Segment Reporting

9 Months Ended

Sep. 30, 2016

Segment Reporting

Segment Reporting

6.  Segment Reporting

The Company’s business is the development, manufacture, and marketing of pharmaceutical products. The Company has established two reporting segments that each report to the Chief Operating Decision Maker, or CODM, as defined in ASC 280, Segment Reporting. The Company’s performance is assessed and resources are allocated by the CODM based on the following two reportable segments:

· Finished pharmaceutical products

· Active pharmaceutical ingredients, or API

The finished pharmaceutical products segment manufactures, markets and distributes enoxaparin, Cortrosyn®, Amphadase®, naloxone, lidocaine jelly, as well as various other critical and non-critical care drugs. The API segment manufactures and distributes RHI and porcine insulin. The Company also uses RHI for internal product development.

Selected financial information by reporting segment is presented below:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
	(in thousands)
Net revenues:
Finished pharmaceutical products	$	59,058	$	57,902	$	181,368	$	158,849
API		5,165		5,966		10,254		15,758
Total net revenues		64,223		63,868		191,622		174,607
Gross profit:
Finished pharmaceutical products		28,621		19,302		85,042		44,789
API		(1,009)		(1,724)		(814)		(613)
Total gross profit		27,612		17,578		84,228		44,176
Operating expenses		21,815		21,326		64,026		65,445
Income (loss) from operations		5,797		(3,748)		20,202		(21,269)
Non-operating income (expenses)		204		(528)		(633)		567
Income (loss) before income taxes	$	6,001	$	(4,276)	$	19,569	$	(20,702)

The Company manages its business segments to the gross profit level and manages its operating and other costs on a company-wide basis. The Company does not identify total assets by segment for internal purposes, as the Company’s CODM does not assess performance, make strategic decisions, or allocate resources based on assets.

Prior to the Merck API Transaction on April 30, 2014, Merck notified the Company of several environmental items that were not in alignment with Merck’s internal policies and procedures. None of these items were in violation of any French environmental law or regulation. The Company has assessed the nature of the remedial actions to be undertaken and since April 30, 2014, recorded the related expenses of €0.6 million as incurred in cost of sales within the API segment. Based on the letter of understanding signed in conjunction with the acquisition on April 30, 2014, the Company and Merck further entered into an agreement on May 11, 2016, pursuant to which Merck shall reimburse the Company for the costs to complete the remedial actions up to €6.0 million. Accordingly, in the nine months ended September 30, 2016, the Company recorded the reimbursement of €0.6 million for the expenses already incurred as a reduction of cost of sales within the API segment.

The amount of net revenues in the finished pharmaceutical products segment is presented below:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
	(in thousands)
Finished pharmaceutical products net revenues:
Enoxaparin	$	15,363	$	21,264	$	51,049	$	64,647
Naloxone		12,407		10,519		38,222		27,944
Lidocaine		8,279		6,176		26,378		20,662
Phytonadione		8,667		5,935		23,555		10,301
Epinephrine		5,303		5,032		14,921		9,958
Other finished pharmaceutical products		9,039		8,976		27,243		25,337
Total finished pharmaceutical products net revenues	$	59,058	$	57,902	$	181,368	$	158,849

Net revenues and carrying values of long-lived assets of enterprises by geographic regions are as follows:

	Net Revenue								Long-Lived Assets
	Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,		December 31,
	2016		2015		2016		2015		2016		2015
	(in thousands)
United States	$	62,691	$	62,955	$	188,865	$	168,705	$	103,179	$	100,404
China		—		—		—		—		34,541		28,547
France		1,532		913		2,757		5,902		14,135		13,210
United Kingdom		—		—		—		—		97		—
Total	$	64,223	$	63,868	$	191,622	$	174,607	$	151,952	$	142,161