal and interest payments on debt at June 30, 2016, are expected to be as follows (in thousands):

 

Year ended December 31,

 

Principal

 

 

Interest

 

 

Total

 

2016

 

$

3,050

 

 

$

654

 

 

$

3,704

 

2017

 

 

6,428

 

 

 

980

 

 

 

7,408

 

2018

 

 

6,892

 

 

 

517

 

 

 

7,409

 

2019

 

 

3,630

 

 

 

1,474

 

 

 

5,104

 

Total

 

$

20,000

 

 

$

3,625

 

 

$

23,625

 

 

Stock-Based Compensation (Tables) (2008 Equity Incentive Plan)

Activity under the Company’s equity incentive plans related to stock options is set forth below (in thousands except per share amounts):

 

 

 

Number of

Options Outstanding

 

 

Weighted

Average

Exercise

Price per

Share

 

Balances at December 31, 2015

 

 

14,119

 

 

$

4.21

 

Granted

 

 

2,225

 

 

 

5.15

 

Forfeited

 

 

(63

)

 

 

6.11

 

Expired

 

 

(232

)

 

 

6.81

 

Exercised

 

 

(196

)

 

 

2.58

 

Balances at June 30, 2016

 

 

15,853

 

 

$

4.32

 

 

Activity under the Company’s equity incentive plans related to RSUs is set forth below (in thousands except per share amounts):

 

 

 

Number of

Shares

Outstanding

 

 

Weighted

Average

Grant Date

Fair Value

per Share

 

Balances at December 31, 2015

 

 

-

 

 

$

-

 

Granted

 

 

687

 

 

 

5.14

 

Forfeited

 

 

(12

)

 

 

5.06

 

Vested

 

 

-

 

 

 

-

 

Balances at June 30, 2016

 

 

675

 

 

$

5.14

 

 

Segment, Customer and Geographic Information (Tables)
Customer that Accounted for More Than Ten Percent of Total Revenue

The Company had the following significant customers that accounted for more than 10% of the Company’s total revenue, each of which operates in a country outside of the U.S., during the three and six months ended June 30, 2016 and 2015 (in percentages):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

2015

 

 

2016

 

 

2015

 

Etablissement Francais du Sang

 

*

 

 

25

%

 

*

 

 

 

25

%

Rode Kruis Vlaanderen

 

*

 

*

 

 

 

10

%

 

*

 

 

*

Represents an amount less than 10% of product revenue.

Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
3 Months Ended 6 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2016
Customer
Jun. 30, 2015
Jun. 30, 2016
Segment
Customer
Jun. 30, 2015
Dec. 31, 2015
Customer
Dec. 31, 2015
Accounting Standards Update 2015-03
Scenario, Previously Reported
Dec. 31, 2015
Accounting Standards Update 2015-03
Scenario, Adjustment
Jun. 30, 2016
Computer Software, Intangible Asset
Jun. 30, 2016
Minimum
Jun. 30, 2016
Maximum
Jun. 30, 2016
Trade Accounts Receivable
Customer Concentration Risk
Dec. 31, 2015
Trade Accounts Receivable
Customer Concentration Risk
Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Number of major customers representing outstanding trade receivables
 
 
 
 
 
 
 
 
 
Concentration risk, percentage
 
 
 
 
 
 
 
 
 
 
37.00% 
49.00% 
Life of inventory
 
 
2 years 
 
 
 
 
 
 
 
 
 
Protracted length of inventory
 
 
1 year 
 
 
 
 
 
 
 
 
 
Inventory valuation reserves
$ 1,600,000 
 
$ 1,600,000 
 
$ 1,800,000 
 
 
 
 
 
 
 
Estimated useful life of property and equipment
 
 
 
 
 
 
 
 
3 years 
5 years 
 
 
Enterprise resource planning system, estimated useful life
 
 
 
 
 
 
 
5 years 
 
 
 
 
Estimated useful life of intangible assets
 
 
10 years 
 
 
 
 
 
 
 
 
 
Number of reportable segments
 
 
 
 
 
 
 
 
 
 
 
Impairment charges on long-lived assets
 
 
 
 
 
 
 
 
Period of warranty
 
 
1 year 
 
 
 
 
 
 
 
 
 
Warranty claim liability
 
 
 
 
 
 
 
 
 
Other current assets
5,345,000 
 
5,345,000 
 
4,755,000 
32,000 
(32,000)
 
 
 
 
 
Other assets
2,293,000 
 
2,293,000 
 
2,579,000 
36,000 
(36,000)
 
 
 
 
 
Debt - current
6,127,000 
 
6,127,000 
 
2,956,000 
 
(32,000)
 
 
 
 
 
Debt - non-current
$ 13,726,000 
 
$ 13,726,000 
 
$ 16,848,000 
 
$ (36,000)
 
 
 
 
 
Reconciliation of Numerator and Denominator Used in Computation of Basic and Diluted Net Income Loss per Share (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Numerator for Basic and Diluted:
 
 
 
 
Net loss used for basic calculation
$ (18,166)
$ (15,972)
$ (35,029)
$ (25,432)
Effect of revaluation of warrant liability
 
 
 
(3,589)
Adjusted net loss used for diluted calculation
$ (18,166)
$ (15,972)
$ (35,029)
$ (29,021)
Denominator:
 
 
 
 
Basic weighted average number of shares outstanding
101,563 
95,728 
100,517 
94,576 
Effect of dilutive potential shares
 
 
 
1,106 
Diluted weighted average number of shares outstanding
101,563 
95,728 
100,517 
95,682 
Net loss per share:
 
 
 
 
Basic
$ (0.18)
$ (0.17)
$ (0.35)
$ (0.27)
Diluted
$ (0.18)
$ (0.17)
$ (0.35)
$ (0.30)
Shares Underlying Stock Options, Excluded from Calculation of Weighted Average Number of Shares Outstanding used for Calculation of Diluted Net Loss Per Share (Detail)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Weighted average number of anti-dilutive potential shares
16,531 
17,000 
15,759 
13,102 
Stock Options
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Weighted average number of anti-dilutive potential shares
15,891 
14,015 
15,331 
13,102 
Restricted Stock Units
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Weighted average number of anti-dilutive potential shares
640 
 
428 
 
Warrants
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Weighted average number of anti-dilutive potential shares
 
2,985 
 
 
Fair Values on Financial Assets and Liabilities (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Fair value of financial assets and liabilities
 
 
Total financial assets
$ 80,942 
$ 96,163 
Level 1
 
 
Fair value of financial assets and liabilities
 
 
Total financial assets
4,592 
70,465 
Level 2
 
 
Fair value of financial assets and liabilities
 
 
Total financial assets
76,350 
25,698 
Money market funds
 
 
Fair value of financial assets and liabilities
 
 
Total financial assets
105 
59,302 
Money market funds |
Level 1
 
 
Fair value of financial assets and liabilities
 
 
Total financial assets
105 
59,302 
United States government agency securities
 
 
Fair value of financial assets and liabilities
 
 
Total financial assets
18,982 
 
United States government agency securities |
Level 2
 
 
Fair value of financial assets and liabilities
 
 
Total financial assets
18,982 
 
Corporate debt securities
 
 
Fair value of financial assets and liabilities
 
 
Total financial assets
57,368 
25,698 
Corporate debt securities |
Level 2
 
 
Fair value of financial assets and liabilities
 
 
Total financial assets
57,368 
25,698 
Marketable equity securities
 
 
Fair value of financial assets and liabilities
 
 
Total financial assets
4,487 
11,163 
Marketable equity securities |
Level 1
 
 
Fair value of financial assets and liabilities
 
 
Total financial assets
$ 4,487 
$ 11,163 
Summary of Available-for-Sale Securities (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized Cost
$ 76,402 
$ 85,049 
Gross Unrealized Gain
4,552 
11,163 
Gross Unrealized (Loss)
(12)
(49)
Fair Value
80,942 
96,163 
Money market funds
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized Cost
105 
59,302 
Fair Value
105 
59,302 
United States government agency securities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized Cost
18,974 
 
Gross Unrealized Gain
 
Fair Value
18,982 
 
Corporate debt securities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized Cost
57,323 
25,747 
Gross Unrealized Gain
57 
 
Gross Unrealized (Loss)
(12)
(49)
Fair Value
57,368 
25,698 
Marketable equity securities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Gross Unrealized Gain
4,487 
11,163 
Fair Value
$ 4,487 
$ 11,163 
Available-for-Sale Debt Securities by Original Contractual Maturity (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Investments Debt And Equity Securities [Abstract]
 
 
One year or less, amortized cost
$ 66,291 
$ 85,049 
Marketable equity securities
Greater than one year and less than five years, amortized cost
10,111 
 
Amortized Cost
76,402 
85,049 
One year or less, fair value
66,311 
85,000 
Marketable equity securities
4,487 
11,163 
Greater than one year and less than five years, fair value
10,144 
 
Total available-for-sale securities fair value
$ 80,942 
$ 96,163 
Available-for-Sale Marketable Securities in Unrealized Position (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
 
 
Less than 12 Months, Fair Value
$ 20,114 
$ 20,170 
Less than 12 Months, Unrealized Loss
(12)
(46)
12 Months or Longer, Fair Value
 
5,528 
12 Months or Longer, Unrealized Loss
 
(3)
Total, Fair Value
20,114 
25,698 
Total, Unrealized Loss
(12)
(49)
Corporate debt securities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Less than 12 Months, Fair Value
20,114 
20,170 
Less than 12 Months, Unrealized Loss
(12)
(46)
12 Months or Longer, Fair Value
 
5,528 
12 Months or Longer, Unrealized Loss
 
(3)
Total, Fair Value
20,114 
25,698 
Total, Unrealized Loss
$ (12)
$ (49)
Available-for-Sale Securities - Additional Information (Detail) (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Investments Debt And Equity Securities [Abstract]
 
 
 
 
Other-than-temporary impairment losses
$ 0 
$ 0 
$ 0 
$ 0 
Gross realized gains from the sale or maturity of available-for-sale investments
Gross realized losses from the sale or maturity of available-for-sale investments
$ 0 
$ 0 
$ 0 
$ 0 
Inventories (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Inventory Disclosure [Abstract]
 
 
Work-in-process
$ 3,354 
$ 3,187 
Finished goods
8,757 
7,625 
Total inventories
$ 12,111 
$ 10,812 
Goodwill and Intangible Assets Net - Additional Information (Detail) (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Goodwill And Intangible Assets Disclosure [Abstract]
 
 
 
 
Dispose, impair or recognition of additional goodwill
$ 0 
 
$ 0 
 
Impairment charges on goodwill
 
 
 
Amortization of intangible assets
51,000 
51,000 
101,000 
101,000 
Impairment losses recognized related to the acquired intangible assets
Annual amortization expense of the intangible assets, 2016 (remaining six months)
100,000 
 
100,000 
 
Annual amortization expense of the intangible assets, 2017
200,000 
 
200,000 
 
Annual amortization expense of the intangible assets, 2018
200,000 
 
200,000 
 
Annual amortization expense of the intangible assets, 2019
200,000 
 
200,000 
 
Annual amortization expense of the intangible assets, 2020
$ 100,000 
 
$ 100,000 
 
Summary of Intangible Assets Net (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Acquired Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
$ 2,017 
$ 2,017 
Accumulated Amortization
(1,178)
(1,077)
Net Carrying Amount
839 
940 
Reacquired license - INTERCEPT Asia
 
 
Acquired Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
2,017 
2,017 
Accumulated Amortization
(1,178)
(1,077)
Net Carrying Amount
$ 839 
$ 940 
Marketable Equity Investments - Additional Information (Detail) (USD $)
1 Months Ended
Jun. 30, 2016
Apr. 30, 2015
Aduro
Investment [Line Items]
 
 
Carrying value of investment
$ 0 
 
Preferred shares converted to common stock
 
396,700 
Accrued Liabilities (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Payables And Accruals [Abstract]
 
 
Accrued compensation and related costs
$ 5,074 
$ 5,198 
Accrued professional services
3,294 
2,337 
Accrued customer costs
482 
987 
Accrued insurance premiums
 
438 
Other accrued expenses
589 
893 
Total accrued liabilities
$ 9,439 
$ 9,853 
Debt (Detail) (USD $)
Jun. 30, 2016
Dec. 31, 2015
Debt Instrument [Line Items]
 
 
Less: debt - current, Principal
$ (6,208,000)
$ (3,050,000)
Less: debt - current, Unamortized Discount
81,000 
94,000 
Less: debt-current
(6,127,000)
(2,956,000)
Debt - non-current, Principal
13,792,000 
16,950,000 
Debt - non-current, Unamortized Discount
(66,000)
(102,000)
Debt-non-current
13,726,000 
16,848,000 
Cerus Term Loans
 
 
Debt Instrument [Line Items]
 
 
Total debt, Principal
20,000,000 
20,000,000 
Total debt, Unamortized Discount
(147,000)
(196,000)
Total debt
$ 19,853,000 
$ 19,804,000 
Debt - Principal and Interest Payments on Debt (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Debt Disclosure [Abstract]
 
2016, Principal
$ 3,050 
2017, Principal
6,428 
2018, Principal
6,892 
2019, Principal
3,630 
Total, Principal
20,000 
2016, Interest
654 
2017, Interest
980 
2018, Interest
517 
2019, Interest
1,474 
Total, Interest
3,625 
2016, Total
3,704 
2017, Total
7,408 
2018, Total
7,409 
2019, Total
5,104 
Total
$ 23,625 
Debt - Additional Information (Detail) (Cerus Term Loans, USD $)
0 Months Ended 6 Months Ended
Jun. 30, 2014
Tranche
Jun. 30, 2016
Line of Credit Facility [Line Items]
 
 
Maximum borrowing limit
$ 30,000,000 
 
Term of agreement
5 years 
 
Number of loan tranches
 
Interest rate, description
 
Term Loan A bears an interest rate of 6.95%. Term Loan B bears an interest rate of 7.01%. 
Maturity period
 
Jun. 01, 2019 
Principal and interest payments
36 months 
 
Final payment term percent
7.00% 
 
Terms of required periodic payments of interest and principal
 
The Company was required to make interest only payments through June 2016, followed by thirty-six months of equal principal and interest payments thereafter. The Company is also required to make a final payment equal to 7% of the principal amounts of the Term Loans drawn payable on the earlier to occur of maturity or prepayment. 
First Tranche (Term Loan A)
 
 
Line of Credit Facility [Line Items]
 
 
Loan and security agreement
10,000,000 
 
Interest rate
6.95% 
 
Second Tranche (Term Loan B)
 
 
Line of Credit Facility [Line Items]
 
 
Loan and security agreement
10,000,000 
 
Borrowing conditions
 
The second tranche of $10.0 million (“Term Loan B”) was drawn on June 15, 2015. 
Interest rate
 
7.01% 
Third Tranche (Term Loan C)
 
 
Line of Credit Facility [Line Items]
 
 
Loan and security agreement
$ 10,000,000 
 
Borrowing conditions
 
As amended, the availability of Term Loan C was subject to the Company achieving consolidated trailing six months’ revenue at a specified threshold (the “Revenue Event”) no later than June 30, 2016. 
Securities Pledged as Collateral
 
 
Line of Credit Facility [Line Items]
 
 
Percentage of investments made in subsidiary
35.00% 
 
Commitments and Contingencies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Dec. 31, 2010
Commitments and Contingencies Disclosure [Line Items]
 
 
Minimum term of non-cancellable operating leases
1 year 
 
Expiration of non-cancellable operating leases maximum year
2020 
 
Financing for leasehold improvement
 
$ 1.1 
Outstanding liability related to leasehold improvements
0.4 
 
Accrued liabilities
 
 
Commitments and Contingencies Disclosure [Line Items]
 
 
Leasehold Improvements reflected in Accrued liabilities
0.1 
 
Other non-current liabilities
 
 
Commitments and Contingencies Disclosure [Line Items]
 
 
Leasehold Improvements reflected in Other non-current liabilities
$ 0.3 
 
Stockholders' Equity - Additional Information (Detail) (USD $)
Share data in Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Cantor
Sales Agreement
May 5, 2016
Cantor
Sales Agreement
Stockholders Equity Note [Line Items]
 
 
 
 
Maximum common stock offering price
 
 
$ 132,200,000 
 
Common stock registered for sale
 
 
70,000,000 
70,000,000 
Percentage of proceeds payable as compensation to underwriter
 
 
2.00% 
 
Common stock, number of shares issued
 
 
2.4 
 
Proceeds from common stock sold
$ 14,547,000 
$ 75,324,000 
$ 14,500,000 
 
Stock-Based Compensation - Additional Information (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
0 Months Ended 6 Months Ended
Jun. 10, 2015
Jun. 30, 2016
Dec. 31, 2015
Jun. 12, 2013
Employee Stock Purchase Plan
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Stock-based compensation, option to be granted at percentage of fair value of common stock
 
85.00% 
 
 
Employee Stock Purchase Plan, offering period
 
12 months 
 
 
Number of purchase periods within each offering period
 
 
 
Increase in shares of common stock authorized for issuance
1,500,000 
1,320,500 
 
 
Aggregate number of shares of common stock reserved for future issuance
 
1,551,390 
 
 
2008 Equity Incentive Plan
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Stock-based compensation, option to be granted at percentage of fair value of common stock
 
100.00% 
 
 
Increase in shares of common stock authorized for issuance
5,000,000 
 
 
 
Aggregate number of shares of common stock reserved for future issuance
 
20,900,000 
 
 
Employee Stock Purchase Plan, authorized shares for issuance
 
 
 
19,540,940 
Stock-based compensation, award term
 
10 years 
 
 
Performance-based stock options, outstanding
 
 
 
Outstanding options and other stock based awards
 
15,853,000 
14,119,000 
 
Number of shares available for future issuance
 
4,400,000 
 
 
2008 Equity Incentive Plan |
Stock Options
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Stock-based compensation, vesting period
 
4 years 
 
 
2008 Equity Incentive Plan |
Restricted Stock Units (RSUs)
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Stock-based compensation, vesting period
 
3 years 
 
 
Number of Restricted Stock Units Outstanding
 
675,000 
 
2008 Equity Incentive Plan |
Performance-based Stock or Cash Awards
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Employee Stock Purchase Plan, authorized shares for issuance
 
500,000 
 
 
Stock option plan granted on cash award
 
$ 1.0 
 
 
Income Taxes - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Income Tax Disclosure [Abstract]
 
 
 
 
Unrealized (losses) gains on available-for-sale investments, taxes
$ (389)
$ 7,493 
$ (4,311)
$ 7,512 
Provision (benefit) for income taxes
$ 983 
$ (2,035)
$ 1,795 
$ (2,016)
Development and License Agreements - Additional Information (Detail)
3 Months Ended 6 Months Ended 1 Months Ended 3 Months Ended 6 Months Ended 6 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2016
USD ($)
Jun. 30, 2015
USD ($)
Jun. 30, 2016
USD ($)
Jun. 30, 2015
USD ($)
Dec. 31, 2015
USD ($)
Jun. 30, 2016
BARDA Agreement
Jun. 30, 2016
BARDA Agreement
USD ($)
Jun. 30, 2015
BARDA Agreement
USD ($)
Jun. 30, 2016
BARDA Agreement
USD ($)
Jun. 30, 2015
BARDA Agreement
USD ($)
Jun. 30, 2016
BARDA Agreement
Maximum
Base Period
USD ($)
Jun. 30, 2016
BARDA Agreement
Maximum
Option Period
USD ($)
Jun. 30, 2016
Other current assets
USD ($)
Dec. 31, 2015
Other current assets
USD ($)
Jun. 30, 2016
Other assets
USD ($)
Dec. 31, 2015
Other assets
USD ($)
Jun. 30, 2016
Fresenius
USD ($)
Jun. 30, 2016
Cerus Corporation
BARDA Agreement
USD ($)
Jun. 30, 2016
Manufacturing and Supply Agreement
USD ($)
Dec. 31, 2015
Manufacturing and Supply Agreement
USD ($)
Jun. 30, 2016
Manufacturing and Supply Agreement
Fresenius
USD ($)
Jun. 30, 2016
Manufacturing and Supply Agreement
Fresenius
EUR (€)
Dec. 31, 2015
Manufacturing and Supply Agreement
Fresenius
USD ($)
Dec. 31, 2015
Manufacturing and Supply Agreement
Fresenius
EUR (€)
Dec. 31, 2016
Scenario Forecast
Manufacturing and Supply Agreement
Fresenius
EUR (€)
Licenses Agreements [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payments made based on the successful achievement of production volumes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
€ 8,600,000 
Accrual for manufacturing and development of entity products
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,000,000 
6,400,000 
7,800,000 
7,200,000 
 
Manufacturing and development obligations, discount rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9.72% 
9.72% 
 
 
 
Manufacturing and development obligations - current
2,221,000 
 
2,221,000 
 
3,282,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,200,000 
2,000,000 
3,300,000 
3,000,000 
 
Manufacturing and development obligations - non-current
4,844,000 
 
4,844,000 
 
4,542,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,800,000 
4,400,000 
4,500,000 
4,200,000 
 
Manufacturing and development payments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,200,000 
1,100,000 
 
 
 
Allocated amount for research and development activities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,800,000 
 
 
 
 
 
 
 
 
Manufacturing efficiency activity cost
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,400,000 
 
 
 
 
 
 
 
 
Research and development assets
 
 
 
 
 
 
 
 
 
 
 
 
3,300,000 
4,100,000 
 
 
 
 
 
 
 
 
 
 
 
Manufacturing efficiency assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,200,000 
2,400,000 
 
 
 
 
 
 
 
 
 
Payments made relating to the manufacturing of the products
3,500,000 
4,700,000 
7,000,000 
9,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrual for manufacturing of entity products
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,800,000 
2,500,000 
 
 
 
 
 
Amounts due from Fresenius
900,000 
 
900,000 
 
200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Committed fund receivable
 
 
 
 
 
 
 
 
 
 
30,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Committed fund receivable
 
 
 
 
 
 
 
 
 
 
 
180,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period of agreement
 
 
 
 
 
5 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Co-investment by the company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14,500,000 
 
 
 
 
 
 
 
Contracts revenue
 
 
 
 
 
 
$ 0 
$ 0 
$ 0 
$ 0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment, Customer and Geographic Information - Additional Information (Detail)
6 Months Ended
Jun. 30, 2016
Segment
Segment Reporting [Abstract]
 
Number of operating segments
Significant Customer that Accounted for More than Ten Percentage of Total Revenue (Detail) (Customer Concentration Risk, Sales Revenue, Goods, Net)
3 Months Ended 6 Months Ended
Jun. 30, 2015
Etablissement Francais du Sang
Jun. 30, 2015
Etablissement Francais du Sang
Jun. 30, 2016
Rode Kruis Vlaanderen
Revenue, Major Customer [Line Items]
 
 
 
Concentration risk, percentage
25.00% 
25.00% 
10.00%