HALOZYME THERAPEUTICS INC, 10-K filed on 2/28/2014
Annual Report
Document and Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Feb. 24, 2014
Jun. 28, 2013
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
HALOZYME THERAPEUTICS INC 
 
 
Entity Central Index Key
0001159036 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2013 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2013 
 
 
Document Fiscal Period Focus
FY 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
$ 707.0 
Entity Common Stock, Shares Outstanding
 
124,003,650 
 
Consolidated Balance Sheets (USD $)
Dec. 31, 2013
Dec. 31, 2012
Current assets:
 
 
Cash and cash equivalents
$ 27,356,947 
$ 99,501,264 
Marketable securities, available-for-sale
44,145,697 
Accounts receivable, net
9,097,084 
15,703,087 
Inventories
6,169,982 
2,670,696 
Prepaid expenses and other assets
8,425,684 
12,752,888 
Total current assets
95,195,394 
130,627,935 
Property and equipment, net
3,421,506 
3,700,462 
Prepaid expenses and other assets
2,675,692 
Restricted cash
500,000 
400,000 
Total Assets
101,792,592 
134,728,397 
Current liabilities:
 
 
Accounts payable
3,134,757 
2,271,689 
Accrued expenses
14,920,446 
7,783,447 
Deferred revenue, current portion
7,397,829 
8,891,017 
Total current liabilities
25,453,032 
18,946,153 
Deferred revenue, net of current portion
45,745,449 
34,954,966 
Long-term debt, net
49,771,737 
29,661,680 
Lease financing obligation
1,450,000 
Deferred rent, net of current portion
794,782 
861,879 
Other long-term liability
18,268 
Commitments and contingencies (Note 9)
   
   
Stockholders' (deficit) equity:
 
 
Preferred stock — $0.001 par value; 20,000,000 shares authorized; no shares issued and outstanding
Common stock — $0.001 par value; 200,000,000 shares authorized; 114,533,466 shares issued and outstanding at December 31, 2013 and 150,000,000 shares authorized; 112,709,174 shares issued and outstanding at December 31, 2012
114,534 
112,709 
Additional paid-in capital
361,929,935 
347,314,658 
Accumulated Other Comprehensive Income
17,054 
Accumulated deficit
(382,052,199)
(298,573,648)
Total stockholders' (deficit) equity
(19,990,676)
48,853,719 
Total Liabilities and Stockholders' (Deficit) Equity
$ 101,792,592 
$ 134,728,397 
Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Statement of Financial Position [Abstract]
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares authorized
20,000,000 
20,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
200,000,000 
150,000,000 
Common stock, shares issued
114,533,466 
112,709,174 
Common stock, shares outstanding
114,533,466 
112,709,174 
Consolidated Statements of Operations (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Revenues:
 
 
 
Product sales, net
$ 24,439,724 
$ 2,887,442 
$ 1,836,102 
Revenues under collaborative agreements
30,359,723 
39,437,784 
54,250,334 
Total revenues
54,799,447 
42,325,226 
56,086,436 
Operating expenses:
 
 
 
Cost of product sales
6,245,761 
1,094,400 
257,834 
Research and development
96,639,575 
70,044,073 
57,563,470 
Selling, general and administrative
32,347,748 
24,812,199 
18,104,073 
Total operating expenses
135,233,084 
95,950,672 
75,925,377 
Operating Loss
(80,433,637)
(53,625,446)
(19,838,941)
Other income (expense)
 
 
 
Investment and other income
229,229 
73,444 
69,090 
Interest expense
(3,274,143)
Net Loss
$ (83,478,551)
$ (53,552,002)
$ (19,769,851)
Basic and diluted net loss per share
$ (0.74)
$ (0.48)
$ (0.19)
Shares used in computing basic and diluted net loss per share
112,805,439 
111,077,105 
102,566,089 
Consolidated Statements of Comprehensive Loss Statement (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Net loss
$ (83,478,551)
$ (53,552,002)
$ (19,769,851)
Unrealized gain on marketable securities
17,054 
Total Comprehensive Loss
$ (83,461,497)
$ (53,552,002)
$ (19,769,851)
Consolidated Statements of Cash Flows (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Operating activities:
 
 
 
Net loss
$ (83,478,551)
$ (53,552,002)
$ (19,769,851)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Share-based compensation
9,538,056 
8,348,587 
5,569,899 
Depreciation and amortization
1,226,927 
1,079,424 
1,095,823 
Non-cash interest expense
155,809 
8,625 
Amortization of premiums on investments, net of accretion of discounts
1,115,625 
Loss (gain) on disposal of equipment
7,370 
(1,566)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
6,606,003 
(13,440,622)
65,803 
Inventories
(3,499,286)
(2,103,433)
(373,841)
Prepaid expenses and other assets
1,958,581 
(4,420,646)
(4,611,346)
Restricted cash
(100,000)
50,000 
50,000 
Accounts payable and accrued expenses
7,888,535 
(3,263,487)
711,777 
Deferred rent
(48,473)
44,895 
172,438 
Deferred revenue
9,297,295 
2,961,993 
(17,209,561)
Net cash used in operating activities
(49,339,479)
(64,279,296)
(34,300,425)
Investing activities:
 
 
 
Purchases of marketable securities
(48,946,616)
Proceeds from sales of marketable securities
3,375,000 
Purchases of property and equipment
(2,297,518)
(1,412,585)
(828,508)
Net cash used in investing activities
(47,869,134)
(1,412,585)
(828,508)
Financing activities:
 
 
 
Proceeds from issuance of long-term debt, net
19,985,250 
29,660,600 
Proceeds from issuance of common stock under equity incentive plans, net
5,079,046 
1,680,173 
4,748,612 
Proceeds from issuance of common stock, net
81,476,845 
Net cash provided by financing activities
25,064,296 
112,817,618 
4,748,612 
Net (decrease) increase in cash and cash equivalents
(72,144,317)
47,125,737 
(30,380,321)
Cash and cash equivalents at beginning of period
99,501,264 
52,375,527 
82,755,848 
Cash and cash equivalents at end of period
27,356,947 
99,501,264 
52,375,527 
Supplemental disclosure of cash flow information:
 
 
 
Interest Paid
3,098,883 
18,875 
Supplemental disclosure of noncash investing and financing activities:
 
 
 
Capitalized property and liability associated with a build-to-suit lease arrangement
(1,450,000)
1,450,000 
Amounts accrued for purchases of property and equipment
$ 100,453 
$ 153,623 
$ 189,898 
Consolidated Statements of Stockholders' (Deficit) Equity (USD $)
Total
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive Income
Accumulated Deficit
Stockholders' (Deficit) Equity, Total at Dec. 31, 2010
$ 20,351,456 
$ 100,581 
$ 245,502,670 
$ 0 
$ (225,251,795)
Shares at Dec. 31, 2010
 
100,580,849 
 
 
 
Share-based compensation expense
5,569,899 
 
5,569,899 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, shares
 
3,060,540 
 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net
4,748,492 
3,060 
4,745,432 
 
 
Issuance of restricted stock awards, shares
347,883 
347,883 
 
 
 
Issuance of restricted stock awards
120 
349 
(229)
 
 
Net loss
(19,769,851)
 
 
 
 
Stockholders' (Deficit) Equity, Total at Dec. 31, 2011
10,900,116 
103,990 
255,817,772 
(245,021,646)
Shares at Dec. 31, 2011
 
103,989,272 
 
 
 
Share-based compensation expense
8,348,587 
 
8,348,587 
 
 
Issuance of common stock for cash, net, shares
 
7,820,000 
 
 
 
Issuance of common stock for cash, net
81,476,845 
7,820 
81,469,025 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, shares
 
525,707 
 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net
1,680,173 
525 
1,679,648 
 
 
Issuance of restricted stock awards, shares
374,195 
374,195 
 
 
 
Issuance of restricted stock awards
374 
(374)
 
 
Net loss
(53,552,002)
 
 
 
 
Stockholders' (Deficit) Equity, Total at Dec. 31, 2012
48,853,719 
112,709 
347,314,658 
(298,573,648)
Shares at Dec. 31, 2012
 
112,709,174 
 
 
 
Share-based compensation expense
9,538,056 
 
9,538,056 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, shares
 
1,362,563 
 
 
 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net
5,079,046 
1,363 
5,077,683 
 
 
Issuance of restricted stock awards, shares
461,729 
461,729 
 
 
 
Issuance of restricted stock awards
462 
(462)
 
 
Other comprehensive income
17,054 
 
 
 
 
Net loss
(83,478,551)
 
 
 
 
Stockholders' (Deficit) Equity, Total at Dec. 31, 2013
$ (19,990,676)
$ 114,534 
$ 361,929,935 
$ 17,054 
$ (382,052,199)
Shares at Dec. 31, 2013
 
114,533,466 
 
 
 
Organization and Business
Organization and Business
Organization and Business
Halozyme Therapeutics, Inc. is a science-driven, biopharmaceutical company committed to making molecules into medicines for patients in need. Our research focuses primarily on human enzymes that alter the extracellular matrix. The extracellular matrix is a complex matrix of proteins and carbohydrates surrounding the cell that provides structural support in tissues and orchestrates many important biological activities, including cell migration, signaling and survival. Over many years, we have developed unique technology and scientific expertise enabling us to pursue this target-rich environment for the development of therapies.
Our proprietary enzymes can be used to facilitate the delivery of injected drugs and fluids, thus enhancing the efficacy and the convenience of other drugs or to alter abnormal tissue structures for clinical benefit. We have chosen to exploit our technology and expertise in a balanced way to modulate both risk and spend by: (1) developing our own proprietary products in therapeutic areas with significant unmet medical needs, such as diabetes, oncology and dermatology, and (2) licensing our technology to biopharmaceutical companies to collaboratively develop products which combine our technology with the collaborators' proprietary compounds.
The majority of the product candidates in our current pipeline are based on rHuPH20, a patented human recombinant hyaluronidase enzyme. rHuPH20 temporarily breaks down hyaluronic acid - a naturally occurring substance that is a major component of the extracellular matrix in tissues throughout the body such as skin and cartilage. We have one proprietary commercial product, Hylenex® recombinant. Our proprietary pipeline consists of multiple clinical stage products in diabetes, oncology and dermatology. We currently have collaborations with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (“Roche”), Pfizer Inc. (“Pfizer”), Baxter Healthcare Corporation (“Baxter”) and Intrexon Corporation (“Intrexon”), with two approved products for marketing in Europe, one product candidate which has been submitted for regulatory approval in the U.S. and one product candidate which has been submitted for regulatory approval in Europe as well as several others at various stages of development.
We were founded in 1998 and reincorporated from the State of Nevada to the State of Delaware in November 2007. Except where specifically noted or the context otherwise requires, references to “Halozyme,” “the Company,” “we,” “our,” and “us” in these Notes to Consolidated Financial Statements refer to Halozyme Therapeutics, Inc. and our wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.'s wholly owned subsidiary, Halozyme Holdings Ltd.
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Halozyme Therapeutics, Inc. and our wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.'s wholly owned subsidiary, Halozyme Holdings Ltd. All intercompany accounts and transactions have been eliminated.
Reclassifications
Certain prior period amounts have been reclassified to conform to current period presentation. Specifically, we have reclassified $400,000 from cash and cash equivalents to restricted cash in the consolidated balance sheet at December 31, 2012.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.
Cash Equivalents and Marketable Securities
Cash equivalents consist of highly liquid investments, readily convertible to cash, that mature within ninety days or less from date of purchase. Our cash equivalents consist of money market funds.
Marketable securities are investments with original maturities of more than ninety days from the date of purchase that are specifically identified to fund current operations. Marketable securities are considered available-for-sale. These investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current balance sheet date which reflects management's intention to use the proceeds from the sale of these investments to fund our operations, as necessary. Such available-for-sale investments are carried at fair value with unrealized gains and losses recorded in other comprehensive loss and included as a separate component of stockholders' (deficit) equity. The cost of marketable securities is adjusted for amortization of premiums or accretion of discounts to maturity, and such amortization or accretion is included in investment income. We use the specific identification method for calculating realized gains and losses on marketable securities sold. Realized gains and losses and declines in value judged to be other-than-temporary on marketable securities, if any, are included in investment income in the consolidated statement of operations.
Restricted Cash
Under the terms of the leases on our facilities, we are required to maintain letters of credit as security deposits during the terms of such leases. At December 31, 2013 and 2012, restricted cash of $500,000 and $400,000, respectively, was pledged as collateral for the letters of credit.
Fair Value of Financial Instruments
The authoritative guidance for fair value measurements establishes a three tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Our financial instruments include cash equivalents, available-for-sale marketable securities, accounts receivable, prepaid expenses, accounts payable, accrued expenses and long-term debt. Fair value estimates of these instruments are made at a specific point in time, based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. The carrying amount of cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments. Further, based on the borrowing rates currently available to us for loans with similar terms, we believe the fair value of long-term debt approximates its carrying value.
Available-for-sale marketable securities consist of corporate debt securities, commercial paper and certificates of deposit and were measured at fair value using Level 2 inputs. Level 2 financial instruments are valued using market prices on less active markets and proprietary pricing valuation models with observable inputs, including interest rates, yield curves, maturity dates, issue dates, settlement dates, reported trades, broker-dealer quotes, issue spreads, benchmark securities or other market related data. We obtain the fair value of Level 2 investments from our investment manager, who obtains these fair values from a third-party pricing service. We validate the fair values of Level 2 financial instruments provided by our investment manager by comparing these fair values to a third-party pricing source.
The following table summarizes, by major security type, our cash equivalents and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy:
 
 
December 31, 2013
 
December 31, 2012
 
 
Level 1
 
Level 2
 
Total estimated fair value
 
Level 1
 
Level 2
 
Total estimated fair value
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
5,710,755

 
$

 
$
5,710,755

 
$
98,024,269

 
$

 
$
98,024,269

 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale marketable
   securities:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
 

 
35,147,326

 
35,147,326

 

 

 

Commercial paper
 

 
5,998,371

 
5,998,371

 

 

 

Certificate of deposit
 

 
3,000,000

 
3,000,000

 

 

 

 
 
$
5,710,755

 
$
44,145,697

 
$
49,856,452

 
$
98,024,269

 
$

 
$
98,024,269


There were no transfers between Level 1 and Level 2 of the fair value hierarchy for the years ended December 31, 2013 and 2012. We have no instruments that are classified within Level 3 as of December 31, 2013 and 2012.
Concentrations of Credit Risk, Sources of Supply and Significant Customers
We are subject to credit risk from our portfolio of cash equivalents and marketable securities. These investments were made in accordance with our investment policy which specifies the categories, allocations, and ratings of securities we may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. We maintain our cash and cash equivalent balances with one major commercial bank and marketable securities with another financial institution. Deposits held with the financial institutions exceed the amount of insurance provided on such deposits. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and marketable securities to the extent recorded on the balance sheet.
We are also subject to credit risk from our accounts receivable related to our product sales and revenues under our license and collaborative agreements. We have license and collaborative agreements with pharmaceutical companies under which we receive payments for license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk formulation of rHuPH20. In addition, we sell Hylenex® recombinant in the United States to a limited number of established wholesale distributors in the pharmaceutical industry. Credit is extended based on an evaluation of the customer’s financial condition, and collateral is not required. Management monitors our exposure to accounts receivable by periodically evaluating the collectibility of the accounts receivable based on a variety of factors including the length of time the receivables are past due, the financial health of the customer and historical experience. Based upon the review of these factors, we recorded no allowance for doubtful accounts at December 31, 2013 and 2012. Approximately 81% and 86% of the accounts receivable balance at December 31, 2013 and 2012, respectively, represents amounts due from Roche and Pfizer. For the years ended December 31, 2013, 2012 and 2011, 64%, 45% and 19% of total revenues, respectively, were from Roche and 10%, 17% and 42% of total revenues, respectively, were from Baxter. For the years ended December 31, 2013 and 2012, 4% and 22% of total revenues, respectively, were from Pfizer. In addition, for the year ended December 31, 2011, 22% and 16% of total revenues were from ViroPharma and Intrexon, respectively.
Worldwide revenues from external customers for the years ended December 31, 2013, 2012 and 2011 consisted of domestic revenues of approximately $19.0 million, $22.7 million and $44.9 million, respectively, and foreign revenues of approximately $35.8 million, $19.6 million and $11.2 million, respectively. Of our total foreign revenues for the years ended December 31, 2013, 2012 and 2011, approximately $35.2 million, $18.9 million, $10.4 million, respectively, were attributable to Switzerland. We attribute revenues under collaborative agreements to the individual countries where the collaborator is headquartered. We attribute revenues from product sales to the individual countries to which the product is shipped. For the years ended December 31, 2013, 2012 and 2011, we had no foreign based operations, and we had no long-lived assets located in foreign countries.
We rely on two third-party manufacturers for the supply of bulk rHuPH20 for use in the manufacture of Hylenex recombinant and our other collaboration products and product candidates. Payments due to these suppliers represented 9% and 20% of the accounts payable balance at December 31, 2013 and 2012, respectively. We also rely on a third-party manufacturer for the fill and finish of Hylenex recombinant product under a contract. Payments due to this supplier represented 2% and 8% of the accounts payable balance at December 31, 2013 and 2012, respectively.
Accounts Receivable, Net
Accounts receivable is recorded at the invoiced amount and is non-interest bearing. Accounts receivable is recorded net of allowances for doubtful accounts, cash discounts for prompt payment, distribution fees and chargebacks. We recorded no allowance for doubtful accounts at December 31, 2013 and 2012 as the collectibility of accounts receivable was reasonably assured.
Inventories
Inventories are stated at lower of cost or market. Cost is determined on a first-in, first-out basis. Inventories are reviewed periodically for potential excess, dated or obsolete status. Management evaluates the carrying value of inventories on a regular basis, taking into account such factors as historical and anticipated future sales compared to quantities on hand, the price we expect to obtain for products in their respective markets compared with historical cost and the remaining shelf life of goods on hand.
Prior to receiving marketing approval from the U.S. Food and Drug Administration (“FDA”) or comparable regulatory agencies in foreign countries, costs related to purchases of bulk rHuPH20 and raw materials and the manufacturing of the product candidates are recorded as research and development expense. All direct manufacturing costs incurred after receiving marketing approval are capitalized as inventory. Inventories used in clinical trials are expensed at the time the inventories are packaged for the clinical trials.
As of December 31, 2013 and 2012, inventories consisted of $2.6 million of Hylenex recombinant inventory and $3.5 million and zero of bulk rHuPH20, respectively, for use in the manufacture of Herceptin® SC. Roche received European marketing approval for its collaboration product, Herceptin SC, in August 2013 and Baxter for its collaboration product, HyQvia, in May 2013. As such, direct manufacturing costs of bulk rHuPH20 for Herceptin SC and HyQvia incurred after the receipt of the European marketing approvals are being capitalized as inventory.
Property and Equipment, Net
Property and equipment are recorded at cost, less accumulated depreciation and amortization. Equipment are depreciated using the straight-line method over their estimated useful lives of three years and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the lease term, whichever is shorter. Leased buildings under build-to-suit lease arrangements are capitalized and included in property and equipment when we are involved in the construction of the structural improvements or take construction risk prior to the commencement of the lease. Upon completion of the construction under the build-to-suit leases, we assess whether those arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If we continue to be the deemed owner, the facilities would be accounted for as financing leases.
Impairment of Long-Lived Assets
We account for long-lived assets in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable. For the years ended December 31, 2013 and 2012, there was no impairment of the value of such assets.
Deferred Rent
Rent expense is recorded on a straight-line basis over the initial term of the lease. The difference between rent expense accrued and amounts paid under lease agreements is recorded as deferred rent in the accompanying consolidated balance sheets.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity during the period from transactions and other events and circumstances from non-owner sources.
Revenue Recognition
We generate revenues from product sales and collaborative agreements. Payments received under collaborative agreements may include nonrefundable fees at the inception of the agreements, license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk rHuPH20, and/or royalties on sales of products resulting from collaborative arrangements.
We recognize revenues in accordance with the authoritative guidance for revenue recognition. We recognize revenue when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectibility is reasonably assured.
Product Sales, Net
Hylenex Recombinant
In December 2011, we reintroduced Hylenex recombinant to the market. We sell Hylenex recombinant in the United States to wholesale pharmaceutical distributors, who sell the product to hospitals and other end-user customers. Sales to wholesalers provide for selling prices that are fixed on the date of sale, although we offer discounts to certain group purchasing organizations ("GPOs"), hospitals and government programs. The wholesalers take the title to the product, bear the risk of loss of ownership and have economic substance to the inventory. Further, we have no significant obligations for future performance to generate pull-through sales; however, we allow the wholesalers to return product that is damaged or received in error. In addition, we accept unused product to be returned beginning six months prior to and ending twelve months following product expiration.
Prior to December 31, 2013, Hylenex recombinant had a limited sales history and we could not reliably estimate expected returns and chargebacks of the product at the time the product was sold to the wholesalers. Accordingly, we deferred the recognition of revenue on sales of Hylenex recombinant to wholesalers, and instead, recognized revenue at the time when evidence existed to confirm that pull-through sales from wholesalers to the hospitals or other end-user customers had occurred or the right of return no longer existed, whichever occurred earlier. At the time product sales revenue was recognized, we recorded allowances for product returns and chargebacks based on our best estimates at the time. Shipments of product that were not recognized as revenue were treated as deferred revenue.
At December 31, 2013, we had developed sufficient historical experience and data to reasonably estimate future returns and chargebacks of Hylenex recombinant. As a result, effective December 31, 2013 we began recognizing Hylenex recombinant product sales and related cost of product sales at the time title transfers to the wholesalers and providing for an estimate of future product returns and chargebacks at that time. In connection with the change in the timing of recognition of product sales, we recorded a one-time adjustment to recognize revenue and related costs that had previously been deferred at December 31, 2012, resulting in additional net product sales of $624,000 and cost of product sales of $179,000 for the year ended December 31, 2013. Based on our analysis and information available at this time, we also recorded a net reduction to allowances for estimated product returns and chargebacks, resulting in a net increase to net product sales of $73,000 for the year ended December 31, 2013. As a result, we recorded a total increase to net product sales of $697,000 for the year ended December 31, 2013.
Allowances for product returns and chargebacks are based on amounts owed or to be claimed on the related sales. We believe that our estimated product returns for Hylenex recombinant requires a high degree of judgment and is subject to change based on our experience and certain quantitative and qualitative factors. In order to develop a methodology to reliably estimate future returns and provide a basis for recognizing revenue on sales to wholesale distributors, we analyzed many factors, including, without limitation: (1) actual Hylenex recombinant product return history, taking into account product expiration dating at the time of shipment, (2) re-order activities of the wholesalers as well as their customers and (3) levels of inventory at the wholesale channel. We have monitored actual return history on an individual product lot basis since product launch. We considered the dating of product at the time of shipment into the distribution channel and changes in the estimated levels of inventory within the distribution channel to estimate our exposure for returned product. We considered historical chargebacks activity and current contract prices to estimate our exposure for returned product. Based on the data gathered, we believe we have the information needed to reasonably estimate product returns and chargebacks.
We recognize product sales allowances as a reduction of product sales in the same period the related revenue is recognized. Because of the shelf life of Hylenex recombinant and our lengthy return period, there may be a significant period of time between when the product is shipped and when we issue credits on returned product. If actual results differ from our estimates, we will be required to make adjustments to these allowances in the future, which could have an effect on product sales revenue and earnings in the period of adjustments.

We record certain sales reserves and allowances as a reduction to gross revenue. These reserves and allowances include:
Product Returns. The product returns reserve is based on management’s best estimate of the products sold that are anticipated to be returned. The product returns reserve is recorded as a reduction of product sales revenue in the same period the related product sales revenue is recognized and is included in accrued expenses.
Distribution Fees. The distribution fees, based on contractually determined rates, arise from contractual agreements we have with certain wholesalers for distribution services they provide with respect to Hylenex recombinant. These fees are generally a fixed percentage of the price of the product purchased by the wholesalers. At the time the sale is made to the respective wholesalers, we record distribution fees as reduction of product sales revenue and accounts receivable.    
Prompt Payment Discounts. We offer cash discounts to certain wholesalers as an incentive to meet certain payment terms. We expect our customers will take advantage of this discount; therefore, at the time the sale is made to the respective wholesalers, we record the entire prompt payment discount, based on the gross amount of each invoice, as reduction of product sales revenue and accounts receivable.    
Other Discounts and Fees. We provide discounts to end-user members of certain GPOs under collective purchasing contracts between us and the GPOs. We also provide discounts to certain hospitals, who are members of the GPOs, with which we do not have contracts. The end-user members purchase products from the wholesalers at a contracted discounted price, and the wholesalers then charge back to us the difference between the current retail price and the price the end-users paid for the product. In the period product sales revenue is recognized, we estimate the related sales from our wholesalers to these GPOs and accrue for the chargebacks we anticipate from our wholesalers based on current contract prices and historical chargebacks activity. We record accrued chargebacks as a reduction to our accounts receivable. GPO administrative service fees for these transactions are also recorded in the same period the related product sales revenue is recognized and are included in accrued expenses. We also provide predetermined discounts under certain government programs, which are recorded at the time of sale.
Bulk rHuPH20
Subsequent to receiving marketing approval from the FDA or comparable regulatory agencies in foreign countries, sales of bulk rHuPH20 for use in collaboration commercial products are recognized as product sales when the materials have met all the specifications required for the customer's acceptance and title and risk of loss have transferred to the customer. Following the receipts of European marketing approvals of Roche's Herceptin SC product in August 2013 and Baxter's HyQvia product in May 2013, revenue from the sales of bulk rHuPH20 for these collaboration products are recognized as product sales. For the year ended December 31, 2013, we recognized $13.7 million and $1.1 million in product sales of bulk rHuPH20 for Herceptin SC and HyQvia, respectively.
Revenues under Collaborative Agreements
We have license and collaboration agreements under which the collaborators obtained worldwide rights for the use of our proprietary rHuPH20 enzyme in the development and commercialization of the collaborators’ biologic compounds. The collaborative agreements contain multiple elements including nonrefundable payments at the inception of the arrangement, license fees, exclusivity fees, payments based on achievement of specified milestones designated in the collaborative agreements, annual maintenance fees, reimbursements of research and development services, payments for supply of bulk rHuPH20 for the collaborator and/or royalties on sales of products resulting from collaborative agreements. We analyze each element of our collaborative agreements and consider a variety of factors in determining the appropriate method of revenue recognition of each element.
In order to account for the multiple-element arrangements, we identify the deliverables included within the agreement and evaluate which deliverables represent units of accounting. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation. The deliverables under our collaborative agreements include (i) the license to our rHuPH20 technology, (ii) at the collaborator’s request, research and development services which are reimbursed at contractually determined rates, and (iii) at the collaborator’s request, supply of bulk rHuPH20 which is reimbursed at our cost plus a margin. A delivered item is considered a separate unit of accounting when the delivered item has value to the collaborator on a standalone basis based on the consideration of the relevant facts and circumstances for each arrangement. Factors considered in this determination include the research capabilities of the collaborator and the availability of research expertise in this field in the general marketplace.
Arrangement consideration is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (“VSOE”) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists, we use our best estimate of the selling price for the deliverable. The amount of allocable arrangement consideration is limited to amounts that are not contingent upon the delivery of additional items or meeting other specified performance conditions. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. Changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement.
Nonrefundable upfront license fee payments are recognized upon delivery of the license if facts and circumstances dictate that the license has standalone value from the undelivered items, which generally include research and development services and the manufacture of bulk rHuPH20, the relative selling price allocation of the license is equal to or exceeds the upfront license fee, persuasive evidence of an arrangement exists, our price to the collaborator is fixed or determinable and collectibility is reasonably assured. Upfront license fee payments are deferred if facts and circumstances dictate that the license does not have standalone value. The determination of the length of the period over which to defer revenue is subject to judgment and estimation and can have an impact on the amount of revenue recognized in a given period.
The terms of our collaborative agreements provide for milestone payments upon achievement of certain development and regulatory events and/or specified sales volumes of commercialized products by the collaborator. We account for milestone payments in accordance with the provisions of ASU No. 2010-17, Revenue Recognition - Milestone Method. We recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following criteria:
1.
The consideration is commensurate with either the entity’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone,
2.
The consideration relates solely to past performance, and
3.
The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.
A milestone is defined as an event (i) that can only be achieved based in whole or in part on either the entity’s performance or on the occurrence of a specific outcome resulting from the entity’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and (iii) that would result in additional payments being due to the vendor.
Reimbursements of research and development services are recognized as revenue during the period in which the services are performed as long as there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the related receivable is reasonably assured. Revenue from the manufacture of bulk rHuPH20 is recognized when the materials have met all specifications required for the collaborator's acceptance and title and risk of loss have transferred to the collaborator. We do not directly control when any collaborator will request research and development services or supply of bulk rHuPH20; therefore, we cannot predict when we will recognize revenues in connection with research and development services and supply of bulk rHuPH20.
Royalty revenue from sales of collaboration products by our collaborators will be recognized when received, which is generally in the quarter following the quarter in which the corresponding sales occur.
The collaborative agreements typically provide the collaborators the right to terminate such agreement in whole or on a product-by-product or target-by-target basis at any time upon 30 to 90 days prior written notice to us. There are no performance, cancellation, termination or refund provisions in any of our collaborative agreements that contain material financial consequences to us.
Refer to Note 4, “Collaborative Agreements,” for further discussion on our collaborative arrangements.
Cost of Product Sales
Cost of product sales consists primarily of raw materials, third-party manufacturing costs, fill and finish costs, freight costs, internal costs and manufacturing overhead associated with the production of Hylenex recombinant. Cost of product sales also consists of the write-down of excess, dated and obsolete inventories and the write-off of any inventories that do not meet certain product specifications. Prior to European marketing approvals of Herceptin SC in August 2013 and HyQvia in May 2013, all costs related to the manufacturing of bulk rHuPH20 for these products were charged to research and development expenses in the periods such costs were incurred. Therefore, cost of bulk rHuPH20 product sales for these collaboration products for the year ended December 31, 2013 excluded the related manufacturing costs totaling $10.0 million, of which $9.0 million and $1.0 million were charged to research and development expenses for the years ended December 31, 2013 and 2012, respectively. Of the bulk rHuPH20 for Herceptin SC on hand as of December 31, 2013, $265,000 in manufacturing costs were previously recorded as research and development expenses. There was no bulk rHuPH20 for HyQvia on hand as of December 31, 2013.
Research and Development Expenses
Research and development expenses include salaries and benefits, facilities and other overhead expenses, external clinical trial expenses, research related manufacturing services, contract services and other outside expenses. Research and development expenses are charged to operations as incurred when these expenditures relate to our research and development efforts and have no alternative future uses. After receiving approval from the FDA or comparable regulatory agencies in foreign countries for a product, costs related to purchases and manufacturing of bulk rHuPH20 for product are capitalized as inventory. The manufacturing costs of bulk rHuPH20 for Herceptin SC and HyQvia incurred after the receipt of the European marketing approvals are capitalized as inventory.
In accordance with certain research and development agreements, we are obligated to make certain upfront payments upon execution of the agreement. Advance payments, including nonrefundable amounts, for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts will be recognized as an expense as the related goods are delivered or the related services are performed or such time when we do not expect the goods to be delivered or services to be performed.
Milestone payments that we make in connection with in-licensed technology for a particular research and development project that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic values are expensed as research and development costs at the time the costs are incurred. We have no in-licensed technologies that have alternative future uses in research and development projects or otherwise.
Clinical Trial Expenses
Payments in connection with our clinical trials are often made under contracts with multiple contract research organizations that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee, unit price or on a time-and-material basis. Payments under these contracts depend on factors such as the successful enrollment or treatment of patients or the completion of other clinical trial milestones.
Expenses related to clinical trials are accrued based on our estimates and/or representations from service providers regarding work performed, including actual level of patient enrollment, completion of patient studies and progress of the clinical trials. Other incidental costs related to patient enrollment or treatment are accrued when reasonably certain. If the contracted amounts are modified (for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), we modify our accruals accordingly on a prospective basis. Revisions in the scope of a contract are charged to expense in the period in which the facts that give rise to the revision become reasonably certain. Historically, we have had no material changes in clinical trial expense accruals that had a material impact on our consolidated results of operations or financial position.
Share-Based Compensation
We record compensation expense associated with stock options and other share-based awards in accordance with the authoritative guidance for stock-based compensation. The cost of employee services received in exchange for an award of an equity instrument is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense on a straight-line basis, net of estimated forfeitures, over the requisite service period of the award. Share-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Share-based compensation expense for an award with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized and any recognized compensation expense is reversed. As share-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. The guidance requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Pre-vesting forfeitures were estimated to be approximately 10% for employees for the years ended December 31, 2013, 2012 and 2011 based on our historical experience for the years then ended.
Total share-based compensation expense related to share-based awards for the years ended December 31, 2013, 2012 and 2011 was comprised of the following: 
 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
Research and development
 
$
4,475,530

 
$
4,190,938

 
$
2,815,362

Selling, general and administrative
 
5,062,526

 
4,157,649

 
2,754,537

Share-based compensation expense
 
$
9,538,056

 
$
8,348,587

 
$
5,569,899

Net share-based compensation expense, per basic and diluted share
 
$
0.08

 
$
0.08

 
$
0.05

Share-based compensation expense from:
 

 

 

Stock options
 
$
5,499,445

 
$
4,722,629

 
$
3,230,822

Restricted stock awards and restricted stock units
 
4,038,611

 
3,625,958

 
2,339,077

 
 
$
9,538,056

 
$
8,348,587

 
$
5,569,899


Cash flows resulting from tax deductions in excess of the cumulative compensation cost recognized for options exercised (excess tax benefits) are classified as cash inflows provided by financing activities and cash outflows used in operating activities. Due to our net loss position, no tax benefits have been recognized in the consolidated statements of cash flows.
Income Taxes
We provide for income taxes using the liability method. Under this method, deferred income tax assets and liabilities are determined based on the differences between the financial statement carrying amounts of existing assets and liabilities at each year end and their respective tax bases and are measured using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Deferred tax assets and other tax benefits are recorded when it is more likely than not that the position will be sustained upon audit. Valuation allowances have been established to reduce our net deferred tax assets to zero, as we believe that it is more likely than not that such assets will not be realized.
Net Loss Per Share
Basic net loss per common share is computed by dividing loss for the period by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. Stock options, unvested restricted stock awards (“RSAs”) and unvested restricted stock units (“RSUs”) are considered common stock equivalents and are only included in the calculation of diluted earnings per common share when their effect is dilutive. Because of our net loss, outstanding stock options, outstanding RSUs and unvested RSAs totaling approximately 8,070,141, 7,444,333 and 6,365,667 were excluded from the calculation of diluted net loss per common share for the years ended December 31, 2013, 2012 and 2011, respectively, because their effect was anti-dilutive.
Segment Information
We operate our business in one segment, which includes all activities related to the research, development and commercialization of our proprietary enzymes that can be used to facilitate the delivery of injected drugs and fluids, thus enhancing the efficacy and the convenience of other drugs or to alter abnormal tissue structures for clinical benefit. This segment also includes revenues and expenses related to (i) research and development and API manufacturing activities conducted under our collaborative agreements with third parties and (ii) product sales of Hylenex recombinant. The chief operating decision-maker reviews the operating results on an aggregate basis and manages the operations as a single operating segment.
Adoption of Recent Accounting Pronouncement
Effective January 1, 2013, we adopted Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The provisions of ASU No. 2013-02 require companies to present reclassifications out of accumulated other comprehensive income and other amounts of other comprehensive income separately by each component of other comprehensive income on the face of the financial statements or in the notes. This update is effective prospectively for reporting periods beginning after December 15, 2012. The adoption of ASU No. 2013-02 did not have a material impact on our consolidated financial position or results of operations as the requirements are disclosure only in nature. ASU No. 2013-02 did not impact our disclosures as there were no reclassifications in any periods reported.
Pending Adoption of Recent Accounting Pronouncement
In July 2013, FASB issued ASU No. 2013-11, Income Taxes (Topic 740), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The provisions of ASU No. 2013-11 require entities to present unrecognized tax benefits as a decrease in a net operating loss, similar tax loss or tax credit carryforward if certain criteria are met. The determination of whether a deferred tax asset is available is based on the unrecognized tax benefit and the deferred tax asset that exists at the reporting date and presumes disallowance of the tax position at the reporting date. The guidance will eliminate the diversity in practice in the presentation of unrecognized tax benefits but will not alter the way in which entities assess deferred tax assets for realizability. The amendments are effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2014. The amendments should be applied prospectively to unrecognized tax benefits that exist at the effective date. Early adoption is permitted. The adoption of ASU No. 2013-11 will not have a material impact on our consolidated financial position or results of operations.
Marketable Securities (Notes)
Marketable Securities Disclosure
Marketable Securities
Available-for-sale marketable securities consisted of the following:
 
 
December 31, 2013
Description
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Corporate debt securities
 
$
35,130,272

 
$
20,185

 
$
(3,131
)
 
$
35,147,326

Commercial paper
 
5,998,371

 

 

 
5,998,371

Certificate of deposit
 
3,000,000

 

 

 
3,000,000

 
 
$
44,128,643

 
$
20,185

 
$
(3,131
)
 
$
44,145,697


As of December 31, 2013, $44.1 million of our available-for-sale marketable securities are scheduled to mature within the next 12 months. Proceeds from sales of available-for-sale securities for the year ended December 31, 2013 were $3.4 million. There was no realized gain or loss for the year ended December 31, 2013. None of these investments have been in a continuous unrealized loss position for more than twelve months as of December 31, 2013. Based on our review of these securities, we believe we had no other-than-temporary impairments on these securities as of December 31, 2013 because we do not intend to sell these securities and it is not more likely than not that we will be required to sell these securities before the recovery of their amortized cost basis. We had no marketable securities as of December 31, 2012.
Collaborative Agreements
Collaborative Agreements
Collaborative Agreements
Roche Collaboration
In December 2006, we and Roche entered into a license and collaborative agreement under which Roche obtained a worldwide, exclusive license to develop and commercialize product combinations of rHuPH20 and up to thirteen Roche target compounds (the “Roche Collaboration”). As of December 31, 2013, Roche had elected a total of five exclusive targets and retains the option to develop and commercialize rHuPH20 with three additional targets, provided that Roche continues to pay annual maintenance fees to us. As of December 31, 2013, we have received $72.5 million from Roche, including the $20.0 million upfront license fee payment for the application of rHuPH20 to the initial three Roche exclusive targets, $21.50 million in connection with Roche's election of two additional exclusive targets and annual license maintenance fees for the right to designate the remaining targets as exclusive targets, $13.0 million in clinical development milestone payments, $8.0 million in regulatory milestone payments and a $10.0 million sales-based payment.
In August 2013, Roche received European marketing approval for its collaboration product, Herceptin SC, for the treatment of patients with HER2-positive breast cancer and launched Herceptin SC in the European Union ("EU") which triggered a $10.0 million payment to us for the achievement of the first commercial sale pursuant to the terms of the Roche Collaboration. We determined this payment to be a sales-based payment. Due to our continuing involvement obligations, revenue from the $10.0 million sales-based payment was deferred and is being recognized over the remaining term of the Roche Collaboration.
Roche assumes all development, manufacturing, clinical, regulatory, sales and marketing costs under the Roche Collaboration, while we are responsible for the supply of bulk rHuPH20. We are entitled to receive reimbursements for providing research and development services and bulk rHuPH20 to Roche at its request.
Under the terms of the Roche Collaboration, Roche will pay us a royalty on each product commercialized under the agreement consisting of a mid-single digit percent of the net sales of such product. Unless terminated earlier in accordance with its terms, the Roche Collaboration continues in effect until the expiration of Roche's obligation to pay royalties. Roche has the obligation to pay royalties with respect to each product in each country, during the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country.
Due to our continuing involvement obligations (for example, support activities associated with rHuPH20), revenues from the upfront payment, exclusive designation fees, annual license maintenance fees and sales-based payment ("Roche Deferred Revenues") were deferred and are being recognized over the term of the Roche Collaboration. In addition, we received prepayments from Roche associated with the manufacture of bulk rHuPH20 for Roche. The manufacturing prepayments have been deferred and are being recognized as revenue at the time bulk rHuPH20 is delivered to Roche.
For the years ended December 31, 2013, 2012 and 2011, we recognized amortization of the Roche Deferred Revenues and manufacturing prepayments as revenues under collaborative agreements totaling approximately $5.9 million, $3.4 million, and $2.0 million, respectively. Total Roche Deferred Revenues and manufacturing prepayments were approximately $41.6 million and $35.9 million as of December 31, 2013 and 2012, respectively. For the years ended December 31, 2013, 2012 and 2011, we recognized $0, $8.0 million, and $5.0 million, respectively, as revenues under collaborative agreements in accordance with the Milestone Method related to the achievement of certain regulatory and clinical milestones pursuant to the terms of the Roche Collaboration.
Gammagard Collaboration
In September 2007, we entered into a license and collaborative agreement with Baxter, under which Baxter obtained a worldwide, exclusive license to develop and commercialize a product consisting of rHuPH20 combined with a current Baxter product, GAMMAGARD LIQUID (the “Gammagard Collaboration”). As of December 31, 2013, we have received $17.0 million under the Gammagard Collaboration, including the $10.0 million upfront license fee payment, a $3.0 million regulatory milestone payment and a $4.0 million sales-based payment. Baxter will pay us a royalty on each product commercialized under the agreement consisting of a mid-single digit percent of the net sales of such product.
In May 2013, the European Commission granted Baxter marketing authorization in all EU Member States for the use of HyQvia (solution for subcutaneous use), a combination of GAMMAGARD LIQUID and rHuPH20 in dual vial units, as replacement therapy for adult patients with primary and secondary immunodeficiencies. Baxter launched HyQvia in the first EU country in July 2013 and in a number of other EU countries in the second half of 2013. Baxter plans to expand the launch to additional EU countries in 2014. The achievement of the first commercial sale triggered a $4.0 million payment to us. We determined this payment to be a sales-based payment. Due to our continuing involvement obligations, revenue from the sales-based payment was deferred and is being recognized over the remaining term of the Gammagard Collaboration.
The Gammagard Collaboration is applicable to both kit and formulation combinations. Baxter assumes all development, manufacturing, clinical, regulatory, sales and marketing costs under the Gammagard Collaboration, while we are responsible for the supply of bulk rHuPH20. We perform research and development activities and supply bulk rHuPH20 at the request of Baxter, and are reimbursed by Baxter under the terms of the Gammagard Collaboration. In addition, Baxter has certain product development and commercialization obligations in major markets identified in the Gammagard Collaboration.
Unless terminated earlier in accordance with its terms, the Gammagard Collaboration continues in effect until the expiration of Baxter's obligation to pay royalties. Baxter has the obligation to pay royalties, with respect to each product in each country, during the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country.
Due to our continuing involvement obligations (for example, support activities associated with rHuPH20 enzyme), the upfront and sales-based payments were deferred and are being recognized over the term of the Gammagard Collaboration. We recognized revenue from the upfront and sales-based payments in the amount of approximately $606,000, $483,000 and $483,000 for the years ended December 31, 2013, 2012 and 2011, respectively. Deferred revenue relating to the upfront and sales-based payments under the Gammagard Collaboration was approximately $10.5 million and $7.1 million as of December 31, 2013 and 2012, respectively.
Other Collaborations
In December 2012, we and Pfizer entered into a collaboration and license agreement, under which Pfizer has the worldwide license to develop and commercialize products combining rHuPH20 enzyme with Pfizer proprietary biologics directed at six targets, of which three were specified (the “Pfizer Collaboration”). Targets may be selected on an exclusive or non-exclusive basis. As of December 31, 2013, we have received $11.0 million in upfront and license fee payments for the licenses to four specified exclusive targets and two additional targets which Pfizer has the right to elect in the future upon payment of additional fees. Unless terminated earlier in accordance with its terms, the Pfizer Collaboration continues in effect until the later of (i) expiration of the last to expire of the valid claims of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers a product developed under the collaboration, and (ii) expiration of the last to expire royalty term for a product developed under the collaboration. The royalty term of a product developed under the Pfizer Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. Pfizer may terminate the agreement prior to expiration for any reason in its entirety or on a target-by-target basis upon 30 days prior written notice to us. Upon any such termination, the license granted to Pfizer (in total or with respect to the terminated target, as applicable) will terminate, provided, however, that in the event of expiration of the agreement, the licenses granted will become perpetual, non-exclusive and fully paid-up.
In May 2011, we and ViroPharma entered into a collaboration and license agreement, under which ViroPharma obtained a worldwide exclusive license for the use of rHuPH20 enzyme in the development and commercialization of a subcutaneous injectable formulation of ViroPharma's commercialized product, Cinryze® (C1 esterase inhibitor [human]) (the “ViroPharma Collaboration”). In addition, the license provided ViroPharma with exclusivity to C1 esterase inhibitor and to the hereditary angioedema indication, along with three additional orphan indications. As of December 31, 2013, we received $14.0 million from ViroPharma, including the $9.0 million nonrefundable upfront license fee payment and a $3.0 million clinical development milestone payment. ViroPharma terminated the collaboration agreement in February 2014.
In June 2011, we and Intrexon entered into a collaboration and license agreement, under which Intrexon obtained a worldwide exclusive license for the use of rHuPH20 enzyme in the development and commercialization of a subcutaneous injectable formulation of Intrexon's recombinant human alpha 1-antitrypsin (rHuA1AT) (the “Intrexon Collaboration”). In addition, the license provides Intrexon with exclusivity for a defined indication (“Exclusive Field”). As of December 31, 2013, we have received $11.0 million from Intrexon, including a nonrefundable upfront license fee payment of $9.0 million. We are entitled to receive a royalty on each product commercialized under the agreement consisting of a percentage of the net sales of such product ranging from mid-single digits up to a low double-digit percentage. Unless terminated earlier in accordance with its terms, the Intrexon Collaboration continues in effect until the later of (i) expiration of the last to expire of the valid claims of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers a product developed under the collaboration, and (ii) expiration of the last to expire royalty term for a product developed under the collaboration. The royalty term of a product developed under the Intrexon Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. Intrexon may terminate the agreement prior to expiration for any reason on a product-by-product basis upon 90 days prior written notice to us. Upon any such termination, the license granted to Intrexon (in total or with respect to the terminated product, as applicable) will terminate. Intrexon's chief executive officer, chairman of its board of directors and major shareholder is also a member of our board of directors.
We identified the deliverables at the inception of the Pfizer, ViroPharma and Intrexon agreements which are the license, research and development services and supply of bulk rHuPH20. We have determined that the license, research and development services and supply of bulk rHuPH20 individually represent separate units of accounting, because each deliverable has standalone value. The estimated selling prices for these units of accounting were determined based on market conditions, the terms of comparable collaborative arrangements for similar technology in the pharmaceutical and biotech industry and entity-specific factors such as the terms of our previous collaborative agreements, our pricing practices and pricing objectives and the nature of the research and development services to be performed for the collaborators. The arrangement consideration was allocated to the deliverables based on the relative selling price method.
The amount allocable to the delivered unit or units of accounting is limited to the amount that is not contingent upon the delivery of additional items or meeting other specified performance conditions (the noncontingent amount). As such, we excluded from the allocable arrangement consideration the milestone payments, annual exclusivity fees and royalties regardless of the probability of receipt. Based on the results of our analysis, we allocated the $11.0 million license fees from Pfizer, the $9.0 million upfront license fee from ViroPharma and the $9.0 million upfront license fee from Intrexon to the license fee deliverable under each of the arrangements. We determined that the upfront payments were earned upon the granting of the worldwide, exclusive right to our technology to the collaborators in these arrangements. As a result, we recognized the $11.0 million license fee under the Pfizer Collaboration, the $9.0 million upfront license fee under the ViroPharma Collaboration and the $9.0 million upfront license fee received under the Intrexon Collaboration as revenues under collaborative agreements in the period when such license fees were earned. There were no revenues recognized related to milestone payments under these collaborations for the years ended December 31, 2013 and 2012. For the year ended December 31, 2011, we recognized the $3.0 million milestone payment as revenues under collaborative agreements in accordance with the Milestone Method related to the achievement of a development milestone pursuant to the terms of the ViroPharma Collaboration.
Pfizer and Intrexon are each solely responsible for the development, manufacturing and marketing of any products resulting from their respective collaborations. We are entitled to receive payments for research and development services and supply of bulk rHuPH20 to these collaborators if requested by such collaborator. We recognize amounts allocated to research and development services as revenues under collaborative agreements as the related services are performed. We recognize amounts allocated to the sales of bulk rHuPH20 as revenues under collaborative agreements when such bulk rHuPH20 have met all required specifications by the collaborators and the related title and risk of loss and damages have passed to the collaborators. We cannot predict the timing of delivery of research and development services and bulk rHuPH20 as they are at the collaborators' requests.
Pursuant to the terms of our existing collaborations collectively, we are entitled to receive additional milestone payments for the successful development of the elected targets in the aggregate of up to approximately $63.0 million upon achievement of specified clinical development milestone events and up to approximately $48.0 million upon achievement of specified regulatory milestone events in connection with specified regulatory filings and receipt of marketing approvals.
Certain Balance Sheet Items
Certain Balance Sheet Items
Certain Balance Sheet Items
Accounts receivable, net consisted of the following:
 
 
December 31,
2013
 
December 31,
2012
Accounts receivable from product sales to collaborators
 
$
4,495,314

 
$

Accounts receivable from revenues under collaborative agreements
 
3,707,248

 
15,058,163

Accounts receivable from other product sales
 
1,505,004

 
823,064

 
 
9,707,566

 
15,881,227

Allowance for distribution fees and discounts
 
(610,482
)
 
(178,140
)
 
 
$
9,097,084

 
$
15,703,087


Inventories consisted of the following:
 
 
December 31,
2013
 
December 31,
2012
Raw materials
 
$
1,136,815

 
$
1,127,061

Work-in-process
 
4,280,076

 
792,257

Finished goods
 
753,091

 
751,378

 
 
$
6,169,982

 
$
2,670,696


Prepaid expenses and other assets consisted of the following:
 
 
December 31,
2013
 
December 31,
2012
Prepaid manufacturing expenses
 
$
5,884,040

 
$
8,152,602

Prepaid research and development expenses
 
3,522,250

 
2,274,551

Other prepaid expenses
 
1,338,758

 
2,250,791

Other assets
 
356,328

 
74,944

 
 
11,101,376

 
12,752,888

Less long-term portion
 
2,675,692

 

 
 
$
8,425,684

 
$
12,752,888


Property and equipment, net consisted of the following:
 
 
December 31,
2013
 
December 31,
2012
Research equipment
 
$
7,713,850

 
$
6,360,004

Computer and office equipment
 
1,948,859

 
1,432,975

Leasehold improvements
 
1,408,025

 
1,138,110

Building(1)
 

 
1,450,000

 
 
11,070,734

 
10,381,089

Accumulated depreciation and amortization
 
(7,649,228
)
 
(6,680,627
)
 
 
$
3,421,506

 
$
3,700,462

________________________
(1)
Represented capitalized building under a build-to-suit lease arrangement where we were considered the owner (for accounting purposes only) during the construction period. Upon the completion of the building construction in the fourth quarter of 2013, we met the sale-leaseback criteria for de-recognition of the building asset and liability; therefore, the building asset was removed from the consolidated balance sheet as of December 31, 2013.
Depreciation and amortization expense was approximately $1.2 million, $1.1 million and $1.1 million for the years ended December 31, 2013, 2012 and 2011, respectively.
Accrued expenses consisted of the following:
 
 
December 31,
2013
 
December 31,
2012
Accrued compensation and payroll taxes
 
$
7,075,347

 
$
4,053,590

Accrued outsourced research and development expenses
 
3,377,256

 
1,239,050

Accrued outsourced manufacturing expenses
 
3,233,012

 
984,192

Other accrued expenses
 
1,234,831

 
1,506,615

 
 
$
14,920,446

 
$
7,783,447


Deferred revenue consisted of the following:
 
 
December 31,
2013
 
December 31,
2012
Collaborative agreements
 
$
51,184,897

 
$
43,222,473

Product sales
 
1,958,381

 
623,510

Total deferred revenue
 
53,143,278

 
43,845,983

Less current portion
 
7,397,829

 
8,891,017

Deferred revenue, net of current portion
 
$
45,745,449

 
$
34,954,966

Long-Term Debt, Net
Long-term Debt, Net
Long-Term Debt, Net
In December 2012, we entered into a Loan and Security Agreement (the “Original Loan Agreement”) with Oxford Finance LLC (“Oxford”) and Silicon Valley Bank (“SVB”) (collectively, the “Lenders”) for a $30 million secured single-draw term loan facility with a maturity date, as amended, of January 1, 2017. In December 2012, we drew down $30 million under the Original Loan Agreement. The proceeds were to be used for working capital and general business requirements. The term loan bore a fixed interest rate of 7.55% per annum. The monthly repayment schedule included interest only payments in arrears for the first 12 months, followed by equal principal and interest payments for the remaining term. The original term loan required a final payment of $2.55 million which was due when the term loan became due or upon the prepayment of the facility. In connection with the original term loan, we received proceeds of $29.7 million, net of debt offering costs.
0n December 27, 2013, we entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with the Lenders, amending and restating in its entirety the Original Loan Agreement. The Loan Agreement extends the original term loan and provides for an additional $20 million new term loan, bringing the total term loan balance to $50 million. Upon closing of the Loan Agreement, we received proceeds of approximately $19 million, net of accrued interest outstanding as of December 31, 2013. The proceeds are to be used for working capital and general business requirements. The amended term loan facility matures on January 1, 2018. Except for extending the principal payments and maturity date of the original term loan and increasing the loan balance to $50 million, no other terms were modified. The present value of the future cash flows under the modified terms described did not exceed the present value of the future cash flows under the original terms by more than 10%. As such, we treated this amendment as a modification.
Consistent with the original loan, the Loan Agreement provides for a 7.55% interest rate on the term loan and a final payment equal to 8.5% of the original principal amount, or $4.25 million, which is due when the term loan becomes due or upon the prepayment of the facility. The amended term loan repayment schedule provides for interest only payments in arrears for the first 12 months, followed by consecutive equal monthly payments of principal and interest in arrears starting in February 2015 and continuing through the maturity date. We have the option to prepay the outstanding balance of the term loan in full, subject to a prepayment fee of 1% to 3% depending upon when the prepayment occurs.
In connection with the term loan, the debt offering costs have been recorded as a debt discount on our consolidated balance sheet which together with the final payment and fixed interest rate payments are being amortized to interest expense throughout the life of the term loan using the effective interest rate method.
The term loan is secured by substantially all of the assets of the Company and our subsidiary, Halozyme, Inc., except that the collateral does not include any intellectual property (including licensing, collaboration and similar agreements relating thereto), and certain other excluded assets. The Loan Agreement contains customary representations, warranties and covenants by us, which covenants limit our ability to convey, sell, lease, transfer, assign or otherwise dispose of certain of our assets; engage in any business other than the businesses currently engaged in by us or reasonably related thereto; liquidate or dissolve; make certain management changes; undergo certain change of control events; create, incur, assume, or be liable with respect to certain indebtedness; grant certain liens; pay dividends and make certain other restricted payments; make certain investments; make payments on any subordinated debt; and enter into transactions with any of our affiliates outside of the ordinary course of business or permit our subsidiaries to do the same. In addition, subject to certain exceptions, we are required to maintain with Silicon Valley Bank our primary deposit accounts, securities accounts and commodities, and to do the same for our domestic subsidiary.
The Loan Agreement also contains customary indemnification obligations and customary events of default, including, among other things, our failure to fulfill certain of our obligations under the Loan Agreement and the occurrence of a material adverse change which is defined as a material adverse change in our business, operations, or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan, or a material impairment in the perfection or priority of lender's lien in the collateral or in the value of such collateral. In the event of default by us under the Loan Agreement, the Lenders would be entitled to exercise their remedies thereunder, including the right to accelerate the debt, upon which we may be required to repay all amounts then outstanding under the Loan Agreement, which could harm our financial condition.
As of December 31, 2013, we were in compliance with all material covenants under the Loan Agreement and there was no material adverse change in our business, operations or condition.
Future maturities and interest payments under the term loan as of December 31, 2013, are as follows:
2014
 
$
3,460,417

2015
 
17,435,636

2016
 
18,677,512

2017
 
18,677,512

2018
 
5,806,459

Total minimum payments
 
64,057,536

Less amount representing interest
 
(14,057,536
)
Gross balance of long-term debt
 
50,000,000

Less unamortized debt discount
 
(228,263
)
Present value of long-term debt
 
49,771,737

Less current portion of long-term debt
 

Long-term debt, less current portion and unamortized debt discount
 
$
49,771,737


Interest expense, including amortization of debt discount, related to the long-term debt for the years ended December 31, 2013 and 2012 was approximately $3.3 million and $28,000, respectively.
Stockholders' Equity
Stockholders' Equity
Stockholders’ (Deficit) Equity
During 2013, we issued an aggregate of 1,270,362 shares of common stock, in connection with the exercises of stock options for cash in the aggregate amount of approximately $5.5 million. In addition, we issued 461,729 shares of common stock, net of RSAs canceled, in connection with the grants of RSAs and 92,201 shares of common stock upon vesting of certain RSUs. The RSU holders surrendered 61,923 RSUs to pay for minimum withholding taxes totaling approximately $431,000.
In May 2013, our stockholders approved an amendment to our Certificate of Incorporation to increase our authorized number of shares of common stock from 150 million shares to 200 million shares.
During 2012, we issued an aggregate of 444,637 shares of common stock in connection with the exercises of stock options for cash in the aggregate amount of approximately $2.0 million. In addition, we issued 374,195 shares of common stock, net of RSAs canceled, in connection with the grants of RSAs and 81,070 shares of common stock upon vesting of certain RSUs. The RSU holders surrendered 46,930 RSUs to pay for minimum withholding taxes totaling approximately $347,000.
In February 2012, we completed an underwritten public offering and issued 7,820,000 shares of common stock, including 1,020,000 shares sold pursuant to the full exercise of an over-allotment option granted to the underwriter. All of the shares were offered at a public offering price of $10.61 per share, generating approximately $81.5 million in net proceeds. Of the 7,820,000 shares of common stock sold, Randal J. Kirk, a member of our board of directors, through his affiliates, purchased 1,360,000 shares of common stock in this offering at the public offering price of $10.61 per share for a total of approximately $14.4 million.
During 2011, we issued an aggregate of 3,045,540 shares of common stock in connection with the exercises of 3,137,056 shares of stock options for cash in the aggregate amount of approximately $4.7 million. In addition, we issued 347,883 shares of common stock in connection with the grants of RSAs and 15,000 shares of common stock upon vesting of certain RSUs.
Equity Incentive Plans
Equity Incentive Plans
Equity Incentive Plans
We currently grant stock options, restricted stock awards and restricted stock units under the Amended and Restated 2011 Stock Plan. In May 2013, our stockholders approved the Amended and Restated 2011 Stock Plan, which provides for the grant of up to 12.5 million shares of common stock (subject to certain limitations as described in the Amended and Restated 2011 Stock Plan) to selected employees, consultants and non-employee members of our Board of Directors ("Outside Directors") as stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance awards. The Amended and Restated 2011 Stock Plan replaced our prior stock plans, consisting of our 2008 Outside Directors' Stock Plan, 2008 Stock Plan, 2006 Stock Plan and 2004 Stock Plan (“Prior Plans”, collectively with the Amended and Restated 2011 Stock Plan, the “Plans”). The Prior Plans were terminated such that no additional awards could be granted under the Prior Plans, but the terms of the Prior Plans remain in effect with respect to outstanding awards until they are exercised, settled or canceled. The Plans were approved by the stockholders. Awards are subject to terms and conditions established by the Compensation Committee of our Board of Directors.
During the year ended December 31, 2013, we granted share-based awards under the Amended and Restated 2011 Stock Plan. We also granted restricted stock awards to the Outside Directors under the 2008 Outside Directors’ Stock Plan until it was terminated in May 2013. At December 31, 2013, 7,437,270 shares were subject to outstanding awards and 6,946,331 shares were available for future grants of share-based awards. At the present time, management intends to issue new common shares upon the exercise of stock options, issuance of restricted stock awards and settlement of restricted stock units.
Stock Options. Options granted under each of the Plans must have an exercise price equal to at least 100% of the fair market value of our common stock on the date of grant. The options will generally have a maximum contractual term of ten years and vest at the rate of one-fourth of the shares on the first anniversary of the date of grant and 1/48 of the shares monthly thereafter. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plans).
A summary of our stock option award activity as of and for the years ended December 31, 2013, 2012 and 2011 is as follows: 

 
Shares
Underlying
Stock Options

Weighted
Average Exercise
Price per Share

Weighted Average
Remaining
Contractual  Term (yrs)
 
Aggregate
Intrinsic
Value
Outstanding at January 1, 2011
 
7,975,365

 
$3.87
 
 
 
 
Granted
 
1,624,768

 
$7.79
 
 
 
 
Exercised
 
(3,137,056
)
 
$1.71
 
 
 
 
Canceled/forfeited
 
(593,293
)
 
$6.72
 
 
 
 
Outstanding at December 31, 2011
 
5,869,784

 
$5.82
 
 
 
 
Granted
 
1,215,442

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

 
$6.59
 
 
 
 
Granted
 
1,806,392

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

 
$7.11
 
6.4
 

$52.8
 million
Vested and expected to vest at December 31, 2013
 
6,352,654

 
$7.07
 
6.3
 

$50.3
 million
Exercisable at December 31, 2013
 
3,747,566

 
$6.55
 
4.8
 

$31.6
 million

The weighted average grant-date fair values of options granted during the years ended December 31, 2013, 2012 and 2011 were $4.40 per share, $5.63 per share and $4.57 per share, respectively. As of December 31, 2013, approximately $9.7 million of total unrecognized compensation costs related to non-vested stock option awards was expected to be recognized over a weighted average period of approximately 2.5 years. The intrinsic value of options exercised during the years ended December 31, 2013, 2012 and 2011 was approximately $8.3 million, $2.9 million and $16.6 million, respectively. Cash received from stock option exercises for the years ended December 31, 2013, 2012 and 2011 was approximately $5.5 million, $2.0 million and $4.7 million, respectively.
The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model (“Black-Scholes model”) that uses the assumptions noted in the following table. Expected volatility is based on historical volatility of our common stock. The expected term of options granted is based on analyses of historical employee termination rates and option exercises. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The dividend yield assumption is based on the expectation of no future dividend payments by us. Assumptions used in the Black-Scholes model were as follows:
 
 
Year Ended December 31,
 
 
2013

2012

2011
Expected volatility
 
70.1-72.5%


64.0-69.2%


64.0-65.1%

Average expected term (in years)
 
5.7


5.6


5.8

Risk-free interest rate
 
0.86-2.00%


0.80-1.15%


1.14-2.55%

Expected dividend yield
 
0
%

0
%

0
%

Restricted Stock AwardsRestricted stock awards are grants that entitle the holder to acquire shares of our common stock at zero or a fixed price, which is typically nominal. The shares covered by a restricted stock award cannot be sold, pledged, or otherwise disposed of until the award vests and any unvested shares may be reacquired by us for the original purchase price following the awardee’s termination of service. The restricted stock awards will generally vest at the rate of one-fourth of the shares on each anniversary of the date of grant. Annual grants of restricted stock awards to Outside Directors typically vest in full the first day the awardee may trade our stock in compliance with our insider trading policy following the date immediately preceding the first annual meeting of stockholders following the grant date.
The following table summarizes our restricted stock award activity during the years ended December 31, 2013, 2012 and 2011:

 
Number of
Shares

Weighted  Average
Grant Date
Fair Value
Unvested at January 1, 2011
 
120,000

 
$
7.67

Granted
 
353,508

 
$
6.51

Vested
 
(120,000
)
 
$
7.67

Forfeited
 
(5,625
)
 
$
6.67

Unvested at December 31, 2011
 
347,883

 
$
6.51

Granted
 
380,158

 
$
10.29

Vested
 
(339,758
)
 
$
6.51

Forfeited
 
(5,963
)
 
$
10.81

Unvested at December 31, 2012
 
382,320

 
$
10.21

Granted
 
476,096

 
$
6.88

Vested
 
(211,178
)
 
$
8.78

Forfeited
 
(14,367
)
 
$
8.17

Unvested at December 31, 2013
 
632,871

 
$
8.23


The fair value of the restricted stock awards is based on the market value of our common stock on the date of grant. The total grant-date fair value of restricted stock awards vested during the years ended December 31, 2013, 2012 and 2011 was approximately $1.9 million, $2.2 million and $0.9 million, respectively. We recognized approximately $2.2 million, $2.1 million and $1.7 million of share-based compensation expense related to restricted stock awards for the years ended December 31, 2013, 2012 and 2011, respectively. As of December 31, 2013, total unrecognized compensation cost related to unvested awards was approximately $2.5 million, which is expected to be recognized over a weighted-average period of approximately 2.3 years.
Restricted Stock Units. A restricted stock unit is a promise by us to issue a share of our common stock upon vesting of the unit. During the years ended December 31, 2013, 2012 and 2011, we granted 323,700, 682,146 and 163,000 shares of restricted stock units, respectively, at no purchase price, to certain employees. The restricted stock units will generally vest at the rate of one-fourth of the shares on each anniversary of the date of grant. Of the total 163,000 shares of restricted stock units granted during the year ended December 31, 2011, 148,000 shares were subject to percentage vesting based upon achievement of certain corporate goals and the employees’ continuing services through May 2012.
The following table summarizes our restricted stock unit activity during the years ended December 31, 2013, 2012 and 2011:

 
Number of
Shares

Weighted
Average
Purchase  Price

Weighted
Average  Remaining
Contractual Term (yrs)
 
Aggregate
Intrinsic
Value
Unvested at January 1, 2011
 

 
$

 
 
 
 
Granted
 
163,000

 
$

 
 
 
 
Vested
 
(15,000
)
 
$

 
 
 
 
Forfeited
 

 
$

 
 
 
 
Unvested at December 31, 2011
 
148,000

 
$

 
 
 
 
Granted
 
682,146

 
$

 
 
 
 
Vested
 
(128,000
)
 
$

 
 
 
 
Forfeited
 
(20,000
)
 
$

 
 
 
 
Unvested at December 31, 2012
 
682,146

 
$

 
 
 
 
Granted
 
323,700

 
$

 
 
 
 
Vested
 
(154,124
)
 
$

 
 
 
 
Forfeited
 
(115,367
)
 
$

 
 
 
 
Unvested at December 31, 2013
 
736,355

 
$

 
1.6
 

$11.0
 million
Expected to vest at December 31, 2013
 
627,647

 
$

 
1.5
 

$9.4
 million

The estimated fair value of the restricted stock units was based on the market value of our common stock on the date of grant. The weighted average grant-date fair value of restricted stock units granted during the years ended December 31, 2013, 2012 and 2011 was $6.69, $10.61 and $6.71 per share, respectively. The total intrinsic value of restricted stock units vested during the years ended December 31, 2013, 2012 and 2011 was approximately $1.1 million, $0.9 million and $0.1 million, respectively. We recognized approximately $1.8 million, $1.5 million and $0.7 million of share-based compensation expense related to the restricted stock units for the years ended December 31, 2013, 2012 and 2011, respectively. As of December 31, 2013, total unrecognized estimated unamortized compensation cost related to non-vested restricted stock units outstanding as of that date was approximately $4.2 million, which is expected to be recognized over a weighted-average amortization period of approximately 3.0 years.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Operating Leases
Our administrative offices and research facilities are located in San Diego, California. We lease an aggregate of approximately 76,000 square feet of office and research space.
In June 2011, we entered into an amended and restated lease (the “11388 Lease”) with BMR-11388 Sorrento Valley Road LP for the office and research facilities located at 11388 Sorrento Valley Road, San Diego, California ("11388 Property"). The 11388 Lease commenced in June 2011 and continues through January 2018. The 11388 Lease supersedes the lease agreement with BC Sorrento, LLC entered into in July 2007. Under the terms of the 11388 Lease, the initial monthly rent payment was approximately $38,000 net of costs and property taxes associated with the operation and maintenance of the leased facilities, commencing in December 2011 and increased to approximately $65,000 starting in January 2013. Thereafter, the annual base rent is subject to approximately 2.5% annual increases each year throughout the term of the 11388 Lease. In addition, we received a cash incentive of approximately $98,000, a tenant improvement allowance of $300,000 and free and reduced rent totaling approximately $744,000 under the terms of the 11388 Lease. Combined with the unamortized deferred rent under the Original Lease, unamortized deferred rent associated with the 11388 Lease of $953,000 and $1.1 million was included in deferred rent as of December 31, 2013 and 2012, respectively.
In July 2007, we entered into a sublease agreement (the “11404 Sublease”) with Avanir Pharmaceuticals, Inc. (“Avanir”) for Avanir’s excess leased facilities located at 11404 Sorrento Valley Road, San Diego, California for office and research space (“11404 Property”) for a monthly rent payment of approximately $54,000, net of costs and property taxes associated with the operation and maintenance of the subleased facilities. The 11404 Sublease expired in January 2013. The annual base rent was subject to approximately 4% annual increases each year throughout the terms of the 11404 Sublease.
In April 2009, we entered into a sublease agreement (the “11408 Sublease”) with Avanir for office and research space located at 11408 Sorrento Valley Road, San Diego, California (“11408 Property”), which expired in January 2013. The monthly rent payments, which commenced in January 2010, were approximately $21,000 and were subject to an annual increase of approximately 3%.
In June 2011, we entered into a lease agreement (the “11404/11408 Lease”) with BMR-Sorrento Plaza LLC (“BMR-Sorrento”) for the 11404 Property and 11408 Property which commenced in January 2013 and continues through January 2018. Pursuant to the terms of the 11404/11408 Lease, the initial monthly rent payment is approximately $71,000 net of costs and property taxes associated with the operation and maintenance of the leased facilities and is subject to approximately 2.5% annual increases each year throughout the term of the 11404/11408 Lease.
In October 2012, we entered into a lease agreement (the “11436 Lease”) with Cal-Sorrento, Ltd. for the 11436 Sorrento Valley Road, San Diego, California ("11436 Property"). Pursuant to the terms of the 11436 Lease, the lessor completed and paid for certain improvements on the building before the commencement of the lease in November 2013. This lease expires in January 2018. The initial monthly rent payment is approximately $24,300 net of costs and property taxes associated with the operation and maintenance of the leased facilities, which commenced in November 2013 and is subject to approximately 3% annual increases each year throughout the term of the 11436 Lease. In addition, we received free and reduced rent totaling approximately $158,000. Under the terms of the 11436 Lease, we were the “deemed owner” (for accounting purposes only) of the facility during the construction period. As such, we recorded an asset of $1.5 million as of December 31, 2012, representing the fair value of the building with a corresponding long-term lease financing obligation. Upon completion of the building construction in the fourth quarter of 2013, we met the sale-leaseback criteria for de-recognition of the building asset and liability; therefore, the building asset and corresponding liability were removed from the consolidated balance sheet as of December 31, 2013.
We pay a pro rata share of operating costs, insurance costs, utilities and real property taxes incurred by the landlords for the subleased facilities.
Additionally, we lease certain office equipment under operating leases. Total rent expense was approximately $1.7 million, $1.6 million and $1.5 million for the years ended December 31, 2013, 2012 and 2011, respectively.
 
Approximate annual future minimum operating lease payments as of December 31, 2013 are as follows: 
Year:
 
Operating
Leases
2014
 
$
1,995,000

2015
 
2,062,000

2016
 
2,081,000

2017
 
2,122,000

2018
 
80,000

Thereafter
 

Total minimum lease payments
 
$
8,340,000


Other Commitments
In order to scale up the production of bulk rHuPH20 and to identify another manufacturer that would help meet anticipated production obligations arising from our proprietary programs and our collaborations, we entered into a Technology Transfer Agreement and a Clinical Supply Agreement with Cook Pharmica LLC (“Cook”). The technology transfer was completed in 2008. In 2009, multiple batches of bulk rHuPH20 were produced to support planned future clinical studies.
In March 2010, we entered into a Commercial Supply Agreement with Cook (the “Cook Commercial Supply Agreement”). Under the terms of the Cook Commercial Supply Agreement, Cook will manufacture certain batches of bulk rHuPH20 that will be used for commercial supply of certain products and product candidates. Under the terms of the Cook Commercial Supply Agreement, we are committed to certain minimum annual purchases of bulk rHuPH20 equal to four quarters of forecasted supply. At December 31, 2013, we had a $3.0 million minimum purchase obligation in connection with the Cook Commercial Supply Agreement.
In March 2010, we amended our Commercial Supply Agreement (the “March 2010 Avid Amendment”) with Avid Bioservices, Inc. ("Avid") which was originally entered into in February 2005 and amended in December 2006. Under the terms of the March 2010 Avid Amendment, we are committed to certain minimum annual purchases of bulk rHuPH20 equal to three quarters of forecasted supply. In addition, Avid has the right to manufacture and supply a certain percentage of bulk rHuPH20 that will be used in Hylenex recombinant. At December 31, 2013, we had a minimum purchase obligation of approximately $142,000.
In March 2010, we entered into a second Commercial Supply Agreement with Avid (the “Avid Commercial Supply Agreement”). Under the terms of the Avid Commercial Supply Agreement, we are committed to certain minimum annual purchases of bulk rHuPH20 equal to three quarters of forecasted supply. In addition, Avid has the right to manufacture and supply a certain percentage of bulk rHuPH20 that will be used in the collaboration products and product candidates. At December 31, 2013, we had a $6.0 million minimum purchase obligation in connection with this agreement.
In June 2011, we entered into a commercial manufacturing and supply agreement with Baxter, under which Baxter provides the final fill and finishing steps in the production process of Hylenex recombinant for a limited period of time. The initial term of the agreement with Baxter was extended to December 31, 2015, subject to further extensions in accordance with the terms and conditions of the agreement. At December 31, 2013, we had a minimum purchase obligation in connection with this agreement of approximately $1.8 million. 
In June 2011, we entered into a services agreement with another third party manufacturer for the technology transfer and manufacture of Hylenex recombinant. At December 31, 2013, we had no minimum purchase obligation in connection with this agreement.
Legal Contingencies
From time to time, we may be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of our business. Any of these claims could subject us to costly legal expenses and, while we generally believe that we have adequate insurance to cover many different types of liabilities, our insurance carriers may deny coverage or our policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on our consolidated results of operations and financial position. Additionally, any such claims, whether or not successful, could damage our reputation and business. We currently are not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our consolidated results of operations or financial position.
Income Taxes
Income Taxes
Income Taxes
Significant components of our net deferred tax assets at December 31, 2013 and 2012 are shown below. A valuation allowance of $162.0 million and $128.4 million has been established to offset the net deferred tax assets as of December 31, 2013 and 2012, respectively, as realization of such assets is uncertain.
 
 
December 31,

 
2013

2012
Deferred tax assets:
 



Net operating loss carryforwards
 
$
116,572,000

 
$
86,732,000

Deferred revenue
 
13,324,000

 
17,345,000

Research and development credits
 
28,867,000

 
20,286,000

Share-based compensation
 
2,495,000

 
2,975,000

Depreciation
 

 
179,000

Other, net
 
853,000

 
926,000


 
162,111,000

 
128,443,000

Valuation allowance for deferred tax assets
 
(161,968,000
)
 
(128,443,000
)
Deferred tax assets, net of valuation
 
143,000

 

Deferred tax liabilities:
 
 
 
 
Depreciation
 
(143,000
)
 

Net deferred tax liabilities
 
(143,000
)
 

Net deferred tax assets
 
$

 
$


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

 
2013

2012

2011
Federal income tax at 34%
 
$
(28,383,000
)
 
$
(18,208,000
)
 
$
(6,722,000
)
State income tax, net of federal benefit
 
(1,745,000
)
 
(3,023,000
)
 
(1,153,000
)
Increase in valuation allowance
 
33,525,000

 
20,954,000

 
9,935,000

Tax effect on non-deductible expenses and other
 
5,219,000

 
1,293,000

 
1,671,000

Research and development credits
 
(8,616,000
)
 
(1,016,000
)
 
(3,731,000
)

 
$

 
$

 
$


At December 31, 2013, we had federal and California tax net operating loss carryforwards of approximately $327.7 million and $276.9 million, respectively. Included in these amounts are federal and California net operating losses of approximately $27.9 million attributable to stock option deductions of which the tax benefit will be credited to equity when realized. The federal and California tax loss carryforwards will begin to expire in 2018 and 2014, respectively, unless previously utilized.
At December 31, 2013, we also had federal and California research and development tax credit carryforwards of approximately $21.9 million and $10.5 million, respectively. The federal research and development tax credits will begin to expire in 2024 unless previously utilized. The California research and development tax credits will carryforward indefinitely until utilized.
Pursuant to Internal Revenue Code Section 382, the annual use of the net operating loss carryforwards and research and development tax credits could be limited by any greater than 50% ownership change during any three-year testing period. As a result of any such ownership change, portions of our net operating loss carryforwards and research and development tax credits are subject to annual limitations. We recently completed an updated Section 382 analysis regarding the limitation of the net operating losses and research and development credits as of December 31, 2012. Based upon the analysis, we determined that ownership changes occurred in prior years. However, the annual limitations on net operating loss and research and development tax credit carryforwards will not have a material impact on the future utilization of such carryforwards.
At December 31, 2013 and 2012, our unrecognized income tax benefits and uncertain tax positions were not material and would not, if recognized, affect the effective tax rate. Interest and/or penalties related to uncertain income tax positions are included by us as a component of income tax expense. For the years ended December 31, 2013, 2012 and 2011, we recognized no interest or penalties.
We are subject to taxation in the U.S. and in various state jurisdictions. Our tax years for 1998 and forward are subject to examination by the U.S. and California tax authorities due to the carryforward of unutilized net operating losses and research and development credits.
Employee Savings Plan
Employee Savings Plan
Employee Savings Plan
We have an employee savings plan pursuant to Section 401(k) of the Internal Revenue Code. All employees are eligible to participate, provided they meet the requirements of the plan. We are not required to make matching contributions under the plan. However, we voluntarily contributed to the plan approximately $633,000, $508,000 and $355,000 for the years ended December 31, 2013, 2012 and 2011, respectively.
Related Party Transactions
Related Party Transactions
Related Party Transactions
In June 2011, we and Intrexon entered into the Intrexon Collaboration, under which Intrexon obtained a worldwide exclusive license for the use of rHuPH20 enzyme in the development of a subcutaneous injectable formulation of Intrexon’s recombinant human alpha 1-antitrypsin (rHuA1AT). Intrexon’s chief executive officer and chairman of its board of directors, Randal J. Kirk, is also a member of our Board of Directors. The collaborative arrangement with Intrexon was reviewed and approved by our Board of Directors in accordance with our related party transaction policy. For the years ended December 31, 2013, 2012 and 2011, we recognized $1.0 million, $1.0 million and $9.0 million, respectively, in revenue under collaborative agreements pursuant to the terms of the Intrexon Collaboration. See Note 4, Collaborative Agreements, for a further discussion of the Intrexon Collaboration.
Subsequent Events (Notes)
Subsequent Events [Text Block]
Subsequent Events
On February 10, 2014, we completed an underwritten public offering and issued 8,846,153 shares of common stock, including 1,153,846 shares sold pursuant to the full exercise of an over-allotment option granted to the underwriters. All of the shares were offered at a public offering price of $13.00 per share, generating approximately $107.8 million in proceeds after deducting the underwriting discounts and commissions and estimated expenses.
Summary of Unaudited Quarterly Financial Information
Summary of Unaudited Quarterly Financial Information
Summary of Unaudited Quarterly Financial Information
The following is a summary of our unaudited quarterly results for the years ended December 31, 2013 and 2012:
 
 
Quarter Ended
2013 (Unaudited):
 
March 31,
 
June 30,
 
September 30,
 
December 31,
Total revenues
 
$
11,833,540

 
$
14,453,810

 
$
16,013,164

 
$
12,498,933

Gross profit on product sales(1)
 
$
769,623

 
$
1,815,903

 
$
9,342,187

 
$
6,266,250

Total operating expenses
 
$
30,329,313

 
$
36,574,458

 
$
34,507,020

 
$
33,822,293

Net loss
 
$
(19,288,369
)
 
$
(22,911,511
)
 
$
(19,292,368
)
 
$
(21,986,303
)
Net loss per share, basic and diluted
 
$
(0.17
)
 
$
(0.20
)
 
$
(0.17
)
 
$
(0.19
)
Shares used in computing basic and diluted net loss
per share
 
112,416,792

 
112,486,211

 
112,765,155

 
113,550,229

 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
2012 (Unaudited):
 
March 31,
 
June 30,
 
September 30,
 
December 31,
Total revenues(2)
 
$
7,440,179

 
$
7,757,175

 
$
5,334,323

 
$
21,793,549

Gross profit on product sales
 
$
116,650

 
$
381,822

 
$
488,719

 
$
805,851

Total operating expenses
 
$
22,580,577

 
$
21,805,273

 
$
25,364,160

 
$
26,200,662

Net loss
 
$
(15,119,181
)
 
$
(14,021,119
)
 
$
(20,005,846
)
 
$
(4,405,856
)
Net loss per share, basic and diluted
 
$
(0.14
)
 
$
(0.13
)
 
$
(0.18
)
 
$
(0.04
)
Shares used in computing basic and diluted net loss
per share
 
107,589,514

 
112,063,665

 
112,305,002

 
112,323,056

 
 
(1)
Gross profit on product sales for the quarters ended June 30, 2013, September 30, 2013 and December 31, 2013 excluded manufacturing costs related to the product sales of bulk rHuPH20 for Herceptin SC and HyQvia in the amounts of $873,000, $6.5 million and $2.6 million, respectively. Such costs were incurred prior to European marketing approvals for Herceptin SC and HyQvia, and therefore, they were charged to research and development expenses in the periods the costs were incurred.
(2)
Revenues for the quarter ended December 31, 2012 included $9.5 million in revenues under collaborative agreements from the Pfizer Collaboration.
Schedule II Valuation and Qualifying Accounts (Notes)
Schedule of Valuation and Qualifying Accounts Disclosure [Text Block]
Valuation and Qualifying Accounts
 
 
Balance at Beginning of Period
 
Additions
 
Deductions
 
Balance at End of Period
For the year ended December 31, 2013
 
 
 
 
 
 
 
 
Accounts receivable allowances (1)
 
$
178,140

 
$
2,979,646

 
$
(2,547,304
)
 
$
610,482

For the year ended December 31, 2012
 
 
 
 
 
 
 
 
Accounts receivable allowances (1)
 
$
15,429

 
$
770,614

 
$
(607,903
)
 
$
178,140

For the year ended December 31, 2011
 
 
 
 
 
 
 
 
Accounts receivable allowances (1)
 
$

 
$
15,429

 
$

 
$
15,429

______________________________
(1)
Allowances are for chargebacks, prompt payment discounts and distribution fees related to Hylenex recombinant product sales.
Summary of Significant Accounting Policies (Policies)
Basis of Presentation
The consolidated financial statements include the accounts of Halozyme Therapeutics, Inc. and our wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.'s wholly owned subsidiary, Halozyme Holdings Ltd. All intercompany accounts and transactions have been eliminated.
Reclassifications
Certain prior period amounts have been reclassified to conform to current period presentation. Specifically, we have reclassified $400,000 from cash and cash equivalents to restricted cash in the consolidated balance sheet at December 31, 2012.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.
Cash Equivalents and Marketable Securities
Cash equivalents consist of highly liquid investments, readily convertible to cash, that mature within ninety days or less from date of purchase. Our cash equivalents consist of money market funds.
Marketable securities are investments with original maturities of more than ninety days from the date of purchase that are specifically identified to fund current operations. Marketable securities are considered available-for-sale. These investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current balance sheet date which reflects management's intention to use the proceeds from the sale of these investments to fund our operations, as necessary. Such available-for-sale investments are carried at fair value with unrealized gains and losses recorded in other comprehensive loss and included as a separate component of stockholders' (deficit) equity. The cost of marketable securities is adjusted for amortization of premiums or accretion of discounts to maturity, and such amortization or accretion is included in investment income. We use the specific identification method for calculating realized gains and losses on marketable securities sold. Realized gains and losses and declines in value judged to be other-than-temporary on marketable securities, if any, are included in investment income in the consolidated statement of operations
Restricted Cash
Under the terms of the leases on our facilities, we are required to maintain letters of credit as security deposits during the terms of such leases. At December 31, 2013 and 2012, restricted cash of $500,000 and $400,000, respectively, was pledged as collateral for the letters of credit.
Fair Value of Financial Instruments
The authoritative guidance for fair value measurements establishes a three tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Our financial instruments include cash equivalents, available-for-sale marketable securities, accounts receivable, prepaid expenses, accounts payable, accrued expenses and long-term debt. Fair value estimates of these instruments are made at a specific point in time, based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. The carrying amount of cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments. Further, based on the borrowing rates currently available to us for loans with similar terms, we believe the fair value of long-term debt approximates its carrying value.
Available-for-sale marketable securities consist of corporate debt securities, commercial paper and certificates of deposit and were measured at fair value using Level 2 inputs. Level 2 financial instruments are valued using market prices on less active markets and proprietary pricing valuation models with observable inputs, including interest rates, yield curves, maturity dates, issue dates, settlement dates, reported trades, broker-dealer quotes, issue spreads, benchmark securities or other market related data. We obtain the fair value of Level 2 investments from our investment manager, who obtains these fair values from a third-party pricing service. We validate the fair values of Level 2 financial instruments provided by our investment manager by comparing these fair values to a third-party pricing source.
Concentrations of Credit Risk, Sources of Supply and Significant Customers
We are subject to credit risk from our portfolio of cash equivalents and marketable securities. These investments were made in accordance with our investment policy which specifies the categories, allocations, and ratings of securities we may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. We maintain our cash and cash equivalent balances with one major commercial bank and marketable securities with another financial institution. Deposits held with the financial institutions exceed the amount of insurance provided on such deposits. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and marketable securities to the extent recorded on the balance sheet.
We are also subject to credit risk from our accounts receivable related to our product sales and revenues under our license and collaborative agreements. We have license and collaborative agreements with pharmaceutical companies under which we receive payments for license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk formulation of rHuPH20. In addition, we sell Hylenex® recombinant in the United States to a limited number of established wholesale distributors in the pharmaceutical industry. Credit is extended based on an evaluation of the customer’s financial condition, and collateral is not required. Management monitors our exposure to accounts receivable by periodically evaluating the collectibility of the accounts receivable based on a variety of factors including the length of time the receivables are past due, the financial health of the customer and historical experience. Based upon the review of these factors, we recorded no allowance for doubtful accounts at December 31, 2013 and 2012. Approximately 81% and 86% of the accounts receivable balance at December 31, 2013 and 2012, respectively, represents amounts due from Roche and Pfizer. For the years ended December 31, 2013, 2012 and 2011, 64%, 45% and 19% of total revenues, respectively, were from Roche and 10%, 17% and 42% of total revenues, respectively, were from Baxter. For the years ended December 31, 2013 and 2012, 4% and 22% of total revenues, respectively, were from Pfizer. In addition, for the year ended December 31, 2011, 22% and 16% of total revenues were from ViroPharma and Intrexon, respectively.
Worldwide revenues from external customers for the years ended December 31, 2013, 2012 and 2011 consisted of domestic revenues of approximately $19.0 million, $22.7 million and $44.9 million, respectively, and foreign revenues of approximately $35.8 million, $19.6 million and $11.2 million, respectively. Of our total foreign revenues for the years ended December 31, 2013, 2012 and 2011, approximately $35.2 million, $18.9 million, $10.4 million, respectively, were attributable to Switzerland. We attribute revenues under collaborative agreements to the individual countries where the collaborator is headquartered. We attribute revenues from product sales to the individual countries to which the product is shipped. For the years ended December 31, 2013, 2012 and 2011, we had no foreign based operations, and we had no long-lived assets located in foreign countries.
We rely on two third-party manufacturers for the supply of bulk rHuPH20 for use in the manufacture of Hylenex recombinant and our other collaboration products and product candidates. Payments due to these suppliers represented 9% and 20% of the accounts payable balance at December 31, 2013 and 2012, respectively. We also rely on a third-party manufacturer for the fill and finish of Hylenex recombinant product under a contract. Payments due to this supplier represented 2% and 8% of the accounts payable balance at December 31, 2013 and 2012, respectively.
Accounts Receivable, Net
Accounts receivable is recorded at the invoiced amount and is non-interest bearing. Accounts receivable is recorded net of allowances for doubtful accounts, cash discounts for prompt payment, distribution fees and chargebacks.
Inventories
Inventories are stated at lower of cost or market. Cost is determined on a first-in, first-out basis. Inventories are reviewed periodically for potential excess, dated or obsolete status. Management evaluates the carrying value of inventories on a regular basis, taking into account such factors as historical and anticipated future sales compared to quantities on hand, the price we expect to obtain for products in their respective markets compared with historical cost and the remaining shelf life of goods on hand.
Prior to receiving marketing approval from the U.S. Food and Drug Administration (“FDA”) or comparable regulatory agencies in foreign countries, costs related to purchases of bulk rHuPH20 and raw materials and the manufacturing of the product candidates are recorded as research and development expense. All direct manufacturing costs incurred after receiving marketing approval are capitalized as inventory. Inventories used in clinical trials are expensed at the time the inventories are packaged for the clinical trials.
As of December 31, 2013 and 2012, inventories consisted of $2.6 million of Hylenex recombinant inventory and $3.5 million and zero of bulk rHuPH20, respectively, for use in the manufacture of Herceptin® SC. Roche received European marketing approval for its collaboration product, Herceptin SC, in August 2013 and Baxter for its collaboration product, HyQvia, in May 2013. As such, direct manufacturing costs of bulk rHuPH20 for Herceptin SC and HyQvia incurred after the receipt of the European marketing approvals are being capitalized as inventory.
Property and Equipment, Net
Property and equipment are recorded at cost, less accumulated depreciation and amortization. Equipment are depreciated using the straight-line method over their estimated useful lives of three years and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the lease term, whichever is shorter. Leased buildings under build-to-suit lease arrangements are capitalized and included in property and equipment when we are involved in the construction of the structural improvements or take construction risk prior to the commencement of the lease. Upon completion of the construction under the build-to-suit leases, we assess whether those arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If we continue to be the deemed owner, the facilities would be accounted for as financing leases.
Impairment of Long-Lived Assets
We account for long-lived assets in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable. For the years ended December 31, 2013 and 2012, there was no impairment of the value of such assets.
Deferred Rent
Rent expense is recorded on a straight-line basis over the initial term of the lease. The difference between rent expense accrued and amounts paid under lease agreements is recorded as deferred rent in the accompanying consolidated balance sheets.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity during the period from transactions and other events and circumstances from non-owner sources.
Revenue Recognition
We generate revenues from product sales and collaborative agreements. Payments received under collaborative agreements may include nonrefundable fees at the inception of the agreements, license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk rHuPH20, and/or royalties on sales of products resulting from collaborative arrangements.
We recognize revenues in accordance with the authoritative guidance for revenue recognition. We recognize revenue when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectibility is reasonably assured.
Product Sales, Net
Hylenex Recombinant
In December 2011, we reintroduced Hylenex recombinant to the market. We sell Hylenex recombinant in the United States to wholesale pharmaceutical distributors, who sell the product to hospitals and other end-user customers. Sales to wholesalers provide for selling prices that are fixed on the date of sale, although we offer discounts to certain group purchasing organizations ("GPOs"), hospitals and government programs. The wholesalers take the title to the product, bear the risk of loss of ownership and have economic substance to the inventory. Further, we have no significant obligations for future performance to generate pull-through sales; however, we allow the wholesalers to return product that is damaged or received in error. In addition, we accept unused product to be returned beginning six months prior to and ending twelve months following product expiration.
Prior to December 31, 2013, Hylenex recombinant had a limited sales history and we could not reliably estimate expected returns and chargebacks of the product at the time the product was sold to the wholesalers. Accordingly, we deferred the recognition of revenue on sales of Hylenex recombinant to wholesalers, and instead, recognized revenue at the time when evidence existed to confirm that pull-through sales from wholesalers to the hospitals or other end-user customers had occurred or the right of return no longer existed, whichever occurred earlier. At the time product sales revenue was recognized, we recorded allowances for product returns and chargebacks based on our best estimates at the time. Shipments of product that were not recognized as revenue were treated as deferred revenue.
At December 31, 2013, we had developed sufficient historical experience and data to reasonably estimate future returns and chargebacks of Hylenex recombinant. As a result, effective December 31, 2013 we began recognizing Hylenex recombinant product sales and related cost of product sales at the time title transfers to the wholesalers and providing for an estimate of future product returns and chargebacks at that time. In connection with the change in the timing of recognition of product sales, we recorded a one-time adjustment to recognize revenue and related costs that had previously been deferred at December 31, 2012, resulting in additional net product sales of $624,000 and cost of product sales of $179,000 for the year ended December 31, 2013. Based on our analysis and information available at this time, we also recorded a net reduction to allowances for estimated product returns and chargebacks, resulting in a net increase to net product sales of $73,000 for the year ended December 31, 2013. As a result, we recorded a total increase to net product sales of $697,000 for the year ended December 31, 2013.
Allowances for product returns and chargebacks are based on amounts owed or to be claimed on the related sales. We believe that our estimated product returns for Hylenex recombinant requires a high degree of judgment and is subject to change based on our experience and certain quantitative and qualitative factors. In order to develop a methodology to reliably estimate future returns and provide a basis for recognizing revenue on sales to wholesale distributors, we analyzed many factors, including, without limitation: (1) actual Hylenex recombinant product return history, taking into account product expiration dating at the time of shipment, (2) re-order activities of the wholesalers as well as their customers and (3) levels of inventory at the wholesale channel. We have monitored actual return history on an individual product lot basis since product launch. We considered the dating of product at the time of shipment into the distribution channel and changes in the estimated levels of inventory within the distribution channel to estimate our exposure for returned product. We considered historical chargebacks activity and current contract prices to estimate our exposure for returned product. Based on the data gathered, we believe we have the information needed to reasonably estimate product returns and chargebacks.
We recognize product sales allowances as a reduction of product sales in the same period the related revenue is recognized. Because of the shelf life of Hylenex recombinant and our lengthy return period, there may be a significant period of time between when the product is shipped and when we issue credits on returned product. If actual results differ from our estimates, we will be required to make adjustments to these allowances in the future, which could have an effect on product sales revenue and earnings in the period of adjustments.

We record certain sales reserves and allowances as a reduction to gross revenue. These reserves and allowances include:
Product Returns. The product returns reserve is based on management’s best estimate of the products sold that are anticipated to be returned. The product returns reserve is recorded as a reduction of product sales revenue in the same period the related product sales revenue is recognized and is included in accrued expenses.
Distribution Fees. The distribution fees, based on contractually determined rates, arise from contractual agreements we have with certain wholesalers for distribution services they provide with respect to Hylenex recombinant. These fees are generally a fixed percentage of the price of the product purchased by the wholesalers. At the time the sale is made to the respective wholesalers, we record distribution fees as reduction of product sales revenue and accounts receivable.    
Prompt Payment Discounts. We offer cash discounts to certain wholesalers as an incentive to meet certain payment terms. We expect our customers will take advantage of this discount; therefore, at the time the sale is made to the respective wholesalers, we record the entire prompt payment discount, based on the gross amount of each invoice, as reduction of product sales revenue and accounts receivable.    
Other Discounts and Fees. We provide discounts to end-user members of certain GPOs under collective purchasing contracts between us and the GPOs. We also provide discounts to certain hospitals, who are members of the GPOs, with which we do not have contracts. The end-user members purchase products from the wholesalers at a contracted discounted price, and the wholesalers then charge back to us the difference between the current retail price and the price the end-users paid for the product. In the period product sales revenue is recognized, we estimate the related sales from our wholesalers to these GPOs and accrue for the chargebacks we anticipate from our wholesalers based on current contract prices and historical chargebacks activity. We record accrued chargebacks as a reduction to our accounts receivable. GPO administrative service fees for these transactions are also recorded in the same period the related product sales revenue is recognized and are included in accrued expenses. We also provide predetermined discounts under certain government programs, which are recorded at the time of sale.
Bulk rHuPH20
Subsequent to receiving marketing approval from the FDA or comparable regulatory agencies in foreign countries, sales of bulk rHuPH20 for use in collaboration commercial products are recognized as product sales when the materials have met all the specifications required for the customer's acceptance and title and risk of loss have transferred to the customer. Following the receipts of European marketing approvals of Roche's Herceptin SC product in August 2013 and Baxter's HyQvia product in May 2013, revenue from the sales of bulk rHuPH20 for these collaboration products are recognized as product sales. For the year ended December 31, 2013, we recognized $13.7 million and $1.1 million in product sales of bulk rHuPH20 for Herceptin SC and HyQvia, respectively.
Revenues under Collaborative Agreements
We have license and collaboration agreements under which the collaborators obtained worldwide rights for the use of our proprietary rHuPH20 enzyme in the development and commercialization of the collaborators’ biologic compounds. The collaborative agreements contain multiple elements including nonrefundable payments at the inception of the arrangement, license fees, exclusivity fees, payments based on achievement of specified milestones designated in the collaborative agreements, annual maintenance fees, reimbursements of research and development services, payments for supply of bulk rHuPH20 for the collaborator and/or royalties on sales of products resulting from collaborative agreements. We analyze each element of our collaborative agreements and consider a variety of factors in determining the appropriate method of revenue recognition of each element.
In order to account for the multiple-element arrangements, we identify the deliverables included within the agreement and evaluate which deliverables represent units of accounting. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation. The deliverables under our collaborative agreements include (i) the license to our rHuPH20 technology, (ii) at the collaborator’s request, research and development services which are reimbursed at contractually determined rates, and (iii) at the collaborator’s request, supply of bulk rHuPH20 which is reimbursed at our cost plus a margin. A delivered item is considered a separate unit of accounting when the delivered item has value to the collaborator on a standalone basis based on the consideration of the relevant facts and circumstances for each arrangement. Factors considered in this determination include the research capabilities of the collaborator and the availability of research expertise in this field in the general marketplace.
Arrangement consideration is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (“VSOE”) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists, we use our best estimate of the selling price for the deliverable. The amount of allocable arrangement consideration is limited to amounts that are not contingent upon the delivery of additional items or meeting other specified performance conditions. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. Changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement.
Nonrefundable upfront license fee payments are recognized upon delivery of the license if facts and circumstances dictate that the license has standalone value from the undelivered items, which generally include research and development services and the manufacture of bulk rHuPH20, the relative selling price allocation of the license is equal to or exceeds the upfront license fee, persuasive evidence of an arrangement exists, our price to the collaborator is fixed or determinable and collectibility is reasonably assured. Upfront license fee payments are deferred if facts and circumstances dictate that the license does not have standalone value. The determination of the length of the period over which to defer revenue is subject to judgment and estimation and can have an impact on the amount of revenue recognized in a given period.
The terms of our collaborative agreements provide for milestone payments upon achievement of certain development and regulatory events and/or specified sales volumes of commercialized products by the collaborator. We account for milestone payments in accordance with the provisions of ASU No. 2010-17, Revenue Recognition - Milestone Method. We recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following criteria:
1.
The consideration is commensurate with either the entity’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone,
2.
The consideration relates solely to past performance, and
3.
The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.
A milestone is defined as an event (i) that can only be achieved based in whole or in part on either the entity’s performance or on the occurrence of a specific outcome resulting from the entity’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and (iii) that would result in additional payments being due to the vendor.
Reimbursements of research and development services are recognized as revenue during the period in which the services are performed as long as there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the related receivable is reasonably assured. Revenue from the manufacture of bulk rHuPH20 is recognized when the materials have met all specifications required for the collaborator's acceptance and title and risk of loss have transferred to the collaborator. We do not directly control when any collaborator will request research and development services or supply of bulk rHuPH20; therefore, we cannot predict when we will recognize revenues in connection with research and development services and supply of bulk rHuPH20.
Royalty revenue from sales of collaboration products by our collaborators will be recognized when received, which is generally in the quarter following the quarter in which the corresponding sales occur.
The collaborative agreements typically provide the collaborators the right to terminate such agreement in whole or on a product-by-product or target-by-target basis at any time upon 30 to 90 days prior written notice to us. There are no performance, cancellation, termination or refund provisions in any of our collaborative agreements that contain material financial consequences to us.
Refer to Note 4, “Collaborative Agreements,” for further discussion on our collaborative arrangements.
Cost of Product Sales
Cost of product sales consists primarily of raw materials, third-party manufacturing costs, fill and finish costs, freight costs, internal costs and manufacturing overhead associated with the production of Hylenex recombinant. Cost of product sales also consists of the write-down of excess, dated and obsolete inventories and the write-off of any inventories that do not meet certain product specifications. Prior to European marketing approvals of Herceptin SC in August 2013 and HyQvia in May 2013, all costs related to the manufacturing of bulk rHuPH20 for these products were charged to research and development expenses in the periods such costs were incurred. Therefore, cost of bulk rHuPH20 product sales for these collaboration products for the year ended December 31, 2013 excluded the related manufacturing costs totaling $10.0 million, of which $9.0 million and $1.0 million were charged to research and development expenses for the years ended December 31, 2013 and 2012, respectively. Of the bulk rHuPH20 for Herceptin SC on hand as of December 31, 2013, $265,000 in manufacturing costs were previously recorded as research and development expenses. There was no bulk rHuPH20 for HyQvia on hand as of December 31, 2013.
Research and Development Expenses
Research and development expenses include salaries and benefits, facilities and other overhead expenses, external clinical trial expenses, research related manufacturing services, contract services and other outside expenses. Research and development expenses are charged to operations as incurred when these expenditures relate to our research and development efforts and have no alternative future uses. After receiving approval from the FDA or comparable regulatory agencies in foreign countries for a product, costs related to purchases and manufacturing of bulk rHuPH20 for product are capitalized as inventory. The manufacturing costs of bulk rHuPH20 for Herceptin SC and HyQvia incurred after the receipt of the European marketing approvals are capitalized as inventory.
In accordance with certain research and development agreements, we are obligated to make certain upfront payments upon execution of the agreement. Advance payments, including nonrefundable amounts, for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts will be recognized as an expense as the related goods are delivered or the related services are performed or such time when we do not expect the goods to be delivered or services to be performed.
Milestone payments that we make in connection with in-licensed technology for a particular research and development project that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic values are expensed as research and development costs at the time the costs are incurred. We have no in-licensed technologies that have alternative future uses in research and development projects or otherwise.
Clinical Trial Expenses
Payments in connection with our clinical trials are often made under contracts with multiple contract research organizations that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee, unit price or on a time-and-material basis. Payments under these contracts depend on factors such as the successful enrollment or treatment of patients or the completion of other clinical trial milestones.
Expenses related to clinical trials are accrued based on our estimates and/or representations from service providers regarding work performed, including actual level of patient enrollment, completion of patient studies and progress of the clinical trials. Other incidental costs related to patient enrollment or treatment are accrued when reasonably certain. If the contracted amounts are modified (for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), we modify our accruals accordingly on a prospective basis. Revisions in the scope of a contract are charged to expense in the period in which the facts that give rise to the revision become reasonably certain. Historically, we have had no material changes in clinical trial expense accruals that had a material impact on our consolidated results of operations or financial position.
Share-Based Compensation
We record compensation expense associated with stock options and other share-based awards in accordance with the authoritative guidance for stock-based compensation. The cost of employee services received in exchange for an award of an equity instrument is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense on a straight-line basis, net of estimated forfeitures, over the requisite service period of the award. Share-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Share-based compensation expense for an award with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized and any recognized compensation expense is reversed. As share-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. The guidance requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Pre-vesting forfeitures were estimated to be approximately 10% for employees for the years ended December 31, 2013, 2012 and 2011 based on our historical experience for the years then ended.
Income Taxes
We provide for income taxes using the liability method. Under this method, deferred income tax assets and liabilities are determined based on the differences between the financial statement carrying amounts of existing assets and liabilities at each year end and their respective tax bases and are measured using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Deferred tax assets and other tax benefits are recorded when it is more likely than not that the position will be sustained upon audit. Valuation allowances have been established to reduce our net deferred tax assets to zero, as we believe that it is more likely than not that such assets will not be realized.
Net Loss Per Share
Basic net loss per common share is computed by dividing loss for the period by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. Stock options, unvested restricted stock awards (“RSAs”) and unvested restricted stock units (“RSUs”) are considered common stock equivalents and are only included in the calculation of diluted earnings per common share when their effect is dilutive. Because of our net loss, outstanding stock options, outstanding RSUs and unvested RSAs totaling approximately 8,070,141, 7,444,333 and 6,365,667 were excluded from the calculation of diluted net loss per common share for the years ended December 31, 2013, 2012 and 2011, respectively, because their effect was anti-dilutive.
Segment Information
We operate our business in one segment, which includes all activities related to the research, development and commercialization of our proprietary enzymes that can be used to facilitate the delivery of injected drugs and fluids, thus enhancing the efficacy and the convenience of other drugs or to alter abnormal tissue structures for clinical benefit. This segment also includes revenues and expenses related to (i) research and development and API manufacturing activities conducted under our collaborative agreements with third parties and (ii) product sales of Hylenex recombinant. The chief operating decision-maker reviews the operating results on an aggregate basis and manages the operations as a single operating segment.
Adoption of Recent Accounting Pronouncement
Effective January 1, 2013, we adopted Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The provisions of ASU No. 2013-02 require companies to present reclassifications out of accumulated other comprehensive income and other amounts of other comprehensive income separately by each component of other comprehensive income on the face of the financial statements or in the notes. This update is effective prospectively for reporting periods beginning after December 15, 2012. The adoption of ASU No. 2013-02 did not have a material impact on our consolidated financial position or results of operations as the requirements are disclosure only in nature. ASU No. 2013-02 did not impact our disclosures as there were no reclassifications in any periods reported.
Pending Adoption of Recent Accounting Pronouncement
In July 2013, FASB issued ASU No. 2013-11, Income Taxes (Topic 740), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The provisions of ASU No. 2013-11 require entities to present unrecognized tax benefits as a decrease in a net operating loss, similar tax loss or tax credit carryforward if certain criteria are met. The determination of whether a deferred tax asset is available is based on the unrecognized tax benefit and the deferred tax asset that exists at the reporting date and presumes disallowance of the tax position at the reporting date. The guidance will eliminate the diversity in practice in the presentation of unrecognized tax benefits but will not alter the way in which entities assess deferred tax assets for realizability. The amendments are effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2014. The amendments should be applied prospectively to unrecognized tax benefits that exist at the effective date. Early adoption is permitted. The adoption of ASU No. 2013-11 will not have a material impact on our consolidated financial position or results of operations.
Summary of Significant Accounting Policies Fair Value of Financial Instruments (Tables)
Fair Value, Assets Measured on Recurring Basis [Table Text Block]
The following table summarizes, by major security type, our cash equivalents and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy:
 
 
December 31, 2013
 
December 31, 2012
 
 
Level 1
 
Level 2
 
Total estimated fair value
 
Level 1
 
Level 2
 
Total estimated fair value
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
5,710,755

 
$

 
$
5,710,755

 
$
98,024,269

 
$

 
$
98,024,269

 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale marketable
   securities:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
 

 
35,147,326

 
35,147,326

 

 

 

Commercial paper
 

 
5,998,371

 
5,998,371

 

 

 

Certificate of deposit
 

 
3,000,000

 
3,000,000

 

 

 

 
 
$
5,710,755

 
$
44,145,697

 
$
49,856,452

 
$
98,024,269

 
$

 
$
98,024,269

Summary of Significant Accounting Policies Share-based compensation (Tables)
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Table Text Block]
Total share-based compensation expense related to share-based awards for the years ended December 31, 2013, 2012 and 2011 was comprised of the following: 
 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
Research and development
 
$
4,475,530

 
$
4,190,938

 
$
2,815,362

Selling, general and administrative
 
5,062,526

 
4,157,649

 
2,754,537

Share-based compensation expense
 
$
9,538,056

 
$
8,348,587

 
$
5,569,899

Net share-based compensation expense, per basic and diluted share
 
$
0.08

 
$
0.08

 
$
0.05

Share-based compensation expense from:
 

 

 

Stock options
 
$
5,499,445

 
$
4,722,629

 
$
3,230,822

Restricted stock awards and restricted stock units
 
4,038,611

 
3,625,958

 
2,339,077

 
 
$
9,538,056

 
$
8,348,587

 
$
5,569,899

Marketable Securities (Tables)
Marketable Securities [Table Text Block]
Available-for-sale marketable securities consisted of the following:
 
 
December 31, 2013
Description
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Corporate debt securities
 
$
35,130,272

 
$
20,185

 
$
(3,131
)
 
$
35,147,326

Commercial paper
 
5,998,371

 

 

 
5,998,371

Certificate of deposit
 
3,000,000

 

 

 
3,000,000

 
 
$
44,128,643

 
$
20,185

 
$
(3,131
)
 
$
44,145,697

Certain Balance Sheet Items (Tables)
Accounts receivable, net consisted of the following:
 
 
December 31,
2013
 
December 31,
2012
Accounts receivable from product sales to collaborators
 
$
4,495,314

 
$

Accounts receivable from revenues under collaborative agreements
 
3,707,248

 
15,058,163

Accounts receivable from other product sales
 
1,505,004

 
823,064

 
 
9,707,566

 
15,881,227

Allowance for distribution fees and discounts
 
(610,482
)
 
(178,140
)
 
 
$
9,097,084

 
$
15,703,087

Inventories consisted of the following:
 
 
December 31,
2013
 
December 31,
2012
Raw materials
 
$
1,136,815

 
$
1,127,061

Work-in-process
 
4,280,076

 
792,257

Finished goods
 
753,091

 
751,378

 
 
$
6,169,982

 
$
2,670,696

Prepaid expenses and other assets consisted of the following:
 
 
December 31,
2013
 
December 31,
2012
Prepaid manufacturing expenses
 
$
5,884,040

 
$
8,152,602

Prepaid research and development expenses
 
3,522,250

 
2,274,551

Other prepaid expenses
 
1,338,758

 
2,250,791

Other assets
 
356,328

 
74,944

 
 
11,101,376

 
12,752,888

Less long-term portion
 
2,675,692

 

 
 
$
8,425,684

 
$
12,752,888

Property and equipment, net consisted of the following:
 
 
December 31,
2013
 
December 31,
2012
Research equipment
 
$
7,713,850

 
$
6,360,004

Computer and office equipment
 
1,948,859

 
1,432,975

Leasehold improvements
 
1,408,025

 
1,138,110

Building(1)
 

 
1,450,000

 
 
11,070,734

 
10,381,089

Accumulated depreciation and amortization
 
(7,649,228
)
 
(6,680,627
)
 
 
$
3,421,506

 
$
3,700,462

________________________
(1)
Represented capitalized building under a build-to-suit lease arrangement where we were considered the owner (for accounting purposes only) during the construction period. Upon the completion of the building construction in the fourth quarter of 2013, we met the sale-leaseback criteria for de-recognition of the building asset and liability; therefore, the building asset was removed from the consolidated balance sheet as of December 31, 2013.
Accrued expenses consisted of the following:
 
 
December 31,
2013
 
December 31,
2012
Accrued compensation and payroll taxes
 
$
7,075,347

 
$
4,053,590

Accrued outsourced research and development expenses
 
3,377,256

 
1,239,050

Accrued outsourced manufacturing expenses
 
3,233,012

 
984,192

Other accrued expenses
 
1,234,831

 
1,506,615

 
 
$
14,920,446

 
$
7,783,447

Deferred revenue consisted of the following:
 
 
December 31,
2013
 
December 31,
2012
Collaborative agreements
 
$
51,184,897

 
$
43,222,473

Product sales
 
1,958,381

 
623,510

Total deferred revenue
 
53,143,278

 
43,845,983

Less current portion
 
7,397,829

 
8,891,017

Deferred revenue, net of current portion
 
$
45,745,449

 
$
34,954,966

Long-Term Debt, Net (Tables)
Schedule of future maturities and interest payments
Future maturities and interest payments under the term loan as of December 31, 2013, are as follows:
2014
 
$
3,460,417

2015
 
17,435,636

2016
 
18,677,512

2017
 
18,677,512

2018
 
5,806,459

Total minimum payments
 
64,057,536

Less amount representing interest
 
(14,057,536
)
Gross balance of long-term debt
 
50,000,000

Less unamortized debt discount
 
(228,263
)
Present value of long-term debt
 
49,771,737

Less current portion of long-term debt
 

Long-term debt, less current portion and unamortized debt discount
 
$
49,771,737

Equity Incentive Plans (Tables)
A summary of our stock option award activity as of and for the years ended December 31, 2013, 2012 and 2011 is as follows: 

 
Shares
Underlying
Stock Options

Weighted
Average Exercise
Price per Share

Weighted Average
Remaining
Contractual  Term (yrs)
 
Aggregate
Intrinsic
Value
Outstanding at January 1, 2011
 
7,975,365

 
$3.87
 
 
 
 
Granted
 
1,624,768

 
$7.79
 
 
 
 
Exercised
 
(3,137,056
)
 
$1.71
 
 
 
 
Canceled/forfeited
 
(593,293
)
 
$6.72
 
 
 
 
Outstanding at December 31, 2011
 
5,869,784

 
$5.82
 
 
 
 
Granted
 
1,215,442

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

 
$6.59
 
 
 
 
Granted
 
1,806,392

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

 
$7.11
 
6.4
 

$52.8
 million
Vested and expected to vest at December 31, 2013
 
6,352,654

 
$7.07
 
6.3
 

$50.3
 million
Exercisable at December 31, 2013
 
3,747,566

 
$6.55
 
4.8
 

$31.6
 million
Assumptions used in the Black-Scholes model were as follows:
 
 
Year Ended December 31,
 
 
2013

2012

2011
Expected volatility
 
70.1-72.5%


64.0-69.2%


64.0-65.1%

Average expected term (in years)
 
5.7


5.6


5.8

Risk-free interest rate
 
0.86-2.00%


0.80-1.15%


1.14-2.55%

Expected dividend yield
 
0
%

0
%

0
%
The following table summarizes our restricted stock award activity during the years ended December 31, 2013, 2012 and 2011:

 
Number of
Shares

Weighted  Average
Grant Date
Fair Value
Unvested at January 1, 2011
 
120,000

 
$
7.67

Granted
 
353,508

 
$
6.51

Vested
 
(120,000
)
 
$
7.67

Forfeited
 
(5,625
)
 
$
6.67

Unvested at December 31, 2011
 
347,883

 
$
6.51

Granted
 
380,158

 
$
10.29

Vested
 
(339,758
)
 
$
6.51

Forfeited
 
(5,963
)
 
$
10.81

Unvested at December 31, 2012
 
382,320

 
$
10.21

Granted
 
476,096

 
$
6.88

Vested
 
(211,178
)
 
$
8.78

Forfeited
 
(14,367
)
 
$
8.17

Unvested at December 31, 2013
 
632,871

 
$
8.23

The following table summarizes our restricted stock unit activity during the years ended December 31, 2013, 2012 and 2011:

 
Number of
Shares

Weighted
Average
Purchase  Price

Weighted
Average  Remaining
Contractual Term (yrs)
 
Aggregate
Intrinsic
Value
Unvested at January 1, 2011
 

 
$

 
 
 
 
Granted
 
163,000

 
$

 
 
 
 
Vested
 
(15,000
)
 
$

 
 
 
 
Forfeited
 

 
$

 
 
 
 
Unvested at December 31, 2011
 
148,000

 
$

 
 
 
 
Granted
 
682,146

 
$

 
 
 
 
Vested
 
(128,000
)
 
$

 
 
 
 
Forfeited
 
(20,000
)
 
$

 
 
 
 
Unvested at December 31, 2012
 
682,146

 
$

 
 
 
 
Granted
 
323,700

 
$

 
 
 
 
Vested
 
(154,124
)
 
$

 
 
 
 
Forfeited
 
(115,367
)
 
$

 
 
 
 
Unvested at December 31, 2013
 
736,355

 
$

 
1.6
 

$11.0
 million
Expected to vest at December 31, 2013
 
627,647

 
$

 
1.5
 

$9.4
 million
Commitments and Contingencies (Tables)
Schedule of future minimum rental payments for operating leases
Approximate annual future minimum operating lease payments as of December 31, 2013 are as follows: 
Year:
 
Operating
Leases
2014
 
$
1,995,000

2015
 
2,062,000

2016
 
2,081,000

2017
 
2,122,000

2018
 
80,000

Thereafter
 

Total minimum lease payments
 
$
8,340,000

Income Taxes (Tables)
Significant components of our net deferred tax assets at December 31, 2013 and 2012 are shown below. A valuation allowance of $162.0 million and $128.4 million has been established to offset the net deferred tax assets as of December 31, 2013 and 2012, respectively, as realization of such assets is uncertain.
 
 
December 31,

 
2013

2012
Deferred tax assets:
 



Net operating loss carryforwards
 
$
116,572,000

 
$
86,732,000

Deferred revenue
 
13,324,000

 
17,345,000

Research and development credits
 
28,867,000

 
20,286,000

Share-based compensation
 
2,495,000

 
2,975,000

Depreciation
 

 
179,000

Other, net
 
853,000

 
926,000


 
162,111,000

 
128,443,000

Valuation allowance for deferred tax assets
 
(161,968,000
)
 
(128,443,000
)
Deferred tax assets, net of valuation
 
143,000

 

Deferred tax liabilities:
 
 
 
 
Depreciation
 
(143,000
)
 

Net deferred tax liabilities
 
(143,000
)
 

Net deferred tax assets
 
$

 
$

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

 
2013

2012

2011
Federal income tax at 34%
 
$
(28,383,000
)
 
$
(18,208,000
)
 
$
(6,722,000
)
State income tax, net of federal benefit
 
(1,745,000
)
 
(3,023,000
)
 
(1,153,000
)
Increase in valuation allowance
 
33,525,000

 
20,954,000

 
9,935,000

Tax effect on non-deductible expenses and other
 
5,219,000

 
1,293,000

 
1,671,000

Research and development credits
 
(8,616,000
)
 
(1,016,000
)
 
(3,731,000
)

 
$

 
$

 
$

Summary of Unaudited Quarterly Financial Information (Tables)
Schedule of quarterly financial information
The following is a summary of our unaudited quarterly results for the years ended December 31, 2013 and 2012:
 
 
Quarter Ended
2013 (Unaudited):
 
March 31,
 
June 30,
 
September 30,
 
December 31,
Total revenues
 
$
11,833,540

 
$
14,453,810

 
$
16,013,164

 
$
12,498,933

Gross profit on product sales(1)
 
$
769,623

 
$
1,815,903

 
$
9,342,187

 
$
6,266,250

Total operating expenses
 
$
30,329,313

 
$
36,574,458

 
$
34,507,020

 
$
33,822,293

Net loss
 
$
(19,288,369
)
 
$
(22,911,511
)
 
$
(19,292,368
)
 
$
(21,986,303
)
Net loss per share, basic and diluted
 
$
(0.17
)
 
$
(0.20
)
 
$
(0.17
)
 
$
(0.19
)
Shares used in computing basic and diluted net loss
per share
 
112,416,792

 
112,486,211

 
112,765,155

 
113,550,229

 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
2012 (Unaudited):
 
March 31,
 
June 30,
 
September 30,
 
December 31,
Total revenues(2)
 
$
7,440,179

 
$
7,757,175

 
$
5,334,323

 
$
21,793,549

Gross profit on product sales
 
$
116,650

 
$
381,822

 
$
488,719

 
$
805,851

Total operating expenses
 
$
22,580,577

 
$
21,805,273

 
$
25,364,160

 
$
26,200,662

Net loss
 
$
(15,119,181
)
 
$
(14,021,119
)
 
$
(20,005,846
)
 
$
(4,405,856
)
Net loss per share, basic and diluted
 
$
(0.14
)
 
$
(0.13
)
 
$
(0.18
)
 
$
(0.04
)
Shares used in computing basic and diluted net loss
per share
 
107,589,514

 
112,063,665

 
112,305,002

 
112,323,056

 
 
(1)
Gross profit on product sales for the quarters ended June 30, 2013, September 30, 2013 and December 31, 2013 excluded manufacturing costs related to the product sales of bulk rHuPH20 for Herceptin SC and HyQvia in the amounts of $873,000, $6.5 million and $2.6 million, respectively. Such costs were incurred prior to European marketing approvals for Herceptin SC and HyQvia, and therefore, they were charged to research and development expenses in the periods the costs were incurred.
(2)
Revenues for the quarter ended December 31, 2012 included $9.5 million in revenues under collaborative agreements from the Pfizer Collaboration.
Summary of Significant Accounting Policies Reclassifications (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Reclassifications [Abstract]
 
Prior Period Reclassification Adjustment
$ 400,000 
Summary of Significant Accounting Policies Restricted Cash (Details) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Restricted Cash [Abstract]
 
 
Restricted cash
$ 500,000 
$ 400,000 
Summary of Significant Accounting Policies Fair Value of Financial Instruments (Details) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount
$ 0 
$ 0 
Investments, Fair Value Disclosure
49,856,452 
98,024,269 
Available-for-sale marketable securities
44,145,697 
Level 1
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Investments, Fair Value Disclosure
5,710,755 
98,024,269 
Level 2
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Investments, Fair Value Disclosure
44,145,697 
Level 3
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Investments, Fair Value Disclosure
Cash Equivalents |
Level 1
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Cash and Cash Equivalents, Fair Value Disclosure
5,710,755 
98,024,269 
Corporate Debt Securities
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Available-for-sale marketable securities
35,147,326 
Corporate Debt Securities |
Level 2
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Available-for-sale marketable securities
35,147,326 
Commercial Paper
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Available-for-sale marketable securities
5,998,371 
Commercial Paper |
Level 2
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Available-for-sale marketable securities
5,998,371 
Certificates of Deposit
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Available-for-sale marketable securities
3,000,000 
Certificates of Deposit |
Level 2
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Available-for-sale marketable securities
$ 3,000,000 
$ 0 
Summary of Significant Accounting Policies Concentrations of Credit Risk, Sources of Supply and Significant Customers (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Concentration Risk
 
 
 
Allowance for doubtful accounts
$ 0 
$ 0 
 
Foreign based operations
no 
no 
no 
Number of manufacturers for supply of bulk rHuPH20
 
 
Roche and Pfizer |
Accounts Receivable |
Customer Concentration Risk
 
 
 
Concentration Risk
 
 
 
Concentration risk, percentage
81.00% 
86.00% 
 
Roche |
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk
 
 
 
Concentration risk, percentage
64.00% 
45.00% 
19.00% 
Baxter |
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk
 
 
 
Concentration risk, percentage
10.00% 
17.00% 
42.00% 
Pfizer |
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk
 
 
 
Concentration risk, percentage
4.00% 
22.00% 
 
ViroPharma |
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk
 
 
 
Concentration risk, percentage
 
 
22.00% 
Intrexon |
Total Revenues |
Customer Concentration Risk
 
 
 
Concentration Risk
 
 
 
Concentration risk, percentage
 
 
16.00% 
Domestic |
Geographic Concentration Risk
 
 
 
Concentration Risk
 
 
 
Revenue, net
19,000,000 
22,700,000 
44,900,000 
Foreign Countries
 
 
 
Concentration Risk
 
 
 
Long-Lived assets in foreign countries
Foreign Countries |
Geographic Concentration Risk
 
 
 
Concentration Risk
 
 
 
Revenue, net
35,800,000 
19,600,000 
11,200,000 
Switzerland |
Geographic Concentration Risk
 
 
 
Concentration Risk
 
 
 
Revenue, net
$ 35,200,000 
$ 18,900,000 
$ 10,400,000 
Bulk formulation |
Third Party Manufacturer |
Accounts Payable |
Supplier Concentration Risk
 
 
 
Concentration Risk
 
 
 
Concentration risk, percentage
9.00% 
20.00% 
 
Fill and Finish |
Third Party Manufacturer |
Accounts Payable |
Supplier Concentration Risk
 
 
 
Concentration Risk
 
 
 
Concentration risk, percentage
2.00% 
8.00% 
 
Summary of Significant Accounting Policies Inventories (Details) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Hylenex recombinant
 
 
Inventory, net of reserves
$ 2,600,000 
$ 2,600,000 
bulk rHuPH20
 
 
Inventory, net of reserves
$ 3,500,000 
$ 0 
Summary of Significant Accounting Policies Revenue Recognition (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Revenue from External Customer [Line Items]
 
 
 
Total net increase to product sales
$ 24,439,724 
$ 2,887,442 
$ 1,836,102 
Bulk rHuPH20 for Herceptin SC
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Total net increase to product sales
13,700,000 
 
 
Bulk rHuPH20 for HyQvia
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Total net increase to product sales
1,100,000 
 
 
Minimum [Member]
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Collaboration agreements, period for termination
30 days 
 
 
Maximum [Member]
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Collaboration agreements, period for termination
90 days 
 
 
Change in Accounting Method Accounted for as Change in Estimate |
Hylenex recombinant
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Recognition of deferred revenue
624,000 
 
 
Cost of product, previously deferred
179,000 
 
 
Revenue recognition, changes in estimated returns
73,000 
 
 
Total net increase to product sales
$ 697,000 
 
 
Period prior to expiration [Member]
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Period to accept returned unused product
6 months 
 
 
Period after expiration [Member]
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Period to accept returned unused product
12 months 
 
 
Summary of Significant Accounting Policies Cost of Product Sales (Details) (USD $)
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Product Information [Line Items]
 
 
 
 
 
 
Manufacturing costs previously recorded as research and development
$ 2,600,000 
$ 6,500,000 
$ 873,000 
 
 
 
Research and development expense for bulk rHuPH20
 
 
 
96,639,575 
70,044,073 
57,563,470 
Change in Accounting Method Accounted for as Change in Estimate
 
 
 
 
 
 
Product Information [Line Items]
 
 
 
 
 
 
Manufacturing costs previously recorded as research and development
 
 
 
10,000,000 
 
 
Change in Accounting Method Accounted for as Change in Estimate |
bulk rHuPH20
 
 
 
 
 
 
Product Information [Line Items]
 
 
 
 
 
 
Research and development expense for bulk rHuPH20
 
 
 
9,000,000 
1,000,000 
 
Change in Accounting Method Accounted for as Change in Estimate |
Bulk rHuPH20 for Herceptin SC
 
 
 
 
 
 
Product Information [Line Items]
 
 
 
 
 
 
Manufacturing costs previously recorded as research and development
 
 
 
265,000 
 
 
Change in Accounting Method Accounted for as Change in Estimate |
Bulk rHuPH20 for HyQvia
 
 
 
 
 
 
Product Information [Line Items]
 
 
 
 
 
 
Inventory, net of reserves
$ 0 
 
 
$ 0 
 
 
Summary of Significant Accounting Policies Share Based Payments (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Share-based compensation expense related to share-based awards
 
 
 
Share-based compensation expense
$ 9,538,056 
$ 8,348,587 
$ 5,569,899 
Share-based compensation expense per basic and diluted share
$ 0.08 
$ 0.08 
$ 0.05 
Share-based Compensation, Additional Disclosures
 
 
 
Pre-vesting forfeitures percent
10.00% 
10.00% 
10.00% 
Share-based compensation, tax benefit
Stock options
 
 
 
Share-based compensation expense related to share-based awards
 
 
 
Share-based compensation expense
5,499,445 
4,722,629 
3,230,822 
Restricted stock awards and restricted stock units [Member]
 
 
 
Share-based compensation expense related to share-based awards
 
 
 
Share-based compensation expense
4,038,611 
3,625,958 
2,339,077 
Research and development
 
 
 
Share-based compensation expense related to share-based awards
 
 
 
Share-based compensation expense
4,475,530 
4,190,938 
2,815,362 
Selling, general and administrative
 
 
 
Share-based compensation expense related to share-based awards
 
 
 
Share-based compensation expense
$ 5,062,526 
$ 4,157,649 
$ 2,754,537 
Summary of Significant Accounting Policies Net Loss Per Share (Details)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Accounting Policies [Abstract]
 
 
 
Antidilutive securities excluded from the calculation of diluted net loss per common share
8,070,141 
7,444,333 
6,365,667 
Summary of Significant Accounting Policies (Details Textual) (USD $)
12 Months Ended
Dec. 31, 2013
Segment
Dec. 31, 2012
Summary of Significant Accounting Policies (Textual)
 
 
Allowance for doubtful accounts
$ 0 
$ 0 
Estimated useful life of equipment
3 years 
 
Impairment of long lived assets
$ 0 
$ 0 
Number of operating segments
 
Marketable Securities (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
$ 44,128,643 
 
Gross unrealized gains
20,185 
 
Gross unrealized losses
(3,131)
 
Available-for-sale marketable securities
44,145,697 
Corporate Debt Securities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
35,130,272 
 
Gross unrealized gains
20,185 
 
Gross unrealized losses
(3,131)
 
Available-for-sale marketable securities
35,147,326 
 
Commercial Paper
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
5,998,371 
 
Gross unrealized gains
 
Gross unrealized losses
 
Available-for-sale marketable securities
5,998,371 
 
Certificates of Deposit
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
3,000,000 
 
Gross unrealized gains
 
Gross unrealized losses
 
Available-for-sale marketable securities
$ 3,000,000 
 
Marketable Securities Textuals (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Marketable Securities [Abstract]
 
 
 
Available-for-sale securities, maturities, next twelve months, fair value
$ 44,100,000 
 
 
Proceeds from Sale of Available-for-sale Securities
3,375,000 
Realized gain or loss
 
 
Continuous unrealized loss position, twelve months or longer
 
 
Other than temporary impairment, marketable securities
 
 
Available-for-sale marketable securities
$ 44,145,697 
$ 0 
 
Collaborative Agreements (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Compound
Dec. 31, 2012
Dec. 31, 2011
Collaborative Agreements (Textual) [Abstract]
 
 
 
Additional Maximum Proceeds Receivable from License and Collaborative Agreements Upon Achievement of Clinical Development Milestones
$ 63,000,000 
 
 
Additional Maximum Proceeds Receivable From Achievement of Regulatory Milestones
48,000,000 
 
 
Roche Collaboration
 
 
 
Collaborative Agreements [Line Items]
 
 
 
Deferred Revenue Relating To Upfront Payment License Fees And Annual Maintenance Fees
41,600,000 
35,900,000 
 
Collaborative Agreements (Textual) [Abstract]
 
 
 
Amount received for sales-based payment
10,000,000 
 
 
Gammagard Collaboration
 
 
 
Collaborative Agreements [Line Items]
 
 
 
Deferred Revenue Relating To Upfront Payment License Fees And Annual Maintenance Fees
10,500,000 
7,100,000 
 
Collaborative Agreements (Textual) [Abstract]
 
 
 
Amount received for sales-based payment
4,000,000 
 
 
Roche Collaboration
 
 
 
Collaborative Agreements (Textual) [Abstract]
 
 
 
Number of product combinations licensed to develop
13 
 
 
Number of targets elected
 
 
Number of additional target, optional
 
 
Total to date proceeds received from partner under license and collaborative agreement
72,500,000 
 
 
Nonrefundable upfront license fee payment
20,000,000 
 
 
Number of targets elected - upfront licence fee payment
 
 
Amount received from Roche for additional exclusive targets and annual license maintenance fees
21,500,000 
 
 
Number of targets elected, additional exclusive targets
 
 
Clinical development milestone payments received under collaborative agreement
13,000,000 
 
 
Regulatory milestone payments received under collaborative agreement
8,000,000 
 
 
Royalty receivable, duration
10 years 
 
 
Milestone payments recognized as revenues
8,000,000 
5,000,000 
Deferred Revenue, Revenue Recognized
5,900,000 
3,400,000 
2,000,000 
Gammagard Collaboration
 
 
 
Collaborative Agreements (Textual) [Abstract]
 
 
 
Total to date proceeds received from partner under license and collaborative agreement
17,000,000 
 
 
Nonrefundable upfront license fee payment
10,000,000 
 
 
Regulatory milestone payments received under collaborative agreement
3,000,000 
 
 
Royalty receivable, duration
10 years 
 
 
Deferred Revenue, Revenue Recognized
606,000 
483,000 
483,000 
Pfizer Collaboration
 
 
 
Collaborative Agreements (Textual) [Abstract]
 
 
 
Number of product combinations licensed to develop
 
 
Number of targets elected
 
 
Number of additional target, optional
 
 
Nonrefundable upfront license fee payment
11,000,000 
 
 
Royalty receivable, duration
10 years 
 
 
Milestone payments recognized as revenues
 
9,500,000 
 
Time period to provide prior notice to terminate collaborative agreements
30 days 
 
 
Allocation of license fee received to license fee deliverable under agreement
11,000,000 
 
 
Recognized Payment Of Revenue Under Collaborative Agreement
11,000,000 
 
 
ViroPharma Collaboration
 
 
 
Collaborative Agreements (Textual) [Abstract]
 
 
 
Total to date proceeds received from partner under license and collaborative agreement
14,000,000 
 
 
Nonrefundable upfront license fee payment
9,000,000 
 
 
Clinical development milestone payments received under collaborative agreement
3,000,000 
 
 
Milestone payments recognized as revenues
 
 
3,000,000 
Allocation of license fee received to license fee deliverable under agreement
9,000,000 
 
 
Recognized Payment Of Revenue Under Collaborative Agreement
 
 
9,000,000 
Intrexon Collaboration
 
 
 
Collaborative Agreements (Textual) [Abstract]
 
 
 
Total to date proceeds received from partner under license and collaborative agreement
11,000,000 
 
 
Nonrefundable upfront license fee payment
9,000,000 
 
 
Royalty receivable, duration
10 years 
 
 
Time period to provide prior notice to terminate collaborative agreements
90 days 
 
 
Allocation of license fee received to license fee deliverable under agreement
9,000,000 
 
 
Recognized Payment Of Revenue Under Collaborative Agreement
 
 
9,000,000 
Pfizer, ViroPharma and Intrexon
 
 
 
Collaborative Agreements (Textual) [Abstract]
 
 
 
Milestone payments recognized as revenues
$ 0 
$ 0 
 
Certain Balance Sheet Items Accounts Receivable (Details) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Accounts Receivable [Abstract]
 
 
Accounts receivable from product sales to collaborators
$ 4,495,314 
$ 0 
Accounts receivable from revenues under collaborative agreements
3,707,248 
15,058,163 
Accounts receivable from other product sales
1,505,004 
823,064 
Accounts receivable, gross
9,707,566 
15,881,227 
Allowance for distribution fees and discounts
(610,482)
(178,140)
Accounts receivable, net
$ 9,097,084 
$ 15,703,087 
Certain Balance Sheet Items Inventories (Details) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Summary of Inventories
 
 
Raw materials
$ 1,136,815 
$ 1,127,061 
Work-in-process
4,280,076 
792,257 
Finished goods
753,091 
751,378 
Inventories
$ 6,169,982 
$ 2,670,696 
Certain Balance Sheet Items Prepaid Expenses and Other Assets (Details) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Prepaid Expenses and Other Assets Disclosure [Abstract]
 
 
Prepaid manufacturing expenses
$ 5,884,040 
$ 8,152,602 
Prepaid research and development expenses
3,522,250 
2,274,551 
Other prepaid expense
1,338,758 
2,250,791 
Other assets
356,328 
74,944 
Prepaid expenses and other assets
11,101,376 
12,752,888 
Less long-term portion
2,675,692 
Prepaid expenses and other assets
$ 8,425,684 
$ 12,752,888 
Certain Balance Sheet Items Property and Equipment, Net (Details) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Summary of property and equipment
 
 
Property and equipment, gross
$ 11,070,734 
$ 10,381,089 
Accumulated depreciation and amortization
(7,649,228)
(6,680,627)
Property and equipment, net
3,421,506 
3,700,462 
Research equipment
 
 
Summary of property and equipment
 
 
Property and equipment, gross
7,713,850 
6,360,004 
Computer and office equipment
 
 
Summary of property and equipment
 
 
Property and equipment, gross
1,948,859 
1,432,975 
Leasehold improvements
 
 
Summary of property and equipment
 
 
Property and equipment, gross
1,408,025 
1,138,110 
Building
 
 
Summary of property and equipment
 
 
Property and equipment, gross
$ 0 1
$ 1,450,000 1
Certain Balance Sheet Items Property and Equipment, Net (Textual) (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Property and Equipment, Net (Textual) [Abstract]
 
 
 
Depreciation and amortization
$ 1,226,927 
$ 1,079,424 
$ 1,095,823 
Certain Balance Sheet Items Accrued Expenses (Details) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Accrued Expenses
 
 
Accrued compensation and payroll taxes
$ 7,075,347 
$ 4,053,590 
Accrued outsourced research and development expenses
3,377,256 
1,239,050 
Accrued outsourced manufacturing expenses
3,233,012 
984,192 
Other accrued expenses
1,234,831 
1,506,615 
Accrued expenses
$ 14,920,446 
$ 7,783,447 
Certain Balance Sheet Items Deferred Revenue (Details) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Deferred Revenue
 
 
Deferred revenue
$ 53,143,278 
$ 43,845,983 
Deferred revenue, current portion
7,397,829 
8,891,017 
Deferred revenue, net of current portion
45,745,449 
34,954,966 
Collaborative agreements
 
 
Deferred Revenue
 
 
Deferred revenue
51,184,897 
43,222,473 
Product sales
 
 
Deferred Revenue
 
 
Deferred revenue
$ 1,958,381 
$ 623,510 
Long-Term Debt, Net (Details) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Debt Disclosure [Abstract]
 
 
2014
$ 3,460,417 
 
2015
17,435,636 
 
2016
18,677,512 
 
2017
18,677,512 
 
2018
5,806,459 
 
Total minimum payments
64,057,536 
 
Less amount representing interest
(14,057,536)
 
Gross balance of long-term debt
50,000,000 
 
Less unamortized debt discount
(228,263)
 
Present value of long-term debt
49,771,737 
29,661,680 
Less current portion of long-term debt
 
Long-term debt, less current portion and unamortized debt discount
$ 49,771,737 
 
Long-Term Debt, Net (Details Textual) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Debt Instrument [Line Items]
 
 
Interest expense
$ 3,300,000 
$ 28,000 
Loan Agreement [Member]
 
 
Debt Instrument [Line Items]
 
 
Face amount of term loan facility
50,000,000 
30,000,000 
Maturity date of term loan facility
Jan. 01, 2018 
Jan. 01, 2017 
Fixed interest rate on term loan
7.55% 
7.55% 
Final payment as percent of original principal
8.50% 
 
Final payment required on term loan
4,250,000 
2,550,000 
Interest only period
12 months 
12 months 
Proceeds from Issuance of long-term debt
19,000,000 
29,700,000 
Debt instrument increase
$ 20,000,000 
 
Debt modification present value of future cash flows did not exceed
10.00% 
 
Loan Agreement [Member] |
Minimum [Member]
 
 
Debt Instrument [Line Items]
 
 
Percentage of pre payment fee on term loan
1.00% 
 
Loan Agreement [Member] |
Maximum [Member]
 
 
Debt Instrument [Line Items]
 
 
Percentage of pre payment fee on term loan
3.00% 
 
Stockholders' Equity (Details) (USD $)
0 Months Ended 1 Months Ended 12 Months Ended
Feb. 10, 2014
Feb. 29, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Stockholders' Equity (Textual) [Abstract]
 
 
 
 
 
Options exercised, shares
 
 
1,270,362 
444,637 
3,137,056 
Net proceeds from stock options exercised
 
 
$ 5,079,046 
$ 1,680,173 
$ 4,748,612 
Shares issued related to restricted stock awards, net of any shares forfeited
 
 
461,729 
374,195 
347,883 
Common Stock, Shares Authorized
 
 
200,000,000 
150,000,000 
 
Underwritten public offering and issued shares
8,846,153 
7,820,000 
 
 
 
Shares sold pursuant to the full exercise of an over-allotment option granted to the underwriter
1,153,846 
1,020,000 
 
 
 
Public Offering Price Per Share
 
$ 10.61 
 
 
 
Net proceeds from common stock issued
107,800,000 
81,500,000 
81,476,845 
Purchase of common stock by affiliates
 
1,360,000 
 
 
 
Purchase of common stock by affiliates amount
 
14,400,000 
 
 
 
Aggregate shares issued for exercise of options
 
 
 
 
3,045,540 
Stock options
 
 
 
 
 
Stockholders' Equity (Textual) [Abstract]
 
 
 
 
 
Net proceeds from stock options exercised
 
 
5,500,000 
2,000,000 
4,700,000 
Restricted Stock Units (RSUs)
 
 
 
 
 
Stockholders' Equity (Textual) [Abstract]
 
 
 
 
 
Number of shares of common stock issued related to RSUs, net of RSUs surrendered as payment for withholding taxes
 
 
92,201 
81,070 
15,000 
Number of RSUs surrendered to pay for minimum withholding taxes
 
 
61,923 
46,930 
 
Amount of withholding taxes associated with RSUs vested during the period
 
 
$ 431,000 
$ 347,000 
 
Equity Incentive Plans (Details) Options (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Options, Outstanding [Roll Forward]
 
 
 
Outstanding, Number, At Beginning
6,379,867 
5,869,784 
7,975,365 
Granted
1,806,392 
1,215,442 
1,624,768 
Exercised
(1,270,362)
(444,637)
(3,137,056)
Cancelled/forfeited
(214,982)
(260,722)
(593,293)
Outstanding, Number, At End
6,700,915 
6,379,867 
5,869,784 
Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
 
 
 
Options, outstanding, weighted average exercise price, at beginning
$ 6.59 
$ 5.82 
$ 3.87 
Options, grants in period, weighted average exercise price
$ 7.14 
$ 9.90 
$ 7.79 
Options, exercises in period, weighted average exercise price
$ 4.34 
$ 4.56 
$ 1.71 
Options, forfeitures and expirations in period, weighted average exercise price
$ 8.18 
$ 8.34 
$ 6.72 
Options, outstanding, weighted average exercise price, at end
$ 7.11 
$ 6.59 
$ 5.82 
Options, Additional Disclosures [Abstract]
 
 
 
Options, outstanding, weighted average remaining contractual term
6 years 5 months 
 
 
Options, outstanding, intrinsic value
$ 52.8 
 
 
Options, Vested and Expected to Vest [Abstract]
 
 
 
Options, vested and expected to vest, outstanding, number
6,352,654 
 
 
Options, vested and expected to vest, outstanding, weighted average exercise price
$ 7.07 
 
 
Options, vested and expected to vest, outstanding, weighted average remaining contractual term
6 years 3 months 
 
 
Options, vested and expected to vest, outstanding, aggregate intrinsic value
50.3 
 
 
Options, vested and expected to vest, exercisable, number
3,747,566 
 
 
Options, vested and expected to vest, exercisable, weighted average exercise price
$ 6.55 
 
 
Options, vested and expected to vest, exercisable, weighted average remaining contractual term
4 years 10 months 
 
 
Options, vested and expected to vest, exercisable, aggregate intrinsic value
$ 31.6 
 
 
Equity Incentive Plans (Details) Black-Scholes Assumptions
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Share-based Compensation
 
 
 
Average expected term
5 years 8 months 
5 years 7 months 
5 years 9 months 
Risk free interest rate, minimum
0.86% 
0.80% 
1.14% 
Risk free interest rate, maximum
2.00% 
1.15% 
2.55% 
Expected dividend rate
0.00% 
0.00% 
0.00% 
Minimum [Member]
 
 
 
Share-based Compensation
 
 
 
Expected volatility rate
70.10% 
64.00% 
64.00% 
Maximum [Member]
 
 
 
Share-based Compensation
 
 
 
Expected volatility rate
72.50% 
69.20% 
65.10% 
Equity Incentive Plans (Details) Restricted Stock Awards (Restricted Stock, USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Restricted Stock
 
 
 
Share-based Compensation - restricted stock awards
 
 
 
Unvested, Number, At Beginning
382,320 
347,883 
120,000 
Granted
476,096 
380,158 
353,508 
Vested
(211,178)
(339,758)
(120,000)
Forfeited
(14,367)
(5,963)
(5,625)
Unvested, Number, At end
632,871 
382,320 
347,883 
Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
 
 
 
Nonvested, weighted average grant date fair value, at beginning
$ 10.21 
$ 6.51 
$ 7.67 
Granted, weighted average grant date fair value
$ 6.88 
$ 10.29 
$ 6.51 
Vested, weighted average grant date fair value
$ 8.78 
$ 6.51 
$ 7.67 
Forfeitures, weighted average grant date fair value
$ 8.17 
$ 10.81 
$ 6.67 
Nonvested, weighted average grant date fair value, at end
$ 8.23 
$ 10.21 
$ 6.51 
Equity Incentive Plans (Details) Restricted Stock Units (Restricted Stock Units (RSUs), USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Restricted Stock Units (RSUs)
 
 
 
Share-based Compensation
 
 
 
Granted, weighted average grant date fair value
$ 6.69 
$ 10.61 
$ 6.71 
Share-based Compensation - restricted stock units
 
 
 
Unvested, Number, At Beginning
682,146 
148,000 
Granted
323,700 
682,146 
163,000 
Vested
154,124 
128,000 
15,000 
Forfeited
(115,367)
(20,000)
Unvested, Number, At end
736,355 
682,146 
148,000 
Equity Instrument Other Than Options Vested And Expected To Vest [Abstract]
 
 
 
Expected to vest, outstanding, number
627,647 
 
 
Equity Instruments Other than Options,WeightedAverage Purchase Price [Roll Forward]
 
 
 
Unvested, weighted average purchase price at beginning
$ 0 
$ 0 
$ 0 
Granted, weighted average purchase price
$ 0 
$ 0 
$ 0 
Exercised, weighted average purchase price
$ 0 
$ 0 
$ 0 
Forfeited, weighted average purchase price
$ 0 
$ 0 
$ 0 
Unvested, weighted average purchase price at end
$ 0 
$ 0 
$ 0 
Equity Instruments Other than Options, Additional Disclosures [Abstract]
 
 
 
Vested and expected to be vested, weighted average purchase price
$ 0 
 
 
Unvested, weighted average remaining contractual terms
1 year 7 months 
 
 
Unvested, aggregate intrinsic value
$ 11.0 
 
 
Expected to vest, weighted average remaining contractual terms
1 year 6 months 
 
 
Expected to vest, outstanding, aggregate intrinsic value
$ 9.4 
 
 
Equity Incentive Plans (Details - Textuals) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Share-based Compensation
 
 
 
Shares reserved for future issuance
6,946,331 
 
 
Future dividend payments expected for dividend yield assumption
$ 0 
 
 
Share based compensation expenses recognized
9,538,056 
8,348,587 
5,569,899 
Outstanding awards [Member]
 
 
 
Share-based Compensation
 
 
 
Options outstanding, number
7,437,270 
 
 
Stock options
 
 
 
Share-based Compensation
 
 
 
Weighted average grant-date fair values
$ 4.40 
$ 5.63 
$ 4.57 
Total unrecognized compensation costs related to non-vested stock option awards
9,700,000 
 
 
Period over which the unrecognized compensation costs will be recognized
2 years 6 months 
 
 
Intrinsic value of options exercised
8,300,000 
2,900,000 
16,600,000 
Cash received from stock option exercises
5,500,000 
2,000,000 
4,700,000 
Share based compensation expenses recognized
5,499,445 
4,722,629 
3,230,822 
Stock options |
Minimum [Member]
 
 
 
Share-based Compensation
 
 
 
Exercise price as a percent of fair value
100.00% 
 
 
Stock options |
Maximum [Member]
 
 
 
Share-based Compensation
 
 
 
Options, outstanding, initial contractual term
10 years 
 
 
Restricted Stock
 
 
 
Share-based Compensation
 
 
 
Period over which the unrecognized compensation costs will be recognized
2 years 3 months 
 
 
Total fair value of restricted stock awards vested
1,900,000 
2,200,000 
900,000 
Share based compensation expenses recognized
2,200,000 
2,100,000 
1,700,000 
Unrecognized share based compensation costs
2,500,000 
 
 
Restricted stock unit purchase price
 
Shares granted
476,096 
380,158 
353,508 
Granted, weighted average grant date fair value
$ 6.88 
$ 10.29 
$ 6.51 
Restricted Stock Units (RSUs)
 
 
 
Share-based Compensation
 
 
 
Period over which the unrecognized compensation costs will be recognized
3 years 
 
 
Total fair value of restricted stock awards vested
1,100,000 
900,000 
100,000 
Share based compensation expenses recognized
1,800,000 
1,500,000 
700,000 
Unrecognized share based compensation costs
4,200,000 
 
 
Restricted stock unit purchase price
$ 0 
 
 
Shares granted
323,700 
682,146 
163,000 
Granted, weighted average grant date fair value
$ 6.69 
$ 10.61 
$ 6.71 
Cliff Vesting, First Anniversary [Member] |
Stock options
 
 
 
Share-based Compensation
 
 
 
Percent of shares to vest
25.00% 
 
 
Percentage Vesting [Member] |
Restricted Stock Units (RSUs)
 
 
 
Share-based Compensation
 
 
 
Shares granted
 
 
148,000 
Monthly Vesting, after One Year [Member] |
Stock options
 
 
 
Share-based Compensation
 
 
 
Percent of shares to vest
2.08% 
 
 
Amended and Restated 2011 Stock Plan [Member]
 
 
 
Share-based Compensation
 
 
 
Number of shares authorized
12,500,000 
 
 
Commitments and Contingencies Operating Lease (Details) (USD $)
Dec. 31, 2013
Commitments and Contingencies Disclosure [Abstract]
 
2014
$ 1,995,000 
2015
2,062,000 
2016
2,081,000 
2017
2,122,000 
2018
80,000 
Thereafter
Total minimum lease payments
$ 8,340,000 
Commitments and Contingencies Operating Lease - Textual (Details) (USD $)
12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Jan. 31, 2013
BMR - 11388 [Member]
Jun. 30, 2011
BMR - 11388 [Member]
Dec. 31, 2013
BMR - 11388 [Member]
Dec. 31, 2012
BMR - 11388 [Member]
Jul. 31, 2007
11404 Sublease [Member]
Dec. 31, 2013
11404 Sublease [Member]
Apr. 30, 2009
11408 Sublease [Member]
Dec. 31, 2013
11408 Sublease [Member]
Jun. 30, 2011
11404/11408 Lease [Member]
Dec. 31, 2013
11404/11408 Lease [Member]
Oct. 31, 2012
11436 Property [Member]
Dec. 31, 2013
11436 Property [Member]
Dec. 31, 2012
11436 Property [Member]
Dec. 31, 2013
Office and Research Facility [Member]
sqft
Operating Leased Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate leased office and research space (in square feet)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
76,000 
Monthly rental payment
 
 
 
$ 65,000 
$ 38,000 
 
 
$ 54,000 
 
$ 21,000 
 
$ 71,000 
 
$ 24,300 
 
 
 
Lease expiration date
 
 
 
 
 
Jan. 31, 2018 
 
 
Jan. 31, 2013 
 
Jan. 31, 2013 
 
Jan. 31, 2018 
 
Jan. 31, 2018 
 
 
Percent of annual increase in base rent
 
 
 
 
2.50% 
 
 
4.00% 
 
3.00% 
 
2.50% 
 
3.00% 
 
 
 
Cash incentive received
 
 
 
 
98,000 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for Tenant Improvement
 
 
 
 
300,000 
 
 
 
 
 
 
 
 
 
 
 
 
Lease Incentive Receivable
 
 
 
 
744,000 
953,000 
1,100,000 
 
 
 
 
 
 
158,000 
 
 
 
Building fair value asset
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,500,000 
 
Total rent expense
$ 1,700,000 
$ 1,600,000 
$ 1,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commitments and Contingencies Other Commitments - Textual (Details) (USD $)
Dec. 31, 2013
Cook Commercial Supply Agreement [Member]
 
Purchase Obligation By Agreement [Line Items]
 
Minimum purchase obligation
$ 3,000,000 
March 2010 Avid Amendment [Member]
 
Purchase Obligation By Agreement [Line Items]
 
Minimum purchase obligation
142,000 
Avid Commercial Supply Agreement [Member]
 
Purchase Obligation By Agreement [Line Items]
 
Minimum purchase obligation
6,000,000 
Baxter Manufacturing and Supply Agreement [Member]
 
Purchase Obligation By Agreement [Line Items]
 
Minimum purchase obligation
1,800,000 
Third Party Manufacturer Agreement [Member]
 
Purchase Obligation By Agreement [Line Items]
 
Minimum purchase obligation
$ 0 
Income Taxes (Components of net deferred tax assets) (Details) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Deferred tax assets
 
 
Net operating loss carryforwards
$ 116,572,000 
$ 86,732,000 
Deferred revenue
13,324,000 
17,345,000 
Research and development credits
28,867,000 
20,286,000 
Share-based compensation
2,495,000 
2,975,000 
Depreciation
179,000 
Other, net
853,000 
926,000 
Total deferred tax assets
162,111,000 
128,443,000 
Valuation allowance for deferred tax assets
(161,968,000)
(128,443,000)
Deferred tax assets, net of valuation
143,000 
Deferred tax liabilities
 
 
Depreciation
(143,000)
Net deferred tax liabilities
(143,000)
Net deferred tax assets
$ 0 
$ 0 
Income Taxes (Schedule of income tax reconciliation) (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Income Tax Provision, Income Tax Reconciliation [Abstract]
 
 
 
Federal income tax at 34%
$ (28,383,000)
$ (18,208,000)
$ (6,722,000)
State income tax, net of federal benefit
(1,745,000)
(3,023,000)
(1,153,000)
Increase in valuation allowance
33,525,000 
20,954,000 
9,935,000 
Tax effect on non-deductible expenses and other
5,219,000 
1,293,000 
1,671,000 
Research and development credits
(8,616,000)
(1,016,000)
(3,731,000)
Provision for income taxes
$ 0 
$ 0 
$ 0 
Federal income tax rate
34.00% 
34.00% 
34.00% 
Income Taxes (Operating Loss Carryforwards - Textual) (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Operating Loss Carryforwards [Line Items]
 
 
 
Net operating loss carryforwards
$ 27,900,000 
 
 
Income tax interest and penalty
Federal [Member]
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
Net operating loss carryforwards
327,700,000 
 
 
Operating loss carryforwards, begin to expire
Dec. 31, 2018 
 
 
California [Member]
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
Net operating loss carryforwards
$ 276,900,000 
 
 
Operating loss carryforwards, begin to expire
Dec. 31, 2014 
 
 
Income Taxes (Tax Credit Carryforward - Textual) (Details) (Research Tax Credit Carryforward [Member], USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Federal [Member]
 
Tax Credit Carryforward [Line Items]
 
Tax credit carryforwards
$ 21.9 
Tax credit carry forward, begin to expire
Dec. 31, 2024 
California [Member]
 
Tax Credit Carryforward [Line Items]
 
Tax credit carryforwards
$ 10.5 
Employee Savings Plan (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Employee Savings Plan [Abstract]
 
 
 
Voluntary contribution by employer to the ESP
$ 633,000 
$ 508,000 
$ 355,000 
Related Party Transactions (Details) (Intrexon, Affiliated Entity [Member], USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Intrexon |
Affiliated Entity [Member]
 
 
 
Related Party Transaction [Line Items]
 
 
 
Revenue from Related Parties
$ 1.0 
$ 1.0 
$ 9.0 
Subsequent Events (Details) (USD $)
0 Months Ended 1 Months Ended 12 Months Ended
Feb. 10, 2014
Feb. 29, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Subsequent Events [Abstract]
 
 
 
 
 
Issuance of common stock for cash, net, shares
8,846,153 
7,820,000 
 
 
 
Shares sold pursuant to the full exercise of an over-allotment option granted to the underwriter
1,153,846 
1,020,000 
 
 
 
Share price
$ 13.00 
 
 
 
 
Proceeds from issuance of common stock, net
$ 107,800,000 
$ 81,500,000 
$ 0 
$ 81,476,845 
$ 0 
Summary of Unaudited Quarterly Financial Information (Details) (USD $)
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Quarterly Financial Information Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$ 12,498,933 
$ 16,013,164 
$ 14,453,810 
$ 11,833,540 
$ 21,793,549 1
$ 5,334,323 1
$ 7,757,175 1
$ 7,440,179 1
$ 54,799,447 
$ 42,325,226 
$ 56,086,436 
Gross profit on product sales
6,266,250 2
9,342,187 2
1,815,903 2
769,623 2
805,851 
488,719 
381,822 
116,650 
 
 
 
Total operating expenses
33,822,293 
34,507,020 
36,574,458 
30,329,313 
26,200,662 
25,364,160 
21,805,273 
22,580,577 
135,233,084 
95,950,672 
75,925,377 
Net loss
$ (21,986,303)
$ (19,292,368)
$ (22,911,511)
$ (19,288,369)
$ (4,405,856)
$ (20,005,846)
$ (14,021,119)
$ (15,119,181)
$ (83,478,551)
$ (53,552,002)
$ (19,769,851)
Net loss per share, basic and diluted
$ (0.19)
$ (0.17)
$ (0.20)
$ (0.17)
$ (0.04)
$ (0.18)
$ (0.13)
$ (0.14)
$ (0.74)
$ (0.48)
$ (0.19)
Shares used in computing basic and diluted net loss per share
113,550,229 
112,765,155 
112,486,211 
112,416,792 
112,323,056 
112,305,002 
112,063,665 
107,589,514 
112,805,439 
111,077,105 
102,566,089 
Summary of Unaudited Quarterly Financial Information (Details Textual) (USD $)
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Dec. 31, 2012
Pfizer Collaboration
Dec. 31, 2013
Change in Accounting Method Accounted for as Change in Estimate
Collaborative Agreements [Line Items]
 
 
 
 
 
Manufacturing costs previously recorded as research and development
$ 2,600,000 
$ 6,500,000 
$ 873,000 
 
$ 10,000,000 
Revenue under collabrative agreements
 
 
 
$ 9,500,000 
 
Schedule II Valuation and Qualifying Accounts (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Valuation and Qualifying Accounts Disclosure [Line Items]
 
 
 
Accounts receivable allowances, beginning balance
$ 178,140 1
$ 15,429 1
$ 0 1
Valuation Allowances and Reserves, Additions
2,979,646 1
770,614 1
15,429 1
Valuation Allowances and Reserves, Deductions
(2,547,304)1
(607,903)1
1
Accounts receivable allowances, ending balance
$ 610,482 1
$ 178,140 1
$ 15,429 1