HALOZYME THERAPEUTICS INC, 10-K filed on 3/2/2015
Annual Report
Document and Entity Information (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Feb. 24, 2015
Jun. 30, 2014
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
HALOZYME THERAPEUTICS INC 
 
 
Entity Central Index Key
0001159036 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2014 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2014 
 
 
Document Fiscal Period Focus
FY 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
$ 1.0 
Entity Common Stock, Shares Outstanding
 
126,704,135 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Current assets:
 
 
Cash and cash equivalents
$ 61,389 
$ 27,357 
Marketable securities, available-for-sale
74,234 
44,146 
Accounts receivable, net
9,149 
9,097 
Inventories
6,406 
6,170 
Prepaid expenses and other assets
10,143 
8,425 
Total current assets
161,321 
95,195 
Property and equipment, net
2,951 
3,422 
Prepaid expenses and other assets
1,205 
2,676 
Restricted cash
500 
500 
Total Assets
165,977 
101,793 
Current liabilities:
 
 
Accounts payable
3,003 
3,135 
Accrued expenses
13,961 
14,369 
Deferred revenue, current portion
7,367 
7,398 
Total current liabilities
24,331 
24,902 
Deferred revenue, net of current portion
47,267 
45,745 
Long-term debt, net
49,860 
49,772 
Other long-term liability
3,167 
1,364 
Commitments and contingencies (Note 9)
   
   
Stockholders' equity (deficit):
 
 
Preferred stock — $0.001 par value; 20,000 shares authorized; no shares issued and outstanding
Common stock — $0.001 par value; 200,000 shares authorized; 125,721 and 114,534 shares issued and outstanding at December 31, 2014 and 2013, respectively
126 
115 
Additional paid-in capital
491,694 
361,930 
Accumulated other comprehensive (loss) income
(41)
17 
Accumulated deficit
(450,427)
(382,052)
Total stockholders' equity (deficit)
41,352 
(19,990)
Total liabilities and stockholders' equity (deficit)
$ 165,977 
$ 101,793 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Statement of Financial Position [Abstract]
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares authorized
20,000 
20,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
200,000 
200,000 
Common stock, shares issued
125,721 
114,534 
Common stock, shares outstanding
125,721 
114,534 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Revenues:
 
 
 
Product sales, net
$ 37,823 
$ 24,439 
$ 2,887 
Revenues under collaborative agreements
28,086 
30,327 
39,438 
Royalties
9,425 
33 
Total revenues
75,334 
54,799 
42,325 
Operating expenses:
 
 
 
Cost of product sales
22,732 
6,246 
1,094 
Research and development
79,696 
96,640 
70,044 
Selling, general and administrative
35,942 
32,347 
24,812 
Total operating expenses
138,370 
135,233 
95,950 
Operating Loss
(63,036)
(80,434)
(53,625)
Other income (expense)
 
 
 
Investment and other income, net
242 
229 
73 
Interest expense
(5,581)
(3,274)
Net loss
$ (68,375)
$ (83,479)
$ (53,552)
Basic and diluted net loss per share
$ (0.56)
$ (0.74)
$ (0.48)
Shares used in computing basic and diluted net loss per share
122,690 
112,805 
111,077 
Consolidated Statements of Comprehensive Loss Statement (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Net loss
$ (68,375)
$ (83,479)
$ (53,552)
Unrealized (loss) gain marketable securities
(58)
17 
Total comprehensive loss
$ (68,433)
$ (83,462)
$ (53,552)
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Operating activities:
 
 
 
Net loss
$ (68,375)
$ (83,479)
$ (53,552)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Share-based compensation
15,274 
9,538 
8,349 
Depreciation and amortization
1,762 
1,227 
1,079 
Non-cash interest expense
2,025 
156 
Amortization of premiums marketable securities, net
1,457 
1,116 
Loss on disposal of equipment
233 
Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(52)
6,606 
(13,441)
Inventories
(236)
(3,499)
(2,103)
Prepaid expenses and other assets
(265)
1,959 
(4,421)
Restricted cash
(100)
50 
Accounts payable and accrued expenses
(816)
7,888 
(3,263)
Deferred revenue
1,490 
9,297 
2,962 
Other liabilities
(15)
(48)
45 
Net cash used in operating activities
(47,518)
(49,339)
(64,279)
Investing activities:
 
 
 
Purchases of marketable securities
(88,884)
(48,947)
Proceeds from maturities of marketable securities
57,301 
3,375 
Purchases of property and equipment
(1,368)
(2,297)
(1,413)
Net cash used in investing activities
(32,951)
(47,869)
(1,413)
Financing activities:
 
 
 
Proceeds from issuance of common stock, net
107,713 
81,477 
Proceeds from issuance of common stock under equity incentive plans, net
6,788 
5,079 
1,680 
Proceeds from issuance of long-term debt, net
19,985 
29,661 
Net cash provided by financing activities
114,501 
25,064 
112,818 
Net increase (decrease) in cash and cash equivalents
34,032 
(72,144)
47,126 
Cash and cash equivalents at beginning of period
27,357 
99,501 
52,375 
Cash and cash equivalents at end of period
61,389 
27,357 
99,501 
Supplemental disclosure of cash flow information:
 
 
 
Interest Paid
3,460 
3,099 
19 
Supplemental disclosure of noncash investing and financing activities:
 
 
 
Amounts accrued for purchases of property and equipment
156 
100 
154 
Capitalized property and liability associated with a build-to-suit lease arrangement
$ 0 
$ (1,450)
$ 1,450 
Consolidated Statements of Stockholders' Equity (Deficit) (USD $)
In Thousands, except Share data
Total
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Stockholders' Equity (Deficit), Total at Dec. 31, 2011
$ 10,901 
$ 104 
$ 255,818 
$ 0 
$ (245,021)
Shares at Dec. 31, 2011
 
103,989,000 
 
 
 
Share-based compensation expense
8,349 
 
8,349 
 
 
Issuance of common stock for cash, net, shares
 
7,820,000 
 
 
 
Issuance of common stock for cash, net
81,477 
81,469 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, shares
 
526,000 
 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net
1,680 
1,679 
 
 
Issuance of restricted stock awards, shares
 
374,000 
 
 
 
Issuance of restricted stock awards
 
 
Net loss
(53,552)
 
 
 
 
Stockholders' Equity (Deficit), Total at Dec. 31, 2012
48,855 
113 
347,315 
(298,573)
Shares at Dec. 31, 2012
 
112,709,000 
 
 
 
Share-based compensation expense
9,538 
 
9,538 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, shares
 
1,363,000 
 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net
5,079 
5,078 
 
 
Issuance of restricted stock awards, shares
461,729 
462,000 
 
 
 
Issuance of restricted stock awards
(1)
 
 
Other comprehensive income (loss)
17 
 
 
17 
 
Net loss
(83,479)
 
 
 
 
Stockholders' Equity (Deficit), Total at Dec. 31, 2013
(19,990)
115 
361,930 
17 
(382,052)
Shares at Dec. 31, 2013
 
114,534,000 
 
 
 
Share-based compensation expense
15,274 
 
15,274 
 
 
Issuance of common stock for cash, net, shares
 
8,846,000 
 
 
 
Issuance of common stock for cash, net
107,713 
107,704 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, shares
 
1,552,000 
 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net
6,788 
6,787 
 
 
Issuance of restricted stock awards, shares
789,345 
789,000 
 
 
 
Issuance of restricted stock awards
(1)
 
 
Other comprehensive income (loss)
(58)
 
 
(58)
 
Net loss
(68,375)
 
 
 
 
Stockholders' Equity (Deficit), Total at Dec. 31, 2014
$ 41,352 
$ 126 
$ 491,694 
$ (41)
$ (450,427)
Shares at Dec. 31, 2014
 
125,721,000 
 
 
 
Organization and Business
Organization and Business
Organization and Business
Halozyme Therapeutics, Inc. is seeking to translate our unique knowledge of the tumor microenvironment to create novel therapies that can improve cancer survival. Our research focuses on human enzymes that alter the extracellular matrix and tumor microenvironment. The extracellular matrix is a complex matrix of proteins and carbohydrates surrounding the cell that provides structural support in tissues and orchestrates many important biological activities, including cell migration, signaling and survival. Over many years, we have developed unique technology and scientific expertise enabling us to pursue this target-rich environment for the development of therapies.
Our proprietary enzymes can be used to facilitate the delivery of injected drugs and fluids, potentially enhancing the efficacy and the convenience of other drugs or can be used to alter abnormal tissue structures for clinical benefit. We have chosen to exploit our technology and expertise in a balanced way to modulate both risk and spend by: (1) developing our own proprietary products in therapeutic areas with significant unmet medical needs, with a focus on oncology, and (2) licensing our technology to biopharmaceutical companies to collaboratively develop products which combine our technology with the collaborators' proprietary compounds.
The majority of our approved product and product candidates are based on rHuPH20, our patented recombinant human hyaluronidase enzyme. rHuPH20 temporarily breaks down hyaluronic acid (HA), a naturally occurring substance that is a major component of the extracellular matrix in tissues throughout the body such as skin and cartilage. We believe this temporary degradation creates an opportunistic window for the improved subcutaneous delivery of injectable biologics, such as monoclonal antibodies and other large therapeutic molecules, as well as small molecules and fluids. We refer to the application of rHuPH20 to facilitate the delivery of other drugs or fluids as Enhanze technology. rHuPH20 is also the active ingredient in our first commercially approved product, Hylenex® recombinant.
Our proprietary development pipeline consists primarily of clinical stage product candidates in oncology and diabetes. Our lead oncology program is PEGPH20 (PEGylated recombinant human hyaluronidase), a new molecular entity, under development for the systemic treatment of tumors that accumulate HA. When HA accumulates in a tumor, it can cause higher pressure in the tumor, reducing blood flow into the tumor and with that, reduced access of cancer therapies to the tumor. PEGPH20 works by temporarily degrading HA surrounding some cancer cells and results in reduced pressure and increased blood flow to the cancer with increased amounts of anticancer treatments administered concomitantly gaining access to the tumor. We are currently in Phase 2 clinical testing for PEGPH20 in metastatic pancreatic cancer (Study 109-202), and we have recently initiated a clinical trial in non-small cell lung cancer (Study 107-201).
Regarding Enhanze, we currently have collaborations with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (Roche), Baxter Healthcare Corporation (Baxter), Pfizer Inc. (Pfizer) and Janssen Biotech, Inc. (Janssen), with one product approved in the U.S. and three products approved for marketing in Europe from which we are receiving royalties and several others at various stages of development.
Except where specifically noted or the context otherwise requires, references to “Halozyme,” “the Company,” “we,” “our,” and “us” in these Notes to Consolidated Financial Statements refer to Halozyme Therapeutics, Inc. and its wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.'s wholly owned subsidiary, Halozyme Holdings Ltd.
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Halozyme Therapeutics, Inc. and our wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.'s wholly owned subsidiary, Halozyme Holdings Ltd. All intercompany accounts and transactions have been eliminated.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation. Specifically, we have reclassified $0.6 million from accrued expenses to other long-term liabilities in the consolidated balance sheet at December 31, 2013.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.
Cash Equivalents and Marketable Securities
Cash equivalents consist of highly liquid investments, readily convertible to cash, that mature within ninety days or less from date of purchase. Our cash equivalents consist of money market funds.
Marketable securities are investments with original maturities of more than ninety days from the date of purchase that are specifically identified to fund current operations. Marketable securities are considered available-for-sale. These investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current balance sheet date which reflects management's intention to use the proceeds from the sale of these investments to fund our operations, as necessary. Such available-for-sale investments are carried at fair value with unrealized gains and losses recorded in other comprehensive gain (loss) and included as a separate component of stockholders' equity (deficit). The cost of marketable securities is adjusted for amortization of premiums or accretion of discounts to maturity, and such amortization or accretion is included in investment and other income, net in the consolidated statements of operations. We use the specific identification method for calculating realized gains and losses on marketable securities sold. Realized gains and losses and declines in value judged to be other-than-temporary on marketable securities, if any, are included in investment and other income, net in the consolidated statements of operations.
Restricted Cash
Under the terms of the leases on our facilities, we are required to maintain letters of credit as security deposits during the terms of such leases. At December 31, 2014 and 2013, restricted cash of $0.5 million was pledged as collateral for the letters of credit.
Fair Value of Financial Instruments
The authoritative guidance for fair value measurements establishes a three tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Our financial instruments include cash equivalents, available-for-sale marketable securities, accounts receivable, prepaid expenses, accounts payable, accrued expenses and long-term debt. Fair value estimates of these instruments are made at a specific point in time, based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. The carrying amount of cash equivalents,
accounts receivable, prepaid expenses, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments. Further, based on the borrowing rates currently available for loans with similar terms, we believe the fair value of long-term debt approximates its carrying value.
Available-for-sale marketable securities consist of corporate debt securities, commercial paper and certificates of deposit and were measured at fair value using Level 2 inputs. Level 2 financial instruments are valued using market prices on less active markets and proprietary pricing valuation models with observable inputs, including interest rates, yield curves, maturity dates, issue dates, settlement dates, reported trades, broker-dealer quotes, issue spreads, benchmark securities or other market related data. We obtain the fair value of Level 2 investments from our investment manager, who obtains these fair values from a third-party pricing service. We validate the fair values of Level 2 financial instruments provided by our investment manager by comparing these fair values to a third-party pricing source.
The following table summarizes, by major security type, our cash equivalents and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):
 
 
December 31, 2014
 
December 31, 2013
 
 
Level 1
 
Level 2
 
Total estimated fair value
 
Level 1
 
Level 2
 
Total estimated fair value
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
42,685

 
$

 
$
42,685

 
$
5,711

 
$

 
$
5,711

 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale marketable
   securities:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
 

 
74,234

 
74,234

 

 
35,147

 
35,147

Commercial paper
 

 

 

 

 
5,999

 
5,999

Certificate of deposit
 

 

 

 

 
3,000

 
3,000

 
 
$
42,685

 
$
74,234

 
$
116,919

 
$
5,711

 
$
44,146

 
$
49,857


There were no transfers between Level 1 and Level 2 of the fair value hierarchy for the years ended December 31, 2014 and 2013. We have no instruments that are classified within Level 3 as of December 31, 2014 and 2013.
Concentrations of Credit Risk, Sources of Supply and Significant Customers
We are subject to credit risk from our portfolio of cash equivalents and marketable securities. These investments were made in accordance with our investment policy which specifies the categories, allocations, and ratings of securities we may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. We maintain our cash and cash equivalent balances with one major commercial bank and marketable securities with another financial institution. Deposits held with the financial institutions exceed the amount of insurance provided on such deposits. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and marketable securities to the extent recorded on the balance sheet.
We are also subject to credit risk from our accounts receivable related to our product sales and revenues under our license and collaborative agreements. We have license and collaborative agreements with pharmaceutical companies under which we receive payments for license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk formulation of rHuPH20. In addition, we sell Hylenex® recombinant in the United States to a limited number of established wholesale distributors in the pharmaceutical industry. Credit is extended based on an evaluation of the customer’s financial condition, and collateral is not required. Management monitors our exposure to accounts receivable by periodically evaluating the collectibility of the accounts receivable based on a variety of factors including the length of time the receivables are past due, the financial health of the customer and historical experience. Based upon the review of these factors, we recorded no allowance for doubtful accounts at December 31, 2014 and 2013. Approximately 76% and 81% of the accounts receivable balance at December 31, 2014 and 2013, respectively, represents amounts due from Roche and Pfizer.
The following table indicates the percentage of total revenues in excess of 10% with any single customer:
 
Year Ended December 31,
 
2014
 
2013
 
2012
Roche
57%
 
64%
 
45%
Janssen
20%
 
 
Baxter
3%
 
10%
 
17%
Pfizer
1%
 
4%
 
22%
We attribute revenues under collaborative agreements to the individual countries where the collaborator is headquartered. We attribute revenues from product sales to the individual countries to which the product is shipped. Worldwide revenues from external customers are summarized by geographic location in the following table (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
United States
$
31,397

 
$
19,019

 
$
22,724

Switzerland
42,791

 
35,157

 
18,913

All other foreign
1,146

 
623

 
688

Total revenues
$
75,334

 
$
54,799

 
$
42,325


For the years ended December 31, 2014, 2013 and 2012, we had no foreign based operations. As of December 31, 2014 and 2013, we had $0.4 million and $0.8 million of research equipment in Germany.
We rely on two third-party manufacturers for the supply of bulk rHuPH20 for use in the manufacture of Hylenex recombinant and our other collaboration products and product candidates. Payments due to these suppliers represented 0% and 9% of the accounts payable balance at December 31, 2014 and 2013, respectively. We also rely on a third-party manufacturer for the fill and finish of Hylenex recombinant product under a contract. Payments due to this supplier represented 6% and 2% of the accounts payable balance at December 31, 2014 and 2013, respectively.
Accounts Receivable, Net
Accounts receivable is recorded at the invoiced amount and is non-interest bearing. Accounts receivable is recorded net of allowances for doubtful accounts, cash discounts for prompt payment, distribution fees and chargebacks. We recorded no allowance for doubtful accounts at December 31, 2014 and 2013 as the collectibility of accounts receivable was reasonably assured.
Inventories
Inventories are stated at lower of cost or market. Cost is determined on a first-in, first-out basis. Inventories are reviewed periodically for potential excess, dated or obsolete status. Management evaluates the carrying value of inventories on a regular basis, taking into account such factors as historical and anticipated future sales compared to quantities on hand, the price we expect to obtain for products in their respective markets compared with historical cost and the remaining shelf life of goods on hand.
Prior to receiving marketing approval from the U.S. Food and Drug Administration (“FDA”) or comparable regulatory agencies in foreign countries, costs related to purchases of bulk rHuPH20 and raw materials and the manufacturing of the product candidates are recorded as research and development expense. All direct manufacturing costs incurred after receiving marketing approval are capitalized as inventory. Inventories used in clinical trials are expensed at the time the inventories are packaged for the clinical trials.
As of December 31, 2014 and 2013, inventories consisted of $3.0 million and $2.6 million of Hylenex recombinant inventory, respectively, and $3.4 million and $3.5 million of bulk rHuPH20, respectively, for use in the manufacture of Roche's collaboration products. Roche received European marketing approval for Herceptin SC® and MabThera® SC in August 2013 and March 2014, respectively. As such, direct manufacturing costs of bulk rHuPH20 for these collaboration products incurred after the receipt of the European marketing approvals are capitalized as inventory.
Property and Equipment, Net
Property and equipment are recorded at cost, less accumulated depreciation and amortization. Equipment is depreciated using the straight-line method over their estimated useful lives of three years and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the lease term, whichever is shorter. Leased buildings under build-to-suit lease arrangements are capitalized and included in property and equipment when we are involved in the construction of the structural improvements or take construction risk prior to the commencement of the lease. Upon completion of the construction under the build-to-suit leases, we assess whether those arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If we continue to be the deemed owner, the facilities would be accounted for as financing leases.
Impairment of Long-Lived Assets
We account for long-lived assets in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable. For the year ended December 31, 2014, we recorded an impairment of $0.2 million relating to manufacturing equipment. For the year ended December 31, 2013, there was no impairment of the value of long-lived assets.
Deferred Rent
Rent expense is recorded on a straight-line basis over the initial term of the lease. The difference between rent expense accrued and amounts paid under lease agreements is recorded as deferred rent in the accompanying consolidated balance sheets.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity during the period from transactions and other events and circumstances from non-owner sources.
Revenue Recognition
We generate revenues from product sales and collaborative agreements. Payments received under collaborative agreements may include nonrefundable fees at the inception of the agreements, license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk rHuPH20, and/or royalties on sales of products resulting from collaborative arrangements.
We recognize revenues in accordance with the authoritative guidance for revenue recognition. We recognize revenue when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectibility is reasonably assured.
Product Sales, Net
Hylenex Recombinant
In December 2011, we reintroduced Hylenex recombinant to the market. We sell Hylenex recombinant in the U.S. to wholesale pharmaceutical distributors, who sell the product to hospitals and other end-user customers. Sales to wholesalers provide for selling prices that are fixed on the date of sale, although we offer discounts to certain group purchasing organizations (“GPOs”), hospitals and government programs. The wholesalers take the title to the product, bear the risk of loss of ownership and have economic substance to the inventory. Further, we have no significant obligations for future performance to generate pull-through sales.
Prior to December 31, 2013, Hylenex recombinant had a limited sales history, and we could not reliably estimate expected returns and chargebacks of the product at the time the product was sold to the wholesalers. Accordingly, we deferred the recognition of revenue on sales of Hylenex recombinant to wholesalers, and instead, recognized revenue at the time when evidence existed to confirm that pull-through sales from wholesalers to the hospitals or other end-user customers had occurred or the right of return no longer existed, whichever occurred earlier. At the time product sales revenue was recognized, we recorded allowances for product returns and chargebacks based on our best estimates at the time. Shipments of product that were not recognized as revenue were treated as deferred revenue.
At December 31, 2013, we had developed sufficient historical experience and data to reasonably estimate future returns and chargebacks of Hylenex recombinant. As a result, effective December 31, 2013, we began recognizing Hylenex recombinant product sales and related cost of product sales at the time title transfers to the wholesalers.
Upon recognition of revenue from product sales of Hylenex recombinant, we record certain sales reserves and allowances as a reduction to gross revenue. These reserves and allowances include:
Product Returns. We allow the wholesalers to return product that is damaged or received in error. In addition, we accept unused product to be returned beginning six months prior to and ending twelve months following product expiration. Our estimates for expected returns of expired products are based primarily on an ongoing analysis of historical return patterns.
Distribution Fees. The distribution fees, based on contractually determined rates, arise from contractual agreements we have with certain wholesalers for distribution services they provide with respect to Hylenex recombinant. These fees are generally a fixed percentage of the price of the product purchased by the wholesalers.
Prompt Payment Discounts. We offer cash discounts to certain wholesalers as an incentive to meet certain payment terms. We estimate prompt payment discounts based on contractual terms, historical utilization rates, as available, and our expectations regarding future utilization rates.    
Other Discounts and Fees. We provide discounts to end-user members of certain GPOs under collective purchasing contracts between us and the GPOs. We also provide discounts to certain hospitals, who are members of the GPOs, with which we do not have contracts. The end-user members purchase products from the wholesalers at a contracted discounted price, and the wholesalers then charge back to us the difference between the current retail price and the price the end-users paid for the product. We also incur GPO administrative service fees for these transactions. In addition, we provide predetermined discounts under certain government programs. Our estimate for these chargebacks and fees take into consideration contractual terms, historical utilization rates, as available, and our expectations regarding future utilization rates.
Allowances for product returns and chargebacks are based on amounts owed or to be claimed on the related sales. We believe that our estimated product returns for Hylenex recombinant requires a high degree of judgment and is subject to change based on our experience and certain quantitative and qualitative factors. In order to develop a methodology to reliably estimate future returns and provide a basis for recognizing revenue on sales to wholesale distributors, we analyzed many factors, including, without limitation: (1) actual Hylenex recombinant product return history, taking into account product expiration dating at the time of shipment, (2) re-order activities of the wholesalers as well as their customers and (3) levels of inventory at the wholesale channel. We have monitored actual return history on an individual product lot basis since product launch. We considered the dating of product at the time of shipment into the distribution channel and changes in the estimated levels of inventory within the distribution channel to estimate our exposure for returned product. We considered historical chargebacks activity and current contract prices to estimate our exposure for returned product. Based on such data, we believe we have the information needed to reasonably estimate product returns and chargebacks.
We recognize product sales allowances as a reduction of product sales in the same period the related revenue is recognized. Because of the shelf life of Hylenex recombinant and our lengthy return period, there may be a significant period of time between when the product is shipped and when we issue credits on returned product. If actual results differ from our estimates, we will be required to make adjustments to these allowances in the future, which could have an effect on product sales revenue and earnings in the period of adjustments.
Bulk rHuPH20
Subsequent to receiving marketing approval from the FDA or comparable regulatory agencies in foreign countries, sales of bulk rHuPH20 for use in collaboration commercial products are recognized as product sales when the materials have met all the specifications required for the customer's acceptance and title and risk of loss have transferred to the customer. Following the receipts of European marketing approvals of Roche's Herceptin SC product in August 2013 and MabThera SC product in March 2014 and Baxter's HYQVIA® product in May 2013, revenue from the sales of bulk rHuPH20 for these collaboration products are recognized as product sales. For the years ended December 31, 2014 and 2013, we recognized $23.5 million and $13.7 million in product sales of bulk rHuPH20 for Roche's collaboration products, respectively. For the years ended December 31, 2014 and 2013, we recognized zero and $1.1 million in product sales of bulk rHuPH20 for Baxter's collaboration product, respectively.
Revenues under Collaborative Agreements
We have license and collaboration agreements under which the collaborators obtained worldwide rights for the use of our proprietary rHuPH20 enzyme in the development and commercialization of the collaborators’ biologic compounds. The collaborative agreements contain multiple elements including nonrefundable payments at the inception of the arrangement, license fees, exclusivity fees, payments based on achievement of specified milestones designated in the collaborative agreements, annual maintenance fees, reimbursements of research and development services, payments for supply of bulk rHuPH20 for the collaborator and/or royalties on sales of products resulting from collaborative agreements. We analyze each element of our collaborative agreements and consider a variety of factors in determining the appropriate method of revenue recognition of each element.
In order to account for the multiple-element arrangements, we identify the deliverables included within the agreement and evaluate which deliverables represent units of accounting. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation. The deliverables under our collaborative agreements include (i) the license to our rHuPH20 technology, (ii) at the collaborator’s request, research and development services which are reimbursed at contractually determined rates, and (iii) at the collaborator’s request, supply of bulk rHuPH20 which is reimbursed at our cost plus a margin. A delivered item is considered a separate unit of accounting when the delivered item has value to the collaborator on a standalone basis based on the consideration of the relevant facts and circumstances for each arrangement. Factors considered in this determination include the research capabilities of the collaborator and the availability of research expertise in this field in the general marketplace.
Arrangement consideration is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (“VSOE”) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists, we use our best estimate of the selling price for the deliverable. The amount of allocable arrangement consideration is limited to amounts that are not contingent upon the delivery of additional items or meeting other specified performance conditions. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. Changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement.
Nonrefundable upfront license fee payments are recognized upon delivery of the license if facts and circumstances dictate that the license has standalone value from the undelivered items, which generally include research and development services and the manufacture of bulk rHuPH20, the relative selling price allocation of the license is equal to or exceeds the upfront license fee, persuasive evidence of an arrangement exists, our price to the collaborator is fixed or determinable and collectibility is reasonably assured. Upfront license fee payments are deferred if facts and circumstances dictate that the license does not have standalone value. The determination of the length of the period over which to defer revenue is subject to judgment and estimation and can have an impact on the amount of revenue recognized in a given period.
The terms of our collaborative agreements provide for milestone payments upon achievement of certain development and regulatory events and/or specified sales volumes of commercialized products by the collaborator. We account for milestone payments in accordance with the provisions of ASU No. 2010-17, Revenue Recognition - Milestone Method. We recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following criteria:
1.
The consideration is commensurate with either the entity’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone,
2.
The consideration relates solely to past performance, and
3.
The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.
A milestone is defined as an event (i) that can only be achieved based in whole or in part on either the entity’s performance or on the occurrence of a specific outcome resulting from the entity’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and (iii) that would result in additional payments being due to the vendor.
Reimbursements of research and development services are recognized as revenue during the period in which the services are performed as long as there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the related receivable is reasonably assured. Revenue from the manufacture of bulk rHuPH20 is recognized when the materials have met all specifications required for the collaborator's acceptance and title and risk of loss have transferred to the collaborator. We do not directly control when any collaborator will request research and development services or supply of bulk rHuPH20; therefore, we cannot predict when we will recognize revenues in connection with research and development services and supply of bulk rHuPH20.
Since we receive royalty reports 60 days after quarter end, royalty revenue from sales of collaboration products by our collaborators will be recognized in the quarter following the quarter in which the corresponding sales occurred.
The collaborative agreements typically provide the collaborators the right to terminate such agreement in whole or on a product-by-product or target-by-target basis at any time upon 30 to 90 days prior written notice to us. There are no performance, cancellation, termination or refund provisions in any of our collaborative agreements that contain material financial consequences to us.
Refer to Note 4, “Collaborative Agreements,” for further discussion on our collaborative arrangements.
Cost of Product Sales
Cost of product sales consists primarily of raw materials, third-party manufacturing costs, fill and finish costs, freight costs, internal costs and manufacturing overhead associated with the production of Hylenex recombinant and bulk rHuPH20 for use in approved collaboration products. Cost of product sales also consists of the write-down of excess, dated and obsolete inventories and the write-off of any inventories that do not meet certain product specifications, if any.
Prior to European marketing approvals of Roche's collaboration products Herceptin SC in August 2013 and MabThera SC in March 2014, and Baxter's collaboration product HYQVIA in May 2013, all costs related to the manufacturing of bulk rHuPH20 for these collaboration products were charged to research and development expenses in the periods such costs were incurred. Therefore, cost of product sales of these bulk rHuPH20 for the year ended December 31, 2013 was materially reduced due to the exclusion of the manufacturing costs that were charged to research and development expenses in the periods prior to receiving marketing approvals.
For the year ended December 31, 2014, cost of product sales of bulk rHuPH20 excluded $1.0 million in manufacturing costs, of which $0.9 million and $0.1 million were charged to research and development expenses in the years ended December 31, 2013 and 2012, respectively. For the year ended December 31, 2013, cost of product sales of bulk rHuPH20 excluded $10.0 million in manufacturing costs, of which $9.0 million and $1.0 million were charged to research and development expenses in the years ended December 31, 2013 and 2012, respectively. As of December 31, 2013, bulk rHuPH20 inventory for collaboration products which were sold in 2014 excluded $1.0 million in manufacturing costs. There was no bulk rHuPH20 for HyQvia on hand as of December 31, 2014 and 2013.
Research and Development Expenses
Research and development expenses include salaries and benefits, facilities and other overhead expenses, external clinical trial expenses, research related manufacturing services, contract services and other outside expenses. Research and development expenses are charged to operations as incurred when these expenditures relate to our research and development efforts and have no alternative future uses. After receiving approval from the FDA or comparable regulatory agencies in foreign countries for a product, costs related to purchases and manufacturing of bulk rHuPH20 for product are capitalized as inventory. The manufacturing costs of bulk rHuPH20 for the collaboration products, Herceptin SC, MabThera SC and HYQVIA, incurred after the receipt of the European marketing approvals are capitalized as inventory.
In accordance with certain research and development agreements, we are obligated to make certain upfront payments upon execution of the agreement. Advance payments, including nonrefundable amounts, for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts will be recognized as an expense as the related goods are delivered or the related services are performed or such time when we do not expect the goods to be delivered or services to be performed.
Milestone payments that we make in connection with in-licensed technology for a particular research and development project that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic values are expensed as research and development costs at the time the costs are incurred. We have no in-licensed technologies that have alternative future uses in research and development projects or otherwise.
Clinical Trial Expenses
Payments in connection with our clinical trials are often made under contracts with multiple contract research organizations that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee, unit price or on a time and materials basis. Payments under these contracts depend on factors such as the successful enrollment or treatment of patients or the completion of other clinical trial milestones.
Expenses related to clinical trials are accrued based on our estimates and/or representations from service providers regarding work performed, including actual level of patient enrollment, completion of patient studies and progress of the clinical trials. Other incidental costs related to patient enrollment or treatment are accrued when reasonably certain. If the contracted amounts are modified (for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), we modify our accruals accordingly on a prospective basis. Revisions in the scope of a contract are charged to expense in the period in which the facts that give rise to the revision become reasonably certain. Historically, we have had no material changes in clinical trial expense accruals that had a material impact on our consolidated results of operations or financial position.
Share-Based Compensation
We record compensation expense associated with stock options and other share-based awards in accordance with the authoritative guidance for stock-based compensation. The cost of employee services received in exchange for an award of an equity instrument is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense on a straight-line basis, net of estimated forfeitures, over the requisite service period of the award. Share-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Share-based compensation expense for an award with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized and any previously recognized compensation expense is reversed. As share-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. The guidance requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Pre-vesting forfeitures were estimated to be approximately 10% for employees for the years ended December 31, 2014, 2013 and 2012 based on our historical experience for the years then ended.
Income Taxes
We provide for income taxes using the liability method. Under this method, deferred income tax assets and liabilities are determined based on the differences between the financial statement carrying amounts of existing assets and liabilities at each year end and their respective tax bases and are measured using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Deferred tax assets and other tax benefits are recorded when it is more likely than not that the position will be sustained upon audit. Valuation allowances have been established to reduce our net deferred tax assets to zero, as we believe that it is more likely than not that such assets will not be realized.
Net Loss Per Share
Basic net loss per common share is computed by dividing loss for the period by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. Stock options, unvested restricted stock awards (“RSAs”) and unvested restricted stock units (“RSUs”) are considered common stock equivalents and are only included in the calculation of diluted earnings per common share when their effect is dilutive. Because of our net loss, outstanding stock options, outstanding RSUs and unvested RSAs totaling approximately 8,405,903, 8,070,141 and 7,444,333 were excluded from the calculation of diluted net loss per common share for the years ended December 31, 2014, 2013 and 2012, respectively, because their effect was anti-dilutive. Since the performance conditions for performance restricted stock units (“PRSUs”) were not satisfied at December 31, 2014, such securities are excluded from potentially dilutive securities.
Segment Information
We operate our business in one segment, which includes all activities related to the research, development and commercialization of our proprietary enzymes. This segment also includes revenues and expenses related to (i) research and development and API manufacturing activities conducted under our collaborative agreements with third parties and (ii) product sales of Hylenex recombinant. The chief operating decision-maker reviews the operating results on an aggregate basis and manages the operations as a single operating segment.
Pending Adoption of Recent Accounting Pronouncements
In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements — Going Concern (“ASU 2014-15”). The provisions of ASU 2014-15 provide that in connection with preparing financial statements for each annual and interim reporting period, an entity's management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). ASU 2014-15 is effective for the annual reporting period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The adoption of ASU 2014-15 will not have a material impact on our consolidated financial position or results of operations.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 will eliminate transaction-specific and industry-specific revenue recognition guidance under current GAAP and replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. ASU 2014-09 also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016. Early application is not permitted. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.
In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). The provisions of ASU 2013-11 require entities to present unrecognized tax benefits as a decrease in a net operating loss, similar tax loss or tax credit carryforward if certain criteria are met. The determination of whether a deferred tax asset is available is based on the unrecognized tax benefit and the deferred tax asset that exists at the reporting date and presumes disallowance of the tax position at the reporting date. The guidance will eliminate the diversity in practice in the presentation of unrecognized tax benefits but will not alter the way in which entities assess deferred tax assets for realizability. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2014. The amendments should be applied prospectively to unrecognized tax benefits that exist at the effective date. Early adoption is permitted. The adoption of ASU 2013-11 will not have a material impact on our consolidated financial position or results of operations.
Marketable Securities (Notes)
Marketable Securities Disclosure
Marketable Securities
Available-for-sale marketable securities consisted of the following (in thousands):
 
 
December 31, 2014
Description
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Corporate debt securities
 
$
74,275

 
$
2

 
$
(43
)
 
$
74,234

 
 
December 31, 2013
Description
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Corporate debt securities
 
$
35,130

 
$
20

 
$
(3
)
 
$
35,147

Commercial paper
 
5,999

 

 

 
5,999

Certificate of deposit
 
3,000

 

 

 
3,000

 
 
$
44,129

 
$
20

 
$
(3
)
 
$
44,146


As of December 31, 2014, all of our available-for-sale marketable securities were scheduled to mature within the next twelve months. There were $57.3 million of available-for-sale securities that matured during the year ended December 31, 2014. There were no realized gains or losses for the year ended December 31, 2014 and 2013. As of December 31, 2014, we had 14 available-for-sale marketable securities in a gross unrealized loss position, all of which had been in such position for less than twelve months. Based on our review of these marketable securities, we believe we had no other-than-temporary impairments on these securities as of December 31, 2014 because we do not intend to sell these securities and it is not more likely than not that we will be required to sell these securities before the recovery of their amortized cost basis.
Collaborative Agreements
Collaborative Agreements
Collaborative Agreements
Roche Collaboration
In December 2006, we and Roche entered into a license and collaborative agreement under which Roche obtained a worldwide, exclusive license to develop and commercialize product combinations of our patented rHuPH20 enzyme and up to thirteen Roche target compounds (the “Roche Collaboration”). As of December 31, 2014, Roche had elected a total of five exclusive targets and retains the option to develop and commercialize rHuPH20 with three additional targets, provided that Roche continues to pay annual maintenance fees to us. Roche received European marketing approval in August 2013 for its collaboration product, Herceptin SC, for the treatment of patients with HER2-positive breast cancer and launched Herceptin SC in the European Union (“EU”) in September 2013.
In March 2014, Roche received European marketing approval for its collaboration product, MabThera SC, for the treatment of patients with common forms of non-Hodgkin lymphoma (“NHL”). In June 2014, Roche launched MabThera SC in the EU which triggered a $5.0 million sales-based payment to us for the achievement of the first commercial sale pursuant to the terms of the Roche Collaboration.
Roche assumes all development, manufacturing, clinical, regulatory, sales and marketing costs under the Roche Collaboration, while we are responsible for the supply of bulk rHuPH20. We are entitled to receive reimbursements for providing research and development services and bulk rHuPH20 to Roche at its request.
Under the terms of the Roche Collaboration, Roche pays us a royalty on each product commercialized under the agreement consisting of a mid-single digit percent of the net sales of such product. Unless terminated earlier in accordance with its terms, the Roche Collaboration continues in effect until the expiration of Roche's obligation to pay royalties. Roche has the obligation to pay royalties with respect to each product in each country, during the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country.
As of December 31, 2014, we have received $78.3 million, excluding royalties and reimbursements for providing research and development services and supplying bulk rHuPH20, from Roche. The amounts received consisted of the $20.0 million upfront license fee payment for the application of rHuPH20 to the initial three Roche exclusive targets, $22.3 million in connection with Roche's election of two additional exclusive targets and annual license maintenance fees for the right to designate the remaining targets as exclusive targets, $13.0 million in clinical development milestone payments, $8.0 million in regulatory milestone payments and $15.0 million in sales-based payments. Due to our continuing involvement obligations (for example, support activities associated with rHuPH20), revenues from the upfront payment, exclusive designation fees, annual license maintenance fees and sales-based payment were deferred and are being amortized over the remaining term of the Roche Collaboration.
For the years ended December 31, 2014, 2013 and 2012, we recognized approximately $8.1 million, $4.6 million, and $2.0 million, respectively, of Roche deferred revenues as revenues under collaborative agreements. In addition, for the years ended December 31, 2014, 2013 and 2012, we recognized approximately $2.0 million, $1.3 million and $1.4 million, respectively, of deferred bulk rHuPH20 sales revenue as product sales revenue. Total Roche deferred revenues was approximately $42.7 million and $41.6 million as of December 31, 2014 and 2013, respectively. For the year ended December 31, 2012, we recognized $8.0 million as revenues under collaborative agreements in accordance with the Milestone Method related to the achievement of certain regulatory milestones pursuant to the terms of the Roche Collaboration. No such revenues were recognized for the years ended December 31, 2014 and 2013.
Gammagard Collaboration
In September 2007, we entered into a license and collaborative agreement with Baxter, under which Baxter obtained a worldwide, exclusive license to develop and commercialize HYQVIA, a combination of Baxter's current product GAMMAGARD LIQUID and our patented rHuPH20 enzyme (the “Baxter Collaboration”). In May 2013, the European Commission granted Baxter marketing authorization in all EU Member States for the use of HYQVIA (solution for subcutaneous use), a combination of GAMMAGARD LIQUID and rHuPH20 in dual vial units, as replacement therapy for adult patients with primary and secondary immunodeficiencies. Baxter launched HYQVIA in the first EU country in July 2013 and in additional EU countries in the second half of 2013 and in 2014. The FDA approved HYQVIA for treatment of adult patients with primary immunodeficiency in September 2014. In October 2014, Baxter announced the launch and first shipments of HYQVIA in the U.S.
The Baxter Collaboration is applicable to both kit and formulation combinations. Baxter assumes all development, manufacturing, clinical, regulatory, sales and marketing costs under the Baxter Collaboration, while we are responsible for the supply of bulk rHuPH20. We perform research and development activities and supply bulk rHuPH20 at the request of Baxter, and are reimbursed by Baxter under the terms of the Baxter Collaboration. In addition, Baxter has certain product development and commercialization obligations in major markets identified in the Baxter Collaboration.
Unless terminated earlier in accordance with its terms, the Baxter Collaboration continues in effect until the expiration of Baxter's obligation to pay royalties. Baxter has the obligation to pay royalties, with respect to each product in each country, during the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country.
As of December 31, 2014, we have received $17.0 million under the Gammagard Collaboration, excluding royalties. The amounts received consisted of the $10.0 million upfront license fee payment, a $3.0 million regulatory milestone payment and a $4.0 million sales-based payment. Baxter pays us a royalty on HYQVIA consisting of a mid-single digit percent of the net sales of such product. Due to our continuing involvement obligations (for example, support activities associated with rHuPH20 enzyme), the upfront and sales-based payments were deferred and are being recognized over the term of the Baxter Collaboration. We recognized revenue from the upfront and sales-based payments in the amount of approximately $0.8 million, $0.6 million and $0.5 million for the years ended December 31, 2014, 2013 and 2012, respectively. Deferred revenue relating to the upfront and sales-based payments under the Gammagard Collaboration was approximately $10.9 million and $10.5 million as of December 31, 2014 and 2013, respectively.
Other Collaborations
In December 2014, we and Janssen entered into a collaboration and license agreement, under which Janssen has the worldwide license to develop and commercialize products combining our patented rHuPH20 enzyme with Janssen proprietary biologics directed at up to five targets (the “Janssen Collaboration”). Targets may be selected on an exclusive or non-exclusive basis. As of December 31, 2014, we have received a $15.0 million payment for the license fee of one specified exclusive target and the right to elect four additional targets in the future upon payment of additional fees. Unless terminated earlier in accordance with its terms, the Janssen Collaboration continues in effect until the later of (i) expiration of the last to expire of the valid claims of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers a product developed under the collaboration, and (ii) expiration of the last to expire royalty term for a product developed under the collaboration. The royalty term of a product developed under the Janssen Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. Janssen may terminate the agreement prior to expiration for any reason in its entirety or on a target-by-target basis upon 90 days prior written notice to us. Upon any such termination, the license granted to Janssen (in total or with respect to the terminated target, as applicable) will terminate, provided, however, that in the event of expiration of the agreement, the licenses granted will become perpetual, non-exclusive and fully paid-up.
In December 2012, we and Pfizer entered into a collaboration and license agreement, under which Pfizer has the worldwide license to develop and commercialize products combining our patented rHuPH20 enzyme with Pfizer proprietary biologics directed at up to six targets (the “Pfizer Collaboration”). Targets may be selected on an exclusive or non-exclusive basis. As of December 31, 2014, we have received $11.0 million in upfront and license fee payments for the licenses to four specified exclusive targets and two additional targets which Pfizer has the right to elect in the future upon payment of additional fees. Unless terminated earlier in accordance with its terms, the Pfizer Collaboration continues in effect until the later of (i) expiration of the last to expire of the valid claims of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers a product developed under the collaboration, and (ii) expiration of the last to expire royalty term for a product developed under the collaboration. The royalty term of a product developed under the Pfizer Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. Pfizer may terminate the agreement prior to expiration for any reason in its entirety or on a target-by-target basis upon 30 days prior written notice to us. Upon any such termination, the license granted to Pfizer (in total or with respect to the terminated target, as applicable) will terminate, provided, however, that in the event of expiration of the agreement, the licenses granted will become perpetual, non-exclusive and fully paid-up.
At the inception of the Pfizer and Janssen arrangements, we identified the deliverables in each arrangement to include the license, research and development services and supply of bulk rHuPH20. We have determined that the license, research and development services and supply of bulk rHuPH20 individually represent separate units of accounting, because each deliverable has standalone value. The estimated selling prices for these units of accounting were determined based on market conditions, the terms of comparable collaborative arrangements for similar technology in the pharmaceutical and biotech industry and entity-specific factors such as the terms of our previous collaborative agreements, our pricing practices and pricing objectives. The arrangement consideration was allocated to the deliverables based on the relative selling price method and the nature of the research and development services to be performed for the collaborator.
The amount allocable to the delivered unit or units of accounting is limited to the amount that is not contingent upon the delivery of additional items or meeting other specified performance conditions (the noncontingent amount). As such, we excluded from the allocable arrangement consideration the milestone payments, annual exclusivity fees and royalties regardless of the probability of receipt. Based on the results of our analysis, we allocated the $11.0 million license fees from Pfizer and the $15.0 million upfront license fee from Janssen to the license fee deliverable under each of the arrangements. We determined that the upfront payments were earned upon the granting of the worldwide, exclusive right to our technology to the collaborators in these arrangements. As a result, we recognized the $11.0 million license fees under the Pfizer Collaboration and the $15.0 million upfront license fee under the Janssen Collaboration as revenues under collaborative agreements in the period when such license fees were earned. There were no revenues recognized related to milestone payments under these collaborations for the years ended December 31, 2014, 2013 and 2012.
The collaborators are each solely responsible for the development, manufacturing and marketing of any products resulting from their respective collaborations. We are entitled to receive payments for research and development services and supply of rHuPH20 API to these collaborators if requested by such collaborator. We recognize amounts allocated to research and development services as revenues under collaborative agreements as the related services are performed. We recognize amounts allocated to the sales of API as revenues under collaborative agreements when such API has met all required specifications by the collaborators and the related title and risk of loss and damages have passed to the collaborators. We cannot predict the timing of delivery of research and development services and API as they are at the collaborators' requests.
In May 2011 and June 2011, we entered into collaboration and license agreements with ViroPharma Incorporated and Intrexon Corporation, respectively. These collaboration agreements were terminated effective May 2014.
Pursuant to the terms of our collaboration agreements with Roche and Pfizer, certain future payments meet the definition of a milestone in accordance with the Milestone Method of Accounting. We are entitled to receive additional milestone payments for the successful development of the elected targets in the aggregate of up to approximately $55.0 million upon achievement of specified clinical development milestone events and up to approximately $12.0 million upon achievement of specified regulatory milestone events in connection with specified regulatory filings and receipt of marketing approvals.
Certain Balance Sheet Items
Certain Balance Sheet Items
Certain Balance Sheet Items
Accounts receivable, net consisted of the following (in thousands):
 
 
December 31,
2014
 
December 31,
2013
Accounts receivable from product sales to collaborators
 
$
6,361

 
$
4,495

Accounts receivable from other product sales
 
2,133

 
1,505

Accounts receivable from revenues under collaborative agreements
 
1,266

 
3,707

Subtotal
 
9,760

 
9,707

Allowance for distribution fees and discounts
 
(611
)
 
(610
)
Total accounts receivable, net
 
$
9,149

 
$
9,097


Inventories consisted of the following (in thousands):
 
 
December 31,
2014
 
December 31,
2013
Raw materials
 
$
553

 
$
1,137

Work-in-process
 
5,207

 
4,280

Finished goods
 
646

 
753

Total inventories
 
$
6,406

 
$
6,170


Prepaid expenses and other assets consisted of the following (in thousands):
 
 
December 31,
2014
 
December 31,
2013
Prepaid manufacturing expenses
 
$
6,339

 
$
5,884

Prepaid research and development expenses
 
2,380

 
3,522

Other prepaid expenses
 
1,094

 
1,339

Other assets
 
1,535

 
356

Total prepaid expenses and other assets
 
11,348

 
11,101

Less long-term portion
 
1,205

 
2,676

Total prepaid expenses and other assets, current
 
$
10,143

 
$
8,425


Property and equipment, net consisted of the following (in thousands):
 
 
December 31,
2014
 
December 31,
2013
Research equipment
 
$
8,474

 
$
7,714

Computer and office equipment
 
2,178

 
1,949

Leasehold improvements
 
1,518

 
1,408

Subtotal
 
12,170

 
11,071

Accumulated depreciation and amortization
 
(9,219
)
 
(7,649
)
Property and equipment, net
 
$
2,951

 
$
3,422


Depreciation and amortization expense was approximately $1.8 million, $1.2 million and $1.1 million for the years ended December 31, 2014, 2013 and 2012, respectively.
Accrued expenses consisted of the following (in thousands):
 
 
December 31,
2014
 
December 31,
2013
Accrued compensation and payroll taxes
 
$
5,923

 
$
7,075

Accrued outsourced research and development expenses
 
4,383

 
3,377

Accrued outsourced manufacturing expenses
 
2,112

 
3,233

Other accrued expenses
 
2,023

 
1,235

Total accrued expenses
 
14,441

 
14,920

Less long-term accrued outsourced research and development expenses
 
480

 
551

     Total accrued expenses, current
 
$
13,961

 
$
14,369


Long-term accrued outsourced research and development is included in other long-term liabilities in the consolidated balance sheets.
Deferred revenue consisted of the following (in thousands):
 
 
December 31,
2014
 
December 31,
2013
Collaborative agreements
 
$
53,479

 
$
51,185

Product sales
 
1,155

 
1,958

Total deferred revenue
 
54,634

 
53,143

Less current portion
 
7,367

 
7,398

Deferred revenue, net of current portion
 
$
47,267

 
$
45,745

Long-Term Debt, Net
Long-term Debt, Net
Long-Term Debt, Net
In December 2013, we entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with Oxford Finance LLC (“Oxford”) and Silicon Valley Bank (“SVB”) (collectively, the “Lenders”), amending and restating in its entirety our original loan agreement with the Lenders, dated December 2012. The Loan Agreement provided for an additional $20 million principal amount of new term loan, bringing the total term loan balance to $50 million. The proceeds are to be used for working capital and general business requirements. The amended term loan facility matures on January 1, 2018.
In January 2015, we entered into the second amendment to the Loan Agreement with the Lenders, amending and restating the loan repayment schedules of the Loan Agreement. The amended and restated term loan repayment schedule provides for interest only payments through January 2016, followed by consecutive equal monthly payments of principal and interest in arrears starting in February 2016 and continuing through the previously established maturity date of January 2018. Consistent with the original loan, the Loan Agreement provides for a 7.55% interest rate on the term loan and a final interest payment equal to 8.5% of the original principal amount, or $4.25 million, which is due when the term loan becomes due or upon the prepayment of the facility. We have the option to prepay the outstanding balance of the term loan in full, subject to a prepayment fee of 1% to 3% depending upon when the prepayment occurs.
In connection with the term loan, the debt offering costs have been recorded as a debt discount in our consolidated balance sheets which, together with the final payment and fixed interest rate payments, are being amortized and recorded as interest expense throughout the life of the term loan using the effective interest rate method.
The amended term loan is secured by substantially all of the assets of the Company and our subsidiary, Halozyme, Inc., except that the collateral does not include any equity interests in Halozyme, Inc., any intellectual property (including all licensing, collaboration and similar agreements relating thereto), and certain other excluded assets. The Loan Agreement contains customary representations, warranties and covenants by us, which covenants limit our ability to convey, sell, lease, transfer, assign or otherwise dispose of certain of our assets; engage in any business other than the businesses currently engaged in by us or reasonably related thereto; liquidate or dissolve; make certain management changes; undergo certain change of control events; create, incur, assume, or be liable with respect to certain indebtedness; grant certain liens; pay dividends and make certain other restricted payments; make certain investments; make payments on any subordinated debt; and enter into transactions with any of our affiliates outside of the ordinary course of business or permit our subsidiaries to do the same. In addition, subject to certain exceptions, we are required to maintain with SVB our primary deposit accounts, securities accounts and commodities, and to do the same for our domestic subsidiary.
The Loan Agreement also contains customary indemnification obligations and customary events of default, including, among other things, our failure to fulfill certain of our obligations under the Loan Agreement and the occurrence of a material adverse change which is defined as a material adverse change in our business, operations, or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan, or a material impairment in the perfection or priority of lender's lien in the collateral or in the value of such collateral. In the event of default by us under the Loan Agreement, the Lenders would be entitled to exercise their remedies thereunder, including the right to accelerate the debt, upon which we may be required to repay all amounts then outstanding under the Loan Agreement, which could harm our financial condition.
 As of December 31, 2014, we were in compliance with all material covenants under the Loan Agreement and there was no material adverse change in our business, operations or financial condition.
Future maturities and interest payments under the term loan as of December 31, 2014, are as follows (in thousands):
2015
 
$
3,775

2016
 
25,077

2017
 
27,013

2018
 
6,501

2019
 

Total minimum payments
 
62,366

Less amount representing interest
 
(12,366
)
Gross balance of long-term debt
 
50,000

Less unamortized debt discount
 
(140
)
Present value of long-term debt
 
49,860

Less current portion of long-term debt
 

Long-term debt, less current portion and unamortized debt discount
 
$
49,860


Interest expense, including amortization of debt discount, related to the long-term debt for the years ended December 31, 2014 and 2013 was approximately $5.6 million and $3.3 million, respectively.
Stockholders' Equity
Stockholders' Equity
Stockholders’ Equity (Deficit)
During 2014, we issued an aggregate of 1,432,206 shares of common stock, in connection with the exercises of stock options for cash in the aggregate amount of approximately $7.8 million. In addition, we issued 789,345 shares of common stock, net of RSAs canceled, in connection with the grants of RSAs and 120,043 shares of common stock upon vesting of certain RSUs. The RSU holders surrendered 74,325 RSUs to pay for minimum withholding taxes totaling approximately $1.0 million.
In February 2014, we completed an underwritten public offering and issued 8,846,153 shares of common stock, including 1,153,846 shares sold pursuant to the full exercise of an over-allotment option granted to the underwriters. All of the shares were offered at a public offering price of $13.00 per share, generating approximately $107.7 million in net proceeds.
During 2013, we issued an aggregate of 1,270,362 shares of common stock in connection with the exercises of stock options for cash in the aggregate amount of approximately $5.5 million. In addition, we issued 461,729 shares of common stock, net of RSAs canceled, in connection with the grants of RSAs and 92,201 shares of common stock upon vesting of certain RSUs. The RSU holders surrendered 61,923 RSUs to pay for minimum withholding taxes totaling approximately $0.4 million.
In February 2012, we completed an underwritten public offering and issued 7,820,000 shares of common stock, including 1,020,000 shares sold pursuant to the full exercise of an over-allotment option granted to the underwriter. All of the shares were offered at a public offering price of $10.61 per share, generating approximately $81.5 million in net proceeds. Of the 7,820,000 shares of common stock sold, Randal J. Kirk, a member of our board of directors, through his affiliates, purchased 1,360,000 shares of common stock in this offering at the public offering price of $10.61 per share for a total of approximately $14.4 million.
Equity Incentive Plans
Equity Incentive Plans
Equity Incentive Plans
We currently grant stock options, restricted stock awards and restricted stock units under the Amended and Restated 2011 Stock Plan ("2011 Stock Plan"). In May 2013, our stockholders approved the Amended and Restated 2011 Stock Plan, which provides for the grant of up to 12.5 million shares of common stock (subject to certain limitations as described in the Amended and Restated 2011 Stock Plan) to selected employees, consultants and non-employee members of our Board of Directors (“Outside Directors”) as stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance awards. The 2011 Stock Plan was approved by the stockholders. Awards are subject to terms and conditions established by the Compensation Committee of our Board of Directors. During the year ended December 31, 2014, we granted share-based awards under the 2011 Stock Plan. At December 31, 2014, 7,247,452 shares were subject to outstanding awards and 4,681,212 shares were available for future grants of share-based awards. At the present time, management intends to issue new common shares upon the exercise of stock options, issuance of restricted stock awards and settlement of restricted stock units.
Total share-based compensation expense related to share-based awards was comprised of the following (in thousands):
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
Research and development
 
$
7,939

 
$
4,476

 
$
4,191

Selling, general and administrative
 
7,335

 
5,062

 
4,158

Share-based compensation expense
 
$
15,274

 
$
9,538

 
$
8,349


Total unrecognized estimated compensation expense by type of award and the weighted-average remaining requisite service period over which such expense is expected to be recognized (in thousands, unless otherwise noted):
 
 
December 31, 2014
 
 
Unrecognized
Expense
 
Remaining
Weighted-Average
Recognition Period
(years)
Stock options
 
$
15,675

 
2.7
RSAs
 
$
7,153

 
1.6
RSUs
 
$
3,991

 
2.6

Cash flows resulting from tax deductions in excess of the cumulative compensation cost recognized for options exercised (excess tax benefits) are classified as cash inflows provided by financing activities and cash outflows used in operating activities. Due to our net loss position, no tax benefits have been recognized in the consolidated statements of cash flows.
Stock Options. Options granted under the Plans must have an exercise price equal to at least 100% of the fair market value of our common stock on the date of grant. The options will generally have a maximum contractual term of ten years and vest at the rate of one-fourth of the shares on the first anniversary of the date of grant and 1/48 of the shares monthly thereafter. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plans).
A summary of our stock option award activity as of and for the years ended December 31, 2014, 2013 and 2012 is as follows: 

 
Shares
Underlying
Stock Options

Weighted
Average Exercise
Price per Share

Weighted Average
Remaining
Contractual Term (years)
 
Aggregate
Intrinsic
Value
Outstanding at January 1, 2012
 
5,869,784

 
$5.82
 
 
 
 
Granted
 
1,215,442

 
$9.90
 
 
 
 
Exercised
 
(444,637
)
 
$4.56
 
 
 
 
Canceled/forfeited
 
(260,722
)
 
$8.34
 
 
 
 
Outstanding at December 31, 2012
 
6,379,867

 
$6.59
 
 
 
 
Granted
 
1,806,392

 
$7.14
 
 
 
 
Exercised
 
(1,270,362
)
 
$4.34
 
 
 
 
Canceled/forfeited
 
(214,982
)
 
$8.18
 
 
 
 
Outstanding at December 31, 2013
 
6,700,915

 
$7.11
 
 
 
 
Granted
 
2,271,143

 
$13.02
 
 
 
 
Exercised
 
(1,432,206
)
 
$5.43
 
 
 
 
Canceled/forfeited
 
(1,185,960
)
 
$9.39
 
 
 
 
Outstanding at December 31, 2014
 
6,353,892

 
$9.18
 
6.5
 

$11.2
 million
Vested and expected to vest at December 31, 2014
 
6,025,883

 
$9.05
 
6.4
 

$10.9
 million
Exercisable at December 31, 2014
 
3,944,408

 
$7.36
 
4.6
 

$8.9
 million

The weighted average grant-date fair values of options granted during the years ended December 31, 2014, 2013 and 2012 were $8.13 per share, $4.40 per share and $5.63 per share, respectively. The intrinsic value of options exercised during the years ended December 31, 2014, 2013 and 2012 was approximately $8.1 million, $8.3 million and $2.9 million, respectively. Cash received from stock option exercises for the years ended December 31, 2014, 2013 and 2012 was approximately $7.8 million, $5.5 million and $2.0 million, respectively.
The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model (“Black-Scholes model”) that uses the assumptions noted in the following table. Expected volatility is based on historical volatility of our common stock. The expected term of options granted is based on analyses of historical employee termination rates and option exercises. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The dividend yield assumption is based on the expectation of no future dividend payments by us. Assumptions used in the Black-Scholes model were as follows:
 
 
Year Ended December 31,
 
 
2014

2013

2012
Expected volatility
 
66.6-71.8%


70.1-72.5%


64.0-69.2%

Average expected term (in years)
 
5.7


5.7


5.6

Risk-free interest rate
 
1.73-2.04%


0.86-2.00%


0.80-1.15%

Expected dividend yield
 
0
%

0
%

0
%

Restricted Stock AwardsRestricted stock awards are grants that entitle the holder to acquire shares of our common stock at zero or a fixed price, which is typically nominal. The shares covered by a restricted stock award cannot be sold, pledged, or otherwise disposed of until the award vests and any unvested shares may be reacquired by us for the original purchase price following the awardee’s termination of service. The restricted stock awards will generally vest at the rate of one-fourth of the shares on each anniversary of the date of grant. Annual grants of restricted stock awards to Outside Directors typically vest in full the first day the awardee may trade our stock in compliance with our insider trading policy following the date immediately preceding the first annual meeting of stockholders following the grant date.
The following table summarizes our restricted stock award activity during the years ended December 31, 2014, 2013 and 2012:

 
Number of
Shares

Weighted  Average
Grant Date
Fair Value
Unvested at January 1, 2012
 
347,883

 
$6.51
Granted
 
380,158

 
$10.29
Vested
 
(339,758
)
 
$6.51
Forfeited
 
(5,963
)
 
$10.81
Unvested at December 31, 2012
 
382,320

 
$10.21
Granted
 
476,096

 
$6.88
Vested
 
(211,178
)
 
$8.78
Forfeited
 
(14,367
)
 
$8.17
Unvested at December 31, 2013
 
632,871

 
$8.23
Granted
 
1,055,122

 
$11.15
Vested
 
(263,765
)
 
$8.33
Forfeited
 
(265,777
)
 
$10.86
Unvested at December 31, 2014
 
1,158,451

 
$10.26

The fair value of the restricted stock awards is based on the market value of our common stock on the date of grant. The total grant-date fair value of restricted stock awards vested during the years ended December 31, 2014, 2013 and 2012 was approximately $2.2 million, $1.9 million and $2.2 million, respectively. We recognized approximately $5.4 million, $2.2 million and $2.1 million of share-based compensation expense related to restricted stock awards for the years ended December 31, 2014, 2013 and 2012, respectively.
Restricted Stock Units. A restricted stock unit is a promise by us to issue a share of our common stock upon vesting of the unit. The restricted stock units will generally vest at the rate of one-fourth of the shares on each anniversary of the date of grant.
The following table summarizes our restricted stock unit activity during the years ended December 31, 2014, 2013 and 2012:

 
Number of
Shares

Weighted
Average
Grant Date
Fair Value

Weighted
Average  Remaining
Contractual Term (yrs)
 
Aggregate
Intrinsic
Value
Unvested at January 1, 2012
 
148,000

 

 
 
 
 
Granted
 
682,146

 
$10.61
 
 
 
 
Vested
 
(128,000
)
 

 
 
 
 
Forfeited
 
(20,000
)
 

 
 
 
 
Outstanding at December 31, 2012
 
682,146

 

 
 
 
 
Granted
 
323,700

 
$6.69
 
 
 
 
Vested
 
(154,124
)
 

 
 
 
 
Forfeited
 
(115,367
)
 

 
 
 
 
Outstanding at December 31, 2013
 
736,355

 
$9.06
 
 
 
 
Granted
 
305,535

 
$13.71
 
 
 
 
Vested
 
(194,368
)
 
$9.12
 
 
 
 
Forfeited
 
(385,200
)
 
$8.84
 
 
 
 
Outstanding at December 31, 2014
 
462,322

 
$11.12
 
2.6
 

$4.5
 million

The estimated fair value of the restricted stock units was based on the market value of our common stock on the date of grant. The total intrinsic value of restricted stock units vested during the years ended December 31, 2014, 2013 and 2012 was approximately $2.6 million, $1.1 million and $0.9 million, respectively. We recognized approximately $2.0 million, $1.8 million and $1.5 million of share-based compensation expense related to the restricted stock units for the years ended December 31, 2014, 2013 and 2012, respectively.
In July 2014, we granted 540,742 PRSUs to our executive officers, which are not included in the table above. For the year ended December 31, 2014, there were 109,504 PRSUs forfeited. As of December 31, 2014, the aggregate intrinsic value of the 431,238 PRSUs outstanding was $4.2 million. For the year ended December 31, 2014, there was no expense recognized related to the PRSUs, as the achievement of the performance conditions was not determined to be probable.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Operating Leases
Our administrative offices and research facilities are located in San Diego, California. We lease an aggregate of approximately 76,000 square feet of office and research space in four buildings. The leases commenced in June 2011 and November 2013 and continue through January 2018. The leases are subject to approximately 2.5% to 3.0% annual increases throughout the terms of the leases. We also pay a pro rata share of operating costs, insurance costs, utilities and real property taxes.
We received incentives under the leases, including tenant improvement allowances and reduced or free rent, which the unamortized deferred rent balances associated with these incentives was $1.0 million as of December 31, 2014 and 2013.
Additionally, we lease certain office equipment under operating leases. Total rent expense was approximately $1.9 million, $1.7 million and $1.6 million for the years ended December 31, 2014, 2013 and 2012, respectively.
Approximate annual future minimum operating lease payments as of December 31, 2014 are as follows (in thousands): 
Year:
 
Operating
Leases
2015
 
$
2,133

2016
 
2,142

2017
 
2,162

2018
 
82

Total minimum lease payments
 
$
6,519


Other Commitments
In order to scale up the production of bulk rHuPH20 and to identify another manufacturer that would help meet anticipated production obligations arising from our proprietary programs and our collaborations, we entered into a Technology Transfer Agreement and a Clinical Supply Agreement with Cook Pharmica LLC (“Cook”). The technology transfer was completed in 2008. In 2009, multiple batches of bulk rHuPH20 were produced to support planned future clinical studies.
In March 2010, we entered into a Commercial Supply Agreement with Cook (the “Cook Commercial Supply Agreement”). Under the terms of the Cook Commercial Supply Agreement, Cook will manufacture certain batches of bulk rHuPH20 that will be used for commercial supply of certain products and product candidates. Under the terms of the Cook Commercial Supply Agreement, we are committed to certain minimum annual purchases of bulk rHuPH20 equal to four quarters of forecasted supply. At December 31, 2014, we had no minimum purchase obligation in connection with the Cook Commercial Supply Agreement.
In March 2010, we amended our Commercial Supply Agreement (the “March 2010 Avid Amendment”) with Avid Bioservices, Inc. (“Avid”) which was originally entered into in February 2005 and amended in December 2006. Under the terms of the March 2010 Avid Amendment, we are committed to certain minimum annual purchases of bulk rHuPH20 equal to three quarters of forecasted supply. In addition, Avid has the right to manufacture and supply a certain percentage of bulk rHuPH20 that will be used in Hylenex recombinant. At December 31, 2014, we had no minimum purchase obligations with this agreement.
In March 2010, we entered into a second Commercial Supply Agreement with Avid (the “Avid Commercial Supply Agreement”). Under the terms of the Avid Commercial Supply Agreement, we are committed to certain minimum annual purchases of bulk rHuPH20 equal to three quarters of forecasted supply. In addition, Avid has the right to manufacture and supply a certain percentage of bulk rHuPH20 that will be used in the collaboration products. At December 31, 2014, we had a $9.6 million minimum purchase obligation in connection with this agreement.
In June 2011, we entered into a commercial manufacturing and supply agreement with Baxter, under which Baxter provides the final fill and finishing steps in the production process of Hylenex recombinant for a limited period of time. The initial term of the agreement with Baxter was extended to December 31, 2015, subject to further extensions in accordance with the terms and conditions of the agreement. At December 31, 2014, we had a minimum purchase obligation in connection with this agreement of approximately $1.7 million. 
In June 2011, we entered into a services agreement with another third party manufacturer for the technology transfer and manufacture of Hylenex recombinant. At December 31, 2014, we had a $1.2 million minimum purchase obligation in connection with this agreement.
Contingencies
We have entered into an in-licensing agreement with a research organization, which is cancelable at our option with 90 days written notice. Under the terms of this agreement, we have received license to know-how and technology claimed, in certain patents or patent applications. We are required to pay fees, milestones and/or royalties on future sales of products employing the technology or falling under claims of a patent, and some of the agreements require minimum royalty payments. We continually reassess the value of the license agreement. If the in-licensed and research candidate is successfully developed, we may be required to pay milestone payments of approximately $9.3 million over the life of this agreement in addition to royalties on sales of the affected products. Due to the uncertainties of the development process, the timing and probability of the milestone and royalty payments cannot be accurately estimated.
Legal Contingencies
From time to time, we may be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of our business. Any of these claims could subject us to costly legal expenses and, while we generally believe that we have adequate insurance to cover many different types of liabilities, our insurance carriers may deny coverage or our policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on our consolidated results of operations and financial position. Additionally, any such claims, whether or not successful, could damage our reputation and business. We currently are not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our consolidated results of operations or financial position.
Income Taxes
Income Taxes
Income Taxes
Significant components of our net deferred tax assets at December 31, 2014 and 2013 are shown below (in thousands). A valuation allowance of $179.0 million and $162.0 million has been established to offset the net deferred tax assets as of December 31, 2014 and 2013, respectively, as realization of such assets is uncertain.
 
 
December 31,

 
2014

2013
Deferred tax assets:
 



Net operating loss carryforwards
 
$
120,707

 
$
116,572

Deferred revenue
 
18,034

 
13,324

Research and development credits
 
34,146

 
28,867

Share-based compensation
 
5,381

 
2,495

Other, net
 
891

 
853


 
179,159

 
162,111

Valuation allowance for deferred tax assets
 
(178,965
)
 
(161,968
)
Deferred tax assets, net of valuation
 
194

 
143

Deferred tax liabilities:
 
 
 
 
Depreciation
 
(194
)
 
(143
)
Net deferred tax liabilities
 
(194
)
 
(143
)
Net deferred tax assets
 
$

 
$


The provision for income taxes on earnings subject to income taxes differs from the statutory federal income tax rate due to the following (in thousands):
 
 
December 31,

 
2014

2013

2012
Federal income tax at 34%
 
$
(23,247
)
 
$
(28,383
)
 
$
(18,208
)
State income tax, net of federal benefit
 
(1,761
)
 
(1,745
)
 
(3,023
)
Increase in valuation allowance
 
16,998

 
33,525

 
20,954

Foreign income subject to tax at other than federal statutory rate
 
12,747

 

 

Tax effect on non-deductible expenses and other
 
540

 
5,219

 
1,293

Research and development credits
 
(5,277
)
 
(8,616
)
 
(1,016
)

 
$

 
$

 
$


At December 31, 2014, we had federal and California tax net operating loss carryforwards of approximately $341.9 million and $307.9 million, respectively. Included in these amounts are federal and California net operating losses of approximately $34.3 million and $32.8 million, respectively, attributable to stock option, RSA and RSU deductions for which the tax benefit will be credited to equity when realized. The federal and California tax loss carryforwards will begin to expire in 2018 and 2015, respectively, unless previously utilized.
At December 31, 2014, we also had federal and California research and development tax credit carryforwards of approximately $26.1 million and $12.2 million, respectively. The federal research and development tax credits will begin to expire in 2024 unless previously utilized. The California research and development tax credits will carryforward indefinitely until utilized.
Pursuant to Internal Revenue Code Section 382, the annual use of the net operating loss carryforwards and research and development tax credits could be limited by any greater than 50% ownership change during any three-year testing period. As a result of any such ownership change, portions of our net operating loss carryforwards and research and development tax credits are subject to annual limitations. We recently completed an updated Section 382 analysis regarding the limitation of the net operating losses and research and development credits as of June 30, 2014. Based upon the analysis, we determined that ownership changes occurred in prior years. However, the annual limitations on net operating loss and research and development tax credit carryforwards will not have a material impact on the future utilization of such carryforwards.
At December 31, 2014 and 2013, our unrecognized income tax benefits and uncertain tax positions were not material and would not, if recognized, affect the effective tax rate. Interest and/or penalties related to uncertain income tax positions are recognized by us as a component of income tax expense. For the years ended December 31, 2014, 2013 and 2012, we recognized no interest or penalties.
We do not provide for U.S. income taxes on the undistributed earnings of our foreign subsidiary as it is our intention to utilize those earnings in the foreign operations for an indefinite period of time. At December 31, 2014, there were no undistributed earnings in the foreign subsidiary.
We are subject to taxation in the U.S. and in various state and foreign jurisdictions. Our tax years for 1998 and forward are subject to examination by the U.S. and California tax authorities due to the carryforward of unutilized net operating losses and research and development credits.
Employee Savings Plan
Employee Savings Plan
Employee Savings Plan
We have an employee savings plan pursuant to Section 401(k) of the Internal Revenue Code. All employees are eligible to participate, provided they meet the requirements of the plan. We are not required to make matching contributions under the plan. However, we voluntarily contributed to the plan approximately $0.7 million, $0.6 million and $0.5 million for the years ended December 31, 2014, 2013 and 2012, respectively.
Related Party Transactions
Related Party Transactions
Related Party Transactions
In June 2011, we and Intrexon entered into the Intrexon Collaboration, under which Intrexon obtained a worldwide exclusive license for the use of rHuPH20 enzyme in the development of a subcutaneous injectable formulation of Intrexon’s recombinant human alpha 1-antitrypsin (rHuA1AT). The Intrexon Collaboration was terminated in May 2014. Intrexon’s chief executive officer and chairman of its board of directors, Randal J. Kirk, is also a member of our Board of Directors. The collaborative arrangement with Intrexon was reviewed and approved by our Board of Directors in accordance with our related party transaction policy. For the years ended December 31, 2014, 2013 and 2012, we recognized zero, $1.0 million and $1.0 million, respectively, in revenue under collaborative agreements pursuant to the terms of the Intrexon Collaboration. See Note 4, Collaborative Agreements, for a further discussion of the Intrexon Collaboration.
Restructuring Expense (Notes)
Restructuring and Related Activities Disclosure [Text Block]
Restructuring Expense
In November 2014, we completed a corporate reorganization to focus our resources on advancing our PEGPH20 oncology proprietary program and Enhanze collaborations. This reorganization resulted in a reduction in the workforce of approximately 13%, primarily in research and development.
We recorded approximately $1.2 million of severance pay and benefits expense in connection with the reorganization, of which $1.1 million and $0.1 million was included in research and development expense and selling, general and administrative expense, respectively, in the consolidated statement of operations for the year ended December 31, 2014. No other restructuring charges were incurred. We made cash payments of $0.7 million related to the restructuring expense for the year ended December 31, 2014. As of December 31, 2014, the restructuring liability was approximately $0.5 million and was included in current accrued expenses. The balance is expected to be paid in 2015.
Summary of Unaudited Quarterly Financial Information
Summary of Unaudited Quarterly Financial Information
Summary of Unaudited Quarterly Financial Information
The following is a summary of our unaudited quarterly results for the years ended December 31, 2014 and 2013 (in thousands):
 
 
Quarter Ended
2014 (Unaudited):
 
March 31,
 
June 30,
 
September 30,
 
December 31,
Total revenues(1)
 
$
11,966

 
$
18,385

 
$
14,606

 
$
30,377

Gross profit on product sales
 
$
3,048

 
$
3,570

 
$
4,476

 
$
3,997

Total operating expenses
 
$
37,185

 
$
33,325

 
$
33,632

 
$
34,228

Net loss
 
$
(26,548
)
 
$
(16,273
)
 
$
(20,280
)
 
$
(5,274
)
Net loss per share, basic and diluted
 
$
(0.22
)
 
$
(0.13
)
 
$
(0.16
)
 
$
(0.04
)
Shares used in computing basic and diluted net loss
per share
 
118,943

 
123,710

 
124,041

 
124,272

 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
2013 (Unaudited):
 
March 31,
 
June 30,
 
September 30,
 
December 31,
Total revenues
 
$
11,833

 
$
14,454

 
$
16,013

 
$
12,499

Gross profit on product sales(2)
 
$
769

 
$
1,816

 
$
9,342

 
$
6,266

Total operating expenses
 
$
30,330

 
$
36,574

 
$
34,507

 
$
33,822

Net loss
 
$
(19,289
)
 
$
(22,912
)
 
$
(19,292
)
 
$
(21,986
)
Net loss per share, basic and diluted
 
$
(0.17
)
 
$
(0.20
)
 
$
(0.17
)
 
$
(0.19
)
Shares used in computing basic and diluted net loss
per share
 
112,417

 
112,486

 
112,765

 
113,550

_______________
(1)
Revenues for the quarter ended December 31, 2014 included $15.0 million in revenue under collaborative agreements from the Janssen Collaboration.
(2)
Gross profit on product sales for the quarters ended June 30, 2013, September 30, 2013 and December 31, 2013 excluded manufacturing costs related to the product sales of bulk rHuPH20 for Herceptin SC and HyQvia in the amounts of $0.9 million, $6.5 million and $2.6 million, respectively. Such costs were incurred prior to European marketing approvals for Herceptin SC and HyQvia, and therefore, they were charged to research and development expenses in the periods the costs were incurred.
Schedule II Valuation and Qualifying Accounts (Notes)
Schedule of Valuation and Qualifying Accounts Disclosure [Text Block]
Valuation and Qualifying Accounts
(in thousands)
 
 
Balance at Beginning of Period
 
Additions
 
Deductions
 
Balance at End of Period
For the year ended December 31, 2014
 
 
 
 
 
 
 
 
Accounts receivable allowances (1)
 
$
610

 
$
4,518

 
$
(4,519
)
 
$
609

For the year ended December 31, 2013
 
 
 
 
 
 
 
 
Accounts receivable allowances (1)
 
$
178

 
$
2,979

 
$
(2,547
)
 
$
610

For the year ended December 31, 2012
 
 
 
 
 
 
 
 
Accounts receivable allowances (1)
 
$
15

 
$
771

 
$
(608
)
 
$
178

_______________
(1)
Allowances are for chargebacks, prompt payment discounts and distribution fees related to Hylenex recombinant product sales.
Summary of Significant Accounting Policies (Policies)
Basis of Presentation
The consolidated financial statements include the accounts of Halozyme Therapeutics, Inc. and our wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.'s wholly owned subsidiary, Halozyme Holdings Ltd. All intercompany accounts and transactions have been eliminated.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation. Specifically, we have reclassified $0.6 million from accrued expenses to other long-term liabilities in the consolidated balance sheet at December 31, 2013.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.
Cash Equivalents and Marketable Securities
Cash equivalents consist of highly liquid investments, readily convertible to cash, that mature within ninety days or less from date of purchase. Our cash equivalents consist of money market funds.
Marketable securities are investments with original maturities of more than ninety days from the date of purchase that are specifically identified to fund current operations. Marketable securities are considered available-for-sale. These investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current balance sheet date which reflects management's intention to use the proceeds from the sale of these investments to fund our operations, as necessary. Such available-for-sale investments are carried at fair value with unrealized gains and losses recorded in other comprehensive gain (loss) and included as a separate component of stockholders' equity (deficit). The cost of marketable securities is adjusted for amortization of premiums or accretion of discounts to maturity, and such amortization or accretion is included in investment and other income, net in the consolidated statements of operations. We use the specific identification method for calculating realized gains and losses on marketable securities sold. Realized gains and losses and declines in value judged to be other-than-temporary on marketable securities, if any, are included in investment and other income, net in the consolidated statements of operations.
Restricted Cash
Under the terms of the leases on our facilities, we are required to maintain letters of credit as security deposits during the terms of such leases. At December 31, 2014 and 2013, restricted cash of $0.5 million was pledged as collateral for the letters of credit.
Fair Value of Financial Instruments
The authoritative guidance for fair value measurements establishes a three tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Our financial instruments include cash equivalents, available-for-sale marketable securities, accounts receivable, prepaid expenses, accounts payable, accrued expenses and long-term debt. Fair value estimates of these instruments are made at a specific point in time, based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. The carrying amount of cash equivalents,
accounts receivable, prepaid expenses, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments. Further, based on the borrowing rates currently available for loans with similar terms, we believe the fair value of long-term debt approximates its carrying value.
Available-for-sale marketable securities consist of corporate debt securities, commercial paper and certificates of deposit and were measured at fair value using Level 2 inputs. Level 2 financial instruments are valued using market prices on less active markets and proprietary pricing valuation models with observable inputs, including interest rates, yield curves, maturity dates, issue dates, settlement dates, reported trades, broker-dealer quotes, issue spreads, benchmark securities or other market related data. We obtain the fair value of Level 2 investments from our investment manager, who obtains these fair values from a third-party pricing service. We validate the fair values of Level 2 financial instruments provided by our investment manager by comparing these fair values to a third-party pricing source.
Concentrations of Credit Risk, Sources of Supply and Significant Customers
We are subject to credit risk from our portfolio of cash equivalents and marketable securities. These investments were made in accordance with our investment policy which specifies the categories, allocations, and ratings of securities we may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. We maintain our cash and cash equivalent balances with one major commercial bank and marketable securities with another financial institution. Deposits held with the financial institutions exceed the amount of insurance provided on such deposits. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and marketable securities to the extent recorded on the balance sheet.
We are also subject to credit risk from our accounts receivable related to our product sales and revenues under our license and collaborative agreements. We have license and collaborative agreements with pharmaceutical companies under which we receive payments for license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk formulation of rHuPH20. In addition, we sell Hylenex® recombinant in the United States to a limited number of established wholesale distributors in the pharmaceutical industry. Credit is extended based on an evaluation of the customer’s financial condition, and collateral is not required. Management monitors our exposure to accounts receivable by periodically evaluating the collectibility of the accounts receivable based on a variety of factors including the length of time the receivables are past due, the financial health of the customer and historical experience.
Accounts Receivable, Net
Accounts receivable is recorded at the invoiced amount and is non-interest bearing. Accounts receivable is recorded net of allowances for doubtful accounts, cash discounts for prompt payment, distribution fees and chargebacks. We recorded no allowance for doubtful accounts at December 31, 2014 and 2013 as the collectibility of accounts receivable was reasonably assured.
Inventories
Inventories are stated at lower of cost or market. Cost is determined on a first-in, first-out basis. Inventories are reviewed periodically for potential excess, dated or obsolete status. Management evaluates the carrying value of inventories on a regular basis, taking into account such factors as historical and anticipated future sales compared to quantities on hand, the price we expect to obtain for products in their respective markets compared with historical cost and the remaining shelf life of goods on hand.
Prior to receiving marketing approval from the U.S. Food and Drug Administration (“FDA”) or comparable regulatory agencies in foreign countries, costs related to purchases of bulk rHuPH20 and raw materials and the manufacturing of the product candidates are recorded as research and development expense. All direct manufacturing costs incurred after receiving marketing approval are capitalized as inventory. Inventories used in clinical trials are expensed at the time the inventories are packaged for the clinical trials.
Property and Equipment, Net
Property and equipment are recorded at cost, less accumulated depreciation and amortization. Equipment is depreciated using the straight-line method over their estimated useful lives of three years and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the lease term, whichever is shorter. Leased buildings under build-to-suit lease arrangements are capitalized and included in property and equipment when we are involved in the construction of the structural improvements or take construction risk prior to the commencement of the lease. Upon completion of the construction under the build-to-suit leases, we assess whether those arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If we continue to be the deemed owner, the facilities would be accounted for as financing leases.
Impairment of Long-Lived Assets
We account for long-lived assets in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable. For the year ended December 31, 2014, we recorded an impairment of $0.2 million relating to manufacturing equipment. For the year ended December 31, 2013, there was no impairment of the value of long-lived assets.
Deferred Rent
Rent expense is recorded on a straight-line basis over the initial term of the lease. The difference between rent expense accrued and amounts paid under lease agreements is recorded as deferred rent in the accompanying consolidated balance sheets.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity during the period from transactions and other events and circumstances from non-owner sources.
Revenue Recognition
We generate revenues from product sales and collaborative agreements. Payments received under collaborative agreements may include nonrefundable fees at the inception of the agreements, license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk rHuPH20, and/or royalties on sales of products resulting from collaborative arrangements.
We recognize revenues in accordance with the authoritative guidance for revenue recognition. We recognize revenue when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectibility is reasonably assured.
Product Sales, Net
Hylenex Recombinant
In December 2011, we reintroduced Hylenex recombinant to the market. We sell Hylenex recombinant in the U.S. to wholesale pharmaceutical distributors, who sell the product to hospitals and other end-user customers. Sales to wholesalers provide for selling prices that are fixed on the date of sale, although we offer discounts to certain group purchasing organizations (“GPOs”), hospitals and government programs. The wholesalers take the title to the product, bear the risk of loss of ownership and have economic substance to the inventory. Further, we have no significant obligations for future performance to generate pull-through sales.
Prior to December 31, 2013, Hylenex recombinant had a limited sales history, and we could not reliably estimate expected returns and chargebacks of the product at the time the product was sold to the wholesalers. Accordingly, we deferred the recognition of revenue on sales of Hylenex recombinant to wholesalers, and instead, recognized revenue at the time when evidence existed to confirm that pull-through sales from wholesalers to the hospitals or other end-user customers had occurred or the right of return no longer existed, whichever occurred earlier. At the time product sales revenue was recognized, we recorded allowances for product returns and chargebacks based on our best estimates at the time. Shipments of product that were not recognized as revenue were treated as deferred revenue.
At December 31, 2013, we had developed sufficient historical experience and data to reasonably estimate future returns and chargebacks of Hylenex recombinant. As a result, effective December 31, 2013, we began recognizing Hylenex recombinant product sales and related cost of product sales at the time title transfers to the wholesalers.
Upon recognition of revenue from product sales of Hylenex recombinant, we record certain sales reserves and allowances as a reduction to gross revenue. These reserves and allowances include:
Product Returns. We allow the wholesalers to return product that is damaged or received in error. In addition, we accept unused product to be returned beginning six months prior to and ending twelve months following product expiration. Our estimates for expected returns of expired products are based primarily on an ongoing analysis of historical return patterns.
Distribution Fees. The distribution fees, based on contractually determined rates, arise from contractual agreements we have with certain wholesalers for distribution services they provide with respect to Hylenex recombinant. These fees are generally a fixed percentage of the price of the product purchased by the wholesalers.
Prompt Payment Discounts. We offer cash discounts to certain wholesalers as an incentive to meet certain payment terms. We estimate prompt payment discounts based on contractual terms, historical utilization rates, as available, and our expectations regarding future utilization rates.    
Other Discounts and Fees. We provide discounts to end-user members of certain GPOs under collective purchasing contracts between us and the GPOs. We also provide discounts to certain hospitals, who are members of the GPOs, with which we do not have contracts. The end-user members purchase products from the wholesalers at a contracted discounted price, and the wholesalers then charge back to us the difference between the current retail price and the price the end-users paid for the product. We also incur GPO administrative service fees for these transactions. In addition, we provide predetermined discounts under certain government programs. Our estimate for these chargebacks and fees take into consideration contractual terms, historical utilization rates, as available, and our expectations regarding future utilization rates.
Allowances for product returns and chargebacks are based on amounts owed or to be claimed on the related sales. We believe that our estimated product returns for Hylenex recombinant requires a high degree of judgment and is subject to change based on our experience and certain quantitative and qualitative factors. In order to develop a methodology to reliably estimate future returns and provide a basis for recognizing revenue on sales to wholesale distributors, we analyzed many factors, including, without limitation: (1) actual Hylenex recombinant product return history, taking into account product expiration dating at the time of shipment, (2) re-order activities of the wholesalers as well as their customers and (3) levels of inventory at the wholesale channel. We have monitored actual return history on an individual product lot basis since product launch. We considered the dating of product at the time of shipment into the distribution channel and changes in the estimated levels of inventory within the distribution channel to estimate our exposure for returned product. We considered historical chargebacks activity and current contract prices to estimate our exposure for returned product. Based on such data, we believe we have the information needed to reasonably estimate product returns and chargebacks.
We recognize product sales allowances as a reduction of product sales in the same period the related revenue is recognized. Because of the shelf life of Hylenex recombinant and our lengthy return period, there may be a significant period of time between when the product is shipped and when we issue credits on returned product. If actual results differ from our estimates, we will be required to make adjustments to these allowances in the future, which could have an effect on product sales revenue and earnings in the period of adjustments.
Bulk rHuPH20
Subsequent to receiving marketing approval from the FDA or comparable regulatory agencies in foreign countries, sales of bulk rHuPH20 for use in collaboration commercial products are recognized as product sales when the materials have met all the specifications required for the customer's acceptance and title and risk of loss have transferred to the customer. Following the receipts of European marketing approvals of Roche's Herceptin SC product in August 2013 and MabThera SC product in March 2014 and Baxter's HYQVIA® product in May 2013, revenue from the sales of bulk rHuPH20 for these collaboration products are recognized as product sales. For the years ended December 31, 2014 and 2013, we recognized $23.5 million and $13.7 million in product sales of bulk rHuPH20 for Roche's collaboration products, respectively. For the years ended December 31, 2014 and 2013, we recognized zero and $1.1 million in product sales of bulk rHuPH20 for Baxter's collaboration product, respectively.
Revenues under Collaborative Agreements
We have license and collaboration agreements under which the collaborators obtained worldwide rights for the use of our proprietary rHuPH20 enzyme in the development and commercialization of the collaborators’ biologic compounds. The collaborative agreements contain multiple elements including nonrefundable payments at the inception of the arrangement, license fees, exclusivity fees, payments based on achievement of specified milestones designated in the collaborative agreements, annual maintenance fees, reimbursements of research and development services, payments for supply of bulk rHuPH20 for the collaborator and/or royalties on sales of products resulting from collaborative agreements. We analyze each element of our collaborative agreements and consider a variety of factors in determining the appropriate method of revenue recognition of each element.
In order to account for the multiple-element arrangements, we identify the deliverables included within the agreement and evaluate which deliverables represent units of accounting. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation. The deliverables under our collaborative agreements include (i) the license to our rHuPH20 technology, (ii) at the collaborator’s request, research and development services which are reimbursed at contractually determined rates, and (iii) at the collaborator’s request, supply of bulk rHuPH20 which is reimbursed at our cost plus a margin. A delivered item is considered a separate unit of accounting when the delivered item has value to the collaborator on a standalone basis based on the consideration of the relevant facts and circumstances for each arrangement. Factors considered in this determination include the research capabilities of the collaborator and the availability of research expertise in this field in the general marketplace.
Arrangement consideration is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (“VSOE”) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists, we use our best estimate of the selling price for the deliverable. The amount of allocable arrangement consideration is limited to amounts that are not contingent upon the delivery of additional items or meeting other specified performance conditions. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. Changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement.
Nonrefundable upfront license fee payments are recognized upon delivery of the license if facts and circumstances dictate that the license has standalone value from the undelivered items, which generally include research and development services and the manufacture of bulk rHuPH20, the relative selling price allocation of the license is equal to or exceeds the upfront license fee, persuasive evidence of an arrangement exists, our price to the collaborator is fixed or determinable and collectibility is reasonably assured. Upfront license fee payments are deferred if facts and circumstances dictate that the license does not have standalone value. The determination of the length of the period over which to defer revenue is subject to judgment and estimation and can have an impact on the amount of revenue recognized in a given period.
The terms of our collaborative agreements provide for milestone payments upon achievement of certain development and regulatory events and/or specified sales volumes of commercialized products by the collaborator. We account for milestone payments in accordance with the provisions of ASU No. 2010-17, Revenue Recognition - Milestone Method. We recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following criteria:
1.
The consideration is commensurate with either the entity’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone,
2.
The consideration relates solely to past performance, and
3.
The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.
A milestone is defined as an event (i) that can only be achieved based in whole or in part on either the entity’s performance or on the occurrence of a specific outcome resulting from the entity’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and (iii) that would result in additional payments being due to the vendor.
Reimbursements of research and development services are recognized as revenue during the period in which the services are performed as long as there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the related receivable is reasonably assured. Revenue from the manufacture of bulk rHuPH20 is recognized when the materials have met all specifications required for the collaborator's acceptance and title and risk of loss have transferred to the collaborator. We do not directly control when any collaborator will request research and development services or supply of bulk rHuPH20; therefore, we cannot predict when we will recognize revenues in connection with research and development services and supply of bulk rHuPH20.
Since we receive royalty reports 60 days after quarter end, royalty revenue from sales of collaboration products by our collaborators will be recognized in the quarter following the quarter in which the corresponding sales occurred.
The collaborative agreements typically provide the collaborators the right to terminate such agreement in whole or on a product-by-product or target-by-target basis at any time upon 30 to 90 days prior written notice to us. There are no performance, cancellation, termination or refund provisions in any of our collaborative agreements that contain material financial consequences to us.
Cost of Product Sales
Cost of product sales consists primarily of raw materials, third-party manufacturing costs, fill and finish costs, freight costs, internal costs and manufacturing overhead associated with the production of Hylenex recombinant and bulk rHuPH20 for use in approved collaboration products. Cost of product sales also consists of the write-down of excess, dated and obsolete inventories and the write-off of any inventories that do not meet certain product specifications, if any.
Prior to European marketing approvals of Roche's collaboration products Herceptin SC in August 2013 and MabThera SC in March 2014, and Baxter's collaboration product HYQVIA in May 2013, all costs related to the manufacturing of bulk rHuPH20 for these collaboration products were charged to research and development expenses in the periods such costs were incurred. Therefore, cost of product sales of these bulk rHuPH20 for the year ended December 31, 2013 was materially reduced due to the exclusion of the manufacturing costs that were charged to research and development expenses in the periods prior to receiving marketing approvals.
Research and Development Expenses
Research and development expenses include salaries and benefits, facilities and other overhead expenses, external clinical trial expenses, research related manufacturing services, contract services and other outside expenses. Research and development expenses are charged to operations as incurred when these expenditures relate to our research and development efforts and have no alternative future uses. After receiving approval from the FDA or comparable regulatory agencies in foreign countries for a product, costs related to purchases and manufacturing of bulk rHuPH20 for product are capitalized as inventory. The manufacturing costs of bulk rHuPH20 for the collaboration products, Herceptin SC, MabThera SC and HYQVIA, incurred after the receipt of the European marketing approvals are capitalized as inventory.
In accordance with certain research and development agreements, we are obligated to make certain upfront payments upon execution of the agreement. Advance payments, including nonrefundable amounts, for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts will be recognized as an expense as the related goods are delivered or the related services are performed or such time when we do not expect the goods to be delivered or services to be performed.
Milestone payments that we make in connection with in-licensed technology for a particular research and development project that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic values are expensed as research and development costs at the time the costs are incurred. We have no in-licensed technologies that have alternative future uses in research and development projects or otherwise.
Clinical Trial Expenses
Payments in connection with our clinical trials are often made under contracts with multiple contract research organizations that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee, unit price or on a time and materials basis. Payments under these contracts depend on factors such as the successful enrollment or treatment of patients or the completion of other clinical trial milestones.
Expenses related to clinical trials are accrued based on our estimates and/or representations from service providers regarding work performed, including actual level of patient enrollment, completion of patient studies and progress of the clinical trials. Other incidental costs related to patient enrollment or treatment are accrued when reasonably certain. If the contracted amounts are modified (for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), we modify our accruals accordingly on a prospective basis. Revisions in the scope of a contract are charged to expense in the period in which the facts that give rise to the revision become reasonably certain. Historically, we have had no material changes in clinical trial expense accruals that had a material impact on our consolidated results of operations or financial position.
Share-Based Compensation
We record compensation expense associated with stock options and other share-based awards in accordance with the authoritative guidance for stock-based compensation. The cost of employee services received in exchange for an award of an equity instrument is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense on a straight-line basis, net of estimated forfeitures, over the requisite service period of the award. Share-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Share-based compensation expense for an award with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized and any previously recognized compensation expense is reversed. As share-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. The guidance requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Pre-vesting forfeitures were estimated to be approximately 10% for employees for the years ended December 31, 2014, 2013 and 2012 based on our historical experience for the years then ended.
Income Taxes
We provide for income taxes using the liability method. Under this method, deferred income tax assets and liabilities are determined based on the differences between the financial statement carrying amounts of existing assets and liabilities at each year end and their respective tax bases and are measured using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Deferred tax assets and other tax benefits are recorded when it is more likely than not that the position will be sustained upon audit. Valuation allowances have been established to reduce our net deferred tax assets to zero, as we believe that it is more likely than not that such assets will not be realized.
Net Loss Per Share
Basic net loss per common share is computed by dividing loss for the period by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. Stock options, unvested restricted stock awards (“RSAs”) and unvested restricted stock units (“RSUs”) are considered common stock equivalents and are only included in the calculation of diluted earnings per common share when their effect is dilutive. Because of our net loss, outstanding stock options, outstanding RSUs and unvested RSAs totaling approximately 8,405,903, 8,070,141 and 7,444,333 were excluded from the calculation of diluted net loss per common share for the years ended December 31, 2014, 2013 and 2012, respectively, because their effect was anti-dilutive. Since the performance conditions for performance restricted stock units (“PRSUs”) were not satisfied at December 31, 2014, such securities are excluded from potentially dilutive securities.
Segment Information
We operate our business in one segment, which includes all activities related to the research, development and commercialization of our proprietary enzymes. This segment also includes revenues and expenses related to (i) research and development and API manufacturing activities conducted under our collaborative agreements with third parties and (ii) product sales of Hylenex recombinant. The chief operating decision-maker reviews the operating results on an aggregate basis and manages the operations as a single operating segment.
Pending Adoption of Recent Accounting Pronouncements
In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements — Going Concern (“ASU 2014-15”). The provisions of ASU 2014-15 provide that in connection with preparing financial statements for each annual and interim reporting period, an entity's management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). ASU 2014-15 is effective for the annual reporting period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The adoption of ASU 2014-15 will not have a material impact on our consolidated financial position or results of operations.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 will eliminate transaction-specific and industry-specific revenue recognition guidance under current GAAP and replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. ASU 2014-09 also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016. Early application is not permitted. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.
In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). The provisions of ASU 2013-11 require entities to present unrecognized tax benefits as a decrease in a net operating loss, similar tax loss or tax credit carryforward if certain criteria are met. The determination of whether a deferred tax asset is available is based on the unrecognized tax benefit and the deferred tax asset that exists at the reporting date and presumes disallowance of the tax position at the reporting date. The guidance will eliminate the diversity in practice in the presentation of unrecognized tax benefits but will not alter the way in which entities assess deferred tax assets for realizability. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2014. The amendments should be applied prospectively to unrecognized tax benefits that exist at the effective date. Early adoption is permitted. The adoption of ASU 2013-11 will not have a material impact on our consolidated financial position or results of operations.
Summary of Significant Accounting Policies Fair Value of Financial Instruments (Tables)
Fair Value, Assets Measured on Recurring Basis [Table Text Block]
The following table summarizes, by major security type, our cash equivalents and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):
 
 
December 31, 2014
 
December 31, 2013
 
 
Level 1
 
Level 2
 
Total estimated fair value
 
Level 1
 
Level 2
 
Total estimated fair value
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
42,685

 
$

 
$
42,685

 
$
5,711

 
$

 
$
5,711

 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale marketable
   securities:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
 

 
74,234

 
74,234

 

 
35,147

 
35,147

Commercial paper
 

 

 

 

 
5,999

 
5,999

Certificate of deposit
 

 

 

 

 
3,000

 
3,000

 
 
$
42,685

 
$
74,234

 
$
116,919

 
$
5,711

 
$
44,146

 
$
49,857

Summary of Significant Accounting Policies Concentrations of Credit Risk (Tables)
Schedules of Concentration of Risk, by Risk Factor [Table Text Block]
The following table indicates the percentage of total revenues in excess of 10% with any single customer:
 
Year Ended December 31,
 
2014
 
2013
 
2012
Roche
57%
 
64%
 
45%
Janssen
20%
 
 
Baxter
3%
 
10%
 
17%
Pfizer
1%
 
4%
 
22%
We attribute revenues under collaborative agreements to the individual countries where the collaborator is headquartered. We attribute revenues from product sales to the individual countries to which the product is shipped. Worldwide revenues from external customers are summarized by geographic location in the following table (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
United States
$
31,397

 
$
19,019

 
$
22,724

Switzerland
42,791

 
35,157

 
18,913

All other foreign
1,146

 
623

 
688

Total revenues
$
75,334

 
$
54,799

 
$
42,325

Marketable Securities (Tables)
Marketable Securities [Table Text Block]
Available-for-sale marketable securities consisted of the following (in thousands):
 
 
December 31, 2014
Description
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Corporate debt securities
 
$
74,275

 
$
2

 
$
(43
)
 
$
74,234

 
 
December 31, 2013
Description
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Corporate debt securities
 
$
35,130

 
$
20

 
$
(3
)
 
$
35,147

Commercial paper
 
5,999

 

 

 
5,999

Certificate of deposit
 
3,000

 

 

 
3,000

 
 
$
44,129

 
$
20

 
$
(3
)
 
$
44,146

Certain Balance Sheet Items (Tables)
Accounts receivable, net consisted of the following (in thousands):
 
 
December 31,
2014
 
December 31,
2013
Accounts receivable from product sales to collaborators
 
$
6,361

 
$
4,495

Accounts receivable from other product sales
 
2,133

 
1,505

Accounts receivable from revenues under collaborative agreements
 
1,266

 
3,707

Subtotal
 
9,760

 
9,707

Allowance for distribution fees and discounts
 
(611
)
 
(610
)
Total accounts receivable, net
 
$
9,149

 
$
9,097

Inventories consisted of the following (in thousands):
 
 
December 31,
2014
 
December 31,
2013
Raw materials
 
$
553

 
$
1,137

Work-in-process
 
5,207

 
4,280

Finished goods
 
646

 
753

Total inventories
 
$
6,406

 
$
6,170

Prepaid expenses and other assets consisted of the following (in thousands):
 
 
December 31,
2014
 
December 31,
2013
Prepaid manufacturing expenses
 
$
6,339

 
$
5,884

Prepaid research and development expenses
 
2,380

 
3,522

Other prepaid expenses
 
1,094

 
1,339

Other assets
 
1,535

 
356

Total prepaid expenses and other assets
 
11,348

 
11,101

Less long-term portion
 
1,205

 
2,676

Total prepaid expenses and other assets, current
 
$
10,143

 
$
8,425

Property and equipment, net consisted of the following (in thousands):
 
 
December 31,
2014
 
December 31,
2013
Research equipment
 
$
8,474

 
$
7,714

Computer and office equipment
 
2,178

 
1,949

Leasehold improvements
 
1,518

 
1,408

Subtotal
 
12,170

 
11,071

Accumulated depreciation and amortization
 
(9,219
)
 
(7,649
)
Property and equipment, net
 
$
2,951

 
$
3,422


Accrued expenses consisted of the following (in thousands):
 
 
December 31,
2014
 
December 31,
2013
Accrued compensation and payroll taxes
 
$
5,923

 
$
7,075

Accrued outsourced research and development expenses
 
4,383

 
3,377

Accrued outsourced manufacturing expenses
 
2,112

 
3,233

Other accrued expenses
 
2,023

 
1,235

Total accrued expenses
 
14,441

 
14,920

Less long-term accrued outsourced research and development expenses
 
480

 
551

     Total accrued expenses, current
 
$
13,961

 
$
14,369

Deferred revenue consisted of the following (in thousands):
 
 
December 31,
2014
 
December 31,
2013
Collaborative agreements
 
$
53,479

 
$
51,185

Product sales
 
1,155

 
1,958

Total deferred revenue
 
54,634

 
53,143

Less current portion
 
7,367

 
7,398

Deferred revenue, net of current portion
 
$
47,267

 
$
45,745

Long-Term Debt, Net (Tables)
Schedule of future maturities and interest payments
Future maturities and interest payments under the term loan as of December 31, 2014, are as follows (in thousands):
2015
 
$
3,775

2016
 
25,077

2017
 
27,013

2018
 
6,501

2019
 

Total minimum payments
 
62,366

Less amount representing interest
 
(12,366
)
Gross balance of long-term debt
 
50,000

Less unamortized debt discount
 
(140
)
Present value of long-term debt
 
49,860

Less current portion of long-term debt
 

Long-term debt, less current portion and unamortized debt discount
 
$
49,860

Equity Incentive Plans (Tables)
Total share-based compensation expense related to share-based awards was comprised of the following (in thousands):
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
Research and development
 
$
7,939

 
$
4,476

 
$
4,191

Selling, general and administrative
 
7,335

 
5,062

 
4,158

Share-based compensation expense
 
$
15,274

 
$
9,538

 
$
8,349

Total unrecognized estimated compensation expense by type of award and the weighted-average remaining requisite service period over which such expense is expected to be recognized (in thousands, unless otherwise noted):
 
 
December 31, 2014
 
 
Unrecognized
Expense
 
Remaining
Weighted-Average
Recognition Period
(years)
Stock options
 
$
15,675

 
2.7
RSAs
 
$
7,153

 
1.6
RSUs
 
$
3,991

 
2.6
A summary of our stock option award activity as of and for the years ended December 31, 2014, 2013 and 2012 is as follows: 

 
Shares
Underlying
Stock Options

Weighted
Average Exercise
Price per Share

Weighted Average
Remaining
Contractual Term (years)
 
Aggregate
Intrinsic
Value
Outstanding at January 1, 2012
 
5,869,784

 
$5.82
 
 
 
 
Granted
 
1,215,442

 
$9.90
 
 
 
 
Exercised
 
(444,637
)
 
$4.56
 
 
 
 
Canceled/forfeited
 
(260,722
)
 
$8.34
 
 
 
 
Outstanding at December 31, 2012
 
6,379,867

 
$6.59
 
 
 
 
Granted
 
1,806,392

 
$7.14
 
 
 
 
Exercised
 
(1,270,362
)
 
$4.34
 
 
 
 
Canceled/forfeited
 
(214,982
)
 
$8.18
 
 
 
 
Outstanding at December 31, 2013
 
6,700,915

 
$7.11
 
 
 
 
Granted
 
2,271,143

 
$13.02
 
 
 
 
Exercised
 
(1,432,206
)
 
$5.43
 
 
 
 
Canceled/forfeited
 
(1,185,960
)
 
$9.39
 
 
 
 
Outstanding at December 31, 2014
 
6,353,892

 
$9.18
 
6.5
 

$11.2
 million
Vested and expected to vest at December 31, 2014
 
6,025,883

 
$9.05
 
6.4
 

$10.9
 million
Exercisable at December 31, 2014
 
3,944,408

 
$7.36
 
4.6
 

$8.9
 million
Assumptions used in the Black-Scholes model were as follows:
 
 
Year Ended December 31,
 
 
2014

2013

2012
Expected volatility
 
66.6-71.8%


70.1-72.5%


64.0-69.2%

Average expected term (in years)
 
5.7


5.7


5.6

Risk-free interest rate
 
1.73-2.04%


0.86-2.00%


0.80-1.15%

Expected dividend yield
 
0
%

0
%

0
%
The following table summarizes our restricted stock award activity during the years ended December 31, 2014, 2013 and 2012:

 
Number of
Shares

Weighted  Average
Grant Date
Fair Value
Unvested at January 1, 2012
 
347,883

 
$6.51
Granted
 
380,158

 
$10.29
Vested
 
(339,758
)
 
$6.51
Forfeited
 
(5,963
)
 
$10.81
Unvested at December 31, 2012
 
382,320

 
$10.21
Granted
 
476,096

 
$6.88
Vested
 
(211,178
)
 
$8.78
Forfeited
 
(14,367
)
 
$8.17
Unvested at December 31, 2013
 
632,871

 
$8.23
Granted
 
1,055,122

 
$11.15
Vested
 
(263,765
)
 
$8.33
Forfeited
 
(265,777
)
 
$10.86
Unvested at December 31, 2014
 
1,158,451

 
$10.26
The following table summarizes our restricted stock unit activity during the years ended December 31, 2014, 2013 and 2012:

 
Number of
Shares

Weighted
Average
Grant Date
Fair Value

Weighted
Average  Remaining
Contractual Term (yrs)
 
Aggregate
Intrinsic
Value
Unvested at January 1, 2012
 
148,000

 

 
 
 
 
Granted
 
682,146

 
$10.61
 
 
 
 
Vested
 
(128,000
)
 

 
 
 
 
Forfeited
 
(20,000
)
 

 
 
 
 
Outstanding at December 31, 2012
 
682,146

 

 
 
 
 
Granted
 
323,700

 
$6.69
 
 
 
 
Vested
 
(154,124
)
 

 
 
 
 
Forfeited
 
(115,367
)
 

 
 
 
 
Outstanding at December 31, 2013
 
736,355

 
$9.06
 
 
 
 
Granted
 
305,535

 
$13.71
 
 
 
 
Vested
 
(194,368
)
 
$9.12
 
 
 
 
Forfeited
 
(385,200
)
 
$8.84
 
 
 
 
Outstanding at December 31, 2014
 
462,322

 
$11.12
 
2.6
 

$4.5
 million
Commitments and Contingencies (Tables)
Schedule of future minimum rental payments for operating leases
Approximate annual future minimum operating lease payments as of December 31, 2014 are as follows (in thousands): 
Year:
 
Operating
Leases
2015
 
$
2,133

2016
 
2,142

2017
 
2,162

2018
 
82

Total minimum lease payments
 
$
6,519

Income Taxes (Tables)
Significant components of our net deferred tax assets at December 31, 2014 and 2013 are shown below (in thousands). A valuation allowance of $179.0 million and $162.0 million has been established to offset the net deferred tax assets as of December 31, 2014 and 2013, respectively, as realization of such assets is uncertain.
 
 
December 31,

 
2014

2013
Deferred tax assets:
 



Net operating loss carryforwards
 
$
120,707

 
$
116,572

Deferred revenue
 
18,034

 
13,324

Research and development credits
 
34,146

 
28,867

Share-based compensation
 
5,381

 
2,495

Other, net
 
891

 
853


 
179,159

 
162,111

Valuation allowance for deferred tax assets
 
(178,965
)
 
(161,968
)
Deferred tax assets, net of valuation
 
194

 
143

Deferred tax liabilities:
 
 
 
 
Depreciation
 
(194
)
 
(143
)
Net deferred tax liabilities
 
(194
)
 
(143
)
Net deferred tax assets
 
$

 
$

The provision for income taxes on earnings subject to income taxes differs from the statutory federal income tax rate due to the following (in thousands):
 
 
December 31,

 
2014

2013

2012
Federal income tax at 34%
 
$
(23,247
)
 
$
(28,383
)
 
$
(18,208
)
State income tax, net of federal benefit
 
(1,761
)
 
(1,745
)
 
(3,023
)
Increase in valuation allowance
 
16,998

 
33,525

 
20,954

Foreign income subject to tax at other than federal statutory rate
 
12,747

 

 

Tax effect on non-deductible expenses and other
 
540

 
5,219

 
1,293

Research and development credits
 
(5,277
)
 
(8,616
)
 
(1,016
)

 
$

 
$

 
$

Summary of Unaudited Quarterly Financial Information (Tables)
Schedule of quarterly financial information
The following is a summary of our unaudited quarterly results for the years ended December 31, 2014 and 2013 (in thousands):
 
 
Quarter Ended
2014 (Unaudited):
 
March 31,
 
June 30,
 
September 30,
 
December 31,
Total revenues(1)
 
$
11,966

 
$
18,385

 
$
14,606

 
$
30,377

Gross profit on product sales
 
$
3,048

 
$
3,570

 
$
4,476

 
$
3,997

Total operating expenses
 
$
37,185

 
$
33,325

 
$
33,632

 
$
34,228

Net loss
 
$
(26,548
)
 
$
(16,273
)
 
$
(20,280
)
 
$
(5,274
)
Net loss per share, basic and diluted
 
$
(0.22
)
 
$
(0.13
)
 
$
(0.16
)
 
$
(0.04
)
Shares used in computing basic and diluted net loss
per share
 
118,943

 
123,710

 
124,041

 
124,272

 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
2013 (Unaudited):
 
March 31,
 
June 30,
 
September 30,
 
December 31,
Total revenues
 
$
11,833

 
$
14,454

 
$
16,013

 
$
12,499

Gross profit on product sales(2)
 
$
769

 
$
1,816

 
$
9,342

 
$
6,266

Total operating expenses
 
$
30,330

 
$
36,574

 
$
34,507

 
$
33,822

Net loss
 
$
(19,289
)
 
$
(22,912
)
 
$
(19,292
)
 
$
(21,986
)
Net loss per share, basic and diluted
 
$
(0.17
)
 
$
(0.20
)
 
$
(0.17
)
 
$
(0.19
)
Shares used in computing basic and diluted net loss
per share
 
112,417

 
112,486

 
112,765

 
113,550

_______________
(1)
Revenues for the quarter ended December 31, 2014 included $15.0 million in revenue under collaborative agreements from the Janssen Collaboration.
(2)
Gross profit on product sales for the quarters ended June 30, 2013, September 30, 2013 and December 31, 2013 excluded manufacturing costs related to the product sales of bulk rHuPH20 for Herceptin SC and HyQvia in the amounts of $0.9 million, $6.5 million and $2.6 million, respectively. Such costs were incurred prior to European marketing approvals for Herceptin SC and HyQvia, and therefore, they were charged to research and development expenses in the periods the costs were incurred.
Summary of Significant Accounting Policies Reclassifications (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Reclassifications [Abstract]
 
Prior Period Reclassification Adjustment
$ 0.6 
Summary of Significant Accounting Policies Restricted Cash (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Restricted Cash [Abstract]
 
 
Restricted cash
$ 500 
$ 500 
Summary of Significant Accounting Policies Fair Value of Financial Instruments (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount
$ 0 
$ 0 
Investments, Fair Value Disclosure
116,919 
49,857 
Available-for-sale marketable securities
 
44,146 
Level 1
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Investments, Fair Value Disclosure
42,685 
5,711 
Level 2
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Investments, Fair Value Disclosure
74,234 
44,146 
Level 3
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Investments, Fair Value Disclosure
Cash Equivalents
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Cash and Cash Equivalents, Fair Value Disclosure
42,685 
5,711 
Cash Equivalents |
Level 1
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Cash and Cash Equivalents, Fair Value Disclosure
42,685 
5,711 
Corporate Debt Securities
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Available-for-sale marketable securities
74,234 
35,147 
Corporate Debt Securities |
Level 2
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Available-for-sale marketable securities
74,234 
35,147 
Commercial Paper
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Available-for-sale marketable securities
5,999 
Commercial Paper |
Level 2
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Available-for-sale marketable securities
5,999 
Certificates of Deposit
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Available-for-sale marketable securities
3,000 
Certificates of Deposit |
Level 2
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Available-for-sale marketable securities
$ 0 
$ 3,000 
Summary of Significant Accounting Policies Concentrations of Credit Risk, Sources of Supply and Significant Customers (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Concentration Risk [Line Items]
 
 
 
Allowance for doubtful accounts
$ 0 
$ 0 
 
Concentration risk, percentage
10.00% 
 
 
Foreign based operations
Number of manufacturers for supply of bulk rHuPH20
 
 
Geographic Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Revenue, net
75,334,000 
54,799,000 
42,325,000 
Bulk formulation [Member] |
Accounts Payable |
Supplier Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
0.00% 
9.00% 
 
Fill and Finish [Member] |
Accounts Payable |
Supplier Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
6.00% 
2.00% 
 
Domestic |
Geographic Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Revenue, net
31,397,000 
19,019,000 
22,724,000 
Switzerland |
Geographic Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Revenue, net
42,791,000 
35,157,000 
18,913,000 
All other foreign |
Geographic Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Revenue, net
1,146,000 
623,000 
688,000 
Germany
 
 
 
Concentration Risk [Line Items]
 
 
 
Long-Lived assets in foreign countries
$ 400,000 
$ 800,000 
 
Roche and Pfizer |
Accounts Receivable |
Customer Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
76.00% 
81.00% 
 
Roche |
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
57.00% 
64.00% 
45.00% 
Janssen |
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
20.00% 
0.00% 
0.00% 
Baxter |
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
3.00% 
10.00% 
17.00% 
Pfizer |
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
1.00% 
4.00% 
22.00% 
Summary of Significant Accounting Policies Inventories (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Hylenex recombinant
 
 
Inventory, net of reserves
$ 3.0 
$ 2.6 
bulk rHuPH20
 
 
Inventory, net of reserves
$ 3.4 
$ 3.5 
Summary of Significant Accounting Policies Revenue Recognition (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Revenue from External Customer [Line Items]
 
 
 
Total net increase to product sales
$ 37,823 
$ 24,439 
$ 2,887 
Collaboration agreements, period for termination
90 days 
 
 
Bulk rHuPH20 for Herceptin SC
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Total net increase to product sales
23,500 
13,700 
 
Bulk rHuPH20 for HyQvia
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Total net increase to product sales
$ 0 
$ 1,100 
 
Minimum [Member]
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Collaboration agreements, period for termination
30 days 
 
 
Maximum [Member]
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Collaboration agreements, period for termination
90 days 
 
 
Period prior to expiration [Member]
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Period to accept returned unused product
6 months 
 
 
Period after expiration [Member]
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Period to accept returned unused product
12 months 
 
 
Summary of Significant Accounting Policies Cost of Product Sales (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2013
bulk rHuPH20
Dec. 31, 2012
bulk rHuPH20
Dec. 31, 2013
bulk rHuPH20 prior period
Dec. 31, 2012
bulk rHuPH20 prior period
Dec. 31, 2014
Bulk rHuPH20 for HyQvia
Dec. 31, 2013
Bulk rHuPH20 for HyQvia
Product Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Manufacturing costs previously recorded as research and development
$ 2.6 
$ 6.5 
$ 0.9 
$ 1.0 
$ 10.0 
 
 
 
 
 
 
Prior periods manufacturing costs previously recorded as research and development
 
 
 
 
 
0.9 
0.1 
9.0 
1.0 
 
 
Manufacturing costs previously recorded for bulk rHuPH20
1.0 
 
 
 
1.0 
 
 
 
 
 
 
Inventory, net of reserves
 
 
 
 
 
 
 
 
 
$ 0 
$ 0 
Summary of Significant Accounting Policies Share Based Payments (Details)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share-based Compensation, Additional Disclosures
 
 
 
Pre-vesting forfeitures percent
10.00% 
10.00% 
10.00% 
Summary of Significant Accounting Policies Net Loss Per Share (Details)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Accounting Policies [Abstract]
 
 
 
Antidilutive securities excluded from the calculation of diluted net loss per common share
8,405,903 
8,070,141 
7,444,333 
Summary of Significant Accounting Policies (Details Textual) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Segment
Dec. 31, 2013
Summary of Significant Accounting Policies (Textual)
 
 
Allowance for doubtful accounts
$ 0 
$ 0 
Estimated useful life of equipment
3 years 
 
Impairment of long lived assets
200 
Number of operating segments
 
Net deferred tax assets
$ 0 
$ 0 
Marketable Securities (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
 
$ 44,129 
Gross unrealized gains
 
20 
Gross unrealized losses
 
(3)
Available-for-sale marketable securities
 
44,146 
Corporate Debt Securities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
74,275 
35,130 
Gross unrealized gains
20 
Gross unrealized losses
(43)
(3)
Available-for-sale marketable securities
74,234 
35,147 
Commercial Paper
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
 
5,999 
Gross unrealized gains
 
Gross unrealized losses
 
Available-for-sale marketable securities
 
5,999 
Certificates of Deposit
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
 
3,000 
Gross unrealized gains
 
Gross unrealized losses
 
Available-for-sale marketable securities
 
$ 3,000 
Marketable Securities Textuals (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Marketable Securities [Abstract]
 
 
 
Proceeds from maturities of marketable securities
$ 57,301 
$ 3,375 
$ 0 
Realized gain or loss
 
 
Continuous unrealized loss position, twelve months or less
14 
 
 
Other than temporary impairment, marketable securities
$ 0 
 
 
Collaborative Agreements (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2014
Roche Collaboration
Dec. 31, 2013
Roche Collaboration
Dec. 31, 2014
Gammagard Collaboration
Dec. 31, 2013
Gammagard Collaboration
Dec. 31, 2014
Roche Collaboration
Compound
Dec. 31, 2013
Roche Collaboration
Dec. 31, 2012
Roche Collaboration
Dec. 31, 2014
Gammagard Collaboration
Dec. 31, 2013
Gammagard Collaboration
Dec. 31, 2012
Gammagard Collaboration
Dec. 31, 2014
Janssen
Dec. 31, 2014
Janssen
Compound
Dec. 31, 2014
Pfizer
Compound
Dec. 31, 2014
Pfizer and Janssen
Dec. 31, 2013
Pfizer and Janssen
Dec. 31, 2012
Pfizer and Janssen
Dec. 31, 2014
ViroPharma
Dec. 31, 2014
Intrexon
Dec. 31, 2014
Bulk rHuPH20 for Herceptin SC
Roche Collaboration
Dec. 31, 2013
Bulk rHuPH20 for Herceptin SC
Roche Collaboration
Dec. 31, 2012
Bulk rHuPH20 for Herceptin SC
Roche Collaboration
Collaborative Agreements [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred Revenue, Additions
 
$ 5.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total to date proceeds received from collaborator under license and collaborative agreement
 
 
 
 
 
78.3 
 
 
17.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nonrefundable upfront license fee payment
 
 
 
 
 
20.0 
 
 
10.0 
 
 
15.0 
15.0 
11.0 
 
 
 
 
 
 
 
 
Amount received from Roche for additional exclusive targets and annual license maintenance fees
 
 
 
 
 
22.3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Clinical development milestone payments received under collaborative agreement
 
 
 
 
 
13.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory milestone payments received under collaborative agreement
 
 
 
 
 
8.0 
 
 
3.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount received for sales-based events
 
 
 
 
 
15.0 
 
 
4.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred revenue, revenue recognized
 
 
 
 
 
8.1 
4.6 
2.0 
0.8 
0.6 
0.5 
 
 
 
 
 
 
 
 
2.0 
1.3 
1.4 
Deferred revenue relating to upfront payment license fees, sales-based payments, and annual maintenance fees
 
42.7 
41.6 
10.9 
10.5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Milestone payments recognized as revenues
 
 
 
 
 
8.0 
 
 
 
15.0 
 
 
 
 
 
 
 
Collaborative Agreements (Textual) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of product combinations licensed to develop
 
 
 
 
 
13 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of targets elected
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of additional target, optional
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Royalty receivable, duration
 
 
 
 
 
10 years 
 
 
10 years 
 
 
 
10 years 
10 years 
 
 
 
 
 
 
 
 
Number of targets elected - upfront licence fee payment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of targets elected, additional exclusive targets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Time period to provide notice to terminate agreement
90 days 
 
 
 
 
 
 
 
 
 
 
 
90 days 
30 days 
 
 
 
 
 
 
 
 
Collaboration Agreement Termination Date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
May 06, 2014 
May 23, 2014 
 
 
 
Additional Maximum Proceeds Receivable from License and Collaborative Agreements Upon Achievement of Clinical Development Milestones
55.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional Maximum Proceeds Receivable From Achievement of Regulatory Milestones
$ 12.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Certain Balance Sheet Items Accounts Receivable (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Accounts Receivable, Net [Abstract]
 
 
Accounts receivable from product sales to collaborators
$ 6,361 
$ 4,495 
Accounts receivable from other product sales
2,133 
1,505 
Accounts receivable from revenues under collaborative agreements
1,266 
3,707 
Accounts receivable, gross
9,760 
9,707 
Allowance for distribution fees and discounts
(611)
(610)
Accounts receivable, net
$ 9,149 
$ 9,097 
Certain Balance Sheet Items Inventories (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Summary of Inventories
 
 
Raw materials
$ 553 
$ 1,137 
Work-in-process
5,207 
4,280 
Finished goods
646 
753 
Inventories
$ 6,406 
$ 6,170 
Certain Balance Sheet Items Prepaid Expenses and Other Assets (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Prepaid Expenses and Other Assets Disclosure [Abstract]
 
 
Prepaid manufacturing expenses
$ 6,339 
$ 5,884 
Prepaid research and development expenses
2,380 
3,522 
Other prepaid expense
1,094 
1,339 
Other assets
1,535 
356 
Prepaid expenses and other assets
11,348 
11,101 
Less long-term portion
1,205 
2,676 
Prepaid expenses and other assets
$ 10,143 
$ 8,425 
Certain Balance Sheet Items Property and Equipment, Net (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Summary of property and equipment
 
 
Property and equipment, gross
$ 12,170 
$ 11,071 
Accumulated depreciation and amortization
(9,219)
(7,649)
Property and equipment, net
2,951 
3,422 
Research equipment
 
 
Summary of property and equipment
 
 
Property and equipment, gross
8,474 
7,714 
Computer and office equipment
 
 
Summary of property and equipment
 
 
Property and equipment, gross
2,178 
1,949 
Leasehold improvements
 
 
Summary of property and equipment
 
 
Property and equipment, gross
$ 1,518 
$ 1,408 
Certain Balance Sheet Items Property and Equipment, Net (Textual) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Property and Equipment, Net (Textual) [Abstract]
 
 
 
Depreciation and amortization
$ 1,762 
$ 1,227 
$ 1,079 
Certain Balance Sheet Items Accrued Expenses (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Accrued Liabilities [Abstract]
 
 
Accrued compensation and payroll taxes
$ 5,923 
$ 7,075 
Accrued outsourced research and development expenses
4,383 
3,377 
Accrued manufacturing expenses
2,112 
3,233 
Other accrued expenses
2,023 
1,235 
Accrued Liabilities
14,441 
14,920 
Less long-term accrued outsourced research and development expenses
480 
551 
Total accrued expenses, current
$ 13,961 
$ 14,369 
Certain Balance Sheet Items Deferred Revenue (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Deferred Revenue
 
 
Deferred revenue
$ 54,634 
$ 53,143 
Deferred revenue, current portion
7,367 
7,398 
Deferred revenue, net of current portion
47,267 
45,745 
Collaborative agreements
 
 
Deferred Revenue
 
 
Deferred revenue
53,479 
51,185 
Product sales
 
 
Deferred Revenue
 
 
Deferred revenue
$ 1,155 
$ 1,958 
Long-Term Debt, Net (Details Textual) (USD $)
In Millions, unless otherwise specified
12 Months Ended 1 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2013
Secured Debt [Member]
Dec. 31, 2014
Secured Debt [Member]
Dec. 31, 2014
Secured Debt [Member]
Minimum [Member]
Dec. 31, 2014
Secured Debt [Member]
Maximum [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
Debt instrument increase
 
 
$ 20 
 
 
 
Face amount of term loan facility
 
 
 
50 
 
 
Maturity date of term loan facility
 
 
 
Jan. 01, 2018 
 
 
Debt Instrument, Payment Terms
 
 
 
interest only payments through January 2016 
 
 
Fixed interest rate on term loan
 
 
 
7.55% 
 
 
Final payment as percent of original principal
 
 
 
8.50% 
 
 
Debt Instrument, Periodic Payment Terms, Balloon Payment to be Paid
 
 
 
4.25 
 
 
Percentage of pre payment fee on term loan
 
 
 
 
1.00% 
3.00% 
Debt Instrument, Covenant Compliance
 
 
 
in compliance 
 
 
Interest expense
$ 5.6 
$ 3.3 
 
 
 
 
Long-Term Debt, Net (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Debt Disclosure [Abstract]
 
2015
$ 3,775 
2016
25,077 
2017
27,013 
2018
6,501 
2019
Total minimum payments
62,366 
Less amount representing interest
(12,366)
Gross balance of long-term debt
50,000 
Less unamortized debt discount
(140)
Present value of long-term debt
49,860 
Less current portion of long-term debt
Long-term debt, less current portion and unamortized debt discount
$ 49,860 
Stockholders' Equity (Details) (USD $)
0 Months Ended 12 Months Ended
Feb. 4, 2014
Feb. 10, 2012
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Stockholders' Equity (Textual) [Abstract]
 
 
 
 
 
Aggregate shares issued for exercise of options
 
 
1,432,206 
1,270,362 
444,637 
Net proceeds from stock options exercised
 
 
$ 6,788,000 
$ 5,079,000 
$ 1,680,000 
Shares issued related to restricted stock awards, net of any shares forfeited
 
 
789,345 
461,729 
 
Underwritten public offering and issued shares
8,846,153 
7,820,000 
 
 
 
Shares sold pursuant to the full exercise of an over-allotment option granted to the underwriter
1,153,846 
1,020,000 
 
 
 
Sale of Stock, Price Per Share
$ 13.00 
$ 10.61 
 
 
 
Net proceeds from common stock issued
107,700,000 
81,500,000 
107,713,000 
81,477,000 
Purchase of common stock by affiliates
 
1,360,000 
 
 
 
Purchase of common stock by affiliates amount
 
14,400,000 
 
 
 
Stock options
 
 
 
 
 
Stockholders' Equity (Textual) [Abstract]
 
 
 
 
 
Aggregate shares issued for exercise of options
 
 
1,432,206 
1,270,362 
 
Net proceeds from stock options exercised
 
 
7,800,000 
5,500,000 
 
Restricted Stock Units (RSUs)
 
 
 
 
 
Stockholders' Equity (Textual) [Abstract]
 
 
 
 
 
Number of shares of common stock issued related to RSUs, net of RSUs surrendered as payment for withholding taxes
 
 
120,043 
92,201 
 
Number of RSUs surrendered to pay for minimum withholding taxes
 
 
74,325 
61,923 
 
Adjustments Related to Tax Withholding for Share-based Compensation
 
 
$ 1,000,000 
$ 400,000 
 
Equity Incentive Plans Share-based compensation expense (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
Share based compensation expense recognized
$ 15,274 
$ 9,538 
$ 8,349 
Research and Development Expense [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
Share based compensation expense recognized
7,939 
4,476 
4,191 
Selling, General and Administrative Expenses [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
Share based compensation expense recognized
$ 7,335 
$ 5,062 
$ 4,158 
Equity Incentive Plans Remaining share-based compensation expense (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Stock options
 
Share-based Compensation
 
Total unrecognized compensation costs related to non-vested stock option awards
$ 15,675 
Period over which the unrecognized compensation costs will be recognized
2 years 8 months 
Restricted Stock Awards
 
Share-based Compensation
 
Unrecognized share based compensation costs
7,153 
Period over which the unrecognized compensation costs will be recognized
1 year 7 months 
Restricted Stock Units (RSUs)
 
Share-based Compensation
 
Unrecognized share based compensation costs
$ 3,991 
Period over which the unrecognized compensation costs will be recognized
2 years 7 months 
Equity Incentive Plans (Details) Options (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Options, Outstanding [Roll Forward]
 
 
 
Outstanding, Number, At Beginning
6,700,915 
6,379,867 
5,869,784 
Granted
2,271,143 
1,806,392 
1,215,442 
Exercised
(1,432,206)
(1,270,362)
(444,637)
Cancelled/forfeited
(1,185,960)
(214,982)
(260,722)
Outstanding, Number, At End
6,353,892 
6,700,915 
6,379,867 
Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
 
 
 
Options, outstanding, weighted average exercise price, at beginning
$ 7.11 
$ 6.59 
$ 5.82 
Options, grants in period, weighted average exercise price
$ 13.02 
$ 7.14 
$ 9.90 
Options, exercises in period, weighted average exercise price
$ 5.43 
$ 4.34 
$ 4.56 
Options, forfeitures and expirations in period, weighted average exercise price
$ 9.39 
$ 8.18 
$ 8.34 
Options, outstanding, weighted average exercise price, at end
$ 9.18 
$ 7.11 
$ 6.59 
Options, Additional Disclosures [Abstract]
 
 
 
Options, outstanding, weighted average remaining contractual term
6 years 6 months 
 
 
Options, outstanding, intrinsic value
$ 11.2 
 
 
Options, Vested and Expected to Vest [Abstract]
 
 
 
Options, vested and expected to vest, outstanding, number
6,025,883 
 
 
Options, vested and expected to vest, outstanding, weighted average exercise price
$ 9.05 
 
 
Options, vested and expected to vest, outstanding, weighted average remaining contractual term
6 years 5 months 
 
 
Options, vested and expected to vest, outstanding, aggregate intrinsic value
10.9 
 
 
Options, vested and expected to vest, exercisable, number
3,944,408 
 
 
Options, vested and expected to vest, exercisable, weighted average exercise price
$ 7.36 
 
 
Options, vested and expected to vest, exercisable, weighted average remaining contractual term
4 years 7 months 
 
 
Options, vested and expected to vest, exercisable, aggregate intrinsic value
$ 8.9 
 
 
Equity Incentive Plans (Details) Black-Scholes Assumptions
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share-based Compensation
 
 
 
Average expected term
5 years 8 months 
5 years 8 months 
5 years 7 months 
Risk free interest rate, minimum
1.73% 
0.86% 
0.80% 
Risk free interest rate, maximum
2.04% 
2.00% 
1.15% 
Expected dividend rate
0.00% 
0.00% 
0.00% 
Minimum [Member]
 
 
 
Share-based Compensation
 
 
 
Expected volatility rate
66.60% 
70.10% 
64.00% 
Maximum [Member]
 
 
 
Share-based Compensation
 
 
 
Expected volatility rate
71.80% 
72.50% 
69.20% 
Equity Incentive Plans (Details) Restricted Stock Awards (Restricted Stock Awards, USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Restricted Stock Awards
 
 
 
Share-based Compensation - restricted stock awards
 
 
 
Outstanding, Number, At Beginning
632,871 
382,320 
347,883 
Granted
1,055,122 
476,096 
380,158 
Vested
(263,765)
(211,178)
(339,758)
Forfeited
(265,777)
(14,367)
(5,963)
Outstanding, Number, At end
1,158,451 
632,871 
382,320 
Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
 
 
 
Nonvested, weighted average grant date fair value, at beginning
$ 8.23 
$ 10.21 
$ 6.51 
Granted, weighted average grant date fair value
$ 11.15 
$ 6.88 
$ 10.29 
Vested, weighted average grant date fair value
$ 8.33 
$ 8.78 
$ 6.51 
Forfeitures, weighted average grant date fair value
$ 10.86 
$ 8.17 
$ 10.81 
Nonvested, weighted average grant date fair value, at end
$ 10.26 
$ 8.23 
$ 10.21 
Equity Incentive Plans (Details) Restricted Stock Units (Restricted Stock Units (RSUs), USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Restricted Stock Units (RSUs)
 
 
 
Share-based Compensation
 
 
 
Nonvested, weighted average grant date fair value, at beginning
$ 9.06 
 
 
Granted, weighted average grant date fair value
$ 13.71 
$ 6.69 
$ 10.61 
Vested, weighted average grant date fair value
$ 9.12 
 
 
Forfeitures, weighted average grant date fair value
$ 8.84 
 
 
Nonvested, weighted average grant date fair value, at end
$ 11.12 
$ 9.06 
 
Share-based Compensation - restricted stock units
 
 
 
Outstanding, Number, At Beginning
736,355 
682,146 
148,000 
Granted
305,535 
323,700 
682,146 
Vested
(194,368)
(154,124)
(128,000)
Forfeited
(385,200)
(115,367)
(20,000)
Outstanding, Number, At end
462,322 
736,355 
682,146 
Equity Instruments Other than Options, Additional Disclosures [Abstract]
 
 
 
Unvested, weighted average remaining contractual terms
2 years 7 months 
 
 
Unvested, aggregate intrinsic value
$ 4.5 
 
 
Equity Incentive Plans Performance stock units (Details) (Performance Shares [Member], USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Performance Shares [Member]
 
Share-based Compensation
 
PRSUs, Granted
540,742 
PRSUs, Forfeitures
109,504 
PRSUs, Outstanding, Number
431,238 
PRSUs, Aggregate Intrinsic Value, Outstanding
$ 4.2 
Share-based compensation expense, PRSUs
$ 0 
Equity Incentive Plans (Details - Textuals) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share-based Compensation
 
 
 
Shares reserved for future issuance
4,681,212 
 
 
Tax Benefit from Compensation Expense
$ 0 
 
 
Future dividend payments expected for dividend yield assumption
 
 
Share based compensation expense recognized
15,274,000 
9,538,000 
8,349,000 
Outstanding awards [Member]
 
 
 
Share-based Compensation
 
 
 
Options outstanding, number
7,247,452 
 
 
Stock options
 
 
 
Share-based Compensation
 
 
 
Weighted average grant-date fair values
$ 8.13 
$ 4.40 
$ 5.63 
Intrinsic value of options exercised
8,100,000 
8,300,000 
2,900,000 
Cash received from stock option exercises
7,800,000 
5,500,000 
2,000,000 
Stock options |
Minimum [Member]
 
 
 
Share-based Compensation
 
 
 
Exercise price as a percent of fair value
100.00% 
 
 
Stock options |
Maximum [Member]
 
 
 
Share-based Compensation
 
 
 
Options, outstanding, initial contractual term
10 years 
 
 
Restricted Stock Awards
 
 
 
Share-based Compensation
 
 
 
Total fair value of restricted stock awards vested
2,200,000 
1,900,000 
2,200,000 
Share based compensation expense recognized
5,400,000 
2,200,000 
2,100,000 
Restricted Stock Units (RSUs)
 
 
 
Share-based Compensation
 
 
 
Total fair value of restricted stock awards vested
2,600,000 
1,100,000 
900,000 
Share based compensation expense recognized
$ 2,000,000 
$ 1,800,000 
$ 1,500,000 
Cliff Vesting, First Anniversary [Member] |
Stock options
 
 
 
Share-based Compensation
 
 
 
Percent of shares to vest
25.00% 
 
 
Percentage Vesting [Member] |
Restricted Stock Units (RSUs)
 
 
 
Share-based Compensation
 
 
 
Percent of shares to vest
25.00% 
 
 
Monthly Vesting, after One Year [Member] |
Stock options
 
 
 
Share-based Compensation
 
 
 
Percent of shares to vest
2.08% 
 
 
Amended and Restated 2011 Stock Plan [Member]
 
 
 
Share-based Compensation
 
 
 
Number of shares authorized
12,500,000 
 
 
Commitments and Contingencies Operating Lease - Textual (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Operating Leased Assets [Line Items]
 
 
 
Lease expiration date
Jan. 31, 2018 
 
 
Deferred rent credit
$ 1.0 
$ 1.0 
 
Total rent expense
$ 1.9 
$ 1.7 
$ 1.6 
Office and Research Facility [Member]
 
 
 
Operating Leased Assets [Line Items]
 
 
 
Aggregate leased office and research space (in square feet)
 
76,000 
 
Minimum [Member]
 
 
 
Operating Leased Assets [Line Items]
 
 
 
Percent of annual increase in base rent
2.50% 
 
 
Maximum [Member]
 
 
 
Operating Leased Assets [Line Items]
 
 
 
Percent of annual increase in base rent
3.00% 
 
 
Commitments and Contingencies Operating Lease (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract]
 
2015
$ 2,133 
2016
2,142 
2017
2,162 
2018
82 
Total minimum lease payments
$ 6,519 
Commitments and Contingencies Other Commitments - Textual (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Cook Commercial Supply Agreement [Member]
 
Unrecorded Unconditional Purchase Obligation [Line Items]
 
Minimum purchase obligation
$ 0 
March 2010 Avid Amendment [Member]
 
Unrecorded Unconditional Purchase Obligation [Line Items]
 
Minimum purchase obligation
Avid Commercial Supply Agreement [Member]
 
Unrecorded Unconditional Purchase Obligation [Line Items]
 
Minimum purchase obligation
9.6 
Baxter Manufacturing and Supply Agreement [Member]
 
Unrecorded Unconditional Purchase Obligation [Line Items]
 
Minimum purchase obligation
1.7 
Third Party Manufacturer Agreement [Member]
 
Unrecorded Unconditional Purchase Obligation [Line Items]
 
Minimum purchase obligation
$ 1.2 
Commitments and Contingencies Contingencies (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract]
 
Time period to provide notice to terminate agreement
90 days 
Contingent milestone payment
$ 9.3 
Income Taxes (Components of net deferred tax assets) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Deferred tax assets
 
 
Net operating loss carryforwards
$ 120,707 
$ 116,572 
Deferred revenue
18,034 
13,324 
Research and development credits
34,146 
28,867 
Share-based compensation
5,381 
2,495 
Other, net
891 
853 
Total deferred tax assets
179,159 
162,111 
Valuation allowance for deferred tax assets
(178,965)
(161,968)
Deferred tax assets, net of valuation
194 
143 
Deferred tax liabilities
 
 
Depreciation
(194)
(143)
Net deferred tax liabilities
(194)
(143)
Net deferred tax assets
$ 0 
$ 0 
Income Taxes (Schedule of income tax reconciliation) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Provision, Income Tax Reconciliation [Abstract]
 
 
 
Federal income tax at 34%
$ (23,247)
$ (28,383)
$ (18,208)
State income tax, net of federal benefit
(1,761)
(1,745)
(3,023)
Increase in valuation allowance
16,998 
33,525 
20,954 
Foreign income subject to tax at other than Federal statutory rate
12,747 
Tax effect on non-deductible expenses and other
540 
5,219 
1,293 
Research and development credits
(5,277)
(8,616)
(1,016)
Provision for income taxes
$ 0 
$ 0 
$ 0 
Federal income tax rate
34.00% 
34.00% 
34.00% 
Income Taxes (Operating Loss Carryforwards - Textual) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Operating Loss Carryforwards [Line Items]
 
 
 
Income tax interest and penalty
$ 0 
$ 0 
$ 0 
Undistributed earnings of foreign subsidiary
 
 
Federal [Member]
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
Net operating loss carryforwards
341.9 
 
 
Operating loss carryforwards, begin to expire
Dec. 31, 2018 
 
 
California [Member]
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
Net operating loss carryforwards
307.9 
 
 
Operating loss carryforwards, begin to expire
Dec. 31, 2015 
 
 
Outstanding awards [Member] |
Federal [Member]
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
Net operating loss carryforwards
34.3 
 
 
Outstanding awards [Member] |
California [Member]
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
Net operating loss carryforwards
$ 32.8 
 
 
Income Taxes (Tax Credit Carryforward - Textual) (Details) (Research Tax Credit Carryforward [Member], USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Federal [Member]
 
Tax Credit Carryforward [Line Items]
 
Tax credit carryforwards
$ 26.1 
Tax credit carry forward, begin to expire
Dec. 31, 2024 
California [Member]
 
Tax Credit Carryforward [Line Items]
 
Tax credit carryforwards
$ 12.2 
Employee Savings Plan (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Employee Savings Plan [Abstract]
 
 
 
Voluntary contribution by employer to the ESP
$ 0.7 
$ 0.6 
$ 0.5 
Related Party Transactions (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Intrexon |
Affiliated Entity [Member]
 
 
 
Related Party Transaction [Line Items]
 
 
 
Revenue from Related Parties
$ 0 
$ 1.0 
$ 1.0 
Intrexon
 
 
 
Related Party Transaction [Line Items]
 
 
 
Collaboration Agreement Termination Date
May 23, 2014 
 
 
Restructuring Expense (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Restructuring Cost and Reserve [Line Items]
 
Restructuring and Related Cost, Number of Positions Eliminated, Period Percent
13.00% 
Severance Costs
$ 1.2 
Other Restructuring Costs
Payments for Restructuring
0.7 
Restructuring Reserve, current
0.5 
Research and Development Expense [Member]
 
Restructuring Cost and Reserve [Line Items]
 
Severance Costs
1.1 
Selling, General and Administrative Expenses [Member]
 
Restructuring Cost and Reserve [Line Items]
 
Severance Costs
$ 0.1 
Summary of Unaudited Quarterly Financial Information (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Quarterly Financial Information Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$ 30,377 1
$ 14,606 
$ 18,385 
$ 11,966 
$ 12,499 
$ 16,013 
$ 14,454 
$ 11,833 
$ 75,334 
$ 54,799 
$ 42,325 
Gross profit on product sales
3,997 
4,476 
3,570 
3,048 
6,266 2
9,342 2
1,816 2
769 
 
 
 
Total operating expenses
34,228 
33,632 
33,325 
37,185 
33,822 
34,507 
36,574 
30,330 
138,370 
135,233 
95,950 
Net loss
$ (5,274)
$ (20,280)
$ (16,273)
$ (26,548)
$ (21,986)
$ (19,292)
$ (22,912)
$ (19,289)
$ (68,375)
$ (83,479)
$ (53,552)
Net loss per share, basic and diluted
$ (0.04)
$ (0.16)
$ (0.13)
$ (0.22)
$ (0.19)
$ (0.17)
$ (0.20)
$ (0.17)
$ (0.56)
$ (0.74)
$ (0.48)
Shares used in computing basic and diluted net loss per share
124,272 
124,041 
123,710 
118,943 
113,550 
112,765 
112,486 
112,417 
122,690 
112,805 
111,077 
Summary of Unaudited Quarterly Financial Information (Details Textual) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended 3 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2014
Janssen
Collaborative Agreements [Line Items]
 
 
 
 
 
 
Revenue under collabrative agreements
 
 
 
 
 
$ 15.0 
Manufacturing costs previously recorded as research and development
$ 2.6 
$ 6.5 
$ 0.9 
$ 1.0 
$ 10.0 
 
Schedule II Valuation and Qualifying Accounts (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Valuation and Qualifying Accounts Disclosure [Line Items]
 
 
 
Accounts receivable allowances, beginning balance
$ 610 1
$ 178 1
$ 15 1
Valuation Allowances and Reserves, Additions
4,518 1
2,979 1
771 1
Valuation Allowances and Reserves, Deductions
(4,519)1
(2,547)1
(608)1
Accounts receivable allowances, ending balance
$ 609 1
$ 610 1
$ 178 1