GALENA BIOPHARMA, INC., 10-Q filed on 8/9/2013
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2013
Jul. 31, 2013
Document Document And Entity Information [Abstract]
 
 
Entity Registrant Name
Galena Biopharma, Inc. 
 
Trading Symbol
GALE 
 
Entity Central Index Key
0001390478 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Document Type
10-Q 
 
Document Period End Date
Jun. 30, 2013 
 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q2 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
84,431,377 
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Current assets:
 
 
Cash and cash equivalents
$ 20,919 
$ 32,807 
Restricted cash
102 
101 
Marketable securities
5,786 
2,678 
Inventories
352 
Prepaid expenses
389 
535 
Total current assets
27,548 
36,121 
Equipment and furnishings, net
467 
29 
In-process research and development
12,864 
12,864 
Abstral rights
15,083 
   
Goodwill
5,898 
5,898 
Deposits and other assets
142 
74 
Total assets
62,002 
54,986 
Current liabilities:
 
 
Accounts payable
2,092 
1,976 
Accrued expense and other current liabilities
8,444 
2,038 
Current maturities of capital lease obligations
Fair value of warrants potentially settleable in cash
14,909 
10,964 
Current contingent purchase price consideration
935 
Current portion of long-term debt
301 
Total current liabilities
25,752 
15,919 
Capital lease obligations, net of current maturities
34 
51 
Deferred tax liability, non-current
5,053 
5,053 
Contingent purchase price consideration, net of current portion
6,529 
6,207 
Long-term debt, net of current portion
9,403 
Total liabilities
46,771 
27,230 
Commitments and contingencies
   
   
Stockholders' equity:
 
 
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding
   
   
Common stock, $0.0001 par value; 200,000,000 shares authorized, 85,083,326 shares issued and 84,408,326 shares outstanding at June 30, 2013; 125,000,000 shares authorized, 83,595,837 shares issued and 82,920,837 outstanding at December 31, 2012
Additional paid-in capital
136,646 
132,168 
Accumulated other comprehensive income
3,513 
1,626 
Deficit accumulated during the developmental stage
121,087 
102,197 
Less treasury shares at cost, 675,000 shares
(3,849)
(3,849)
Total stockholders' equity
15,231 
27,756 
Total liabilities and stockholders' equity
$ 62,002 
$ 54,986 
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Jun. 30, 2013
Dec. 31, 2012
Statement of Financial Position [Abstract]
 
 
Preferred stock, par value (usd per share)
$ 0.0001 
$ 0.0001 
Preferred stock, shares authorized
5,000,000 
5,000,000 
Preferred stock, shares issued
   
   
Preferred stock, shares outstanding
   
   
Common stock, par value (usd per share)
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
200,000,000 
125,000,000 
Common stock, shares issued
85,083,326 
83,595,837 
Common stock, shares outstanding
84,408,326 
82,920,837 
Treasury stock, shares
675,000 
675,000 
CONDENSED CONSOLIDATED STATEMENTS OF EXPENSES AND COMPREHENSIVE LOSS (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended 126 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Expenses:
 
 
 
 
 
Research and development expense
$ 5,131 
$ 3,671 
$ 10,099 
$ 6,094 
$ 29,109 
Research and development employee stock-based compensation expense
116 
56 
207 
90 
719 
Total research and development expense
29 
(7)
51 
200 
6,320 
Total research and development expense
5,276 
3,720 
10,357 
6,384 
36,148 
General and administrative expense
2,336 
1,778 
3,615 
3,047 
36,380 
General and administrative employee stock-based compensation expense
257 
87 
414 
281 
10,483 
General and administrative non-employee stock-based compensation expense
117 
98 
211 
381 
3,667 
Total general and administrative expense
2,710 
1,963 
4,240 
3,709 
50,530 
Operating loss
(7,986)
(5,683)
(14,597)
(10,093)
(86,678)
Other income (expense):
 
 
 
 
 
Interest income (expense), net
(186)
(19)
(181)
(35)
408 
Other income (expense)
116 
5,929 
(5,333)
(13,185)
(6,419)
Total other income (expense), net
(70)
5,910 
(5,514)
(13,220)
(6,011)
Income (loss) from continuing operations before income taxes
(8,056)
227 
(20,111)
(23,313)
(92,689)
Income tax expense (benefit)
1,541 
   
(1,221)
   
(2,273)
Income (loss) from continuing operations before income taxes
(9,597)
227 
(18,890)
(23,313)
(90,416)
Loss from discontinued operations
   
(423)
(1,644)
(40,712)
Net loss
(9,597)
(196)
(18,890)
(24,957)
(131,128)
Net loss per common share:
 
 
 
 
 
Basic loss per share, continuing operations (usd per share)
$ (0.11)
$ 0.00 
$ (0.23)
$ (0.41)
 
Basic loss per share, discontinued operations (usd per share)
$ 0.00 
$ (0.01)
$ 0.00 
$ (0.03)
 
Basic net loss per share (usd per share)
$ (0.11)
$ 0.00 
$ (0.23)
$ (0.44)
 
Diluted loss per share, continuing operations (usd per share)
$ (0.11)
$ (0.03)
$ (0.23)
$ (0.41)
 
Diluted loss per share, discontinued operations (usd per share)
$ 0.00 
$ (0.01)
$ 0.00 
$ (0.03)
 
Diluted net loss per share (usd per share)
$ (0.11)
$ (0.03)
$ (0.23)
$ (0.44)
 
Weighted average common shares outstanding: basic
83,656,184 
65,112,147 
83,331,059 
56,554,160 
 
Weighted average common shares outstanding: diluted
83,656,184 
67,177,572 
83,331,059 
56,554,160 
 
Comprehensive loss
 
 
 
 
 
Net loss
(9,597)
(196)
(18,890)
(24,957)
(131,128)
Reclassification of unrealized gain upon sale of marketable securities
(795)
(795)
(795)
Unrealized gain (loss) on marketable securities, net of tax
(3,128)
   
3,903 
   
6,581 
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, Tax
312 
312 
312 
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Tax
1,229 
(1,533)
(2,585)
Total comprehensive loss
$ (11,979)
$ (196)
$ (17,003)
$ (24,957)
$ (127,615)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
6 Months Ended 126 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Cash flows from operating activities:
 
 
 
Net loss
$ (18,890)
$ (24,957)
$ (131,128)
Adjustment to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization expense
41 
44 
754 
Loss on disposal of equipment
   
   
19 
Gain on sale of marketable securities
(578)
(578)
Deferred taxes
(1,221)
   
(2,273)
Non-cash rent expense
   
   
29 
Accretion and receipt of bond discount
   
   
35 
Non-cash stock-based compensation
615 
621 
20,867 
Change in fair value of warrants potentially settleable in cash
   
   
(785)
Fair value of common stock warrants issued in exchange for services
   
246 
2,402 
Fair value of common stock issued in exchange for services
262 
185 
980 
Change in fair value of common stock warrants
5,521 
11,632 
5,124 
Fair value of common stock issued in exchange for licensing rights
   
   
3,954 
Change in fair value of contingent consideration
387 
1,548 
2,648 
Changes in operating assets and liabilities:
 
 
 
Increase (Decrease) in Inventories
(352)
(352)
Prepaid expenses and other assets
151 
(621)
(494)
Accounts payable
116 
371 
1,981 
Due to former parent
   
   
(207)
Accrued expenses and other current liabilities
1,494 
(699)
4,829 
Net cash used in operating activities
(12,454)
(11,630)
(92,195)
Cash flows from investing activities:
 
 
 
Change in restricted cash
(1)
   
(102)
Cash paid for acquisition of Abstral rights
(10,083)
   
(10,083)
Cash received in NeuVax acquisition
   
   
168 
Purchase of short-term investments
   
   
(37,532)
Maturities of short-term investments
   
   
37,497 
Proceeds from sale of marketable securities
578 
578 
Cash paid for purchase of equipment and furnishings
(450)
   
(1,189)
Disposal of equipment and furnishings
   
   
(1)
Cash paid for lease deposit
   
   
(45)
Cash transferred with the RXi spin-off
   
(87)
(87)
Net cash used in investing activities
(9,956)
(87)
(10,796)
Cash flows from financing activities:
 
 
 
Net proceeds from issuance of common stock
   
13,865 
101,000 
Cash paid for repurchase of common stock warrants
   
(266)
(266)
Cash paid for repurchase of common stock
   
   
(3,489)
Net proceeds from exercise of common stock options
   
   
631 
Net proceeds from exercise of common stock warrants
630 
5,384 
6,488 
Common stock issued in connection with ESPP
44 
39 
152 
Net proceeds from issuance of convertible notes payable
   
500 
1,000 
Net proceeds from issuance of long-term debt
9,865 
9,865 
Repayments of capital lease obligations
(17)
(10)
(237)
Cash advances from former parent company, net
   
   
8,766 
Net cash provided by financing activities
10,522 
19,512 
123,910 
Net increase (decrease) in cash and cash equivalents
(11,888)
7,795 
20,919 
Cash and cash equivalents at the beginning of period
32,807 
11,433 
   
Cash and cash equivalents at end of period
20,919 
19,228 
20,919 
Supplemental disclosure of cash flow information:
 
 
 
Cash received during the periods for interest
726 
Cash paid during the periods for interest
53 
36 
65 
Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Future payment for Abstral rights included in accrued expenses
5,000 
   
5,000 
Settlement of corporate formation expenses in exchange for common stock
   
   
978 
Fair value of warrants issued in connection with common stock recorded as cost of equity
   
   
25,324 
Issuance of common stock in exchange of outstanding warrants
   
   
3,120 
Fair value of shares mandatorily redeemable for cash upon exercise of warrants
   
   
785 
Reclassification of warrant liabilities upon exercise
1,207 
10,149 
12,050 
Net liabilities distributed in the RXi spin-off, excluding cash
2,246 
2,246 
Common stock issued in settlement of contingent purchase price consideration
1,000 
1,579 
2,579 
Allocation of management expenses
   
   
551 
Equipment and furnishings exchanged for common stock
   
   
48 
Equipment and furnishings acquired through capital lease
   
   
277 
Non-cash lease deposit
   
   
50 
Value of restricted stock units and common stock issued in lieu of cash bonuses
   
   
634 
Change in fair value of marketable securities
3,108 
   
5,786 
NeuVax Acquisition:
 
 
 
Fair value of shares issued to acquire NeuVax
   
 
6,367 
Fair value of contingent purchase price consideration in connection with NeuVax acquisition
   
 
6,460 
Net assets acquired excluding cash of $168
$ 0 
 
$ 12,827 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) (USD $)
In Thousands, unless otherwise specified
123 Months Ended
Mar. 31, 2013
Statement of Cash Flows [Abstract]
 
Cash excluding from net assets acquired
$ 168 
Business and Basis of Presentation
Business and Basis of Presentation
Business and Basis of Presentation Business

Galena Biopharma, Inc. (“we,” “us,” “our,” “Galena” or the “company”) is a biopharmaceutical company developing and commercializing innovative, targeted oncology treatments that address major unmet medical needs to advance cancer care.

Galena is developing peptide vaccine (off-the-shelf) cancer immunotherapies, which address patient populations of cancer survivors to prevent disease recurrence by harnessing the patient's own immune system to seek out and attack any residual cancer. In this case, 25% of resectable node-positive breast cancer patients, despite having no evidence of disease following surgery and chemo/radiation therapy, will still relapse within 3 years. Increased presence of circulating tumor cells (CTC) predict DFS (disease free survival) and OS (overall survival) - suggesting a dormancy of isolated micrometastases, which over time, leads to recurrence. Our lead product, NeuVaxTM (nelipepimut-S) elicits a robust, specific and durable killer CD8+ cytotoxic T lymphocyte (CTLs) response to lyse HER2 expressing tumor cells.

NeuVax™ (nelipepimut-S) is the immmunodominant nonapeptide derived from the extracellular domain of the HER2 protein, a well-established target for therapeutic intervention in breast carcinoma. The nelipepimut sequence stimulates specific CTLs following binding to HLA-A2/A3 molecules on antigen presenting cells (APC). These activated specific CTLs recognize, neutralize and destroy, through cell lysis, HER2 expressing cancer cells, including occult cancer cells and micrometastatic foci. The nelipepimut immune response can also generate CTLs to other immunogenic peptides through inter- and intra-antigenic epitope spreading. Based on a successful Phase 2 trial, which achieved its primary endpoint of disease-free survival (DFS), the Food and Drug Administration (FDA) granted NeuVax a Special Protocol Assessment (SPA) for its Phase 3 PRESENT (Prevention of Recurrence in Early-Stage, Node-Positive Breast Cancer with Low to Intermediate HER2 Expression with NeuVax Treatment) study. The PRESENT trial is ongoing and additional information on the study can be found at www.neuvax.com. A randomized, multicenter, investigator-sponsored, 300 patient Phase 2b clinical trial is also enrolling patients to study NeuVax in combination with Herceptin® (trastuzumab; Genentech/Roche).

Our second product candidate, Folate Binding Protein, or “FBP,” is a peptide that is over-expressed (20-80 fold) in more than 90% of ovarian and endometrial cancers. FBP is a highly immunogenic peptide that can stimulate CTLs to recognize and destroy preclinical FBP-expressing cancer cells. The FBP vaccine consists of the FBP peptide(s) combined with the immune adjuvant, recombinant human granulocyte macrophage-colony stimulating factor (rhGM-CSF). Galena’s FBP vaccine is currently in a Phase 1/2 trial in two gynecological cancers: ovarian and endometrial adenocarcinomas.

Our third product, Abstral® (fentanyl) Sublingual Tablets, are an important new treatment option for inadequately controlled breakthrough cancer pain (BTcP) which impact 40%-80% of cancer patients. Abstral is approved by the FDA, and is a sublingual (under the tongue) fentanyl tablet indicated only for the management of breakthrough pain in patients with cancer, 18 years of age and older, who are already receiving, and who are tolerant to, opioid therapy for their persistent baseline cancer pain. The innovative Abstral formulation delivers the analgesic power and increased bioavailability of micronized fentanyl in a more convenient sublingual tablet which rapidly dissolves under the tongue in seconds, provides rapid relief of breakthrough pain in minutes, and matches the duration of the entire pain episode.

In the future, we may pursue selective acquisitions of other cancer treatments to complement or add to our existing cancer product pipeline.

Basis of Presentation and Significant Accounting Policies

The condensed consolidated financial statements included herein have been prepared by Galena pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. The year-end condensed consolidated balance sheet information was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The financial statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Unless the context otherwise indicates, references in this quarterly report to the “company,” “we,” “us” or “our” refer (i) to Galena, our wholly owned subsidiary, Apthera, Inc., or “Apthera,” and our former subsidiary, RXi Pharmaceuticals Corporation, or “RXi,” collectively, prior to our partial spin-off of RXi in April 2012; and (ii) to Galena and Apthera, together, after the partial spin-off.

Uses of Estimates in Preparation of Financial Statements — The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Principles of Consolidation — The consolidated financial statements include the accounts of Galena and its wholly owned subsidiary. All material intercompany accounts have been eliminated in consolidation.

Reclassifications — Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications had no effect on net loss per share.

Cash and Cash Equivalents — The company considers all highly liquid debt instruments with an original maturity of 90 days or less to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market accounts.

Restricted Cash — Restricted cash consists of certificates of deposit on hand with the company’s financial institutions as collateral for its corporate credit cards.

Marketable Securities — Marketable securities consist of shares of common stock of our former subsidiary, RXi Pharmaceuticals Corporation, a publicly traded company, and are classified as available-for-sale and carried at fair value on the balance sheet. Changes in the fair value of marketable securities are recorded as other comprehensive income.

Fair Value of Financial Instruments — The carrying amounts reported in the balance sheet for cash equivalents, marketable securities, accounts payable, convertible notes payable and capital leases approximate their fair values due to their short-term nature and market rates of interest.

Inventories — Inventories are stated at the lower of cost or market value and are determined using the first-in, first-out ("FIFO") method. Inventories consist of Abstral work-in-process and finished goods. The Company has entered into manufacturing and supply agreements for the manufacture and packing of Abstral finished goods. As of June 30, 2013, the Company had inventories of $352,000, consisting of $300,000 of work-in-process and $52,000 of finished goods. The Company had no inventory as of December 31, 2012.

Equipment and Furnishings — Equipment and furnishings are stated at cost and depreciated using the straight-line method based on the estimated useful lives (generally three to five years for equipment and furniture) of the related assets.

Goodwill and Intangible Assets — Goodwill and indefinite-lived intangible assets are not amortized but are tested annually for impairment at the reporting unit level, or more frequently if events and circumstances indicate impairment may have occurred. Factors the company considers important that could trigger an interim review for impairment include, but are not limited to, the following:
Significant changes in the manner of its use of acquired assets or the strategy for its overall business;
Significant negative industry or economic trends;
Significant decline in stock price for a sustained period; and
Significant decline in market capitalization relative to net book value.

Goodwill and other intangible assets with indefinite lives are evaluated for impairment first by a qualitative assessment to determine the likelihood of impairment. If it is determined that impairment is more likely than not, the company will then proceed to the two step impairment test. The first step is to compare the fair value of the reporting unit to the carrying amount of the reporting unit (the “First Step”). If the carrying amount exceeds the fair value, a second step must be followed to calculate impairment (the “Second Step”). Otherwise, if the fair value of the reporting unit exceeds the carrying amount, the goodwill is not considered to be impaired as of the measurement date. In its review of the carrying value of the goodwill for its single reporting unit and its indefinite-lived intangible assets, the company determines fair values of its goodwill using the market approach, and its indefinite-lived intangible assets using the income approach.

Intangible assets not considered indefinite-lived are reviewed for impairment when facts or circumstances suggest that the carrying value of these assets may not be recoverable. The company’s policy is to identify and record impairment losses, if necessary, on intangible product rights when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets.

The company performed its review for impairment using the qualitative assessment for both goodwill and indefinite-lived intangible assets, and has determined that there has been no impairment to these assets as of June 30, 2013.

Acquisitions and In-Licensing — For all in-licensed products and technologies, we perform an analysis to determine whether we hold a variable interest or a controlling financial interest in a variable interest entity. On the basis of our interpretations and conclusions, we determine whether the acquisition falls under the purview of variable interest entity accounting and if so, consider the necessity to consolidate the acquisition. As of June 30, 2013, we determined there were no variable interest entities required to be consolidated.

We also perform an analysis to determine if the assets and liabilities acquired in an acquisition qualify as a "business." The excess of the purchase price over the fair value of the net assets acquired can only be recognized as goodwill in a business combination.

The acquisition of the Abstral rights has been accounted for as an asset acquisition and not a business combination. The purchase price, including transaction costs, was recorded as an intangible asset related to the license and distribution rights acquired in the transaction. No other significant assets or liabilities were acquired or assumed in the transactions. The license and distribution rights will be amortized over ten years in a pattern based on our Abstral sales projections, commencing in the period that sales commence. No amortization was recorded related to the Abstral rights as of June 30, 2013. Refer to Note 11 for further information regarding the acquisition of Abstral U.S. rights.
 
Contingent Purchase Price Consideration — Contingent consideration is recorded at the estimated fair value as of the acquisition date. The fair value of the contingent consideration is remeasured at each reporting period with any adjustments in fair value included in our consolidated statement of expenses.

Patents and Patent Application Costs — Although the company believes that its patents and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Patent costs are, therefore, expensed as incurred.

Share-based Compensation — The company follows the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, “ Compensation — Stock Compensation” (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock based payment awards made to employees, non-employee directors, and consultants, including stock options and warrants. Stock compensation expense based on the grant date fair value estimated in accordance with the provisions of ASC 718 is recognized as an expense over the requisite service period.

For stock options and warrants granted as consideration for services rendered by non-employees, the company recognizes compensation expense in accordance with the requirements of FASB ASC Topic 505-50 (“ASC 505-50”), “ Equity Based Payments to Non- Employees.” Non-employee option and warrant grants that do not vest immediately upon grant are recorded as an expense over the vesting period. At the end of each financial reporting period prior to vesting, the value of these options and warrants, as calculated using the Black-Scholes option-pricing model, will be re-measured using the fair value of the company’s common stock and the non-cash compensation recognized during the period will be adjusted accordingly. Since the fair market value of options and warrants granted to non-employees is subject to change in the future, the amount of the future compensation expense will include fair value re-measurements until the stock options are fully vested.

Derivative Financial Instruments — During the normal course of business, the company from time to time grants warrants to vendors as consideration for their services. We may also issue warrants as part of a debt or equity financing. The company does not enter into any derivative contracts for speculative purposes.

The company recognizes all derivatives as assets or liabilities measured at fair value with changes in fair value of derivatives reflected as current period income or loss unless the derivatives qualify for hedge accounting and are accounted for as such. In accordance with FASB ASC Topic 815-40, “ Derivatives and Hedging — Contracts in Entity’s Own Stock,” the value of warrants that are deemed to meet the definition of derivatives are required to be recorded as a liability, as the holders have an option to put the warrants back to the company upon the occurrence of certain events set forth in the warrants.

Research and Development Expenses — Research and development costs are expensed as incurred. Included in research and development costs are wages, benefits and other operating costs, facilities, supplies, external services and overhead related to our research and development departments, as well as costs to acquire technology licenses and clinical trial expenses.

Clinical trial expenses include expenses associated with contract research organizations ("CROs"), as well as set-up and patient related costs from the sites at which are trial is being conducted which are billed to us by our CROs as pass-through costs.

Direct costs associated with our CROs are generally payable both as fixed fees and as certain enrollment and monitoring milestones are achieved. Expense related to milestones is recognized in the period in which the milestone is achieved or in which we determine that it is more likely than not that the milestone will be achieved.

The invoicing from clinical trial sites can lag several months. We accrue these site costs based on our estimate of upfront set-up costs upon the screening of the first patient at each site, and the patient related costs based on our knowledge of patient enrollment status at each site.

Other Income (Expense)

Other income (expense) is summarized as follows (in thousands):
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Change in fair value of warrants potentially settleable in cash
$
(518
)
 
$
6,638

 
$
(5,521
)
 
$
(11,632
)
Realized gain on sale of marketable securities
578

 

 
578

 

Change in fair value of the contingent purchase price liability
56

 
(704
)
 
(387
)
 
(1,548
)
Miscellaneous other income (expense)

 
(5
)
 
(3
)
 
(5
)
Total other income (expense)
$
116

 
$
5,929

 
$
(5,333
)
 
$
(13,185
)


Income Taxes — The company recognizes liabilities or assets for the deferred tax consequences of temporary differences between the tax basis of assets or liabilities and their reported amounts in the financial statements in accordance with FASB ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”). These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. ASC 740-10 requires that a valuation allowance be established when management determines that it is more likely than not that all or a portion of a deferred asset will not be realized. The company evaluates the realizability of its net deferred income tax assets and valuation allowances as necessary, at least on an annual basis. During this evaluation, the company reviews its forecasts of income in conjunction with other positive and negative evidence surrounding the realizability of its deferred income tax assets to determine if a valuation allowance is required. Adjustments to the valuation allowance will increase or decrease the company’s income tax provision or benefit. The recognition and measurement of benefits related to the company’s tax positions requires significant judgment, as uncertainties often exist with respect to new laws, new interpretations of existing laws, and rulings by taxing authorities. Differences between actual results and the company’s assumptions or changes in the company’s assumptions in future periods are recorded in the period they become known.

For the three months ended June 30, 2013, we recognized income tax expense of $1,541,000. This expense offsets the tax impact related to the unrealized loss on our marketable securities, which is presented as other comprehensive income, net of tax, on our condensed consolidated statement of expenses and comprehensive loss. For the six months ended June 30, 2013, we recognized an income tax benefit of $1,221,000, which offsets the tax impact related to the unrealized gain on our marketable securities. We continue to maintain a full valuation allowance against our net deferred tax assets.

Concentrations of Credit Risk — Financial instruments that potentially subject the company to significant concentrations of credit risk consist principally of cash and cash equivalents. The company maintains cash balances in several accounts with two banks, which at times are in excess of federally insured limits. As of June 30, 2013, the company’s cash equivalents were invested in money market mutual funds. The company’s investment policy does not allow investment in any debt securities rated less than “investment grade” by national ratings services. The company has not experienced any losses on its deposits of cash and cash equivalents. As of June 30, 2013, we had approximately $20,555,000 in interest-bearing accounts above federally insured limits.

Comprehensive Loss — Comprehensive loss consists of our net loss and other comprehensive income related to the unrealized gain (loss), net of tax, on our marketable securities, which are classified as available-for-sale.
Recently Adopted Accounting Pronouncements
Recently Adopted Accounting Pronouncements
Recently Adopted Accounting Pronouncements

In July 2012, the FASB issued Accounting Standards Update (ASU) No. 2012-02, IntangiblesGoodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets, a new accounting pronouncement intended to simplify how entities test indefinite-lived intangible assets other than goodwill for impairment. The new standard permits an entity to first assess qualitative factors to determine whether it is “more likely than not” (defined as having a likelihood of more than 50%) that an indefinite-lived intangible asset is impaired, in order to determine whether further impairment testing is necessary. The new standard was effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Adoption of this new standard did not have a material impact on the company’s consolidated financial statements for the three and six months ended June 30, 2013 or the fiscal year ended December 31, 2012.

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, a new accounting pronouncement intended to improve the reporting of reclassifications out of accumulated other comprehensive income. The new standard requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The new standards also requires an entity to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts not required to be reclassified in their entirety in the same reporting period, an entity is required to cross-reference to other required disclosures required that provide additional detail about those amounts. The new standard was effective for reporting periods beginning after December 31, 2012. Adoption of this new standard for the three and six months ended June 30, 2013 did not have a material impact on the company’s consolidated financial statements.
RXi Spin-off
RXi Spin-off
RXi Spin-off

On September 24, 2011, the company entered into a contribution agreement with our former subsidiary, RXi Pharmaceuticals Corporation, or “RXi,” pursuant to which we assigned and contributed to RXi substantially all of the company’s RNAi-related technologies and assets. The contributed assets consist primarily of our novel RNAi compounds and licenses relating to our RNAi technologies, as well as the lease of our Worcester, Massachusetts laboratory facility, fixed assets and other equipment located at the facility and our employment arrangements with certain scientific, corporate and administrative personnel who became employees of RXi. The company also contributed $1.5 million of cash to the capital of RXi.

Pursuant to the contribution agreement, RXi assumed certain accrued expenses of our former RXI-109 development program and all subsequent obligations under the contributed licenses, employment arrangements and other agreements. RXi also has agreed to make future milestone payments to us of up to $45 million, consisting of two one-time payments of $15 million and $30 million, respectively, if RXi achieves annual net sales equal to or greater than $500 million and $1 billion, respectively, of any covered products that may be developed with the contributed RNAi technologies.

The company agreed in the securities purchase agreement to distribute to our stockholders on a share-for-share basis a total of approximately 66,959,894 RXi shares, which distribution was made in April 2012. The company retained 33,476,595 shares of common stock of RXi, which were subject to a one-year lock-up period that expired on April 27, 2013. As of June 30, 2013, the company had sold 3,022,080 RXi shares since the expiration of the lock-up period for total proceeds of $578,000, which is included in other income. On July 19, 2013, RXi effected a 1-for-30 reverse stock split of its outstanding shares of common stock.

The value of RXi shares held by the company at June 30, 2013 was approximately $5,786,000, based on the closing price on the last trading day of the quarter of RXi of $0.19 per share as reported on the OTCQX marketplace. The value of our RXi shares will depend on RXi’s success in developing and commercializing products developed based upon its RNAi technologies and other factors that are subject to significant risks and uncertainties described in RXi’s filings with the SEC. There is no assurance, therefore, as to the value we may realize from our RXi shares.

The company classified the RXi activities, including for previously reported periods, as discontinued operations in the accompanying consolidated statements of expenses retroactively for all periods presented. The net assets of RXi were removed from the consolidated balance sheet as of the date of the spin-off, and were recorded as an equity distribution.
Fair Value Measurements
Fair Value Measurements
Fair Value Measurements

The company follows ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”) for the company’s financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and are re-measured and reported at fair value at least annually using a fair value hierarchy that is broken down into three levels. Level inputs are as defined as follows:
Level 1 — quoted prices in active markets for identical assets or liabilities.
Level 2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.
Level 3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

The company categorized its cash equivalents and marketable securities as Level 1 inputs. The valuations for Level 1 were determined based on a “market approach” using quoted prices in active markets for identical assets. Valuation of these assets does not require a significant degree of judgment. The company categorized its warrants potentially settleable in cash as a Level 2 inputs. The warrants are measured at market value on a recurring basis and are being marked to market each quarter-end until they are completely settled. The warrants are valued using an appropriate pricing model, using assumptions consistent with our application of ASC 718. The contingent purchase price consideration is categorized as a Level 3 inputs and is measured at its estimated fair value on a recurring basis and is adjusted at each quarter-end until it is completely settled. The contingent price consideration is valued based on the expected timing of milestones, the expected probability of success for each milestone and discount rates based on a corporate debt interest rate index publicly issued.

The following tables present information about our assets and liabilities measured at fair value on a recurring basis in the condensed consolidated balance sheets (in thousands):
 
Description
June 30, 2013
 
Quoted Prices In    
Active Markets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Unobservable 
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Cash equivalents
$
9,109

 
$
9,109

 
$

 
$

Marketable securities
5,786

 
5,786

 

 

Total assets measured and recorded at fair value
$
14,895

 
$
14,895

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
Warrants potentially settleable in cash
$
14,909

 
$

 
$
14,909

 
$

Contingent purchase price consideration
6,529

 

 

 
6,529

Total liabilities measured and recorded at fair value
$
21,438

 
$

 
$
14,909

 
$
6,529


Description
December 31, 2012
 
Quoted Prices In    
Active Markets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Unobservable 
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Cash equivalents
$
32,431

 
$
32,431

 
$

 
$

Marketable securities
2,678

 
2,678

 

 

Total assets measured and recorded at fair value
$
35,109

 
$
35,109

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
Warrants potentially settleable in cash
$
10,964

 
$

 
$
10,964

 
$

Contingent purchase price consideration
7,142

 

 

 
7,142

Total liabilities measured and recorded at fair value
$
18,106

 
$

 
$
10,964

 
$
7,142



The company has classified its liabilities for contingent earn-out consideration relating to its acquisitions of Apthera within Level 3 of the fair value hierarchy, because the fair values are determined using significant unobservable inputs, including probability-weighted discounted cash outflows. During the three months ended June 30, 2013 the company achieved another milestone under the contingent value rights agreement entered into connection with the company's acquisition of Apthera, resulting in a $1,000,000 milestone payment that we paid by issuing to the contingent value rights holders 384,688 shares of our common stock.

The company has not transferred any financial instruments into or out of Level 3 classification during the six months ended June 30, 2013 or 2012. A reconciliation of the beginning and ending Level 3 liabilities for the six months ended June 30, 2013 is as follows (in thousands):
 
 
Fair Value
Measurements
Using Significant
Unobservable
Inputs
(Level 3)
Balance, January 1, 2013
$
7,142

Milestone payment
(1,000
)
Change in the estimated fair value of the contingent purchase price consideration
387

Balance at June 30, 2013
$
6,529



The fair value of the contingent purchase price consideration is measured at the end of each reporting period using Level 3 inputs in a probability-weighted, discounted cash-outflow model. The significant unobservable assumptions include the probability of achieving each milestone, the date we expect to reach the milestone, and a determination of present value factors used to discount future expected cash outflows.
Accrued Expenses and Other Current Liabilities
Accrued Expenses and Other Current Liabilities
Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

 
June 30, 2013
 
December 31, 2012
Abstral milestone payment
$
5,000

 
$

Contract research organizations
2,369

 
1,705

Compensation and related benefits
642

 
217

Professional fees
363

 
116

Interest expense
70

 

Accrued expenses and other current liabilities
$
8,444

 
$
2,038

Long-term Debt
Long-term Debt
Long-term Debt

On May 8, 2013 we entered into a loan and security agreement with Oxford Finance LLC, as collateral agent, and related lenders under which we may borrow up to $15 million (the “Loan”) in two tranches. We borrowed the first tranche of $10 million on May 8, 2013, and we may borrow the second tranche of $5 million on or before May 31, 2014, subject to our achievement of certain operational and financial conditions. There is no assurance these conditions will be achieved. The Loan payments will include 12 months of interest-only payments at the fixed coupon rate of 8.45%, followed by 30 months of amortization of principal and interest until maturity in November 2016. In connection with the Loan, we paid the lender a 1% cash facility fee and a 5.5% cash final payment and granted to the lenders seven-year warrants to purchase up to 182,186 shares of our common stock at an exercise price of $2.47, which equaled a 20-day average market price of our common stock prior to the date of the grant.
Stockholders' Equity
Stockholders' Equity
Stockholders’ Equity

Preferred Stock — The Company has authorized up to 5,000,000 shares of preferred stock, $0.0001 par value per share, for issuance. The preferred stock will have such rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the Company’s board of directors upon its issuance. To date, the Company has not issued any preferred shares.

Common Stock — The Company has authorized up to 200,000,000 shares of common stock, $0.0001 par value per share, for issuance. Shares of common stock are reserved as follows (in thousands):
 
 
As of June 30, 2013
Warrants outstanding
12,405

Stock options outstanding
9,972

Options reserved for future issuance under the Company’s 2007 Incentive Plan
5,314

Shares reserved for future issuance under the Employee Stock Purchase Plan
756

Total reserved for future issuance
28,447

Warrants
Warrants
Warrants

The following is a summary of warrant activity for the six months ended June 30, 2013 (in thousands):
 
 
December
2012
Warrants

 
April 2011
Warrants

 
March
2011
Warrants

 
March
2010
Warrants

 
August
2009
Warrants

 
Consultant
and Oxford Warrants
 
Total
Outstanding, January 1, 2013
7,578

 
2,846

 
361

 
360

 
978

 
1,093

 
13,216

Granted

 

 

 

 

 
182

 
182

Exercised
(8
)
 
(825
)
 

 

 

 
(160
)
 
(993
)
Outstanding, June 30, 2013
7,570

 
2,021

 
361

 
360

 
978

 
1,115

 
12,405

Expiration
December 2017
 
April 2017
 
March 2016
 
March 2016
 
August 2014
 
Varies 2013-2020
 
 


Warrants consist of warrants potentially settleable in cash, which are liability-classified warrants, and equity-classified warrants.

Warrants classified as liabilities

Liability-classified warrants consist of warrants to purchase common stock issued in connection with equity financings in December 2012, April 2011, March 2011, March 2010 and August 2009. These warrants are potentially settleable in cash and were determined not to be indexed to our common stock.

The estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the consolidated statement of expenses as other income (expense). The fair value of the warrants is estimated using an appropriate pricing model with the following inputs:
 
 
As of June 30, 2013
 
December
2012
Warrants
 
April 2011
Warrants
 
March
2011
Warrants
 
March
2010
Warrants
 
August
2009
Warrants
Strike price
$
1.90

 
$
0.65

 
$
0.65

 
$
2.18

 
$
4.50

Expected term (years)
4.48

 
3.81

 
2.68

 
2.74

 
1.09

Volatility %
73.39
%
 
70.15
%
 
70.47
%
 
70.18
%
 
76.58
%
Risk-free rate %
1.21
%
 
0.96
%
 
0.56
%
 
0.58
%
 
0.17
%
 
 
As of December 31, 2012
 
December
2012
Warrants
 
April 2011
Warrants
 
March
2011
Warrants
 
March
2010
Warrants
 
August
2009
Warrants
Strike price
$
1.90

 
$
0.65

 
$
0.65

 
$
2.18

 
$
4.50

Expected term (years)
4.98

 
4.30

 
3.18

 
3.24

 
1.59

Volatility %
80.93
%
 
82.48
%
 
69.90
%
 
69.79
%
 
74.13
%
Risk-free rate %
0.72
%
 
0.59
%
 
0.39
%
 
0.40
%
 
0.21
%


The company’s expected volatility is based on a combination of implied volatilities of similar publicly traded entities. The expected life assumption is based on the remaining contractual terms of the warrants. The risk-free rate is based on the zero coupon rates in effect at the time of valuation. The dividend yield used in the pricing model is zero, because the company has no present intention to pay cash dividends.

The changes in fair value of the warrant liability for the six months ended June 30, 2013 were as follows (in thousands):
 
 
December
2012
Warrants
 
April 2011
Warrants
 
March
2011
Warrants
 
March
2010
Warrants
 
August
2009
Warrants
 
Total
Warrant liability, January 1, 2013
$
6,954

 
$
3,310

 
$
378

 
$
183

 
$
139

 
$
10,964

Fair value of warrants exercised
(15
)
 
(1,561
)
 

 

 

 
(1,576
)
Change in fair value of warrants
3,275

 
1,743

 
224

 
173

 
106

 
5,521

Warrant liability, June 30, 2013
$
10,214

 
$
3,492

 
$
602

 
$
356

 
$
245

 
$
14,909



Warrants classified as equity

Equity-classified warrants consist of warrants issued in connection with consulting services provided to us. Additionally, on May 8, 2013 as a part of our Loan financing, we granted Oxford Financial LLC warrants to purchase 182,186 shares of common stock at an exercise price of $2.47, equaled to the 20-day average market price of our common stock prior to the date of the grant. The warrants were valued using the Black Scholes model as described in Note 9, below. The fair value assumptions for the grant included a volatility of 75.34%, expected term of seven years, risk free rate of 1.20%, and a dividend rate of 0.00%. The fair value of the warrants granted was $1.93 per share. These warrants are recorded in equity at fair value upon issuance, and not as liabilities.
Stock Based Compensation
Stock Based Compensation
Stock Based Compensation

Options to Purchase Shares of Common Stock — The company follows the provisions ASC 718, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, non-employee directors and consultants, including employee stock options. Stock compensation expense based on the grant date fair value estimated in accordance with the provisions of ASC 718 is recognized as an expense over the requisite service period.

For stock options and warrants granted in consideration for services rendered by non-employees, the company recognizes compensation expense in accordance with the requirements of ASC Topic 505-50. Non-employee option and warrant grants that do not vest immediately upon grant are recorded as an expense over the vesting period. At the end of each financial reporting period prior to vesting, the value of these options and warrants, as calculated using the Black-Scholes option-pricing model, is being re-measured using the fair value of the company’s common stock and the non-cash compensation recognized during the period will be adjusted accordingly. Since the fair market value of options and warrants granted to non-employees is subject to change in the future, the amount of the future compensation expense will include fair value re-measurements until the stock options and warrants are fully vested.

The company uses the Black-Scholes option-pricing model and the following weighted average assumptions to determine the fair value of all its stock options granted:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Risk free interest rate
1.35
%
 
1.12
%
 
1.25
%
 
1.07
%
Volatility
78.18
%
 
75.65
%
 
77.66
%
 
75.69
%
Expected lives (years)
6.25

 
6.25

 
6.25

 
6.12

Expected dividend yield
0.00
%
 
0.00
%
 
0.00
%
 
0.00
%


The weighted average fair value of options granted during the three months and six months ended June 30, 2013 was $1.63 per share and $1.28 per share, respectively.

The company’s expected common stock price volatility assumption is based upon the volatility of a basket of comparable companies. The expected life assumptions for employee grants were based upon the simplified method provided for under ASC 718-10, which averages the contractual term of the company’s options of 10 years with the average vesting term of 4 years for an average of 6 years. The expected life assumptions for non-employees were based upon the contractual term of the option. The dividend yield assumption is zero, because the company has never paid cash dividends and presently has no intention of paying cash dividends in the future. The risk-free interest rate used for each grant was also based upon prevailing short-term interest rates. The company has estimated an annualized forfeiture rate of 15% for options granted to its employees, 8% for options granted to senior management and zero for non-employee directors. The company will record additional expense if the actual forfeitures are lower than estimated and will record a recovery of prior expense if the actual forfeiture rates are higher than estimated.

The company recorded approximately $519,000 and $883,000 of stock-based compensation from continuing operations related to employee and non-employee stock options for the three months and six months ended June 30, 2013, respectively. The company recorded approximately $234,000 and $952,000 of stock-based compensation from continuing operations related to employee and non-employee stock options for the three months and six months ended June 30, 2012, respectively. As of June 30, 2013, there was $3,372,000 of unrecognized compensation cost related to outstanding options that is expected to be recognized as a component of the company’s operating expenses over a weighted average period of 3.01 years.

As of June 30, 2013, an aggregate of 16,500,000 shares of common stock were reserved for issuance under the company’s 2007 Incentive Plan, including 9,972,000 shares subject to outstanding common stock options granted under the plan and 5,314,000 shares available for future grants. The administrator of the plan determines the times when an option may become exercisable. Vesting periods of options granted to date have not exceeded four years. The options generally will expire, unless previously exercised, no later than ten years from the grant date. The company is using unissued shares for all shares issued upon exercise of stock options and for any restricted share awards.

The following table summarizes option activity of the company:
 
 
Total
Number of
Shares
(In Thousands)
 
Weighted
Average
Exercise
Price
 
Aggregate
Intrinsic
Value
(In Thousands)
Outstanding at January 1, 2013
7,672

 
$
2.54

 
$

Granted
2,783

 
1.88

 
1,057

Exercised
(8
)
 
0.85

 
15

Cancelled
(475
)
 
4.58

 
31

Outstanding at June 30, 2013
9,972

 
$
2.26

 
$
6,447

Options exercisable at June 30, 2013
5,866

 
$
2.72

 
$
3,768



The aggregate intrinsic values of outstanding and exercisable options at June 30, 2013 were calculated based on the closing price of the company’s common stock as reported on The NASDAQ Capital Market on June 28, 2013 of $2.22 per share. The aggregate intrinsic value equals the positive difference between the closing fair market value of the company’s common stock and the exercise price of the underlying options.
Net Loss Per Share
Net Loss Per Share
Net Loss Per Share

The company accounts for and discloses net loss per common share in accordance with FASB ASC Topic 260 “Earnings per Share.” Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares that would have been outstanding during the period assuming the issuance of common shares for all potential dilutive common shares outstanding. Potential common shares consist of shares issuable upon the exercise of stock options and warrants.

The following table sets forth the potential common shares excluded from the calculation of net loss per common share because their inclusion would be anti-dilutive (in thousands):
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2013
 
2012
 
2013
 
2012
Warrants to purchase common stock
12,405

 
4,129

 
12,405

 
20,201

Options to purchase common stock
9,972

 
7,599

 
9,972

 
5,605

Total
22,377

 
11,728

 
22,377

 
25,806

License Agreements
License Agreements
License Agreements

As part of its business, the company enters into licensing agreements with third parties that often require milestone and royalty payments based on the progress of the asset through development stages. Milestone payments may be required, for example, upon approval of the product for marketing by a regulatory agency. In certain agreements, the company is required to make royalty payments based upon a percentage of net sales. The expenditures required under these arrangements in any period may be material and are likely to fluctuate from period to period.

These arrangements sometimes permit the company to unilaterally terminate development of the product and thereby avoid future contingent payments; however, the company is unlikely to cease development if the compound successfully achieves clinical testing objectives.

In conjunction with the acquisition of NeuVaxTM, the company acquired rights and assumed obligations under a license agreement among Apthera and The University of Texas M. D. Anderson Cancer Center (“MDACC”) and The Henry M. Jackson Foundation for the Advancement of Military Medicine, Inc. (“HJF”) which grants exclusive worldwide rights to a U.S. patent covering the nelipepimut-S peptide and several U.S. and foreign patents and patent applications covering methods of using the peptide as a vaccine. Under the terms of this license, we are required to pay an annual maintenance fee of $200,000, a milestone payment of $200,000 upon commencing the Phase 3 PRESENT trial of NeuVax and other clinical milestone payments, as well as royalty payments based on sales of NeuVax or other therapeutic products developed from the licensed technologies.

Effective December 3, 2012, we entered into a license and supply agreement with ABIC Marketing Limited, a subsidiary of Teva Pharmaceuticals (“ABIC”), under which we granted ABIC exclusive rights to seek marketing approval in Israel for our NeuVax product candidate for intradermal injection for the treatment of breast cancer following its approval by the FDA or the European Medicines Agency, and to market, sell and distribute NeuVax in Israel assuming such approval is obtained. ABIC’s rights also include a right of first refusal in Israel for all future indications for which NeuVax may be approved. Under the license and supply agreement, ABIC will assume responsibility for regulatory registration of NeuVax in Israel, provide financial support for local development, and commercialize the product in the region in exchange for making royalty payments to us based on future sales of NeuVax. ABIC also agrees in the license and supply agreement to purchase from us all supplies of NeuVax at a price determined according to a specified formula.

On March 18, 2013, we acquired Abstral® (fentanyl) sublingual tablets for sale and distribution in the United States from Orexo AB (ORX.ST), an emerging specialty pharmaceutical company based in Sweden. Abstral has been approved by the U.S. Food and Drug Administration (FDA) and is a transmucosal immediate-release fentanyl (TIRF) product.

Under our agreement with Orexo, we assumed responsibility for the U.S. commercialization of Abstral and for all regulatory and reporting matters in the U.S. We also agreed to establish and maintain through 2015 a specified minimum field sales force to market, sell and distribute Abstral and to use commercially reasonable efforts to reach the specified sales milestones. Orexo is entitled to reacquire the U.S. rights to Abstral from us for no consideration if we breach our obligations to establish and maintain the requisite sales force throughout the marketing period. Galena intends to launch U.S. commercial operations for Abstral in the fourth quarter of 2013.

In exchange for the U.S. rights to Abstral, (1) we paid Orexo $10 million, and (2) we agreed to pay to Orexo: (a) $5 million in cash upon the earlier of the approval by the FDA of a specified U.S. manufacturer of Abstral and the first anniversary of the closing; (b) three one-time future cash milestone payments based on our net sales of Abstral; and (c) a low double-digit royalty on future net sales. No further milestone or royalty payments will be due after the date on which all claims of the last remaining licensed patents expire (currently 2019) or become invalidated by a governmental agency.

The $5 million milestone payable no later than the first anniversary of the closing is included in intangible assets and accrued expenses and other current liabilities at June 30, 2013.
Subsequent Events
Subsequent Events
Subsequent Events

The company evaluated all events or transactions that occurred after June 30, 2013 up through the date these financial statements were issued. Other than as disclosed below or elsewhere in the notes to the condensed consolidated financial statements, the company did not have any material recognizable or unrecognizable subsequent events.

On July 19, 2013, RXi Pharmaceuticals Corporation (OTCQX: RXIID) effected a 1-for-30 reverse stock split of its outstanding shares of common stock. As of August 8, 2013, we owned approximately 841,675 RXi shares of common stock on a post-split basis with a value of approximately $3,367,000 based on the closing price of $4.00 per RXi share as reported on the OTCQX marketplace. For the period July 1, 2013 through August 8, 2013 we sold an additional 226,852 RXi shares on a post-split basis for total net proceeds of $698,000.
Business and Basis of Presentation (Policies)
Uses of Estimates in Preparation of Financial Statements — The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.
Principles of Consolidation — The consolidated financial statements include the accounts of Galena and its wholly owned subsidiary. All material intercompany accounts have been eliminated in consolidation.

Reclassifications — Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications had no effect on net loss per share.
Cash and Cash Equivalents — The company considers all highly liquid debt instruments with an original maturity of 90 days or less to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market accounts.
Restricted Cash — Restricted cash consists of certificates of deposit on hand with the company’s financial institutions as collateral for its corporate credit cards
Marketable Securities — Marketable securities consist of shares of common stock of our former subsidiary, RXi Pharmaceuticals Corporation, a publicly traded company, and are classified as available-for-sale and carried at fair value on the balance sheet. Changes in the fair value of marketable securities are recorded as other comprehensive income.
Fair Value of Financial Instruments — The carrying amounts reported in the balance sheet for cash equivalents, marketable securities, accounts payable, convertible notes payable and capital leases approximate their fair values due to their short-term nature and market rates of interest.
Inventories — Inventories are stated at the lower of cost or market value and are determined using the first-in, first-out ("FIFO") method. Inventories consist of Abstral work-in-process and finished goods. The Company has entered into manufacturing and supply agreements for the manufacture and packing of Abstral finished goods. As of June 30, 2013, the Company had inventories of $352,000, consisting of $300,000 of work-in-process and $52,000 of finished goods. The Company had no inventory as of December 31, 2012.
Equipment and Furnishings — Equipment and furnishings are stated at cost and depreciated using the straight-line method based on the estimated useful lives (generally three to five years for equipment and furniture) of the related assets.
Goodwill and Intangible Assets — Goodwill and indefinite-lived intangible assets are not amortized but are tested annually for impairment at the reporting unit level, or more frequently if events and circumstances indicate impairment may have occurred. Factors the company considers important that could trigger an interim review for impairment include, but are not limited to, the following:
Significant changes in the manner of its use of acquired assets or the strategy for its overall business;
Significant negative industry or economic trends;
Significant decline in stock price for a sustained period; and
Significant decline in market capitalization relative to net book value.

Goodwill and other intangible assets with indefinite lives are evaluated for impairment first by a qualitative assessment to determine the likelihood of impairment. If it is determined that impairment is more likely than not, the company will then proceed to the two step impairment test. The first step is to compare the fair value of the reporting unit to the carrying amount of the reporting unit (the “First Step”). If the carrying amount exceeds the fair value, a second step must be followed to calculate impairment (the “Second Step”). Otherwise, if the fair value of the reporting unit exceeds the carrying amount, the goodwill is not considered to be impaired as of the measurement date. In its review of the carrying value of the goodwill for its single reporting unit and its indefinite-lived intangible assets, the company determines fair values of its goodwill using the market approach, and its indefinite-lived intangible assets using the income approach.

Intangible assets not considered indefinite-lived are reviewed for impairment when facts or circumstances suggest that the carrying value of these assets may not be recoverable. The company’s policy is to identify and record impairment losses, if necessary, on intangible product rights when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets.

The company performed its review for impairment using the qualitative assessment for both goodwill and indefinite-lived intangible assets, and has determined that there has been no impairment to these assets as of June 30, 2013.
Goodwill and Intangible Assets — Goodwill and indefinite-lived intangible assets are not amortized but are tested annually for impairment at the reporting unit level, or more frequently if events and circumstances indicate impairment may have occurred. Factors the company considers important that could trigger an interim review for impairment include, but are not limited to, the following:
Significant changes in the manner of its use of acquired assets or the strategy for its overall business;
Significant negative industry or economic trends;
Significant decline in stock price for a sustained period; and
Significant decline in market capitalization relative to net book value.

Goodwill and other intangible assets with indefinite lives are evaluated for impairment first by a qualitative assessment to determine the likelihood of impairment. If it is determined that impairment is more likely than not, the company will then proceed to the two step impairment test. The first step is to compare the fair value of the reporting unit to the carrying amount of the reporting unit (the “First Step”). If the carrying amount exceeds the fair value, a second step must be followed to calculate impairment (the “Second Step”). Otherwise, if the fair value of the reporting unit exceeds the carrying amount, the goodwill is not considered to be impaired as of the measurement date. In its review of the carrying value of the goodwill for its single reporting unit and its indefinite-lived intangible assets, the company determines fair values of its goodwill using the market approach, and its indefinite-lived intangible assets using the income approach.

Intangible assets not considered indefinite-lived are reviewed for impairment when facts or circumstances suggest that the carrying value of these assets may not be recoverable. The company’s policy is to identify and record impairment losses, if necessary, on intangible product rights when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets.

The company performed its review for impairment using the qualitative assessment for both goodwill and indefinite-lived intangible assets, and has determined that there has been no impairment to these assets as of June 30, 2013.
Acquisitions and In-Licensing — For all in-licensed products and technologies, we perform an analysis to determine whether we hold a variable interest or a controlling financial interest in a variable interest entity. On the basis of our interpretations and conclusions, we determine whether the acquisition falls under the purview of variable interest entity accounting and if so, consider the necessity to consolidate the acquisition. As of June 30, 2013, we determined there were no variable interest entities required to be consolidated.

We also perform an analysis to determine if the assets and liabilities acquired in an acquisition qualify as a "business." The excess of the purchase price over the fair value of the net assets acquired can only be recognized as goodwill in a business combination.

The acquisition of the Abstral rights has been accounted for as an asset acquisition and not a business combination. The purchase price, including transaction costs, was recorded as an intangible asset related to the license and distribution rights acquired in the transaction. No other significant assets or liabilities were acquired or assumed in the transactions. The license and distribution rights will be amortized over ten years in a pattern based on our Abstral sales projections, commencing in the period that sales commence. No amortization was recorded related to the Abstral rights as of June 30, 2013. Refer to Note 11 for further information regarding the acquisition of Abstral U.S. rights.
Contingent Purchase Price Consideration — Contingent consideration is recorded at the estimated fair value as of the acquisition date. The fair value of the contingent consideration is remeasured at each reporting period with any adjustments in fair value included in our consolidated statement of expenses.
Patents and Patent Application Costs — Although the company believes that its patents and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Patent costs are, therefore, expensed as incurred.
Share-based Compensation — The company follows the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, “ Compensation — Stock Compensation” (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock based payment awards made to employees, non-employee directors, and consultants, including stock options and warrants. Stock compensation expense based on the grant date fair value estimated in accordance with the provisions of ASC 718 is recognized as an expense over the requisite service period.

For stock options and warrants granted as consideration for services rendered by non-employees, the company recognizes compensation expense in accordance with the requirements of FASB ASC Topic 505-50 (“ASC 505-50”), “ Equity Based Payments to Non- Employees.” Non-employee option and warrant grants that do not vest immediately upon grant are recorded as an expense over the vesting period. At the end of each financial reporting period prior to vesting, the value of these options and warrants, as calculated using the Black-Scholes option-pricing model, will be re-measured using the fair value of the company’s common stock and the non-cash compensation recognized during the period will be adjusted accordingly. Since the fair market value of options and warrants granted to non-employees is subject to change in the future, the amount of the future compensation expense will include fair value re-measurements until the stock options are fully vested.
Derivative Financial Instruments — During the normal course of business, the company from time to time grants warrants to vendors as consideration for their services. We may also issue warrants as part of a debt or equity financing. The company does not enter into any derivative contracts for speculative purposes.

The company recognizes all derivatives as assets or liabilities measured at fair value with changes in fair value of derivatives reflected as current period income or loss unless the derivatives qualify for hedge accounting and are accounted for as such. In accordance with FASB ASC Topic 815-40, “ Derivatives and Hedging — Contracts in Entity’s Own Stock,” the value of warrants that are deemed to meet the definition of derivatives are required to be recorded as a liability, as the holders have an option to put the warrants back to the company upon the occurrence of certain events set forth in the warrants.
Research and Development Expenses — Research and development costs are expensed as incurred. Included in research and development costs are wages, benefits and other operating costs, facilities, supplies, external services and overhead related to our research and development departments, as well as costs to acquire technology licenses and clinical trial expenses.

Clinical trial expenses include expenses associated with contract research organizations ("CROs"), as well as set-up and patient related costs from the sites at which are trial is being conducted which are billed to us by our CROs as pass-through costs.

Direct costs associated with our CROs are generally payable both as fixed fees and as certain enrollment and monitoring milestones are achieved. Expense related to milestones is recognized in the period in which the milestone is achieved or in which we determine that it is more likely than not that the milestone will be achieved.

The invoicing from clinical trial sites can lag several months. We accrue these site costs based on our estimate of upfront set-up costs upon the screening of the first patient at each site, and the patient related costs based on our knowledge of patient enrollment status at each site.
Income Taxes — The company recognizes liabilities or assets for the deferred tax consequences of temporary differences between the tax basis of assets or liabilities and their reported amounts in the financial statements in accordance with FASB ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”). These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. ASC 740-10 requires that a valuation allowance be established when management determines that it is more likely than not that all or a portion of a deferred asset will not be realized. The company evaluates the realizability of its net deferred income tax assets and valuation allowances as necessary, at least on an annual basis. During this evaluation, the company reviews its forecasts of income in conjunction with other positive and negative evidence surrounding the realizability of its deferred income tax assets to determine if a valuation allowance is required. Adjustments to the valuation allowance will increase or decrease the company’s income tax provision or benefit. The recognition and measurement of benefits related to the company’s tax positions requires significant judgment, as uncertainties often exist with respect to new laws, new interpretations of existing laws, and rulings by taxing authorities. Differences between actual results and the company’s assumptions or changes in the company’s assumptions in future periods are recorded in the period they become known.

For the three months ended June 30, 2013, we recognized income tax expense of $1,541,000. This expense offsets the tax impact related to the unrealized loss on our marketable securities, which is presented as other comprehensive income, net of tax, on our condensed consolidated statement of expenses and comprehensive loss. For the six months ended June 30, 2013, we recognized an income tax benefit of $1,221,000, which offsets the tax impact related to the unrealized gain on our marketable securities. We continue to maintain a full valuation allowance against our net deferred tax assets.
Concentrations of Credit Risk — Financial instruments that potentially subject the company to significant concentrations of credit risk consist principally of cash and cash equivalents. The company maintains cash balances in several accounts with two banks, which at times are in excess of federally insured limits. As of June 30, 2013, the company’s cash equivalents were invested in money market mutual funds. The company’s investment policy does not allow investment in any debt securities rated less than “investment grade” by national ratings services. The company has not experienced any losses on its deposits of cash and cash equivalents. As of June 30, 2013, we had approximately $20,555,000 in interest-bearing accounts above federally insured limits.
Comprehensive Loss — Comprehensive loss consists of our net loss and other comprehensive income related to the unrealized gain (loss), net of tax, on our marketable securities, which are classified as available-for-sale.
Fair Value Measurements

The company follows ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”) for the company’s financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and are re-measured and reported at fair value at least annually using a fair value hierarchy that is broken down into three levels. Level inputs are as defined as follows:
Level 1 — quoted prices in active markets for identical assets or liabilities.
Level 2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.
Level 3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

The company categorized its cash equivalents and marketable securities as Level 1 inputs. The valuations for Level 1 were determined based on a “market approach” using quoted prices in active markets for identical assets. Valuation of these assets does not require a significant degree of judgment. The company categorized its warrants potentially settleable in cash as a Level 2 inputs. The warrants are measured at market value on a recurring basis and are being marked to market each quarter-end until they are completely settled. The warrants are valued using an appropriate pricing model, using assumptions consistent with our application of ASC 718. The contingent purchase price consideration is categorized as a Level 3 inputs and is measured at its estimated fair value on a recurring basis and is adjusted at each quarter-end until it is completely settled. The contingent price consideration is valued based on the expected timing of milestones, the expected probability of success for each milestone and discount rates based on a corporate debt interest rate index publicly issued.
Net Loss Per Share

The company accounts for and discloses net loss per common share in accordance with FASB ASC Topic 260 “Earnings per Share.” Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares that would have been outstanding during the period assuming the issuance of common shares for all potential dilutive common shares outstanding. Potential common shares consist of shares issuable upon the exercise of stock options and warrants.
Business and Basis of Presentation (Tables)
Other Income (Expense)
Other income (expense) is summarized as follows (in thousands):
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Change in fair value of warrants potentially settleable in cash
$
(518
)
 
$
6,638

 
$
(5,521
)
 
$
(11,632
)
Realized gain on sale of marketable securities
578

 

 
578

 

Change in fair value of the contingent purchase price liability
56

 
(704
)
 
(387
)
 
(1,548
)
Miscellaneous other income (expense)

 
(5
)
 
(3
)
 
(5
)
Total other income (expense)
$
116

 
$
5,929

 
$
(5,333
)
 
$
(13,185
)
Fair Value Measurements (Tables)
Description
June 30, 2013
 
Quoted Prices In    
Active Markets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Unobservable 
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Cash equivalents
$
9,109

 
$
9,109

 
$

 
$

Marketable securities
5,786

 
5,786

 

 

Total assets measured and recorded at fair value
$
14,895

 
$
14,895

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
Warrants potentially settleable in cash
$
14,909

 
$

 
$
14,909

 
$

Contingent purchase price consideration
6,529

 

 

 
6,529

Total liabilities measured and recorded at fair value
$
21,438

 
$

 
$
14,909

 
$
6,529


Description
December 31, 2012
 
Quoted Prices In    
Active Markets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Unobservable 
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Cash equivalents
$
32,431

 
$
32,431

 
$

 
$

Marketable securities
2,678

 
2,678

 

 

Total assets measured and recorded at fair value
$
35,109

 
$
35,109

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
Warrants potentially settleable in cash
$
10,964

 
$

 
$
10,964

 
$

Contingent purchase price consideration
7,142

 

 

 
7,142

Total liabilities measured and recorded at fair value
$
18,106

 
$

 
$
10,964

 
$
7,142

A reconciliation of the beginning and ending Level 3 liabilities for the six months ended June 30, 2013 is as follows (in thousands):
 
 
Fair Value
Measurements
Using Significant
Unobservable
Inputs
(Level 3)
Balance, January 1, 2013
$
7,142

Milestone payment
(1,000
)
Change in the estimated fair value of the contingent purchase price consideration
387

Balance at June 30, 2013
$
6,529

Accrued Expenses and Other Current Liabilities (Tables)
Schedule of Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):

 
June 30, 2013
 
December 31, 2012
Abstral milestone payment
$
5,000

 
$

Contract research organizations
2,369

 
1,705

Compensation and related benefits
642

 
217

Professional fees
363

 
116

Interest expense
70

 

Accrued expenses and other current liabilities
$
8,444

 
$
2,038

Stockholders' Equity (Tables)
Common Stock are Reserved for Future Issuance
Shares of common stock are reserved as follows (in thousands):
 
 
As of June 30, 2013
Warrants outstanding
12,405

Stock options outstanding
9,972

Options reserved for future issuance under the Company’s 2007 Incentive Plan
5,314

Shares reserved for future issuance under the Employee Stock Purchase Plan
756

Total reserved for future issuance
28,447

Warrants (Tables)
The following is a summary of warrant activity for the six months ended June 30, 2013 (in thousands):
 
 
December
2012
Warrants

 
April 2011
Warrants

 
March
2011
Warrants

 
March
2010
Warrants

 
August
2009
Warrants

 
Consultant
and Oxford Warrants
 
Total
Outstanding, January 1, 2013
7,578

 
2,846

 
361

 
360

 
978

 
1,093

 
13,216

Granted

 

 

 

 

 
182

 
182

Exercised
(8
)
 
(825
)
 

 

 

 
(160
)
 
(993
)
Outstanding, June 30, 2013
7,570

 
2,021

 
361

 
360

 
978

 
1,115

 
12,405

Expiration
December 2017
 
April 2017
 
March 2016
 
March 2016
 
August 2014
 
Varies 2013-2020
 
 
The fair value of the warrants is estimated using an appropriate pricing model with the following inputs:
 
 
As of June 30, 2013
 
December
2012
Warrants
 
April 2011
Warrants
 
March
2011
Warrants
 
March
2010
Warrants
 
August
2009
Warrants
Strike price
$
1.90

 
$
0.65

 
$
0.65

 
$
2.18

 
$
4.50

Expected term (years)
4.48

 
3.81

 
2.68

 
2.74

 
1.09

Volatility %
73.39
%
 
70.15
%
 
70.47
%
 
70.18
%
 
76.58
%
Risk-free rate %
1.21
%
 
0.96
%
 
0.56
%
 
0.58
%
 
0.17
%
 
 
As of December 31, 2012
 
December
2012
Warrants
 
April 2011
Warrants
 
March
2011
Warrants
 
March
2010
Warrants
 
August
2009
Warrants
Strike price
$
1.90

 
$
0.65

 
$
0.65

 
$
2.18

 
$
4.50

Expected term (years)
4.98

 
4.30

 
3.18

 
3.24

 
1.59

Volatility %
80.93
%
 
82.48
%
 
69.90
%
 
69.79
%
 
74.13
%
Risk-free rate %
0.72
%
 
0.59
%
 
0.39
%
 
0.40
%
 
0.21
%
The changes in fair value of the warrant liability for the six months ended June 30, 2013 were as follows (in thousands):
 
 
December
2012
Warrants
 
April 2011
Warrants
 
March
2011
Warrants
 
March
2010
Warrants
 
August
2009
Warrants
 
Total
Warrant liability, January 1, 2013
$
6,954

 
$
3,310

 
$
378

 
$
183

 
$
139

 
$
10,964

Fair value of warrants exercised
(15
)
 
(1,561
)
 

 

 

 
(1,576
)
Change in fair value of warrants
3,275

 
1,743

 
224

 
173

 
106

 
5,521

Warrant liability, June 30, 2013
$
10,214

 
$
3,492

 
$
602

 
$
356

 
$
245

 
$
14,909

Stock Based Compensation (Tables)
The company uses the Black-Scholes option-pricing model and the following weighted average assumptions to determine the fair value of all its stock options granted:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Risk free interest rate
1.35
%
 
1.12
%
 
1.25
%
 
1.07
%
Volatility
78.18
%
 
75.65
%
 
77.66
%
 
75.69
%
Expected lives (years)
6.25

 
6.25

 
6.25

 
6.12

Expected dividend yield
0.00
%
 
0.00
%
 
0.00
%
 
0.00
%
The following table summarizes option activity of the company:
 
 
Total
Number of
Shares
(In Thousands)
 
Weighted
Average
Exercise
Price
 
Aggregate
Intrinsic
Value
(In Thousands)
Outstanding at January 1, 2013
7,672

 
$
2.54

 
$

Granted
2,783

 
1.88

 
1,057

Exercised
(8
)
 
0.85

 
15

Cancelled
(475
)
 
4.58

 
31

Outstanding at June 30, 2013
9,972

 
$
2.26

 
$
6,447

Options exercisable at June 30, 2013
5,866

 
$
2.72

 
$
3,768

Net Loss Per Share (Tables)
Common Shares Excluded from Net Loss
The following table sets forth the potential common shares excluded from the calculation of net loss per common share because their inclusion would be anti-dilutive (in thousands):
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2013
 
2012
 
2013
 
2012
Warrants to purchase common stock
12,405

 
4,129

 
12,405

 
20,201

Options to purchase common stock
9,972

 
7,599

 
9,972

 
5,605

Total
22,377

 
11,728

 
22,377

 
25,806

Business and Basis of Presentation (Additional Information) (Detail) (USD $)
3 Months Ended 6 Months Ended 123 Months Ended 126 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Mar. 31, 2013
Jun. 30, 2013
Dec. 31, 2012
Schedule Of Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
 
 
 
Cash paid for acquisition of Abstral rights
$ 10,000,000 
 
$ 10,083,000 
    
$ 10,086,000 
$ 10,083,000 
 
Highly-liquid debt instruments maturity days
90 days 
 
 
 
 
 
 
Inventories
352,000 
 
352,000 
 
 
352,000 
Inventories, work-in-process
300,000 
 
300,000 
 
 
300,000 
 
Inventories, finished goods
52,000 
 
52,000 
 
 
52,000 
 
Amortization period of license and distribution rights
10 years 
 
 
 
 
 
 
Income tax expense (benefit)
1,541,000 
   
(1,221,000)
   
 
(2,273,000)
 
Interest bearing accounts
 
 
 
 
20,555,000 
 
 
Orexo [Member]
 
 
 
 
 
 
 
Schedule Of Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
 
 
 
Remaining cash held of Abstral rights
 
 
 
 
$ 5,000,000 
 
 
Estimated year of licensed patents expiration
2019 
 
 
 
 
 
 
Minimum [Member] |
Equipment and Furnishings [Member]
 
 
 
 
 
 
 
Schedule Of Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
 
 
 
Estimated useful lives
3 years 
 
 
 
 
 
 
Maximum [Member] |
Equipment and Furnishings [Member]
 
 
 
 
 
 
 
Schedule Of Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
 
 
 
Estimated useful lives
5 years 
 
 
 
 
 
 
Business and Basis of Presentation (Other Income (Expense)) (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended 126 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Accounting Policies [Abstract]
 
 
 
 
 
Change in fair value of warrants potentially settleable in cash
$ (518)
$ 6,638 
$ (5,521)
$ (11,632)
 
Marketable Securities, Realized Gain (Loss)
578 
578 
 
Change in fair value of the contingent purchase price liability
56 
(704)
(387)
(1,548)
 
Miscellaneous other income (expense)
(5)
(3)
(5)
 
Total other income (expense)
$ 116 
$ 5,929 
$ (5,333)
$ (13,185)
$ (6,419)
Recently Adopted Accounting Pronouncements (Additional Information) (Detail)
6 Months Ended
Jun. 30, 2013
Accounting Changes and Error Corrections [Abstract]
 
Minimum likely hood for more-likely-than-not threshold
50.00% 
RXi Spin-off (Additional Information) (Detail) (USD $)
6 Months Ended 6 Months Ended
Jun. 30, 2013
Sep. 24, 2011
Jun. 30, 2013
RXi [Member]
Apr. 30, 2012
RXi [Member]
Related Party Transaction [Line Items]
 
 
 
 
Cash contribution in capital
 
$ 1,500,000 
 
 
Proceeds from technology revenue
45,000,000 
 
 
 
Proceeds from technology revenue under condition one
15,000,000 
 
 
 
Proceeds from technology revenue under condition two
30,000,000 
 
 
 
Minimum estimated sales
 
 
500,000,000 
 
Estimated sales
 
 
1,000,000,000 
 
Number of shares distributed to surrenders under spin-off
 
 
 
66,959,894 
Number of shares retained by company under spin-off
 
 
 
33,476,595 
Lock up period of shares under spin-off
 
 
1 year 
 
Expiration date of shares under spin-off
 
 
Apr. 27, 2013 
 
Number of shares sold by company after spin-off
 
 
3,022,080 
 
Proceeds from sale of shares after spin-off
578,000 
 
 
 
Retained price per shares under spin-off
 
 
$ 0.19 
 
Retained value of shares under spin-off
 
 
$ 5,786,000 
 
Fair Value Measurements (Contingent Purchase Price Consideration, Measured at Estimated Fair Value on Recurring Basis) (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Assets:
 
 
 
Cash equivalents
 
$ 20,555 
 
Marketable securities
5,786 
 
2,678 
Liabilities:
 
 
 
Warrants potentially settleable in cash
14,909 
 
10,964 
Unobservable Inputs (Level 3) [Member]
 
 
 
Liabilities:
 
 
 
Contingent purchase price consideration
6,529 
 
7,142 
Fair Value, Measurements, Recurring [Member]
 
 
 
Assets:
 
 
 
Cash equivalents
9,109 
 
32,431 
Marketable securities
5,786 
 
2,678 
Total assets
14,895 
 
35,109 
Liabilities:
 
 
 
Warrants potentially settleable in cash
14,909 
 
10,964 
Contingent purchase price consideration
6,529 
 
7,142 
Total liabilities
21,438 
 
18,106 
Fair Value, Measurements, Recurring [Member] |
Quoted Prices in Active Markets (Level 1) [Member]
 
 
 
Assets:
 
 
 
Cash equivalents
9,109 
 
32,431 
Marketable securities
5,786 
 
2,678 
Total assets
14,895 
 
35,109 
Liabilities:
 
 
 
Warrants potentially settleable in cash
 
Contingent purchase price consideration
 
Total liabilities
 
Fair Value, Measurements, Recurring [Member] |
Significant Other Observable Inputs (Level 2) [Member]
 
 
 
Assets:
 
 
 
Cash equivalents
 
Marketable securities
 
Total assets
 
Liabilities:
 
 
 
Warrants potentially settleable in cash
14,909 
 
10,964 
Contingent purchase price consideration
 
Total liabilities
14,909 
 
10,964 
Fair Value, Measurements, Recurring [Member] |
Unobservable Inputs (Level 3) [Member]
 
 
 
Assets:
 
 
 
Cash equivalents
 
Marketable securities
 
Total assets
 
Liabilities:
 
 
 
Warrants potentially settleable in cash
 
Contingent purchase price consideration
6,529 
 
7,142 
Total liabilities
$ 6,529 
 
$ 7,142 
Fair Value Measurements (Reconciliation of Level 3 Liabilities) (Detail) (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
 
 
Shares Issued for Milestone Payment
384,688 
 
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Change in the estimated fair value of the contingent purchase price consideration
$ 56,000 
$ (704,000)
$ (387,000)
$ (1,548,000)
Unobservable Inputs (Level 3) [Member]
 
 
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
 
 
MIlestone Payment
 
 
(1,000,000)
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Beginning Balance Liabilities
 
 
7,142,000 
 
MIlestone Payment
 
 
(1,000,000)
 
Change in the estimated fair value of the contingent purchase price consideration
 
 
(387,000)
 
Ending Balance Liabilities
$ 6,529,000 
 
$ 6,529,000 
 
Accrued Expenses and Other Current Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Payables and Accruals [Abstract]
 
 
Abstral milestone payment
$ 5,000 
$ 0 
Contract research organizations
2,369 
1,705 
Compensation and related benefits
642 
217 
Professional fees
363 
116 
Interest expense
70 
Accrued expense and other current liabilities
$ 8,444 
$ 2,038 
Long-term Debt (Details) (USD $)
In Millions, except Share data, unless otherwise specified
0 Months Ended
May 8, 2013
Debt Instrument [Line Items]
 
Loan, amount
$ 15 
Term for interest only payments
12 months 
Interest payments at the fixed coupon rate
8.45% 
Term for principal and interest payments
30 months 
Cash facility fee percentage
1.00% 
Cash final payment percentage
5.50% 
Warrant term
7 years 
Exercise price (usd per share)
2.47 
Duration of average market price used for warrant exercise price
20 days 
Maximum [Member]
 
Debt Instrument [Line Items]
 
Number of shares availabe from warrants
182,186 
First Tranche [Member]
 
Debt Instrument [Line Items]
 
Loan, amount
10 
Second Tranche [Member]
 
Debt Instrument [Line Items]
 
Loan, amount
$ 5 
Stockholders' Equity (Additional Information) (Detail) (USD $)
Jun. 30, 2013
Dec. 31, 2012
Equity [Abstract]
 
 
Preferred stock, shares authorized
5,000,000 
5,000,000 
Preferred stock, par value (usd per share)
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
200,000,000 
125,000,000 
Common stock, par value (usd per share)
$ 0.0001 
$ 0.0001 
Stockholders' Equity (Common Stock are Reserved for Future Issuance) (Detail)
In Thousands, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Equity [Abstract]
 
 
Warrants outstanding
12,405 
13,216 
Stock options outstanding
9,972 
7,672 
Options reserved for future issuance under the Company's 2007 Incentive Plan
5,314 
 
Shares reserved for future issuance under the Employee Stock Purchase Plan
756 
 
Total reserved for future issuance
28,447 
 
Warrants (Schedule of Warrant Activity) (Detail)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2013
Class of Warrant or Right, Outstanding [Roll Forward]
 
 
Warrants outstanding , Beginning balance
 
13,216 
Granted
 
182 
Exercised
 
(993)
Warrants outstanding , Ending balance
12,405 
12,405 
December 2012 Warrants [Member]
 
 
Class of Warrant or Right, Outstanding [Roll Forward]
 
 
Warrants outstanding , Beginning balance
 
7,578 
Granted
 
Exercised
 
(8)
Warrants outstanding , Ending balance
7,570 
7,570 
Expiration
Dec. 31, 2017 
 
April 2011 Warrants [Member]
 
 
Class of Warrant or Right, Outstanding [Roll Forward]
 
 
Warrants outstanding , Beginning balance
 
2,846 
Granted
 
Exercised
 
(825)
Warrants outstanding , Ending balance
2,021 
2,021 
Expiration
Apr. 30, 2017 
 
March 2011 Warrants [Member]
 
 
Class of Warrant or Right, Outstanding [Roll Forward]
 
 
Warrants outstanding , Beginning balance
 
361 
Granted
 
Exercised
 
Warrants outstanding , Ending balance
361 
361 
Expiration
Mar. 31, 2016 
 
March 2010 Warrants [Member]
 
 
Class of Warrant or Right, Outstanding [Roll Forward]
 
 
Warrants outstanding , Beginning balance
 
360 
Granted
 
Exercised
 
Warrants outstanding , Ending balance
360 
360 
Expiration
Mar. 31, 2016 
 
August 2009 Warrants [Member]
 
 
Class of Warrant or Right, Outstanding [Roll Forward]
 
 
Warrants outstanding , Beginning balance
 
978 
Granted
 
Exercised
 
Warrants outstanding , Ending balance
978 
978 
Expiration
Aug. 31, 2014 
 
Consultant Warrants [Member]
 
 
Class of Warrant or Right, Outstanding [Roll Forward]
 
 
Warrants outstanding , Beginning balance
 
1,093 
Granted
 
182 
Exercised
 
(160)
Warrants outstanding , Ending balance
1,115 
1,115 
Consultant Warrants [Member] |
Minimum [Member]
 
 
Class of Warrant or Right, Outstanding [Roll Forward]
 
 
Expiration
Dec. 31, 2013 
 
Consultant Warrants [Member] |
Maximum [Member]
 
 
Class of Warrant or Right, Outstanding [Roll Forward]
 
 
Expiration
Dec. 31, 2020 
 
Warrants (Fair Value of Warrants is Estimated Using Black-Scholes Option Pricing Model) (Detail)
6 Months Ended 12 Months Ended
Jun. 30, 2013
Dec. 31, 2012
December 2012 Warrants [Member]
 
 
Class of Warrant or Right [Line Items]
 
 
Strike price
$ 1.90 
$ 1.90 
Expected term (years)
4 years 5 months 23 days 
4 years 11 months 23 days 
Volatility %
73.39% 
80.93% 
Risk-free rate %
1.21% 
0.72% 
April 2011 Warrants [Member]
 
 
Class of Warrant or Right [Line Items]
 
 
Strike price
$ 0.65 
$ 0.65 
Expected term (years)
3 years 9 months 22 days 
4 years 3 months 18 days 
Volatility %
70.15% 
82.48% 
Risk-free rate %
0.96% 
0.59% 
March 2011 Warrants [Member]
 
 
Class of Warrant or Right [Line Items]
 
 
Strike price
$ 0.65 
$ 0.65 
Expected term (years)
2 years 8 months 5 days 
3 years 2 months 5 days 
Volatility %
70.47% 
69.90% 
Risk-free rate %
0.56% 
0.39% 
March 2010 Warrants [Member]
 
 
Class of Warrant or Right [Line Items]
 
 
Strike price
$ 2.18 
$ 2.18 
Expected term (years)
2 years 8 months 27 days 
3 years 2 months 27 days 
Volatility %
70.18% 
69.79% 
Risk-free rate %
0.58% 
0.40% 
August 2009 Warrants [Member]
 
 
Class of Warrant or Right [Line Items]
 
 
Strike price
$ 4.50 
$ 4.50 
Expected term (years)
1 year 1 month 2 days 
1 year 7 months 2 days 
Volatility %
76.58% 
74.13% 
Risk-free rate %
0.17% 
0.21% 
Warrants (Changes in Fair Value of Warrant Liability) (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Class of Warrant or Right, Fair Value [Roll Forward]
 
 
 
 
Warrant liability, Beginning balance
 
 
$ 10,964 
 
Fair value of warrants exercised
 
 
1,576 
 
Change in fair value of warrants
518 
(6,638)
5,521 
11,632 
Warrant liability, Ending balance
14,909 
 
14,909 
 
December 2012 Warrants [Member]
 
 
 
 
Class of Warrant or Right, Fair Value [Roll Forward]
 
 
 
 
Warrant liability, Beginning balance
 
 
6,954 
 
Fair value of warrants exercised
 
 
15 
 
Change in fair value of warrants
 
 
3,275 
 
Warrant liability, Ending balance
10,214 
 
10,214 
 
April 2011 Warrants [Member]
 
 
 
 
Class of Warrant or Right, Fair Value [Roll Forward]
 
 
 
 
Warrant liability, Beginning balance
 
 
3,310 
 
Fair value of warrants exercised
 
 
1,561 
 
Change in fair value of warrants
 
 
1,743 
 
Warrant liability, Ending balance
3,492 
 
3,492 
 
March 2011 Warrants [Member]
 
 
 
 
Class of Warrant or Right, Fair Value [Roll Forward]
 
 
 
 
Warrant liability, Beginning balance
 
 
378 
 
Fair value of warrants exercised
 
 
 
Change in fair value of warrants
 
 
224 
 
Warrant liability, Ending balance
602 
 
602 
 
March 2010 Warrants [Member]
 
 
 
 
Class of Warrant or Right, Fair Value [Roll Forward]
 
 
 
 
Warrant liability, Beginning balance
 
 
183 
 
Fair value of warrants exercised
 
 
 
Change in fair value of warrants
 
 
173 
 
Warrant liability, Ending balance
356 
 
356 
 
August 2009 Warrants [Member]
 
 
 
 
Class of Warrant or Right, Fair Value [Roll Forward]
 
 
 
 
Warrant liability, Beginning balance
 
 
139 
 
Fair value of warrants exercised
 
 
 
Change in fair value of warrants
 
 
106 
 
Warrant liability, Ending balance
$ 245 
 
$ 245 
 
Warrants (Warrants Classified as Equity) (Details) (USD $)
0 Months Ended
May 8, 2013
Class of Warrant or Right [Line Items]
 
Warrants Granted, Number of Shares
182,186 
Class of Warrant or Right, Exercise Price of Warrants or Rights
2.47 
Number of Days Averaged for Exercise Price
20 days 
Fair Value Assumptions, Expected Volatility Rate
75.34% 
Fair Value Assumptions, Expected Term
7 years 
Fair Value Assumptions, Risk Free Interest Rate
1.20% 
Fair Value Assumptions, Expected Dividend Rate
0.00% 
Fair Value of Warrants Granted, per Share
$ 1.93 
Stock Based Compensation (Assumptions for Option Grants Issued) (Detail)
3 Months Ended 6 Months Ended
Jun. 30, 2013
Mar. 31, 2012
Jun. 30, 2013
Jun. 30, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
 
 
 
 
Risk free interest rate
1.35% 
1.12% 
1.25% 
1.07% 
Volatility
78.18% 
75.65% 
77.66% 
75.69% 
Expected lives (years)
6 years 3 months 
6 years 3 months 
6 years 3 months 
6 years 1 month 13 days 
Expected dividend yield
0.00% 
0.00% 
0.00% 
0.00% 
Stock Based Compensation (Additional Information) (Detail) (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Minimum [Member]
Jun. 30, 2013
Maximum [Member]
Jun. 30, 2013
2007 Incentive Plan [Member]
Jun. 28, 2013
2007 Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
Weighted average exercise price, granted
$ 1.63 
 
$ 1.28 
 
 
 
 
 
Averages contractual term
 
 
10 years 
 
 
 
 
 
Average vesting term
 
 
 
 
4 years 
6 years 
 
 
Estimated annualized forfeiture rate for options granted to employees
 
 
15.00% 
 
 
 
 
 
Estimated annualized forfeiture rate for options granted to senior management
 
 
8.00% 
 
 
 
 
 
Allocated share based compensation expense
$ 519,000 
$ 234,000 
$ 883,000 
$ 952,000 
 
 
 
 
Unrecognized compensation cost
 
 
$ 3,372,000 
 
 
 
 
 
Operating expenses weighted average period
 
 
3 years 0 months 4 days 
 
 
 
 
 
Shares of common stock reserved for issuance
 
 
 
 
 
 
16,500,000 
 
Shares subject to outstanding common stock options granted
 
 
2,783,000 
 
 
 
9,972,000 
 
Shares available for future grants
 
 
 
 
 
 
5,314,000 
 
Vesting periods of options granted
 
 
 
 
 
 
4 years 
 
Options expire from date of grant
 
 
 
 
 
 
10 years 
 
Closing price of the Company's common stock
 
 
 
 
 
 
 
$ 2.22 
Stock Based Compensation (Stock Option Activity) (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
6 Months Ended
Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
 
Total Number of Shares, outstanding Beginning Balance
7,672 
Stock options activity, Total Number of Shares, Granted
2,783 
Stock options activity, Total Number of Shares, Exercised
(8)
Stock options activity, Total Number of Shares, Cancelled
(475)
Total Number of Shares, outstanding Ending Balance
9,972 
Total Number of Shares, exercisable
5,866 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
 
Stock options activity, Weighted Average Exercise Price, Beginning balance
$ 2.54 
Stock options activity, Weighted Average Exercise Price, Granted
$ 1.88 
Stock options activity, Weighted Average Exercise Price, Exercised
$ 0.85 
Stock options activity, Weighted Average Exercise Price, Cancelled
$ 4.58 
Stock options activity, Weighted Average Exercise Price, Ending balance
$ 2.26 
Stock options activity, Weighted Average Exercise Price, exercisable
$ 2.72 
Stock options activity, Aggregate Intrinsic Value, Beginning balance
$ 0 
Stock options activity, Aggregate Intrinsic Value, Granted
1,057 
Stock options activity, Aggregate Intrinsic Value, Exercised
15 
Stock options activity, Aggregate Intrinsic Value, Cancelled
31 
Stock options activity, Aggregate Intrinsic Value, Ending balance
6,447 
Stock options activity, Aggregate Intrinsic Value, exercisable
$ 3,768 
Net Loss Per Share (Common Shares Excluded from Net Loss) (Detail)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Shares of common stock issuable upon the exercise which were excluded from the computation of diluted earnings per share
22,377 
11,728 
22,377 
25,806 
Warrants to purchase common stock [Member]
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Shares of common stock issuable upon the exercise which were excluded from the computation of diluted earnings per share
12,405 
4,129 
12,405 
20,201 
Options to purchase common stock [Member]
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Shares of common stock issuable upon the exercise which were excluded from the computation of diluted earnings per share
9,972 
7,599 
9,972 
5,605 
License Agreements (Additional Information) (Detail) (USD $)
3 Months Ended 6 Months Ended 123 Months Ended 126 Months Ended
Jun. 30, 2013
Jun. 30, 2013
Jun. 30, 2012
Mar. 31, 2013
Jun. 30, 2013
Dec. 31, 2012
License And Collaboration Agreements [Line Items]
 
 
 
 
 
 
Milestone payment for Phase 3
$ 5,000,000 
$ 5,000,000 
 
 
$ 5,000,000 
$ 0 
Cash paid for acquisition of Abstral rights
10,000,000 
10,083,000 
   
10,086,000 
10,083,000 
 
Orexo [Member]
 
 
 
 
 
 
License And Collaboration Agreements [Line Items]
 
 
 
 
 
 
Remaining cash held of Abstral rights
 
 
 
5,000,000 
 
 
Estimated year of licensed patents expiration
2019 
 
 
 
 
 
M D Anderson Cancer Center [Member]
 
 
 
 
 
 
License And Collaboration Agreements [Line Items]
 
 
 
 
 
 
Annual maintenance fee
200,000 
200,000 
 
 
200,000 
 
Milestone payment for Phase 3
$ 200,000 
$ 200,000 
 
 
$ 200,000 
 
Subsequent Events (Additional Information) (Detail) (Subsequent Event [Member], RXi [Member], USD $)
In Thousands, except Share data, unless otherwise specified
0 Months Ended 1 Months Ended
Jul. 19, 2013
Aug. 8, 2013
Subsequent Event [Member] |
RXi [Member]
 
 
Subsequent Event [Line Items]
 
 
Reverese stock split ratio
0.30 
 
Shares owned
 
841,675 
Value of shares owned
 
$ 3,367 
Share price (usd per share)
 
$ 4.00 
Number of shares sold
 
226,852 
Proceeds from sale of shares
 
$ 698