HALOZYME THERAPEUTICS INC, 10-Q filed on 5/11/2015
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2015
May 6, 2015
Document Information [Line Items]
 
 
Entity Registrant Name
HALOZYME THERAPEUTICS INC 
 
Entity Central Index Key
0001159036 
 
Document Type
10-Q 
 
Document Period End Date
Mar. 31, 2015 
 
Amendment Flag
false 
 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q1 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
127,260,270 
Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except per share data) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Current assets:
 
 
Cash and cash equivalents
$ 44,287 
$ 61,389 
Marketable securities, available-for-sale
84,212 
74,234 
Accounts receivable, net
7,725 
9,149 
Inventories
7,482 
6,406 
Prepaid expenses and other assets
9,623 
10,143 
Total current assets
153,329 
161,321 
Property and equipment, net
2,732 
2,951 
Prepaid expenses and other assets
2,564 
1,205 
Restricted cash
500 
500 
Total assets
159,125 
165,977 
Current liabilities:
 
 
Accounts payable
3,299 
3,003 
Accrued expenses
12,813 
13,961 
Deferred revenue, current portion
6,367 
7,367 
Current portion of long-term debt, net
3,730 
0 
Total current liabilities
26,209 
24,331 
Deferred revenue, net of current portion
46,259 
47,267 
Long-term debt, net
45,985 
49,860 
Other long-term liabilities
3,127 
3,167 
Commitments and contingencies (Note 8)
   
   
Stockholders' equity:
 
 
Preferred stock - $0.001 par value; 20,000 shares authorized; no shares issued and outstanding
0 
0 
Common stock - $0.001 par value; 200,000 shares authorized; 127,163 and 125,721 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively
127 
126 
Additional paid-in capital
502,980 
491,694 
Accumulated other comprehensive loss
(27)
(41)
Accumulated deficit
(465,535)
(450,427)
Total stockholders' equity
37,545 
41,352 
Total liabilities and stockholders' equity
$ 159,125 
$ 165,977 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
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
0 
0 
Preferred stock, shares outstanding
0 
0 
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
200,000 
200,000 
Common stock, shares issued
127,163 
125,721 
Common stock, shares outstanding
127,163 
125,721 
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Revenues:
 
 
Product sales, net
$ 9,860 
$ 8,568 
Royalties
6,775 
799 
Revenues under collaborative agreements
2,031 
2,599 
Total revenues
18,666 
11,966 
Operating expenses:
 
 
Cost of product sales
6,494 
5,520 
Research and development
16,684 
21,415 
Selling, general and administrative
9,399 
10,250 
Total operating expenses
32,577 
37,185 
Operating loss
(13,911)
(25,219)
Other income (expense)
 
 
Investment and other income, net
102 
47 
Interest expense
(1,299)
(1,376)
Net loss
$ (15,108)
$ (26,548)
Basic and diluted net loss per share
$ (0.12)
$ (0.22)
Shares used in computing basic and diluted net loss per share
125,299 
118,943 
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Statement of Comprehensive Income [Abstract]
 
 
Net loss
$ (15,108)
$ (26,548)
Other comprehensive gain (loss):
 
 
Unrealized gain (loss) on marketable securities
14 
(42)
Total comprehensive loss
$ (15,094)
$ (26,590)
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Operating activities:
 
 
Net loss
$ (15,108)
$ (26,548)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Share-based compensation
4,130 
3,295 
Depreciation and amortization
421 
397 
Non-cash interest expense
172 
746 
Amortization of premiums on marketable securities, net
325 
(1,035)
Changes in operating assets and liabilities:
 
 
Accounts receivable, net
1,424 
(1,859)
Inventories
(1,076)
(595)
Prepaid expenses and other assets
(843)
(252)
Accounts payable and accrued expenses
(1,209)
3,419 
Deferred revenue
(2,007)
4,729 
Other liabilities
(68)
73 
Net cash used in operating activities
(13,839)
(17,630)
Investing activities:
 
 
Purchases of marketable securities
(33,185)
(65,005)
Proceeds from maturities of marketable securities
22,895 
22,225 
Purchases of property and equipment
(130)
(411)
Net cash used in investing activities
(10,420)
(43,191)
Financing activities:
 
 
Proceeds from issuance of common stock under equity incentive plans, net
7,157 
2,321 
Proceeds from issuance of common stock, net
0 
107,713 
Net cash provided by financing activities
7,157 
110,034 
Net (decrease) increase in cash and cash equivalents
(17,102)
49,213 
Cash and cash equivalents at beginning of period
61,389 
27,357 
Cash and cash equivalents at end of period
$ 44,287 
$ 76,570 
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 have the potential to improve cancer patient 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 complex carbohydrate 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. 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 condensed 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 accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) related to a quarterly report on Form 10-Q. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for a complete set of financial statements. These interim unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 2, 2015. The unaudited financial information for the interim periods presented herein reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial condition and results of operations for the periods presented, with such adjustments consisting only of normal recurring adjustments. Operating results for interim periods are not necessarily indicative of the operating results for an entire fiscal year.
The accompanying condensed consolidated financial statements include the accounts of Halozyme Therapeutics, Inc. and its wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.'s wholly owned subsidiary, Halozyme Holdings Ltd. All intercompany accounts and transactions have been eliminated.
The preparation of consolidated financial statements in conformity with 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.
Adoption and Pending Adoption of Recent Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board (“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 eliminates the diversity in practice in the presentation of unrecognized tax benefits but does not alter the way in which entities assess deferred tax assets for realizability. ASU 2013-11 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2014. ASU 2013-11 should be applied prospectively to unrecognized tax benefits that exist at the effective date. The adoption of ASU 2013-11 did 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 U.S. 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. On April 1, 2015, the FASB voted to propose a one-year deferral to the effective date, but to permit entities to adopt one year earlier if they choose (i.e., the original effective date). The proposal will be subject to the FASB’s due process requirement, which includes a period for public comments. 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 August 2014, the 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 April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount. The recognition and measurement guidance for debt issuance costs is not affected by ASU 2015-03. ASU 2015-03 is effective fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted. The adoption of ASU 2015-03 is not expected to have a material impact on our consolidated financial position or results of operations.
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. 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 condensed 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 condensed consolidated statements of operations.
Restricted Cash
Under the terms of the leases of our facilities, we are required to maintain letters of credit as security deposits during the terms of such leases. At March 31, 2015 and December 31, 2014, 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 financial instruments from our investment manager, who obtains these fair values from a third-party pricing source. 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 financial instrument 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):
 
 
March 31, 2015
 
December 31, 2014
 
 
Level 1
 
Level 2
 
Total estimated fair value
 
Level 1
 
Level 2
 
Total estimated fair value
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
35,967

 
$
—

 
$
35,967

 
$
42,685

 
$
—

 
$
42,685

 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale marketable
   securities:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
 
—

 
84,212

 
84,212

 
—

 
74,234

 
74,234

 
 
$
35,967

 
$
84,212

 
$
120,179

 
$
42,685

 
$
74,234

 
$
116,919


There were no transfers between Level 1 and Level 2 of the fair value hierarchy in the three months ended March 31, 2015. We have no financial instruments that are classified within Level 3 as of March 31, 2015 and December 31, 2014.
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 March 31, 2015 and December 31, 2014, inventories consisted of $2.1 million and $3.0 million of Hylenex recombinant inventory, respectively, and $5.4 million and $3.4 million of bulk rHuPH20, respectively.
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 revenue 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 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 transfered 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 takes 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 in 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 receipt 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 were recognized as product sales. For the three months ended March 31, 2015 and 2014, we recognized product sales of bulk rHuPH20 for Roche collaboration products in the amount of $6.1 million and $5.9 million, respectively, and zero for both periods for the Baxter collaboration products.
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 is 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 agreements.
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.
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 are recognized as 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 value 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 authoritative 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.
Total share-based compensation expense related to all of our share-based awards was allocated as follows (in thousands):
 
 
Three Months Ended
March 31,
 
 
2015
 
2014
Research and development
 
$
2,097

 
$
1,622

Selling, general and administrative
 
2,033

 
1,673

Share-based compensation expense
 
$
4,130

 
$
3,295


Since we have a net operating loss carryforward as of March 31, 2015, no excess tax benefits for the tax deductions related to share-based awards were recognized in the condensed consolidated statement of operations for the three months ended March 31, 2015. Share-based compensation expense for the three months ended March 31, 2015 includes $0.4 million related to restricted stock units (“RSUs”) with performance conditions (“PRSUs”).
As of March 31, 2015, total unrecognized estimated compensation cost related to non-vested stock options was $20.5 million, which was expected to be recognized over a weighted-average period of approximately 3.0 years. Total unrecognized estimated compensation cost related to unvested restricted stock awards ("RSAs") and RSUs as of March 31, 2015 was approximately $14.1 million, which was expected to be recognized over a weighted-average period of approximately 2.2 years.
Net Loss Per Share
Basic net loss per common share is computed by dividing net 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 RSAs, unvested RSUs, and unvested PRSUs 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, unvested RSAs, unvested RSUs, and unvested PRSUs totaling approximately 9.4 million and 9.6 million were excluded from the calculation of diluted net loss per common share for the three months ended March 31, 2015 and 2014, respectively, because their effect is anti-dilutive.
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.
Marketable Securities (Notes)
Marketable securities disclosure
Marketable Securities
Available-for-sale marketable securities consisted of the following (in thousands):
 
 
March 31, 2015
Description
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Corporate debt securities
 
$
84,239

 
$
10

 
$
(37
)
 
$
84,212


 
 
December 31, 2014
Description
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Corporate debt securities
 
$
74,275

 
$
2

 
$
(43
)
 
$
74,234


As of March 31, 2015, $77.1 million of our available-for-sale marketable securities were scheduled to mature within the next 12 months, and $7.1 million were scheduled to mature between twelve and eighteen months. There were $22.9 million of marketable securities that matured during the three months ended March 31, 2015. As of March 31, 2015, we had 16 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 there were no other-than-temporary impairments on these marketable securities as of March 31, 2015 because we do not intend to sell these marketable securities and it is not more likely than not that we will be required to sell these marketable securities before the recovery of their amortized cost basis.
Collaborative Agreements (Notes)
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 rHuPH20 and up to thirteen Roche target compounds (the “Roche Collaboration”). As of March 31, 2015, Roche has 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 March 31, 2015, we have received $78.3 million from Roche, excluding royalties and reimbursements for providing research and development services and supplying bulk rHuPH20. 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 payments were deferred and are being amortized over the remaining term of the Roche Collaboration.
For the three months ended March 31, 2015 and 2014, we recognized approximately $0.8 million and $0.7 million, respectively, of Roche deferred revenues as revenues under collaborative agreements. Roche deferred revenues were approximately $41.9 million and $42.7 million as of March 31, 2015 and December 31, 2014, respectively.
Baxter 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 March 31, 2015, we have received $17.0 million under the Baxter 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 license fee and sales-based payments were deferred and are being recognized over the term of the Baxter Collaboration. We recognized revenue from the upfront license fee and sales-based payments of approximately $0.2 million for both of the three months ended March 31, 2015 and 2014. Deferred revenues relating to the upfront license fee and sales-based payments under the Baxter Collaboration were approximately $10.7 million and $10.9 million as of March 31, 2015 and December 31, 2014, 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 March 31, 2015, we have received a $15.0 million payment for the license fee of one specified exclusive target, CD38, 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 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 March 31, 2015, 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 three months ended March 31, 2015 and 2014.
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.
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 (Notes)
Certain Balance Sheet Items
Certain Balance Sheet Items
Accounts receivable, net consisted of the following (in thousands):
 
 
March 31,
2015
 
December 31,
2014
Accounts receivable from product sales to collaborators
 
$
6,074

 
$
6,361

Accounts receivable from other product sales
 
2,457

 
2,133

Accounts receivable from revenues under collaborative agreements
 
66

 
1,266

     Subtotal
 
8,597

 
9,760

Allowance for distribution fees and discounts
 
(872
)
 
(611
)
     Total accounts receivable, net
 
$
7,725

 
$
9,149


Inventories consisted of the following (in thousands):
 
 
March 31,
2015
 
December 31,
2014
Raw materials
 
$
552

 
$
553

Work-in-process
 
5,675

 
5,207

Finished goods
 
1,255

 
646

     Total inventories
 
$
7,482

 
$
6,406


Prepaid expenses and other assets consisted of the following (in thousands):
 
 
March 31,
2015
 
December 31,
2014
Prepaid manufacturing expenses
 
$
6,788

 
$
6,339

Prepaid research and development expenses
 
3,473

 
2,380

Other prepaid expenses
 
921

 
1,094

Other assets
 
1,005

 
1,535

     Total prepaid expenses and other assets
 
12,187

 
11,348

Less long-term portion
 
2,564

 
1,205

     Total prepaid expenses and other assets, current
 
$
9,623

 
$
10,143


Property and equipment, net consisted of the following (in thousands):
 
 
March 31,
2015
 
December 31,
2014
Research equipment
 
$
8,597

 
$
8,474

Computer and office equipment
 
2,178

 
2,178

Leasehold improvements
 
1,554

 
1,518

     Subtotal
 
12,329

 
12,170

Accumulated depreciation and amortization
 
(9,597
)
 
(9,219
)
     Property and equipment, net
 
$
2,732

 
$
2,951

Depreciation and amortization expense totaled approximately $0.4 million for both of the three months ended March 31, 2015 and 2014.
Accrued expenses consisted of the following (in thousands):
 
 
March 31,
2015
 
December 31,
2014
Accrued outsourced research and development expenses
 
$
4,936

 
$
4,383

Accrued compensation and payroll taxes
 
3,079

 
5,923

Accrued outsourced manufacturing expenses
 
1,810

 
2,112

Other accrued expenses
 
3,510

 
2,023

     Total accrued expenses
 
13,335

 
14,441

Less long-term accrued outsourced research and development expenses
 
522

 
480

     Total accrued expenses, current
 
$
12,813

 
$
13,961


Long-term accrued outsourced research and development is included in other long-term liabilities in the condensed consolidated balance sheets.
Deferred revenue consisted of the following (in thousands):
 
 
March 31,
2015
 
December 31,
2014
Collaborative agreements
 
$
51,471

 
$
53,479

Product sales
 
1,155

 
1,155

Total deferred revenue
 
52,626

 
54,634

Less current portion
 
6,367

 
7,367

Deferred revenue, net of current portion
 
$
46,259

 
$
47,267

Long-Term Debt, Net (Notes)
Long-term Debt
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 condensed 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 March 31, 2015, 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.
Interest expense, including amortization of the debt discount, related to the long-term debt totaled approximately $1.3 million and $1.4 million for the three months ended March 31, 2015 and 2014, respectively. Accrued interest, which is included in accrued expenses and other long-term liabilities, was $2.3 million and $2.0 million as of March 31, 2015 and December 31, 2014, respectively.
Stockholders' Equity (Deficit)
Stockholders' Equity (Deficit)
Stockholders’ Equity
During the three months ended March 31, 2015 and 2014, we issued an aggregate of 1,053,453 and 535,882 shares of common stock, respectively, in connection with the exercises of stock options at a weighted average exercise price of $7.31 and $5.92 per share, respectively, for net proceeds of approximately $7.7 million and $3.2 million, respectively. For the three months ended March 31, 2015 and 2014, we issued 65,562 and 91,114 shares of common stock, respectively, upon vesting of certain RSUs. The RSU holders surrendered 42,080 and 56,915 RSUs, respectively, to pay for minimum withholding taxes totaling approximately $0.5 million and $0.9 million, respectively. In addition, we issued 374,740 and 477,964 shares of common stock in connection with the grants of RSAs during the three months ended March 31, 2015 and 2014, respectively. Stock options, unvested RSUs, and PRSUs totaling approximately 8.1 million shares and 7.2 million shares of our common stock were outstanding as of March 31, 2015 and December 31, 2014, respectively.
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.
Commitments and Contingencies
Commitments and Contingencies
Commitments and 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.
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.
As of December 31, 2014, the restructuring liability was approximately $0.5 million and was included in current accrued expenses. The restructuring liability was paid in full during the three months ended March 31, 2015.
.
Summary of Significant Accounting Policies (Policies)
Basis of Presentation 
Basis of Presentation
The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) related to a quarterly report on Form 10-Q. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for a complete set of financial statements. These interim unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 2, 2015. The unaudited financial information for the interim periods presented herein reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial condition and results of operations for the periods presented, with such adjustments consisting only of normal recurring adjustments. Operating results for interim periods are not necessarily indicative of the operating results for an entire fiscal year.
The accompanying condensed consolidated financial statements include the accounts of Halozyme Therapeutics, Inc. and its wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.'s wholly owned subsidiary, Halozyme Holdings Ltd. All intercompany accounts and transactions have been eliminated.
The preparation of consolidated financial statements in conformity with 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.
Pending Adoption of Recent Accounting Pronouncements 
Adoption and Pending Adoption of Recent Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board (“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 eliminates the diversity in practice in the presentation of unrecognized tax benefits but does not alter the way in which entities assess deferred tax assets for realizability. ASU 2013-11 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2014. ASU 2013-11 should be applied prospectively to unrecognized tax benefits that exist at the effective date. The adoption of ASU 2013-11 did 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 U.S. 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. On April 1, 2015, the FASB voted to propose a one-year deferral to the effective date, but to permit entities to adopt one year earlier if they choose (i.e., the original effective date). The proposal will be subject to the FASB’s due process requirement, which includes a period for public comments. 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 August 2014, the 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 April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount. The recognition and measurement guidance for debt issuance costs is not affected by ASU 2015-03. ASU 2015-03 is effective fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted. The adoption of ASU 2015-03 is not expected to have a material impact on our consolidated financial position or results of operations.
Cash Equivalents 
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 
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. 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 condensed 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 condensed consolidated statements of operations.
Restricted Cash 
Restricted Cash
Under the terms of the leases of our facilities, we are required to maintain letters of credit as security deposits during the terms of such leases. At March 31, 2015 and December 31, 2014, restricted cash of $0.5 million was pledged as collateral for the letters of credit.
Fair Value of Financial Instruments 
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 financial instruments from our investment manager, who obtains these fair values from a third-party pricing source. 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.
Inventories 
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.
Revenue Recognition 
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 revenue 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 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 transfered 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 takes 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 in 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 receipt 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 were recognized as product sales. For the three months ended March 31, 2015 and 2014, we recognized product sales of bulk rHuPH20 for Roche collaboration products in the amount of $6.1 million and $5.9 million, respectively, and zero for both periods for the Baxter collaboration products.
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 is 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
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.
Research and Development Expenses 
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 are recognized as 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 value 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 
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 
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 authoritative 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.
Net Loss Per Share 
Net Loss Per Share
Basic net loss per common share is computed by dividing net 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 RSAs, unvested RSUs, and unvested PRSUs 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, unvested RSAs, unvested RSUs, and unvested PRSUs totaling approximately 9.4 million and 9.6 million were excluded from the calculation of diluted net loss per common share for the three months ended March 31, 2015 and 2014, respectively, because their effect is anti-dilutive.
Segment Information 
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.
Summary of Significant Accounting Policies (Tables)
Fair value, assets measured on recurring basis 
The following table summarizes, by major financial instrument 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):
 
 
March 31, 2015
 
December 31, 2014
 
 
Level 1
 
Level 2
 
Total estimated fair value
 
Level 1
 
Level 2
 
Total estimated fair value
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
35,967

 
$
—

 
$
35,967

 
$
42,685

 
$
—

 
$
42,685

 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale marketable
   securities:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
 
—

 
84,212

 
84,212

 
—

 
74,234

 
74,234

 
 
$
35,967

 
$
84,212

 
$
120,179

 
$
42,685

 
$
74,234

 
$
116,919

Share-based compensation expense related to share-based awards 
Total share-based compensation expense related to all of our share-based awards was allocated as follows (in thousands):
 
 
Three Months Ended
March 31,
 
 
2015
 
2014
Research and development
 
$
2,097

 
$
1,622

Selling, general and administrative
 
2,033

 
1,673

Share-based compensation expense
 
$
4,130

 
$
3,295

Marketable Securities (Tables)
Available-for-sale marketable securities
Available-for-sale marketable securities consisted of the following (in thousands):
 
 
March 31, 2015
Description
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Corporate debt securities
 
$
84,239

 
$
10

 
$
(37
)
 
$
84,212


 
 
December 31, 2014
Description
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Corporate debt securities
 
$
74,275

 
$
2

 
$
(43
)
 
$
74,234

Certain Balance Sheet Items (Tables)
Summary of Accounts Receivable 
Accounts receivable, net consisted of the following (in thousands):
 
 
March 31,
2015
 
December 31,
2014
Accounts receivable from product sales to collaborators
 
$
6,074

 
$
6,361

Accounts receivable from other product sales
 
2,457

 
2,133

Accounts receivable from revenues under collaborative agreements
 
66

 
1,266

     Subtotal
 
8,597

 
9,760

Allowance for distribution fees and discounts
 
(872
)
 
(611
)
     Total accounts receivable, net
 
$
7,725

 
$
9,149

Summary of Inventories 
Inventories consisted of the following (in thousands):
 
 
March 31,
2015
 
December 31,
2014
Raw materials
 
$
552

 
$
553

Work-in-process
 
5,675

 
5,207

Finished goods
 
1,255

 
646

     Total inventories
 
$
7,482

 
$
6,406

Summary of Prepaid Expenses and Other Assets 
Prepaid expenses and other assets consisted of the following (in thousands):
 
 
March 31,
2015
 
December 31,
2014
Prepaid manufacturing expenses
 
$
6,788

 
$
6,339

Prepaid research and development expenses
 
3,473

 
2,380

Other prepaid expenses
 
921

 
1,094

Other assets
 
1,005

 
1,535

     Total prepaid expenses and other assets
 
12,187

 
11,348

Less long-term portion
 
2,564

 
1,205

     Total prepaid expenses and other assets, current
 
$
9,623

 
$
10,143

Summary of Property and Equipment 
Property and equipment, net consisted of the following (in thousands):
 
 
March 31,
2015
 
December 31,
2014
Research equipment
 
$
8,597

 
$
8,474

Computer and office equipment
 
2,178

 
2,178

Leasehold improvements
 
1,554

 
1,518

     Subtotal
 
12,329

 
12,170

Accumulated depreciation and amortization
 
(9,597
)
 
(9,219
)
     Property and equipment, net
 
$
2,732

 
$
2,951

Summary of Accrued Expenses 
Accrued expenses consisted of the following (in thousands):
 
 
March 31,
2015
 
December 31,
2014
Accrued outsourced research and development expenses
 
$
4,936

 
$
4,383

Accrued compensation and payroll taxes
 
3,079

 
5,923

Accrued outsourced manufacturing expenses
 
1,810

 
2,112

Other accrued expenses
 
3,510

 
2,023

     Total accrued expenses
 
13,335

 
14,441

Less long-term accrued outsourced research and development expenses
 
522

 
480

     Total accrued expenses, current
 
$
12,813

 
$
13,961

Summary of Deferred Revenue 
Deferred revenue consisted of the following (in thousands):
 
 
March 31,
2015
 
December 31,
2014
Collaborative agreements
 
$
51,471

 
$
53,479

Product sales
 
1,155

 
1,155

Total deferred revenue
 
52,626

 
54,634

Less current portion
 
6,367

 
7,367

Deferred revenue, net of current portion
 
$
46,259

 
$
47,267

Summary of Significant Accounting Policies - Restricted Cash (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Restricted Cash and Investments, Current [Abstract]
 
 
Restricted cash
$ 500 
$ 500 
Summary of Significant Accounting Policies - Fair Value Measurements (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Assets Measured on Recurring Basis
 
 
Assets, fair value disclosure
$ 120,179 
$ 116,919 
Fair value, assets, Level 1 to Level 2 transfers, amount
0 
0 
Level 1
 
 
Assets Measured on Recurring Basis
 
 
Assets, fair value disclosure
35,967 
42,685 
Level 2
 
 
Assets Measured on Recurring Basis
 
 
Assets, fair value disclosure
84,212 
74,234 
Level 3
 
 
Assets Measured on Recurring Basis
 
 
Investments, fair value disclosure
0 
0 
Cash equivalents
 
 
Assets Measured on Recurring Basis
 
 
Cash and cash equivalents, fair value disclosure
35,967 
42,685 
Cash equivalents |
Level 1
 
 
Assets Measured on Recurring Basis
 
 
Cash and cash equivalents, fair value disclosure
35,967 
42,685 
Corporate debt securities
 
 
Assets Measured on Recurring Basis
 
 
Available-for-sale securities, fair value disclosure
84,212 
74,234 
Corporate debt securities |
Level 2
 
 
Assets Measured on Recurring Basis
 
 
Available-for-sale securities, fair value disclosure
$ 84,212 
$ 74,234 
Summary of Significant Accounting Policies Inventories (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Hylenex recombinant
 
 
Inventory [Line Items]
 
 
Inventories
$ 2.1 
$ 3.0 
bulk rHuPH20
 
 
Inventory [Line Items]
 
 
Inventories
$ 5.4 
$ 3.4 
Summary of Significant Accounting Policies Revenue recognition (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Sales Revenue, Product
 
 
Product sales, net
$ 9,860 
$ 8,568 
Period prior to expiration [Member]
 
 
Collaborative agreements termination notification
 
 
Period to accept returned unused product
6 months 
 
Period after expiration [Member]
 
 
Collaborative agreements termination notification
 
 
Period to accept returned unused product
12 months 
 
Period prior to expiration
 
 
Collaborative agreements termination notification
 
 
Notification period for termination
30 days 
 
Period after expiration
 
 
Collaborative agreements termination notification
 
 
Notification period for termination
90 days 
 
Bulk rHuPH20 for Herceptin SC
 
 
Sales Revenue, Product
 
 
Product sales, net
6,100 
5,900 
Bulk rHuPH20 for HyQvia
 
 
Sales Revenue, Product
 
 
Product sales, net
$ 0 
$ 0 
- Share-Based Compensation (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Share-based compensation expense
 
 
Share-based compensation expense
$ 4,130 
$ 3,295 
Selling, General and Administrative Expenses [Member]
 
 
Share-based compensation expense
 
 
Share-based compensation expense
2,033 
1,673 
Research and Development Expense [Member]
 
 
Share-based compensation expense
 
 
Share-based compensation expense
$ 2,097 
$ 1,622 
- Share-based Compensation (Details Textual) (USD $)
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Excess tax benefits
$ 0 
 
Allocated Share-based Compensation Expense
4,130,000 
3,295,000 
Stock options
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Total unrecognized estimated compensation cost related to non-vested stock options
20,500,000 
 
Weighted-average period of non-vested awards
3 years 
 
Restricted stock awards and restricted stock units
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Total unrecognized estimated compensation cost of non-vested restricted stock awards and restricted stock units
14,100,000 
 
Weighted-average period of non-vested awards
2 years 2 months 
 
Performance Shares [Member]
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Allocated Share-based Compensation Expense
$ 400,000 
 
Summary of Significant Accounting Policies - Net Loss Per Share (Details)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Earnings Per Share, Diluted [Abstract]
 
 
Antidilutive securities excluded from computation of earnings per share, amount
9.4 
9.6 
Summary of Significant Accounting Policies Segment information (Details)
3 Months Ended
Mar. 31, 2015
Segment
Segment Reporting [Abstract]
 
Number of Operating Segments
1 
Marketable Securities (Details) (Corporate debt securities, USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Mar. 31, 2015
Dec. 31, 2014
Corporate debt securities
 
 
Schedule of Available-for-sale Securities
 
 
Amortized cost
$ 84,239 
$ 74,275 
Gross unrealized gains
10 
2 
Gross unrealized losses
(37)
(43)
Estimated fair value
$ 84,212 
$ 74,234 
Marketable Securities Marketable Securities Textuals (Details) (USD $)
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Marketable Securities [Abstract]
 
 
Available-for-sale securities maturities, next twelve months
$ 77,100,000 
 
Available-for-sale securities, year two
7,100,000 
 
Available-for-sale securities, maturities
22,895,000 
22,225,000 
Number of available-for-sale securities in unrealized loss position, less than one year
16 
 
Other than Temporary Impairment Losses, Investments
$ 0 
 
Collaborative Agreements Collaborative Agreements Textuals (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Mar. 31, 2015
Mar. 31, 2015
Baxter [Member]
Mar. 31, 2015
Roche collaboration
Compound
Mar. 31, 2014
Roche collaboration
Mar. 31, 2014
Gammagard collaboration
Mar. 31, 2015
Janssen [Member]
Compound
Mar. 31, 2015
Pfizer [Member]
Compound
Mar. 31, 2015
Pfizer and Janssen [Member]
Mar. 31, 2015
Baxter [Member]
Dec. 31, 2014
Baxter [Member]
Dec. 31, 2014
Roche collaboration
Mar. 31, 2015
Roche collaboration
Collaborative Agreements Terms
 
 
 
 
 
 
 
 
 
 
 
 
Number of product compound combinations licenced to develop
 
 
13 
 
 
5 
6 
 
 
 
 
 
Number of targets elected
 
 
5 
 
 
1 
4 
 
 
 
 
 
Number of additional targets, optional
 
 
3 
 
 
4 
2 
 
 
 
 
 
Deferred revenue, additions, sales-based payments
 
 
 
 
 
 
 
 
 
 
$ 5.0 
 
Number of targets elected - upfront licence fee payment
 
 
3 
 
 
 
 
 
 
 
 
 
Number of targets elected, additional exclusive targets
 
 
2 
 
 
 
 
 
 
 
 
 
Duration of royalty receivable
 
10 years 
10 years 
 
 
10 years 
10 years 
 
 
 
 
 
Notification period for termination
 
 
 
 
 
90 days 
30 days 
 
 
 
 
 
Collaborative Agreements (Textual)
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds, inception to date, from collaborator of license and collaborative agreement
 
 
78.3 
 
 
 
 
 
17.0 
 
 
 
Nonrefundable upfront license fee payment received under collaborative agreement, inception to date
 
 
 
 
 
15.0 
11.0 
 
10.0 
 
 
20.0 
Revenue Recognition, Milestone Method, Revenue Recognized
 
 
 
 
 
 
 
0 
 
 
 
 
Amount received for additional exclusive targets and annual license maintenance fees under collaborative agreement
 
 
 
 
 
 
 
 
 
 
 
22.3 
Clinical development milestone payments received under collaborative agreement
 
 
 
 
 
 
 
 
 
 
 
13.0 
Regulatory milestone payments received under collaborative agreement
 
 
 
 
 
 
 
 
3.0 
 
 
8.0 
Amount received for sales-based payment
 
 
 
 
 
 
 
 
4.0 
 
 
15.0 
Deferred revenue, revenue recognized
 
0.2 
0.8 
0.7 
0.2 
 
 
 
 
 
 
 
Additional maximum proceeds receivable from collaborators of license and collaborative agreement upon achievement of clinical development milestones for elected targets
55.0 
 
 
 
 
 
 
 
 
 
 
 
Sales-based payment to be received upon the first commercial sale
12.0 
 
 
 
 
 
 
 
 
 
 
 
Deferred Revenue (Textual) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
Deferred revenue relating to upfront payment license fees and annual maintenance fees
 
 
 
 
 
 
 
 
$ 10.7 
$ 10.9 
$ 42.7 
$ 41.9 
Certain Balance Sheet Items - Accounts receivable (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Accounts Receivable, Net, Current [Abstract]
 
 
Accounts receivable from product sales to collaborators
$ 6,074 
$ 6,361 
Accounts receivable from other product sales
2,457 
2,133 
Accounts receivable from revenues under collaborative agreements
66 
1,266 
Accounts receivable, gross
8,597 
9,760 
Allowance for distribution fees and discounts
(872)
(611)
Total accounts receivable, net
$ 7,725 
$ 9,149 
Certain Balance Sheet Items - Inventories (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Summary of Inventories
 
 
Raw materials
$ 552 
$ 553 
Work-in-process
5,675 
5,207 
Finished goods
1,255 
646 
Total inventories
$ 7,482 
$ 6,406 
Certain Balance Sheet Items - Prepaid expenses and other assets (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Prepaid Expense and Other Assets, Current [Abstract]
 
 
Prepaid manufacturing expenses
$ 6,788 
$ 6,339 
Prepaid research and development expenses
3,473 
2,380 
Other prepaid expenses
921 
1,094 
Other assets
1,005 
1,535 
Total prepaid expense and other assets
12,187 
11,348 
Less long-term portion
2,564 
1,205 
Total prepaid expense and other assets, current
$ 9,623 
$ 10,143 
Certain Balance Sheet Items - Property and Equipment (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Property and equipment, gross
$ 12,329 
$ 12,170 
Accumulated depreciation and amortization
(9,597)
(9,219)
Property and equipment, net
2,732 
2,951 
Research equipment
 
 
Property and equipment, gross
8,597 
8,474 
Computer and office equipment
 
 
Property and equipment, gross
2,178 
2,178 
Leasehold improvements
 
 
Property and equipment, gross
$ 1,554 
$ 1,518 
Certain Balance Sheet Items - Property and Equipment, Net (Textuals) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Depreciation and amortization
 
 
Depreciation and amortization expense
$ 0.4 
$ 0.4 
Certain Balance Sheet Items - Accrued Expenses (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Summary of Accrued Expenses
 
 
Accrued outsourced research and development
$ 4,936 
$ 4,383 
Accrued compensation and payroll taxes
3,079 
5,923 
Accrued outsourced manufacturing expenses
1,810 
2,112 
Other accrued expenses
3,510 
2,023 
Total accrued expenses
13,335 
14,441 
Long-term accrued outsourced research and development
522 
480 
Total accrued expenses, current
$ 12,813 
$ 13,961 
Certain Balance Sheet Items - Deferred Revenue (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Deferred revenue
 
 
Total deferred revenue
$ 52,626 
$ 54,634 
Less current portion
6,367 
7,367 
Deferred revenue, net of current portion
46,259 
47,267 
Collaborative agreements
 
 
Deferred revenue
 
 
Total deferred revenue
51,471 
53,479 
Product sales
 
 
Deferred revenue
 
 
Total deferred revenue
$ 1,155 
$ 1,155 
Long-Term Debt, Net Long-Term Debt Textuals (Details) (USD $)
3 Months Ended 1 Months Ended 3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Dec. 31, 2014
Dec. 31, 2013
Secured Debt
Mar. 31, 2015
Secured Debt
Mar. 31, 2015
Secured Debt
Minimum
Mar. 31, 2015
Secured Debt
Maximum
Debt Instrument [Line Items]
 
 
 
 
 
 
 
Issuance date
 
 
 
Dec. 27, 2013 
 
 
 
Term loan, increase
 
 
 
$ 20,000,000 
 
 
 
Total term loan balance
 
 
 
 
50,000,000 
 
 
Maturity date
 
 
 
 
Jan. 01, 2018 
 
 
Debt Instrument, interest only period
 
 
 
 
interest only payments through January 2016 
 
 
Interest rate, stated percentage
 
 
 
 
7.55% 
 
 
Final payment as percent of original principal
 
 
 
 
8.50% 
 
 
Final payment
 
 
 
 
4,250,000 
 
 
Prepayment fee, percent
 
 
 
 
 
1.00% 
3.00% 
Debt instrument, covenant in compliance
 
 
 
 
in compliance 
 
 
Interest Expense, debt
1,300,000 
1,400,000 
 
 
 
 
 
Accrued interest, noncurrent
$ 2,300,000 
 
$ 2,000,000 
 
 
 
 
Stockholders' Equity (Deficit) (Details) (USD $)
0 Months Ended 3 Months Ended
Feb. 4, 2014
Mar. 31, 2015
Mar. 31, 2014
Dec. 31, 2014
Stockholders' equity (textual)
 
 
 
 
Outstanding stock options and restricted stock units
 
8,100,000 
 
7,200,000 
Proceeds from Issuance or Sale of Equity
 
 
 
 
Underwritten public offering and issued shares
8,846,153 
 
 
 
Stock issued during period shares new issues to underwriter
1,153,846 
 
 
 
Public offering price per share
$ 13.00 
 
 
 
Proceeds from issuance of common stock
$ 107,713,000 
$ 0 
$ 107,713,000 
 
Stock options
 
 
 
 
Stockholders' equity (textual)
 
 
 
 
Number of shares of common stock issued as a result of stock option exercises
 
1,053,453 
535,882 
 
Stock options weighted average exercise price
 
$ 7.31 
$ 5.92 
 
Net proceeds from stock options exercised
 
7,700,000 
3,200,000 
 
Restricted stock units
 
 
 
 
Stockholders' equity (textual)
 
 
 
 
Stock issued during period, shares, restricted stock award, net of forfeitures
 
65,562 
91,114 
 
Number of RSUs surrendered to pay for minimum withholding taxes
 
42,080 
56,915 
 
Payments for tax withholding for restricted stock units vested, net
 
$ 500,000 
$ 900,000 
 
Restricted stock awards
 
 
 
 
Stockholders' equity (textual)
 
 
 
 
Stock issued during period, shares, restricted stock award, net of forfeitures
 
374,740 
477,964 
 
Restructuring Expense (Details) (USD $)
In Millions, unless otherwise specified
0 Months Ended 3 Months Ended
Nov. 3, 2014
Mar. 31, 2015
Dec. 31, 2014
Restructuring Costs [Abstract]
 
 
 
Restructuring and Related Cost, Number of Positions Eliminated, Period Percent
13.00% 
 
 
Restructuring Reserve, Current
 
 
$ 0.5 
Restructuring and Related Cost, Status
 
paid in full