QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) | |
(Address of principal executive offices) |
(Zip Code) |
Title of Each Class |
Ticker Symbol |
Name of Exchange on Which Registered | ||
Large accelerated filer | ☐ | ☒ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
Emerging growth company |
PART I. FINANCIAL INFORMATION |
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Item 1. |
FINANCIAL STATEMENTS |
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3 |
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4 |
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5 |
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6 |
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7 |
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Item 2. |
24 |
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Item 3. |
35 |
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Item 4. |
36 |
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PART II. OTHER INFORMATION |
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Item 1. |
36 |
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Item 1A. |
37 |
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Item 2. |
37 |
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Item 3. |
37 |
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Item 4. |
37 |
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Item 5. |
37 |
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Item 6. |
38 |
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39 |
March 31, |
December 31, |
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2021 |
2020 |
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(unaudited) |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Short-term investments |
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Accounts receivable, net |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Operating lease right-of-use |
— | |||||||
Property and equipment, net |
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Deferred tax assets |
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Deposits |
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Total assets |
$ | $ | ||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities: |
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Accounts payable |
$ | $ | ||||||
Accrued expenses and other liabilities |
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Total current liabilities |
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Operating lease liability, net of current portion |
— | |||||||
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Total liabilities |
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Commitments and contingencies (Note 10) |
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Stockholders’ equity: |
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Preferred stock, $ |
— | |||||||
Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
( |
) | ( |
) | ||||
Accumulated other comprehensive income (loss) |
( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
$ | $ | ||||||
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For the Three Months Ended March 31, |
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2021 |
2020 |
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, net |
$ | $ | ||||||
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Operating costs and expenses: |
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sales |
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Research and development |
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Selling, general and administrative |
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Total operating costs and expenses |
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Operating income |
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Other income, net |
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Net income before income taxes |
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Provision for income taxes |
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Net income |
$ | $ | ||||||
Net income per share: |
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Basic |
$ | $ | ||||||
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Diluted |
$ | $ | ||||||
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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Net income |
$ | $ | ||||||
Other comprehensive income: |
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Unrealized gain (loss) on available-for-sale |
( |
) |
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Comprehensive income |
$ | $ | ||||||
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Common Stock |
Additional |
Accumulated Other |
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Preferred Stock |
Shares |
Amount |
Paid-in Capital |
Accumulated Deficit |
Comprehensive Gain (Loss) |
Total |
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Balance at December 31, 2020 |
$ | — | $ | $ | $ | ( |
) | $ | $ |
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Issuance of stock options for services |
— | — | — | — | — | |||||||||||||||||||||||
Exercise of stock options for common stock |
— | — | — | — | ||||||||||||||||||||||||
Amortization of restricted stock for services |
— | — | — | — | — | |||||||||||||||||||||||
Repurchase of common stock |
— | ( |
) |
— | — | ( |
) |
— | ( |
) | ||||||||||||||||||
Other comprehensive gain (loss) |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||
Net income |
— | — | — | — | — | |||||||||||||||||||||||
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Balance at March 31, 2021 |
$ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||
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Common Stock |
Additional |
Accumulated Other |
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Preferred Stock |
Shares |
Amount |
Paid-in Capital |
Accumulated Deficit |
Comprehensive Gain (Loss) |
Total |
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Balance at December 31, 2019 |
$ | — | $ | $ | $ | ( |
) | $ | $ |
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Issuance of stock options for services |
— | — | — | — | — | |||||||||||||||||||||||
Exercise of stock options for common stock |
— | — | — | — | ||||||||||||||||||||||||
Amortization of restricted stock for services |
— | — | — | — | — | |||||||||||||||||||||||
Other comprehensive gain (loss) |
— | — | — | — | — | |||||||||||||||||||||||
Net income |
— | — | — | — | — | |||||||||||||||||||||||
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Balance at March 31, 2020 |
$ | — | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||
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For the Three Months Ended March 31, |
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2021 |
2020 |
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Operating Activities: |
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Net income |
$ | $ | ||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Depreciation |
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Stock-based compensation |
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Deferred taxes |
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— |
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Change in accrued interest and accretion of discount on investments |
( |
) | ||||||
Amortization of right-of-use asset |
— | |||||||
(Increase) decrease in: |
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Accounts receivable, net |
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Inventory |
( |
) | ||||||
Prepaid expenses and other current assets and deposits |
( |
) | ||||||
Increase (decrease) in: |
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Accounts payable |
( |
) | ( |
) | ||||
Accrued expenses and other liabilities |
( |
) | ( |
) | ||||
Operating lease liability |
( |
) | ||||||
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Net cash provided by (used in) operating activities |
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Investing Activities: |
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Purchases of property and equipment |
( |
) | — | |||||
Purchases of investments |
( |
) | — | |||||
Proceeds from maturities and sales of investments |
— |
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Net cash provided by (used in) investing activities |
( |
) | ||||||
Financing Activities: |
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Proceeds from exercise of stock options |
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Net cash provided by (used in) financing activities |
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Net increase (decrease) in cash and cash equivalents |
( |
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Cash and cash equivalents—beginning of period |
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Cash and cash equivalents—end of period |
$ | $ | ||||||
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Non-cash investing and financing activities: |
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Unrealized gain (loss) on available-for-sale |
$ | ( |
) | $ | ||||
Repurchase of common stock not yet settled at end of period |
$ | $ | — | |||||
Operating lease liabilities arising from obtaining right-of-use assets |
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$ |
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$ |
— |
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1. |
Organization and Description of Business. |
2. |
Basis of Presentation and Significant Accounting Policies. |
a. |
INTERIM FINANCIAL STATEMENTS. 10-Q was derived from the audited financial statements and does not include all disclosures required by U.S. GAAP. |
2. |
Basis of Presentation and Significant Accounting Policies (continued). |
b. |
PRINCIPLES OF CONSOLIDATION |
c. |
USE OF ESTIMATES. |
d. |
CASH AND CASH EQUIVALENTS. U.S. Treasuries. The Company has substantially all of its cash and cash equivalents deposited with one financial institution. These amounts exceed federally insured limits. |
e. |
INVESTMENTS of short-term bond funds and U.S. Treasuries. Such investments are not insured by the Federal Deposit Insurance Corporation. |
f. |
ACCOUNTS RECEIVABLE, NET. |
2. |
Basis of Presentation and Significant Accounting Policies (continued). |
g. |
INVENTORY. work-in-process first-in, first out (FIFO) flow of goods. The Company began capitalizing inventories post FDA approval of Firdapse® on November 28, 2018 as the related costs were expected to be recoverable through the commercialization of the product. Costs incurred prior to the FDA approval of Firdapse® were recorded as research and development expenses in prior years’ consolidated statements of operations and comprehensive income. If information becomes available that suggests that inventories may not be realizable, the Company may be required to expense a portion or all of the previously capitalized inventories. As of March 31, 2021 and December 31, 2020, inventory consisted mainly of work-in-process |
h. |
PREPAID EXPENSES AND OTHER CURRENT ASSETS. pre-clinical studies, clinical trials and studies, regulatory affairs and consulting. Prepaid manufacturing consists of advances for the Company’s drug manufacturing activities. Such advances are recorded as expense as the related goods are received or the related services are performed. |
i. |
FAIR VALUE OF FINANCIAL INSTRUMENTS. |
j. |
FAIR VALUE MEASUREMENTS. |
2. |
Basis of Presentation and Significant Accounting Policies (continued). |
Fair Value Measurements at Reporting Date Using (in thousands) |
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Balances as of March 31, 2021 |
Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
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Cash and cash equivalents: |
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Money market funds |
$ | $ | $ | — | $ | — | ||||||||||
U.S. Treasuries |
$ | $ | $ | — |
$ | — | ||||||||||
Short-term investments: |
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Short-term bond funds |
$ | $ | $ | — | $ | — | ||||||||||
Balances as of December 31, 2020 |
Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
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Cash and cash equivalents: |
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Money market funds |
$ | $ | $ | — | $ | — | ||||||||||
U.S. Treasuries |
$ | $ | — |
$ | $ | — | ||||||||||
Short-term investments: |
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Short-term bond funds |
$ | $ | $ | — | $ | — | ||||||||||
k. |
OPERATING LEASES. right-of-use non-lease components, which are generally accounted for separately. |
l. |
SHARE REPURCHASES. |
m. |
REVENUE RECOGNITION. ® in November 2018. Subsequent to receiving FDA approval, the Company entered into an arrangement with one distributor (the “Customer”), which is the exclusive distributor of Firdapse® in the United States. The Customer subsequently resells Firdapse® to a small group of exclusive specialty pharmacies (“SPs”) whose dispensing activities for patients with specific payors may result in government-mandated or privately negotiated rebate obligations for the Company with respect to the purchase of Firdapse® . |
2. |
Basis of Presentation and Significant Accounting Policies (continued). |
2. |
Basis of Presentation and Significant Accounting Policies (continued). |
2. |
Basis of Presentation and Significant Accounting Policies (continued). |
2. |
Basis of Presentation and Significant Accounting Policies (continued). |
n. |
RESEARCH AND DEVELOPMENT. |
o. |
STOCK-BASED COMPENSATION. |
p. |
CONCENTRATION OF RISK. |
2. |
Basis of Presentation and Significant Accounting Policies (continued). |
q. |
ROYALTIES. |
r. |
INCOME TAXES. The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. |
s. |
COMPREHENSIVE INCOME. available-for-sale |
t. |
NET INCOME PER COMMON SHARE. |
For the Three Months Ended March 31, |
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2021 |
2020 |
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Basic weighted average common shares outstanding |
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Effect of dilutive securities |
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Diluted weighted average common shares outstanding |
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2. |
Basis of Presentation and Significant Accounting Policies (continued). |
u. |
RECLASSIFICATIONS. |
v. |
RECENTLY ISSUED ACCOUNTING STANDARDS. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes step-up in the tax basis of goodwill. The standard is effective for annual periods beginning after December 15, 2020 and interim periods within, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The Company adopted the new standard on January 1, 2021. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. |
3. |
Investments. |
Estimated Fair Value |
Gross Unrealized Gains |
Gross Unrealized Losses |
Amortized Cost |
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At March 31, 2021: |
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U.S. Treasuries – Cash equivalents |
$ |
$ | $ | — | $ |
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Short-term bond funds |
— |
( |
) |
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Total |
$ | $ | $ | ( |
) |
$ | ||||||||||
At December 31, 2020: |
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U.S. Treasuries – Cash equivalents |
$ | $ | $ | — | $ | |||||||||||
Short-term bond funds |
— | |||||||||||||||
Total |
$ | $ | $ | — | $ | |||||||||||
There were r available-for-sale securities for the three months ended March 31, 2021 or March 31, 2020. The Company did not hold any securities in an unrealized loss position for more than 12 months as of March 31, 2021. The estimated fair values of available-for-sale securities at March 31, 2021, by contractual maturity, are summarized as follows (in thousands): |
March 31, 2021 |
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Due in one year or less |
$ |
4. |
Inventory, net. |
March 31, 2021 |
December 31, 2020 |
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Raw materials |
$ | $ | — | |||||
Work-in-process |
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Finished goods |
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Total inventory, net |
$ | $ | ||||||
5. |
Prepaid Expenses and Other Current Assets. |
March 31, 2021 |
December 31, 2020 |
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Prepaid manufacturing costs |
$ | $ | ||||||
Prepaid tax |
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Prepaid insurance |
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Prepaid subscription fees |
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Prepaid research fees |
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Prepaid commercialization expenses |
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Due from collaborative arrangements |
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Other |
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Total prepaid expenses and other current assets |
$ | $ | ||||||
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6. |
Operating Lease. |
March 31, 2021 |
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Operating lease cost |
$ |
March 31, 2021 |
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Cash paid for amounts included in the measurement of lease liabilities: |
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Operating cash flows |
$ | |||
Right-of-use |
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Operating leases |
$ |
Operating lease right-of-use |
$ |
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Other current liabilities |
$ | | ||
Operating lease liabilities, net of current portion |
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Total operating lease liabilities |
$ | | ||
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Remaining lease term |
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Discount rate |
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% |
6. |
Operating Lease (continued). |
2021 (remaining nine months) |
$ | |||
2022 |
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2023 |
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2024 |
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2025 |
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Thereafter |
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Total lease payments |
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Less imputed interest |
( |
) | ||
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Total |
$ | |||
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7. |
Property and Equipment, net. |
March 31, 2021 |
December 31, 2020 |
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Computer equipment |
$ | $ | ||||||
Furniture and equipment |
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Leasehold improvements |
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Less: Accumulated depreciation |
( |
) | ( |
) | ||||
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Total property and equipment, net |
$ | $ | ||||||
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8. |
Accrued Expenses and Other Liabilities. |
March 31, 2021 |
December 31, 2020 |
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Accrued preclinical and clinical trial expenses |
$ | $ | ||||||
Accrued professional fees |
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Accrued compensation and benefits |
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Accrued license fees |
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Accrued purchases |
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Accrued contributions |
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Operating lease liability |
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Accrued variable consideration |
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Accrued income tax |
— | |||||||
Other |
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Current accrued expenses and other liabilities |
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Lease liability—non-current |
— | |||||||
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Non-current accrued expenses and other liabilities |
— | |||||||
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Total accrued expenses and other liabilities |
$ | $ | ||||||
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9. |
Collaborative Arrangements. |
9. |
Collaborative Arrangements (continued). |
10. |
Commitments and Contingencies. |
11. |
Agreements. |
a. |
LICENSE AGREEMENT WITH BIOMARIN (FIRDAPSE ® ) ® . Under the license agreement, the Company pays: (i) royalties to the licensor for ® equal to ® equal to |
b. |
AGREEMENTS FOR DRUG MANUFACTURING, DEVELOPMENT, PRECLINICAL AND CLINICAL STUDIES. |
12. |
Income Taxes. |
13. |
Stockholders’ Equity. |
13. |
Stockholders’ Equity (continued). |
14. |
Stock Compensation. |
Three months ended March 31, |
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2021 |
2020 |
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Research and development |
$ | $ | ||||||
Selling, general and administrative |
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|
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Total stock-based compensation |
$ | $ | ||||||
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14. |
Stock Compensation (continued). |
15. |
Subsequent Events. |
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Introduction |
• | Overview. |
• | Basis of Presentation. |
• | Critical Accounting Policies and Estimates. |
• | Results of Operations. |
• | Liquidity and Capital Resources. off-balance sheet arrangements and our outstanding commitments, if any. |
• | Caution Concerning Forward-Looking Statements. |
OVERVIEW |
Basis |
of Presentation |
Three months ended March 31, |
Change |
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2021 |
2020 |
$ |
% |
|||||||||||||
Research and development expenses |
$ | 2,618 | $ | 3,805 | (1,187 | ) | (31.2 | )% | ||||||||
Employee stock-based compensation |
389 | 418 | (29 | ) | (7.0 | )% | ||||||||||
|
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|
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Total research and development expenses |
$ | 3,007 | $ | 4,223 | (1,216 | ) | (28.8 | )% | ||||||||
|
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|
Three months ended March 31, |
Change |
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2021 |
2020 |
$ |
% |
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Selling |
$ | 5,676 | $ | 5,804 | (128 | ) | (2.2 | )% | ||||||||
General and administrative |
5,858 | 3,158 | 2,700 | 85.5 | % | |||||||||||
Employee stock-based compensation |
1,182 | 1,101 | 81 | 7.4 | % | |||||||||||
|
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|
|
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|
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|
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Total selling, general and administrative expenses |
$ | 12,716 | $ | 10,063 | 2,653 | 26.4 | % | |||||||||
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• | the extent to which we seek to acquire or in-license additional drug development candidates; |
• | the scope, rate of progress and cost of our clinical trials and other product development activities; |
• | future clinical trial results; |
• | the terms and timing of any collaborative, licensing and other arrangements that we may establish; |
• | the cost and timing of regulatory approvals; |
• | the cost and delays in product development as a result of any changes in regulatory oversight applicable to our products; |
• | the level of revenues that we report from sales of Firdapse ® ; |
• | the effect of competition and market developments; and |
• | the cost of filing and potentially prosecuting, defending and enforcing any patent claims and other intellectual property rights. |
• | Payments under our license agreement |
• | Royalties to our licensor for seven years from the first commercial sale of Firdapse ® equal to 7% of net sales (as defined in the License Agreement) in North America for any calendar year for sales up to $100 million, and 10% of net sales in North America in any calendar year in excess of $100 million; and |
• | Royalties to the third-party licensor of the rights sublicensed to us from the first commercial sale of Firdapse ® equal to 7% of net sales (as defined in the License Agreement between BioMarin and the third-party licensor) in any calendar year for the duration of regulatory exclusivity within a territory and 3.5% for territories in any calendar year in territories without regulatory exclusivity. |
• | Employment agreements |
• | Purchase commitment. |
• | Lease for office space |
• | The impact of the COVID-19 pandemic on our business or on the economy generally; |
• | Whether we will be able to continue to successfully market Firdapse ® while maintaining full compliance with applicable federal and state laws, rules and regulations; |
• | Whether our estimates of the size of the market for Firdapse ® for the treatment of Lambert-Eaton Myasthenic Syndrome (“LEMS”) will turn out to be accurate; |
• | Whether we will be able to locate LEMS patients who are undiagnosed or are misdiagnosed with other diseases; |
• | Whether patients will discontinue from the use of our drug at rates that are higher than historically experienced or are higher than we project; |
• | Whether the daily dose taken by patients changes over time and affects our results of operations; |
• | Whether Firdapse ® patients can be successfully titrated to stable therapy; |
• | Whether we can continue to market Firdapse ® on a profitable and cash flow positive basis; |
• | Whether any revenue guidance that we provide to the public market will turn out to be accurate; |
• | Whether payors will reimburse for our product at the price that we charge for the product; |
• | The ability of our third-party suppliers and contract manufacturers to maintain compliance with current Good Manufacturing Practices (cGMP); |
• | The ability of our distributor and the specialty pharmacies that distribute our product to maintain compliance with applicable law; |
• | Our ability to maintain compliance with applicable rules relating to our patient assistance programs and our contributions to 501(c)(3) organizations that support LEMS patients; |
• | The scope of our intellectual property and the outcome of any future challenges or opposition to our intellectual property, and, conversely, whether any third-party intellectual property presents unanticipated obstacles for Firdapse ® ; |
• | Whether our lawsuits against Jacobus and the specialty pharmacy distributing its product for patent infringement will be successful; |
• | The effect on our business and future results of operations arising from the approval by the FDA of Ruzurgi ® for the treatment of pediatric LEMS patients (ages 6 to under 17); |
• | Whether our appeal of the District Court’s decision in our suit against the United States FDA seeking to vacate the FDA’s approval of Ruzurgi ® will be successful; |
• | Whether we can continue to compete successfully if the approval of Ruzurgi ® is not overturned and Ruzurgi® continues to be prescribed for off-label use by adult LEMS patients; |
• | Whether, because of the lower price of Ruzurgi ® , payors will require that patients try off-label Ruzurgi® first before they approve Firdapse® as a treatment for adult LEMS patients; |
• | The impact on Firdapse ® of adverse changes in potential reimbursement and coverage policies from government and private payors such as Medicare, Medicaid, insurance companies, health maintenance organizations and other plan administrators, or the impact of pricing pressures enacted by industry organization, the federal government or the government of any state, including as a result of increased scrutiny over pharmaceutical pricing or otherwise; |
• | The impact on our business and results of operations of public statements by politicians and a vocal group of LEMS patients and doctors who object to our pricing of Firdapse ® ; |
• | Changes in the healthcare industry and the effect of political pressure from and actions by President Biden, Congress and/or medical professionals seeking to reduce prescription drug costs; |
• | The state of the economy generally and its impact on our business; |
• | Changes to the healthcare industry occasioned by any changes in laws relating to the pricing of drug products, or changes in the healthcare industry generally; |
• | The scope, rate of progress and expense of our clinical trials and studies, pre-clinical studies, proof-of-concept |
• | Our ability to complete any clinical trials and studies that we may undertake on a timely basis and within the budgets we establish for such trials and studies; |
• | Whether COVID-19 will further affect the timing and costs of our currently ongoing and contemplated clinical trials; |
• | Whether Firdapse ® will ever be approved for the treatment of any neuromuscular disease other than LEMS; |
• | Whether we can successfully commercialize Firdapse ® in Canada on a profitable basis; |
• | Whether our suit to overturn the approval of Ruzurgi ® in Canada will be successful; |
• | The impact on sales of Firdapse ® in the United States if an amifampridine product is purchased in Canada for use in the United States; |
• | Whether we will be able to successfully complete the clinical trial in Japan that will be required to seek approval to commercialize Firdapse ® in Japan; |
• | Whether we will be able to obtain approval to commercialize Firdapse ® in Japan; |
• | Whether we can successfully develop, obtain approval of and successfully market a long-acting version of amifampridine; |
• | Whether our efforts to grow our business beyond Firdapse ® through acquisitions of companies or in-licensing of product opportunities will be successful; |
• | Whether we will have sufficient capital to finance any such acquisitions; |
• | Whether our version of generic vigabatrin tablets will ever be approved by the FDA; |
• | Even if our version of vigabatrin tablets is approved for commercialization, whether Endo Ventures/Par Pharmaceutical (our collaborator in this venture) will be successful in marketing the product; and |
• | Whether we will earn milestone payments on the first commercial sale of vigabatrin tablets and royalties on sales of generic vigabatrin tablets. |
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
ITEM 4. |
CONTROLS AND PROCEDURES |
a. |
We have carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of March 31, 2021, our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act, was recorded, processed, summarized or reported within the time periods specified in the rules and regulations of the SEC, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports was accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures. |
b. |
During the three months ended March 31, 2021, there were no changes in our internal controls or in other factors that could have a material effect, or are reasonably likely to have a material effect, on our internal control over financial reporting. |
ITEM 1. |
LEGAL PROCEEDINGS |
ITEM 1A. |
RISK FACTORS |
ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Period |
Total Number of Shares Purchased |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of Publicly Announced Program |
Dollar Value of Shares that May Yet Be Purchased (in thousands) |
||||||||||||
January 1, 2021 – January 31, 2021 |
N/A | N/A | N/A | N/A | ||||||||||||
February 1, 2021 – February 28, 2021 |
N/A | N/A | N/A | N/A | ||||||||||||
March 1, 2021 – March 31, 2021 |
67,049 | $ | 4.36 | 67,049 | $ | 39,707 |
ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. |
MINE SAFETY DISCLOSURE |
ITEM 5. |
OTHER INFORMATION |
ITEM 6. |
EXHIBITS |
31.1 | Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of Principal Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification of Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | XBRL Taxonomy Extension Label Linkbase | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
Catalyst Pharmaceuticals, Inc. | ||
By: | /s/ Alicia Grande | |
Alicia Grande | ||
Vice President, Treasurer and Chief Financial Officer |
Exhibit 31.1
Certification of Principal Executive Officer
I, Patrick J. McEnany, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Catalyst Pharmaceuticals, Inc.; |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 10, 2021
/s/ Patrick J. McEnany |
Patrick J. McEnany |
Chief Executive Officer |
(Principal Executive Officer) |
Exhibit 31.2
Certification of Principal Financial Officer
I, Alicia Grande, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Catalyst Pharmaceuticals, Inc.; |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 10, 2021
/s/ Alicia Grande |
Alicia Grande |
Chief Financial Officer |
(Principal Financial Officer) |
Exhibit 32.1
Certification Required by 18 U.S.C. Section 1350
(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
I, Patrick J. McEnany as Principal Executive Officer of Catalyst Pharmaceuticals, Inc. (the Company), certify, pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), that to my knowledge:
1. | the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2021 (the Report), filed with the U.S. Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 10, 2021 | /s/ Patrick J. McEnany | |||||
Patrick J. McEnany | ||||||
Chief Executive Officer | ||||||
(Principal Executive Officer) |
Exhibit 32.2
Certification Required by 18 U.S.C. Section 1350
(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
I, Alicia Grande as Principal Financial Officer of Catalyst Pharmaceuticals, Inc. (the Company), certify, pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), that to my knowledge:
1. | the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2021 (the Report), filed with the U.S. Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 10, 2021 | /s/ Alicia Grande | |||||
Alicia Grande | ||||||
Chief Financial Officer | ||||||
(Principal Financial Officer) |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 103,804,590 | 103,781,641 |
Common stock, shares outstanding | 103,804,590 | 103,781,641 |
Organization and Description of Business |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021 | |||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Organization and Description of Business |
Catalyst Phar m aceuticals, Inc. and subsidiary (collectively, the “Company”) is a commercial-stage patient-centric biopharmaceutical company focused on in-licensing, developing and commercializing novel high-quality medicines for patients living with rare diseases. On November 28, 2018, the U.S. Food and Drug Administration, or FDA, granted approval of Firdapse ® for the treatment of adults with LEMS (ages 17 and above). On January 15, 2019, the Company launched its first product, Firdapse® , in the United States for the treatment of adults with LEMS. On August 6, 2020, the Company announced that Canada’s national healthcare r egulatory agency, Health Canada, has approved Firdapse® for the treatment of patients in Canada with LEMS. On October 28, 2020, the Company launched Firdapse® in Canada for the treatment of patients with LEMS through a license and supply agreement with KYE Pharmaceuticals. Since inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets, raising capital, and selling its product. The Company incurred operating losses in each period from inception until the second quarter of 2019, when it started reporting operating income. The Company has been able to fund its cash needs to date through offerings of its securities and revenues from its product sales. See Note 13 (Stockholders’ Equity). Capital Resources While there can be no assurance, based on currently available information, the Company estimates that it has sufficient resources to support its planned operations for at least the next 12 months from the issuance date of this Form 10-Q. The Company may raise required funds in the future through public or private equity offerings, debt financings, corporate collaborations, governmental research grants or other means. The Company may also seek to raise new capital to fund additional drug development efforts, even if it has sufficient funds for its planned operations. Any sale by the Company of additional equity or convertible debt securities could result in dilution to the Company’s current stockholders. There can be no assurance that any required additional funding will be available to the Company at all or available on terms acceptable to the Company. Further, to the extent that the Company raises additional funds through collaborative arrangements, it may be necessary to relinquish some rights to the Company’s drug candidates or grant sublicenses on terms that are not favorable to the Company. If the Company is not able to secure additional funding when needed, the Company may have to delay, reduce the scope of, or eliminate one or more research and development programs, which could have an adverse effect on the Company’s business. Risks and Uncertainties There are numerous aspects of the coronavirus (COVID-19) pandemic that have adversely affected the Company’s business since the beginning of the pandemic. The Company closely monitors the impact of the pandemic on all aspects of its business and takes steps, wherever possible, to lessen those impacts. However, the Company is unable to predict the impact that the coronavirus pandemic will have on its business in future periods. |
Basis of Presentation and Significant Accounting Policies |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Significant Accounting Policies |
In the opinion of management, the accompanying unaudited interim consolidated financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of the dates and for the periods presented. Accordingly, these consolidated statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2020 included in the 2020 Annual Report on Form 10-K filed by the Company with the SEC. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for any future period or for the full 2021 fiscal year.
The short-term bond funds and U.S. Treasuries held at March 31, 2021 are classified as available-for-sale non-current investments in its consolidated balance sheets. There arenon-current investments as of March 31, 2021 and December 31, 2020. The Company records available-for-sale available-for-sale available-for-sale
Products that have been approved by the FDA or other regulatory authorities, such as Firdapse ® , are also used in clinical programs to assess the safety and efficacy of the products for usage in treating diseases that have not been approved by the FDA or other regulatory authorities. The form of Firdapse® utilized for both commercial and clinical programs is identical and, as a result, the inventory has an “alternative future use” as defined in authoritative guidance. Raw materials associated with clinical development programs are included in inventory and charged to research and development expense when the product enters the research and development process and no longer can be used for commercial purposes and, therefore, does not have an “alternative future use”. The Company evaluates for potential excess inventory by analyzing current and future product demand relative to the remaining product shelf life. The Company builds demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance, and patient usage.
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
The Company accounts for share repurchases by charging the excess of repurchase price over the repurchased common stock’s par value entirely to accumulated deficit. All repurchased shares are retired and become authorized but unissued shares. The Company accrues for the shares purchased under the share repurchase plan based on the trade date. The Company may terminate or modify its share repurchase program at any time.
To determine revenue recognition for arrangements that are within the scope of Accounting Standards Codification (“ASC”) Topic 606 – Revenue from Contracts with Customers (“Topic 606”), the Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. For a complete discussion of accounting for product revenue, see Product Revenue, Net below. The Company also may generate revenues from payments received under a collaborative agreement. Collaborative agreement payments may include nonrefundable fees at the inception of the agreements, contingent payments for specific achievements designated in the collaborative agreements, and/or net profit-sharing payments on sales of products resulting from a collaborative arrangement. For a complete discussion of accounting for collaborative arrangements, see Revenues from Collaborative Arrangements below. Product Revenue, Net: ® to the Customer (its exclusive distributor) who subsequently resells Firdapse® to both a small group of SPs who have exclusive contracts with the Company to distribute the Company’s products to patients and potentially to medical centers or hospitals on an emergency basis. In addition to the distribution agreement with its Customer, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s products. The Company recognizes revenue on product sales when the Customer obtains control of the Company’s product, which occurs at a point in time (upon delivery or upon dispense to patient). Product revenue is recorded net of applicable reserves for variable consideration, including discounts and allowances. The Company’s payment terms range between 15 and 30 days. Shipping and handling costs for product shipments occur prior to the customer obtaining control of the goods and are recorded in cost of sales. If taxes should be collected from the Customer relating to product sales and remitted to governmental authorities, they will be excluded from revenue. The Company expenses incremental costs of obtaining a contract when incurred, if the expected amortization period of the asset that the Company would have recognized is one year or less. However, no such costs were incurred during the three-months ended March 31, 2021 and 2020. During the three-month periods ended March 31, 2021 and 2020, all of the Company’s sales of Firdapse ® in the United States were to its Customer. Reserves for Variable Consideration: These estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in Topic 606 for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted Customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts. The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period. The Company’s analyses also contemplates application of the constraint in accordance with the guidance, under which it determined a material reversal of revenue would not occur in a future period for the estimates detailed below as of March 31, 2021 and, therefore, the transaction price was not reduced further during the three-month periods ended March 31, 2021 and 2020. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. Trade Discounts and Allowances: ® Prompt Payment Discounts: Funded Co-pay Assistance Program:co-pay assistance program intended to provide financial assistance to qualified commercially-insured patients. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with Firdapse® that has been recognized as revenue, but remains in the distribution channel at the end of each reporting period. These payments are considered payable to the third-party vendor and the related reserve is recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses and other current liabilities in the consolidated balance sheets. Product Returns: Provider Chargebacks and Discounts: Government Rebates: m ade for product that has been recognized as revenue, but which remains in the distribution channel inventories at the end of each reporting period. Bridge and Patient Assistance Programs: ® free of charge to uninsured patients who satisfy pre-established criteria for either the Bridge Program or the Patient Assistance Program. Patients who meet the Bridge Program eligibility criteria and are transitioning from investigational product while they are waiting for a coverage determination, or later, for patients whose access is threatened by the complications arising from a change of insurer may receive a temporary supply of free Firdapse® ® . The Patient Assistance Program provides Firdapse® ® because they are unable to obtain coverage from their payor despite having health insurance, to the extent allowed by applicable law. The Company does not recognize any revenue related to these free products and the associated costs are classified in selling, general and administrative expenses in the Company’s consolidated statements of operations and comprehensive income. Revenues from Collaborative Arrangements: For elements of collaboration arrangements that are not accounted for pursuant to guidance in ASC 606, an appropriate recognition method is determined and applied consistently, generally by analogy to the revenue from contracts with customers guidance. Pursuant to ASC 606, for arrangements or transactions between arrangement participants determined to be within the scope of the contracts with customers guidance, the Company performs the following steps to determine the appropriate amount of revenue to be recognized as the Company fulfills its obligations: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company evaluates the performance obligations promised in the contract that are based on goods and services that will be transferred to the customer and determines whether those obligations are both (i) capable of being distinct and (ii) distinct in the context of the contract. Goods or services that meet these criteria are considered distinct performance obligations. The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration or variable consideration. The collaborative agreements provide for milestone payments upon achievement of development and regulatory events. The Company accounts for milestone payments as variable consideration in accordance with Topic 606. At the inception of each arrangement that includes variable consideration, the Company evaluates the amount of potential transaction price and the likelihood that the transaction price will be received. The Company utilizes either the most likely amount method or expected value method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration that is included in the transaction price may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and, if so, these options are considered performance obligations. Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset. After contract inception, the transaction price is reassessed at every period end and updated for changes such as resolution of uncertain events. Any change in the overall transaction price is allocated to the performance obligations based on the same methodology used at contract inception. The Company recognizes sales-based royalties or net profit-sharing when the later of (a) the subsequent sale occurs, or (b) the performance obligation to which the sales-based royalty or net profit-sharing has been satisfied. Payments to and from the collaborator are presented in the statement of operations based on the nature of the Company’s business operations, the nature of the arrangement, including the contractual terms, and the nature of the payments. Refer to Note 9 (Collaborative Arrangements), for further discussion on the Company’s collaborative arrangements.
The Company sells its product in the United States through an exclusive distributor (its Customer) to specialty pharmacies. Therefore, its distributor and specialty pharmacies account for all of its trade receivables and net product revenues. The creditworthiness of its Customer is continuously monitored, and the Company has internal policies regarding customer credit limits. The Company estimates an allowance for expected credit loss primarily based on the credit worthiness of its Customer, historical payment patterns, aging of receivable balances and general economic conditions. The Company currently has a single product with limited commercial sales experience, which makes it difficult to evaluate its current business, predict its future prospects and forecast financial performance and growth. The Company has invested a significant portion of its efforts and financial resources in the development and commercialization of the lead product, Firdapse ® , and expects Firdapse® to constitute virtually all of product revenue for the foreseeable future. The Company’s success depends on its ability to effectively commercialize Firdapse® .The Company relies exclusively on third parties to formulate and manufacture Firdapse ® and its drug candidates. The commercialization of Firdapse® and any other drug candidates, if approved, could be stopped, delayed or made less profitable if those third parties fail to provide sufficient quantities of product or fail to do so at acceptable quality levels or prices. The Company does not intend to establish its own manufacturing facilities. The Company is using the same third-party contractors to manufacture, supply, store and distribute drug supplies for clinical trials and for the commercialization of Firdapse® . If the Company is unable to continue its relationships with one or more of these third-party contractors, it could experience delays in the development or commercialization efforts as it locates and qualifies new manufacturers. The Company intends to rely on one or more third-party contractors to manufacture the commercial supply of its drugs.
The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company is subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company is not subject to U.S. federal, state and local tax examinations by tax authorities for years before 2017. If the Company were to subsequently record an unrecognized tax benefit, associated penalties and tax related interest expense would be reported as a component of income tax expense.
Diluted net income per common share is computed by dividing net income by the weighted average number of common shares outstanding, increased by the assumed conversion of other potentially dilutive securities during the period. The following table reconciles basic and diluted weighted average common shares:
Outstanding common stock equivalents totaling approximately 6.9 million, were excluded from the calculation of diluted net income per common share for the three months ended March 31, 2021 as their effect would be anti-dilutive. For the three months ended March 31, 2020, approximately 5.4 million shares of common stock equivalents were excluded from the calculation of diluted net income per common share as their effect would be anti-dilutive.
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Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Inventory, net |
Inventory, net consists of the following (in thousands):
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Prepaid Expenses and Other Current Assets |
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Prepaid Expenses and Other Current Assets |
Prepaid expenses and other current assets consist of the following (in thousands):
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Operating Leases |
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Disclosure of Operating Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Leases |
The Company has an operating lease agreement for its corporate office. The lease includes an option to e x tend the lease for up to 5 years and options to terminate the lease within 6 and 7.6 years. There are no obligations under finance leases. The Company entered into an agreement in May 2020 that amended its lease for its office facilities. Under the amended lease, the Company’s leased space increased from approximately 7,800 square feet of space to approximately 10,700 square feet of space. The amended lease commenced in March 2021 when construction of the asset was completed and space became available for use. Consequently, the Company recorded the effects of the amended lease during Q1 2021. The components of lease expense were as follows (in thousands):
Supplemental cash flow information related to leases was as follows:
Supplemental balance sheet information related to leases was as follows:
Remaining payments of lease liabilities as of March 31, 2021 were as follows (in thousands):
Rent expense was approximately $ 0.1 million for the three months ended March 31, 2021 and 2020. |
Property and Equipment, net |
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Property and Equipment, net |
Property and equipment, net consists of the following (in thousands):
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Accrued Expenses and Other Liabilities |
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Accrued Expenses and Other Liabilities |
Accrued expenses and other liabilities consist of the following (in thousands):
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Collaborative Arrangements |
3 Months Ended | ||
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Mar. 31, 2021 | |||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Collaborative Arrangements |
Endo Collaboration In December 2018, the Company entered into a collaboration and license agreement (Collaboration) with Endo, for the further development and commercialization of generic Sabril ® (vigabatrin) tablets through Endo’s U.S. Generic Pharmaceuticals segment, doing business as Par Pharmaceutical. Under the Collaboration, Endo assumes all development, manufacturing, clinical, regulatory, sales and marketing costs under the collaboration, while the Company is responsible for exercising commercially reasonable efforts to develop, or cause the development of, a final finished, stable dosage form of generic Sabril ® tablets. Under the terms of the Collaboration, the Company has received an up-front payment, and will receive a milestone payment, and a sharing of defined net profits upon commercialization from Endo consisting of a mid-double digit percent of net sales of generic Sabril® . The Company has also agreed to a sharing of certain development expenses. Unless terminated earlier in accordance with its terms, the collaboration continues in effect until the date that is following the commercial launch of the product. The Company evaluated the license agreement with Endo to determine whether it is a collaborative arrangement for purposes of ASC 808. As the Company shares in the significant risks and rewards, the Company has concluded that this is a collaborative arrangement. As developing a final fished dosage form of a generic product in exchange for consideration is not an output of the Company’s ongoing activities, Endo does not represent a contract with a customer. However, Topic 808 does not provide guidance on the recognition of consideration exchanged or accounting for the obligations that may arise between the parties. The Company concluded that ASC Topic 730, Research and Development The collaborative agreement included a nonrefundable upfront license fee that was recognized upon receipt following execution of the collaborative arrangement for vigabatrin tablets. The collaborative agreement provides for a $2.0 million milestone payment on the commercial launch of the product by Par. As of March 31, 2021 and 2020, no milestone payments have been earned. There were no revenues from this collaborative arrangement for the three months ended March 31, 2021 and 2020. There were no expenses incurred in connection with the collaborative agreement for the three months ended March 31, 2021. Total expenses incurred, net, in connection with the collaborative agreement for three months ended March 31, 2020 were approximately $5,700, and have been included in research and development expenses in the accompanying consolidated statements of operations and comprehensive income. KYE Pharmaceuticals Collaboration In August 2020, the Company entered into a collaboration and license agreement with KYE Pharmaceuticals Inc (KYE), for the commercialization of Firdapse ® in Canada. Under the agreement, Catalyst granted KYE an exclusive license to commercialize and market Firdapse ® in Canada. KYE assumes all selling and marketing costs under the collaboration, while the Company is responsible for supply of Firdapse® based on the collaboration partner’s purchase orders. Under the terms of the agreement, the Company will receive an up-front payment, received payment upon transfer of Marketing Authorization and delivery of commercial product, received payment for supply of Firdapse® , will receive milestone payments, and a sharing of defined net profits upon commercialization from KYE consisting of a mid-double-digit percent of net sales of Firdapse® . The Company has also agreed to a sharing of certain development expenses. Unless terminated earlier in accordance with its terms, the collaboration continues in effect until the date that is ten years following the commercial launch of the product in Canada. Although this agreement is in form identified as a collaborative agreement, the Company has concluded for accounting purposes that it represents a contract with a customer. This is because the Company grants to KYE a license and provides supply of Firdapse ® in exchange for consideration, which are outputs of the Company’s ongoing activities. Accordingly, the Company has concluded that this collaborative arrangement will be accounted for pursuant to ASC 606. The collaborative agreement included a nonrefundable upfront license fee that was recognized upon transfer of the license based on a determination that the right is provided as the intellectual property exists at the point in time in which the license is granted. Under the arrangement, the Company will receive profit-sharing reports within nine days after quarter end from the collaborator. Revenue from sales of collaboration products by the Company’s collaborator will be recognized in the quarter in which the sales occurred. For the three-month periods ended March 31, 2021 and 2020, there was no profit-sharing revenue from sales of the collaborative product. There was no revenue from the arrangement with KYE for the three months ended March 31, 2021. Total expenses incurred, net, in connection with the agreement with KYE for the three months ended March 31, 2021 were approximately $37,800. These expenses have been included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income. |
Commitments and Contingencies |
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Mar. 31, 2021 | |||
Commitments and Contingencies Disclosure [Abstract] | |||
Commitments and Contingencies |
In May 2019, the FDA approved a New Drug Application (NDA) for Jacobus Pharmaceuticals for Ruzurgi ® , their version of amifampridine (3,4-DAP), for the treatment of pediatric LEMS patients (ages 6 to under 17). The Company believes that Jacobus is offering Ruzurgi® ® . While the NDA for Ruzurgi® only covers pediatric patients, the Company believes that Ruzurgi® is being prescribed off label to adult LEMS patients. If Jacobus is able to successfully sell Ruzurgi® off-label to adult LEMS patients, it could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company believes that the FDA’s approval of Ruzurgi ® violated its statutory rights and was in multiple other respects arbitrary, capricious and contrary to law. As a result, in June 2019 the Company filed suit against the FDA and several related parties challenging this approval and related drug labeling, and Jacobus intervened in the case. The Company’s complaint, which was filed in the federal district court for the Southern District of Florida, alleged that the FDA’s approval of Ruzurgi® violated multiple provisions of FDA regulations regarding labeling, resulting in misbranding in violation of the Federal Food, Drug, and Cosmetic Act (FDCA); violated its statutory rights to Orphan Drug Exclusivity and New Chemical Entity Exclusivity under the FDCA; and was in multiple other respects arbitrary, capricious, and contrary to law, in violation of the Administrative Procedure Act. Among other remedies, the suit sought an order vacating the FDA’s approval of Ruzurgi® .On July 30, 2020, the Magistrate Judge considering the Company’s lawsuit against the FDA filed a Report and Recommendation in which she recommended to the District Judge handling the case that she grant the FDA’s and Jacobus’ motions for summary judgment and deny the Company’s motion for summary judgment. On September 29, 2020, the District Judge adopted the Report and Recommendation of the Magistrate Judge, granted the FDA’s and Jacobus’s motions for summary judgment, and dismissed the Company’s case. The Company has appealed the District Court’s decision to the Eleventh Circuit Court of Appeals. There can be no assurance as to the outcome of the Company’s appeal. On August 10, 2020, Health Canada issued a Notice of Compliance (NOC) to Medunik for Ruzurgi ® for the treatment of LEMS. The Company has since initiated a legal proceeding in Canada seeking judicial review of Health Canada’s decision to issue the NOC for Ruzurgi® ® Product Monograph clearly references pivotal nonclinical carcinogenicity and reproductive toxicity data for amifampridine phosphate developed by the Company. As such, the Company believes that its data was relied upon to establish the nonclinical safety profile of Ruzurgi® needed to meet the standards of the Canadian Food and Drugs Act. There can be no assurance of the result of this proceeding. Additionally, from time to time the Company may become involved in legal proceedings arising in the ordinary course of business. Except as set forth above, the Company believes that there is no other litigation pending at this time that could have, individually or in the aggregate, a material adverse effect on its results of operations, financial condition or cash flows. |
Agreements |
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Agreements |
On May 29, 2019, the Company entered into an amendment to its license agreement for Firdapse ® . Under the amendment, the Company has expanded its commercial territory for Firdapse® , which originally was comprised of North America, to include Japan. Additionally, the Company has an option to further expand its territory under the license agreement to include most of Asia, as well as Central and South America, upon the achievement of certain milestones in Japan. Under the amendment, the Company will pay royalties on net sales in Japan of a similar percentage to the royalties that the Company is currently paying under its original license agreement for North America. In January 2020, the Company was advised that BioMarin has transferred certain rights under the license agreement to SERB S.A.
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Income Taxes |
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Mar. 31, 2021 | |||
Income Tax Disclosure [Abstract] | |||
Income Taxes |
The Company’s effective income tax rate was 22.5% and 5.4% for the three months ended March 31, 2021 and 2020, respectively. Differences in the effective tax and the statutory federal income tax rate of 21% are driven by state income taxes and anticipated annual permanent differences, including orphan drug credit expense limitations and other items. The effective tax rate for the three months ended March 31, 2020 is also affected by a valuation allowance provided on the Company’s deferred tax assets.The Company had no uncertain tax positions as of March 31, 2021 and December 31, 2020. |
Stockholders' Equity |
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Equity [Abstract] | ||||||||||||
Stockholders' Equity |
Preferred Stock The Company has 5,000,000 shares of authorized preferred stock, $0.001 par value per share, at March 31, 2021 and December 31, 2020. Common Stock The Company has 200,000,000 shares of authorized common stock, par value $0.001 per share. At March 31, 2021 and December 31, 2020, 103,804,590 and 103,781,641 shares, respectively, of common stock were issued and outstanding. Each holder of common stock is entitled to one Share Repurchases In March 2021, the Company’s Board of Directors approved a share repurchase program that authorizes the repurchase of up to $40 million of the Company’s common stock, pursuant to a repurchase plan under Rule 10b-18 of the Securities Act. The share repurchase programcommenced on March 22, 2021 and, during the three months ended March 31, 2021, 67,049 shares were repurchased for an aggregate purchase price of approximately $0.3 million ($4.36 average price per share).2020 Shelf Registration Statement On July 23, 2020, the Company filed a shelf registration statement with the SEC to sell up to $200 million of common stock, preferred stock, warrants to purchase common stock, debt securities and units consisting of one or more of such securities (the “2020 Shelf Registration Statement”). The 2020 Shelf Registration Statement (file no.
333-240052) was declared effective by the SEC on July 31, 2020. As of the date of this report, no offerings have been completed under the Company’s 2020 Shelf Registration Statement. |
Stock Compensation |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Compensation |
For the three-month periods ended March 31, 2021 and 2020, the Company recorded stock-based compensation expense as follows (in thousands):
Stock Options As of March 31, 2021, there were outstanding stock options to purchase 13,852,004 shares of common stock, of which stock options to purchase 8,592,289 shares of common stock were exercisable as of March 31, 2021. During the three-month periods ended March 31, 2021 and 2020, the Company granted seven-year term options to purchase an aggregate of 560,000 and 735,000 shares, respectively, of the Company’s common stock to employees. The Company recorded stock-based compensation related to stock options totaling $1.4 million during the three-month periods ended March 31, 2021 and 2020. During the three-month periods ended March 31, 2021 and 2020, respectively, 761,151 and 854,831 options vested. During the three-month periods ended March 31, 2021 and 2020, options to purchase 89,998 shares and 11,666 shares, respectively, of the Company’s common stock were exercised, with proceeds of $188,295 and $26,149 respectively, to the Company. As of March 31, 2021, there was approximately $9.7 million of unrecognized compensation expense related to non-vested stock option awards granted under the 2014 and 2018 Stock Incentive Plans. The cost is expected to be recognized over a weighted average period of approximately 2.24 years.Restricted Stock Units There were no grants of restricted stock units to employees or directors during the three-month periods ended March 31, 2021 and March 31, 2020. During the three-month periods ended March 31, 2021, and March 31, 2020, the Company recorded non-cash stock-based compensation expense related to restricted stock units totaling $0.1 million and $0.1 million, respectively. As of March 31, 2021, there was approximately $0.9 million of unrecognized compensation expense related to
non-vested restricted stock units granted under the 2018 Stock Incentive Plan. The cost is expected to be recognized over a weighted average period of approximately 1.74 years. |
Subsequent Events |
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Mar. 31, 2021 | |||
Subsequent Events [Abstract] | |||
Subsequent Events |
Subsequent to March 31, 2021, 440,506 shares of the Company’s common stock were repurchased under the Company’s stock repurchase plan. The shares were purchased at an average price of $4.53 per share for a total cost of $2.0 million. |
Basis of Presentation and Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTERIM FINANCIAL STATEMENTS |
In the opinion of management, the accompanying unaudited interim consolidated financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of the dates and for the periods presented. Accordingly, these consolidated statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2020 included in the 2020 Annual Report on Form
10-K filed by the Company with the SEC. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for any future period or for the full 2021 fiscal year. |
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PRINCIPLES OF CONSOLIDATION. |
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USE OF ESTIMATES |
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CASH AND CASH EQUIVALENTS |
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INVESTMENTS |
The short-term bond funds and U.S. Treasuries held at March 31, 2021 are classified as available-for-sale non-current investments in its consolidated balance sheets. There arenon-current investments as of March 31, 2021 and December 31, 2020. The Company records available-for-sale available-for-sale available-for-sale |
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ACCOUNTS RECEIVABLE, NET |
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INVENTORY |
Products that have been approved by the FDA or other regulatory authorities, such as Firdapse ® , are also used in clinical programs to assess the safety and efficacy of the products for usage in treating diseases that have not been approved by the FDA or other regulatory authorities. The form of Firdapse® utilized for both commercial and clinical programs is identical and, as a result, the inventory has an “alternative future use” as defined in authoritative guidance. Raw materials associated with clinical development programs are included in inventory and charged to research and development expense when the product enters the research and development process and no longer can be used for commercial purposes and, therefore, does not have an “alternative future use”. The Company evaluates for potential excess inventory by analyzing current and future product demand relative to the remaining product shelf life. The Company builds demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance, and patient usage. |
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PREPAID EXPENSES AND OTHER CURRENT ASSETS |
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FAIR VALUE OF FINANCIAL INSTRUMENTS |
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FAIR VALUE MEASUREMENTS |
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
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OPERATING LEASES |
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SHARE REPURCHASES |
The Company accounts for share repurchases by charging the excess of repurchase price over the repurchased common stock’s par value entirely to accumulated deficit. All repurchased shares are retired and become authorized but unissued shares. The Company accrues for the shares purchased under the share repurchase plan based on the trade date. The Company may terminate or modify its share repurchase program at any time. |
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REVENUE RECOGNITION |
To determine revenue recognition for arrangements that are within the scope of Accounting Standards Codification (“ASC”) Topic 606 – Revenue from Contracts with Customers (“Topic 606”), the Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. For a complete discussion of accounting for product revenue, see Product Revenue, Net below. The Company also may generate revenues from payments received under a collaborative agreement. Collaborative agreement payments may include nonrefundable fees at the inception of the agreements, contingent payments for specific achievements designated in the collaborative agreements, and/or net profit-sharing payments on sales of products resulting from a collaborative arrangement. For a complete discussion of accounting for collaborative arrangements, see Revenues from Collaborative Arrangements below. Product Revenue, Net: ® to the Customer (its exclusive distributor) who subsequently resells Firdapse® to both a small group of SPs who have exclusive contracts with the Company to distribute the Company’s products to patients and potentially to medical centers or hospitals on an emergency basis. In addition to the distribution agreement with its Customer, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s products. The Company recognizes revenue on product sales when the Customer obtains control of the Company’s product, which occurs at a point in time (upon delivery or upon dispense to patient). Product revenue is recorded net of applicable reserves for variable consideration, including discounts and allowances. The Company’s payment terms range between 15 and 30 days. Shipping and handling costs for product shipments occur prior to the customer obtaining control of the goods and are recorded in cost of sales. If taxes should be collected from the Customer relating to product sales and remitted to governmental authorities, they will be excluded from revenue. The Company expenses incremental costs of obtaining a contract when incurred, if the expected amortization period of the asset that the Company would have recognized is one year or less. However, no such costs were incurred during the three-months ended March 31, 2021 and 2020. During the three-month periods ended March 31, 2021 and 2020, all of the Company’s sales of Firdapse ® in the United States were to its Customer. Reserves for Variable Consideration: These estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in Topic 606 for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted Customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts. The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period. The Company’s analyses also contemplates application of the constraint in accordance with the guidance, under which it determined a material reversal of revenue would not occur in a future period for the estimates detailed below as of March 31, 2021 and, therefore, the transaction price was not reduced further during the three-month periods ended March 31, 2021 and 2020. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. Trade Discounts and Allowances: ® Prompt Payment Discounts: Funded Co-pay Assistance Program:co-pay assistance program intended to provide financial assistance to qualified commercially-insured patients. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with Firdapse® that has been recognized as revenue, but remains in the distribution channel at the end of each reporting period. These payments are considered payable to the third-party vendor and the related reserve is recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses and other current liabilities in the consolidated balance sheets. Product Returns: Provider Chargebacks and Discounts: Government Rebates: m ade for product that has been recognized as revenue, but which remains in the distribution channel inventories at the end of each reporting period. Bridge and Patient Assistance Programs: ® free of charge to uninsured patients who satisfy pre-established criteria for either the Bridge Program or the Patient Assistance Program. Patients who meet the Bridge Program eligibility criteria and are transitioning from investigational product while they are waiting for a coverage determination, or later, for patients whose access is threatened by the complications arising from a change of insurer may receive a temporary supply of free Firdapse® ® . The Patient Assistance Program provides Firdapse® ® because they are unable to obtain coverage from their payor despite having health insurance, to the extent allowed by applicable law. The Company does not recognize any revenue related to these free products and the associated costs are classified in selling, general and administrative expenses in the Company’s consolidated statements of operations and comprehensive income. Revenues from Collaborative Arrangements: For elements of collaboration arrangements that are not accounted for pursuant to guidance in ASC 606, an appropriate recognition method is determined and applied consistently, generally by analogy to the revenue from contracts with customers guidance. Pursuant to ASC 606, for arrangements or transactions between arrangement participants determined to be within the scope of the contracts with customers guidance, the Company performs the following steps to determine the appropriate amount of revenue to be recognized as the Company fulfills its obligations: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company evaluates the performance obligations promised in the contract that are based on goods and services that will be transferred to the customer and determines whether those obligations are both (i) capable of being distinct and (ii) distinct in the context of the contract. Goods or services that meet these criteria are considered distinct performance obligations. The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration or variable consideration. The collaborative agreements provide for milestone payments upon achievement of development and regulatory events. The Company accounts for milestone payments as variable consideration in accordance with Topic 606. At the inception of each arrangement that includes variable consideration, the Company evaluates the amount of potential transaction price and the likelihood that the transaction price will be received. The Company utilizes either the most likely amount method or expected value method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration that is included in the transaction price may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and, if so, these options are considered performance obligations. Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset. After contract inception, the transaction price is reassessed at every period end and updated for changes such as resolution of uncertain events. Any change in the overall transaction price is allocated to the performance obligations based on the same methodology used at contract inception. The Company recognizes sales-based royalties or net profit-sharing when the later of (a) the subsequent sale occurs, or (b) the performance obligation to which the sales-based royalty or net profit-sharing has been satisfied. Payments to and from the collaborator are presented in the statement of operations based on the nature of the Company’s business operations, the nature of the arrangement, including the contractual terms, and the nature of the payments. Refer to Note 9 (Collaborative Arrangements), for further discussion on the Company’s collaborative arrangements. |
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RESEARCH AND DEVELOPMENT |
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STOCK-BASED COMPENSATION |
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CONCENTRATION OF RISK |
The Company sells its product in the United States through an exclusive distributor (its Customer) to specialty pharmacies. Therefore, its distributor and specialty pharmacies account for all of its trade receivables and net product revenues. The creditworthiness of its Customer is continuously monitored, and the Company has internal policies regarding customer credit limits. The Company estimates an allowance for expected credit loss primarily based on the credit worthiness of its Customer, historical payment patterns, aging of receivable balances and general economic conditions. The Company currently has a single product with limited commercial sales experience, which makes it difficult to evaluate its current business, predict its future prospects and forecast financial performance and growth. The Company has invested a significant portion of its efforts and financial resources in the development and commercialization of the lead product, Firdapse ® , and expects Firdapse® to constitute virtually all of product revenue for the foreseeable future. The Company’s success depends on its ability to effectively commercialize Firdapse® .The Company relies exclusively on third parties to formulate and manufacture Firdapse ® and its drug candidates. The commercialization of Firdapse® and any other drug candidates, if approved, could be stopped, delayed or made less profitable if those third parties fail to provide sufficient quantities of product or fail to do so at acceptable quality levels or prices. The Company does not intend to establish its own manufacturing facilities. The Company is using the same third-party contractors to manufacture, supply, store and distribute drug supplies for clinical trials and for the commercialization of Firdapse® . If the Company is unable to continue its relationships with one or more of these third-party contractors, it could experience delays in the development or commercialization efforts as it locates and qualifies new manufacturers. The Company intends to rely on one or more third-party contractors to manufacture the commercial supply of its drugs. |
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ROYALTIES |
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INCOME TAXES |
The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company is subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company is not subject to U.S. federal, state and local tax examinations by tax authorities for years before 2017. If the Company were to subsequently record an unrecognized tax benefit, associated penalties and tax related interest expense would be reported as a component of income tax expense. |
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COMPREHENSIVE INCOME |
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NET INCOME PER COMMON SHARE |
Diluted net income per common share is computed by dividing net income by the weighted average number of common shares outstanding, increased by the assumed conversion of other potentially dilutive securities during the period. The following table reconciles basic and diluted weighted average common shares:
Outstanding common stock equivalents totaling approximately 6.9 million, were excluded from the calculation of diluted net income per common share for the three months ended March 31, 2021 as their effect would be anti-dilutive. For the three months ended March 31, 2020, approximately 5.4 million shares of common stock equivalents were excluded from the calculation of diluted net income per common share as their effect would be anti-dilutive. |
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RECLASSIFICATIONS |
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RECENTLY ISSUED ACCOUNTING STANDARDS |
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Basis of Presentation and Significant Accounting Policies (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement Specific to Assets or Liability |
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Basic and Dilutive Weighted Average Common Shares | The following table reconciles basic and diluted weighted average common shares:
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Investments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Available-for-Sale Investments by Security type | Available-for-sale
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Estimated Fair Values of Available for Sale Securities | The estimated fair values of available-for-sale securities at March 31, 2021, by contractual maturity, are summarized as follows (in thousands):
|
Inventory, net (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of current inventory | Inventory, net consists of the following (in thousands):
|
Prepaid Expenses and Other Current Assets (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Text Block [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses and other current assets | Prepaid expenses and other current assets consist of the following (in thousands):
|
Operating Leases (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Operating Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease, Cost | The components of lease expense were as follows (in thousands):
|
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Schedule of Supplemental Cash Flow Information Related To Lease | Supplemental cash flow information related to leases was as follows:
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Schedule of Supplemental Balance Sheet related To Lease | Supplemental balance sheet information related to leases was as follows:
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Lessee, Operating Lease, Liability, Maturity | Remaining payments of lease liabilities as of March 31, 2021 were as follows (in thousands):
|
Property and Equipment, net (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Property and Equipment, net | Property and equipment, net consists of the following (in thousands):
|
Accrued Expenses and Other Liabilities (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Expenses and Other Liabilities | Accrued expenses and other liabilities consist of the following (in thousands):
|
Stock Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation Expense | For the three-month periods ended March 31, 2021 and 2020, the Company recorded stock-based compensation expense as follows (in thousands):
|
Basis of Presentation and Significant Accounting Policies - Additional Information (Detail) - USD ($) shares in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
|
Summary Of Basis Of Presentation And Significant Accounting Policies [Line Items] | |||
Maximum maturity period of cash and cash equivalent | three months | ||
Minimum amortization period of compensation cost on straight line basis | 1 year | ||
Maximum Amortization Period Of Compensation Cost On Straight Line Basis | 3 years | ||
Potential equivalent common stock excluded | 6.9 | 5.4 | |
Share repurchase authorized amount | $ 300,000 | ||
Non current investments | 0 | $ 0 | |
Common Stock [Member] | Share Purchase Program [Member] | |||
Summary Of Basis Of Presentation And Significant Accounting Policies [Line Items] | |||
Share repurchase authorized amount | $ 40,000,000 |
Basis of Presentation and Significant Accounting Policies - Schedule Of Reconcile Basic And Dilutive Weighted Average Common Shares (Details) - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Weighted Average Number of Shares Outstanding Reconciliation [Abstract] | ||
Basic weighted average common shares outstanding | 103,814,725 | 103,407,347 |
Effect of dilutive securities | 2,865,619 | 3,127,253 |
Dilutive weighted average common shares outstanding | 106,680,344 | 106,534,600 |
Investments - Additional Information (Detail) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Investments, Debt and Equity Securities [Abstract] | ||
Realized gains losses from available for sale securities | $ 0 | $ 0 |
Investment - Summary of Available-for-Sale Investments by Security type (Detail) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2021 |
Dec. 31, 2020 |
|
Net Investment Income [Line Items] | ||
Amortized cost | $ 86,015 | $ 115,004 |
Gross Unrealized Gains | 2 | 31 |
Gross Unrealized Losses | (47) | |
Estimated Fair Value | 85,970 | 115,035 |
U.S. Treasuries – Cash equivalents [Member] | ||
Net Investment Income [Line Items] | ||
Amortized cost | 69,997 | 104,992 |
Gross Unrealized Gains | 2 | 2 |
Estimated Fair Value | 69,999 | 104,994 |
Short-term bond funds [Member] | ||
Net Investment Income [Line Items] | ||
Amortized cost | 16,018 | 10,012 |
Gross Unrealized Gains | 29 | |
Gross Unrealized Losses | (47) | |
Estimated Fair Value | $ 15,971 | $ 10,041 |
Investment - Estimated Fair Values of Available for Sale Securities (Detail) $ in Thousands |
Mar. 31, 2021
USD ($)
|
---|---|
Investments, Debt and Equity Securities [Abstract] | |
Due in one year or less | $ 85,970 |
Inventory, net - Summary Of Current Inventory (Detail) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Inventory [Line Items] | ||
Raw materials | $ 0 | |
Work-in-process | 3,593 | $ 3,555 |
Finished goods | 797 | 1,096 |
Total inventory, net | $ 4,390 | $ 4,651 |
Prepaid Expenses and Other Current Assets - Prepaid Expenses and Other Current Assets (Detail) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid manufacturing costs | $ 4,266 | $ 3,328 |
Prepaid tax | 761 | 1,368 |
Prepaid insurance | 1,011 | 1,285 |
Prepaid subscription fees | 735 | 729 |
Prepaid research fees | 426 | 453 |
Prepaid commercialization expenses | 364 | 199 |
Due from collaborative arrangements | 404 | 437 |
Other | 276 | 529 |
Total prepaid expenses and other current assets | $ 8,243 | $ 8,328 |
Operating Leases - Operating Leases (Detail) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2021
USD ($)
| |
Disclosure of Operating Leases [Abstract] | |
Operating lease cost | $ 56 |
Operating Leases - Schedule of Supplemental Cash Flow Information Related To Lease (Detail) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2021
USD ($)
| |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows | $ 29 |
Right-of-use assets obtained in exchange for lease obligations: | |
Operating leases | $ 14 |
Operating Leases -Schedule of Supplemental Balance Sheet related To Lease (Detail) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Disclosure of Operating Leases [Line Items] | ||
Operating lease right-of-use assets | $ 3,309 | |
Other current liabilities | 122 | $ 29 |
Operating lease liabilities, net of current portion | 4,129 | |
Total operating lease liabilities | $ 4,251 | |
Remaining lease term | 10 years 1 month 6 days | |
Discount rate | 4.51% |
Operating Leases -Lessee, Operating Lease, Liability, Maturity (Detail) $ in Thousands |
Mar. 31, 2021
USD ($)
|
---|---|
Disclosure of Operating Leases [Line Items] | |
2021 (remaining nine months) | $ 80 |
2022 | 492 |
2023 | 506 |
2024 | 522 |
2025 | 537 |
Thereafter | 3,150 |
Total lease payments | 5,287 |
Less imputed interest | (1,036) |
Total | $ 4,251 |
Operating Leases - Additional Information (Detail) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021
USD ($)
ft²
|
Mar. 31, 2020
USD ($)
|
|
Disclosure of Operating Leases [Line Items] | ||
Finance Lease Obligations | $ | $ 0 | |
Lessor, Operating Lease, Option to Extend | 5 years | |
Rent expense | $ | $ 100 | $ 100 |
Before agreement of company leased spaces | ft² | 7,800 | |
After agreement of company leased spaces | ft² | 10,700 | |
Maximum [Member] | ||
Disclosure of Operating Leases [Line Items] | ||
Lessor, Operating Lease, Option to Terminate | 7.6 | |
Minimum [Member] | ||
Disclosure of Operating Leases [Line Items] | ||
Lessor, Operating Lease, Option to Terminate | 6 |
Property and Equipment, Net - Summary Of Property and Equipment, Net (Detail) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Less: Accumulated depreciation | $ (180) | $ (340) |
Total property and equipment, net | 944 | 130 |
Computer Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 51 | 51 |
Furniture and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 134 | 242 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 939 | $ 177 |
Accrued Expenses and Other Liabilities - Schedule of Accrued Expenses and Other Liabilities (Detail) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued preclinical and clinical trial expenses | $ 766 | $ 585 |
Accrued professional fees | 1,622 | 1,884 |
Accrued compensation and benefits | 1,901 | 3,991 |
Accrued license fees | 4,115 | 10,373 |
Accrued purchases | 286 | 258 |
Accrued contributions | 1,100 | 310 |
Operating lease liability | 122 | 29 |
Accrued variable consideration | 1,772 | 964 |
Accrued income tax | 80 | |
Other | 111 | 106 |
Current accrued expenses and other liabilities | 11,875 | 18,500 |
Lease liability__non-current | 4,129 | |
Non-current accrued expenses and other liabilities | 4,129 | |
Total accrued expenses and other liabilities | $ 16,004 | $ 18,500 |
Agreements - Additional Information (Detail) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2021
USD ($)
| |
License Agreement [Line Items] | |
Percentage of royalty on net sales | 3.50% |
License Agreement with BioMarin [Member] | |
License Agreement [Line Items] | |
Date on which strategic collaboration is entered into | Oct. 26, 2012 |
Royalty agreement period | 7 years |
Net sales royalty threshold | $ 100 |
License Agreement with BioMarin [Member] | Minimum [Member] | |
License Agreement [Line Items] | |
Percentage of royalty on net sales | 7.00% |
License Agreement with BioMarin [Member] | Maximum [Member] | |
License Agreement [Line Items] | |
Percentage of royalty on net sales | 10.00% |
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
|
Income Tax Disclosure [Line Items] | |||
Unrecognized Tax Benefits that Would Impact Effective Tax Rate | $ 0 | $ 0 | |
Effective Income Tax Rate Reconciliation, Percent | 22.50% | 5.40% | |
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% |
Stockholders' Equity (2020 Shelf Registration Statement) - Additional Information (Detail) $ in Millions |
Jul. 23, 2020
USD ($)
|
---|---|
2020 Shelf Registration Statement [Member] | |
Stockholders' Equity [Line Items] | |
Maximum dollar amount of common stock to be issued under shelf registration statement | $ 200 |
Stock Compensation - Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation | $ 1,571 | $ 1,519 |
Research and Development [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation | 389 | 418 |
Selling, General and Administrative [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation | $ 1,182 | $ 1,101 |
Subsequent Events - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions |
1 Months Ended | 3 Months Ended |
---|---|---|
Apr. 30, 2021 |
Mar. 31, 2021 |
|
Subsequent Event [Line Items] | ||
Number of Shares Authorized to be Repurchased | 67,049 | |
Treasury Stock Acquired, Average Cost Per Share | $ 4.36 | |
Stock Repurchase Program, Authorized Amount | $ 0.3 | |
Subsequent Event [Member] | Common Stock [Member] | ||
Subsequent Event [Line Items] | ||
Number of Shares Authorized to be Repurchased | 440,506 | |
Treasury Stock Acquired, Average Cost Per Share | $ 4.53 | |
Stock Repurchase Program, Authorized Amount | $ 2.0 |
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