10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

___________________________________________

FORM 10-Q

___________________________________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 001-34962

___________________________________________

Zogenix, Inc.

(Exact Name of Registrant as Specified in its Charter)

____________________________________________

Delaware	20-5300780
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
5858 Horton Street, Suite 455 Emeryville, California	94608
(Address of Principal Executive Offices)	(Zip Code)

510-550-8300

(Registrant’s Telephone Number, Including Area Code)

____________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of April 30, 2018 was 35,223,373.

ZOGENIX, INC.

FORM 10-Q

For the Quarterly Period Ended March 31, 2018

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2018 and 2017	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017	5
	Notes to the Condensed Consolidated Financial Statements	6
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3	Quantitative and Qualitative Disclosures about Market Risk	19
Item 4	Controls and Procedures	20
PART II. OTHER INFORMATION
Item 1	Legal Proceedings	21
Item 1A	Risk Factors	21
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3	Defaults Upon Senior Securities	21
Item 4	Mine Safety Disclosures	21
Item 5	Other Information	21
Item 6	Exhibits	22
	Signatures	23

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Zogenix, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except par value)

	March 31, 2018			December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	271,953		$	293,503
Prepaid expenses	8,547			5,994
Other current assets	827			5,206
Total current assets	281,327			304,703
Property and equipment, net	287			245
Intangible assets	102,500			102,500
Goodwill	6,234			6,234
Other assets	1,509			3,931
Total assets	$	391,857		$	417,613
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,866		$	3,356
Accrued expenses	16,024			10,499
Accrued compensation	3,691			6,616
Common stock warrant liabilities	495			512
Total current liabilities	23,076			20,983
Contingent consideration	76,900			76,900
Deferred income taxes	17,425			17,425
Other long-term liabilities	684			784
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value; 50,000 shares authorized; 34,973 and 34,808 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively	35			35
Additional paid-in capital	875,957			873,526
Accumulated deficit	(602,220		)	(572,040		)
Total stockholders’ equity	273,772			301,521
Total liabilities and stockholders’ equity	$	391,857		$	417,613

See accompanying notes to the unaudited condensed consolidated financial statements.

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Zogenix, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except per share amounts)

	Three Months Ended March 31,
	2018			2017
Contract manufacturing revenue	$	—		$	2,696
Costs and expenses:
Cost of contract manufacturing	—			2,487
Research and development	22,980			13,341
Selling, general and administrative	8,070			6,554
Asset impairment charges	—			813
Change in fair value of contingent consideration	—			600
Total costs and expenses	31,050			23,795
Loss from operations	(31,050		)	(21,099		)
Other income (expense):
Interest income	833			94
Interest expense	(6		)	(671		)
Change in fair value of common stock warrant liabilities	17			587
Other income (expense)	26			(20		)
Total other income (expense)	870			(10		)
Loss from continuing operations before income taxes	(30,180		)	(21,109		)
Income tax expense	—			(17		)
Net loss from continuing operations	(30,180		)	(21,126		)
Loss from discontinued operations, net of taxes	—			(181		)
Net loss	$	(30,180	)	$	(21,307	)
Net loss per share, basic and diluted:
Continuing operations	$	(0.87	)	$	(0.85	)
Discontinued operations	$	—		$	(0.01	)
Total	$	(0.87	)	$	(0.86	)
Weighted average common shares used in the calculation of basic and diluted net loss per common share	34,841			24,813
Comprehensive loss	$	(30,180	)	$	(21,307	)

See accompanying notes to the unaudited condensed consolidated financial statements.

4

Zogenix, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Three Months Ended March 31,
	2018			2017
Operating activities:
Net loss	$	(30,180	)	$	(21,307	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	1,912			1,673
Depreciation and amortization	23			213
Amortization of debt issuance costs and debt discount	—			252
Asset impairment charges	—			813
Change in fair value of common stock warrant liabilities	(17		)	(587		)
Change in fair value of contingent consideration	—			600
Changes in operating assets and liabilities:
Trade accounts receivable	—			11,550
Inventory	—			(2,052		)
Prepaid expenses and other assets	2,588			226
Accounts payable, accrued expenses and other liabilities	891			(2,525		)
Deferred revenue	—			(273		)
Net cash used in operating activities	(24,783		)	(11,417		)
Investing activities:
Purchases of property and equipment	(65		)	(26		)
Net cash used in investing activities	(65		)	(26		)
Financing activities:
Proceeds from issuance of common stock under equity incentive plans	3,590			—
Taxes paid related to net share settlement of equity awards	(292		)	—
Net cash provided by financing activities	3,298			—
Net decrease in cash and cash equivalents	(21,550		)	(11,443		)
Cash and cash equivalents, beginning of the period	293,503			91,551
Cash and cash equivalents, end of the period	$	271,953		$	80,108

See accompanying notes to the unaudited condensed consolidated financial statements.

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Zogenix, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 – Organization and Basis of Presentation

Zogenix, Inc. and its wholly-owned subsidiaries (the “Company”) is a pharmaceutical company developing and commercializing innovative central nervous system (“CNS”) therapies for people living with serious and life-threatening rare CNS disorders and medical conditions. The Company’s current primary area of therapeutic focus is rare, or “orphan” childhood-onset epilepsy disorders and its lead product candidate is ZX008. ZX008 is currently being developed for the treatment of seizures associated with Dravet syndrome and Lennox-Gastaut Syndrome. The Company operates in one business segment—the research, development and commercialization of pharmaceutical products and its headquarters are located in Emeryville, California.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Zogenix, Inc. and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. Certain reclassifications have been made to the prior period amounts to conform to the current year presentation. Previously reported “Interest expense, net” have been reclassified to present interest income and interest expense separately in the accompanying condensed consolidated statements of operations and comprehensive loss. The results of operations for any interim period are not necessarily indicative of results of operations for any future period. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted. Accordingly, these unaudited interim condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on March 6, 2018.

Future Funding Requirements

Excluding gains from two discrete business divestitures, the Company has incurred significant net losses and negative cash flows from operating activities since inception resulting in an accumulated deficit of $602.2 million at March 31, 2018. The Company expects to continue to incur significant operating losses and negative cash flows from operations to advance its product candidates through development and commercialization. Additionally, upon acceptance of the Company’s regulatory submissions for ZX008 by the U.S. Food and Drug Administration (“FDA”) or the European Medicines Agency (“EMA”), if at all, each a milestone event, the Company will owe milestone payments under an existing agreement in connection with the Company’s prior acquisition of ZX008. To date, the Company has relied primarily on the proceeds from equity offerings to finance its operations. Until such time, if ever, the Company can generate a sufficient amount of revenue to finance its cash requirements, the Company may need to continue to rely on additional financing to achieve its business objectives. However, if such financing is not available at adequate levels when needed, the Company may be required to significantly delay, scale back or discontinue one or more of the product development programs or commercialization efforts or other aspects of its business plans, and its operating results and financial condition would be adversely affected.

Note 2 – Summary of Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates.

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2018, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

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Accounting Pronouncements Recently Adopted

Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) and subsequent amendments to the initial guidance (collectively, “Topic 606”) amended the existing accounting standards for revenue recognition. The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The Company adopted Topic 606 effective January 1, 2018 using the modified retrospective approach. The adoption of Topic 606 did not have a material impact on the Company’s condensed consolidated financial statements as the Company does not have any contracts with customers

ASU 2016-15, Statement of Cash Flows (Topic 230) provides guidance on eight specific cash flow issues, thereby reducing the diversity in practice in how certain transactions are classified in the statement of cash flows. The amendments in this ASU are applied using a retrospective transition method to each period presented. The Company adopted ASU 2016-15 effective January 1, 2018. The adoption of this accounting standards update did not have a material impact on the Company’s condensed consolidated financial statements.

ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business narrows the definition of a business and provides additional guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This accounting standards update is required to be applied prospectively to transactions occurring after the date of adoption. The impact of the adoption on the Company's financial position and results of operations will be dependent upon future acquisitions or disposals, if any. The Company adopted ASU 2017-09 effective January 1, 2018.

ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting provides guidance on determining changes to the terms and conditions of share-based payment awards and require an entity to apply modification accounting under Topic 718 unless all of the following conditions are met: (1) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification; (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments should be applied prospectively to an award modified on or after the adoption date. The Company adopted ASU 2017-09 effective January 1, 2018. The adoption of this accounting standards update did not have a material impact on the Company’s condensed consolidated financial statements.

On December 22, 2017, the U.S. federal government enacted the Tax Cuts and Jobs Act (“the Act”). The Tax Act contains, among other things, significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21% for tax years beginning after December 31, 2017, limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, implementing a territorial tax system, and requiring a mandatory one-time tax on U.S. owned undistributed foreign earnings and profits known as the transition tax. In December 2017, SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) to address the accounting implications of recently enacted U.S. federal tax reform. SAB 118 allows companies to record provisional amounts during a measurement period not to extend beyond one year of the enactment date to address ongoing guidance and tax interpretations that are expected over the next 12 months. The Company has adopted SAB 118 and currently considers its accounting of the impact of U.S. federal tax reform to be incomplete but continues to make a reasonable estimate of the effects on our existing deferred tax assets. The Company expects to complete the remainder of the analysis within the measurement period in accordance with SAB 118. Adjustments, if any, are not expected to impact the condensed consolidated statement of operations and comprehensive loss due to the full valuation allowance on the Company’s deferred tax assets.

Accounting Pronouncements Issued But Not Yet Effective

ASU 2016-02, Leases (Topic 842) requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of key information about leasing arrangements. Accordingly, the lessee will recognize a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. Both the asset and the liability will initially be measured at the present value of the future minimum lease payments over the lease term. Subsequent measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. Initial costs directly attributable to negotiating and arranging the lease will be included in the asset. Lessees will also be required to provide additional qualitative and quantitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. The new standard is effective for fiscal years beginning after December 15,

7

2018, and interim periods therein. Early adoption is permitted. As currently issued, entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. There are additional optional practical expedients that an entity may elect to apply. In January 2018, the FASB issued an exposure draft of the proposed ASU, Leases (Topic 842): Targeted Improvements. The proposed ASU provides an alternative transition method of adoption, permitting the recognition of a cumulative-effect adjustment to retained earnings on the date of adoption. We intend to adopt the standard on the effective date but have not yet selected a transition method. We are in the process of inventorying and scoping our population of leased assets in order to assess the impact Topic 842. Topic 842 is expected to impact the Company’s condensed consolidated financial statements as the Company has certain operating lease arrangements for which the Company is the lessee. Management is currently evaluating the impact of the adoption of Topic 842 will have on the Company’s financial position and results of operations. While the Company is currently evaluating the impact of the adoption of this standard on its financial statements, the Company anticipates the recognition of additional assets and corresponding liabilities on its condensed consolidated balance sheet related to leases.

ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the amendments in ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The updated guidance requires a prospective adoption. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the timing and impact of adopting this accounting standard update on its condensed consolidated financial statements and related disclosures.

Note 3 – Fair Value Measurements

The carrying amount of the Company’s financial instruments, including cash and cash equivalents, other current assets, accounts payable, accrued expenses and accrued compensation approximate their fair value due to their short maturities.

Authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The fair value of cash equivalents was determined based on Level 1 inputs utilizing quoted prices in active markets. The fair value of the Company’s common stock warrant liabilities and contingent consideration liabilities were determined based on Level 3 inputs using valuation models with significant unobservable inputs. Assets and liabilities measured at fair value on a recurring basis at March 31, 2018 and December 31, 2017 were as follows (in thousands):

8

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
March 31, 2018
Assets
Cash equivalents(1)	$	256,615	$	—	$	—	$	256,615
Liabilities
Common stock warrant liabilities(2)	$	—	$	—	$	495	$	495
Contingent consideration liabilities(3)	$	—	$	—	$	76,900	$	76,900
December 31, 2017
Assets
Cash equivalents(1)	$	289,782	$	—	$	—	$	289,782
Liabilities
Common stock warrant liabilities(2)	$	—	$	—	$	512	$	512
Contingent consideration liabilities(3)	$	—	$	—	$	76,900	$	76,900

(1) Cash equivalents are comprised of money market fund shares and are included as a component of cash and cash equivalents on the condensed consolidated balance sheets.

(2) Represents the fair value of common stock warrants outstanding that may require cash settlement under certain circumstances. The Company estimated the fair value of the warrant liabilities using the Black-Scholes valuation model. As of December 31, 2017 and March 31, 2018, common stock warrant liabilities relate to warrants issued in July 2011 in connection with a debt financing arrangement. The warrants entitle the holder to purchase up to 28,125 shares of common stock at an exercise price of $72.00 per share. The warrants will expire in July 2021.

(3) In connection with a prior acquisition, the Company may be required to pay future consideration that is contingent upon the achievement of specified development, regulatory approval or sales-based milestone events. The Company estimated the fair value of the contingent consideration liabilities on the acquisition date using a probability-weighted income approach, which reflects the probability and timing of future payments. This fair value measurement is based on significant Level 3 inputs such as the anticipated timelines and probability of achieving development, regulatory approval or sales-based milestone events and projected revenues. The resulting probability-weighted cash flows are discounted at risk-adjusted rates. Subsequent to the acquisition date, at each reporting period prior to settlement, the Company revalues these liabilities by performing a review of the assumptions listed above and record increases or decreases in the fair value of these contingent consideration liabilities. In the absence of any significant changes in key assumptions, the quarterly determination of fair values of these contingent consideration liabilities would primarily reflect the passage of time. Significant judgment is used in determining Level 3 inputs and fair value measurements as of the acquisition date and for each subsequent reporting period. Updates to assumptions could have a significant impact on the Company’s results of operations in any given period and actual results may differ from estimates. For example, significant increases in the probability of achieving a milestone or projected revenues would result in a significantly higher fair value measurement while significant decreases in the estimated probability of achieving a milestone or projected revenues would result in a significantly lower fair value measurement. Significant increases in the discount rate or in the anticipated timelines would result in a significantly lower fair value measurement while significant decreases in the discount rate or anticipated timelines would result in a significantly higher fair value measurement. The potential contingent consideration payments required upon achievement of development, regulatory approval and sales-based milestones related to the Company’s acquisition of ZX008 range from zero if none of the milestones are achieved to a maximum of $95.0 million (undiscounted).

There were no transfers between levels during the periods presented.

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The following table provides a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months endedMarch 31, 2018 and 2017 (in thousands):

	December 31, 2017		Change in Fair Value			March 31, 2018		December 31, 2016		Change in Fair Value			March 31, 2017
Contingent consideration liabilities	$	76,900	$	—		$	76,900	$	52,800	$	600		$	53,400
Common stock warrant liabilities	512		(17		)	495		809		(587		)	222

The changes in fair value of the liabilities shown in the table above are recorded through change in fair value of contingent consideration liabilities within operating expense and the change in fair value of common stock warrant liabilities within other income (expense) in the condensed consolidated statements of operations.

Note 4 – Commitments and Contingencies

Leases

The Company has two noncancelable operating leases consisting of administrative and research and development office space for its Emeryville, California headquarters and former headquarters in San Diego, California that expire in November 2022 and March 2020, respectively. The former headquarters has been subleased to an unrelated third party for the remainder of the Company’s original lease term. Future minimum lease payments under our non-cancellable operating leases at March 31, 2018, net of sublease income, were as follows (in thousands):

	Gross Lease Payments		Sublease Income			Net Lease Payments
2018 (remaining 9 months)	$	1,424	$	(379	)	$	1,045
2019	1,955		(576		)	1,379
2020	1,234		(148		)	1,086
2021	1,004		—			1,004
2022	946		—			946
Total	$	6,563	$	(1,103	)	$	5,460

Legal Matters

The Company is not currently involved in any material legal proceedings. The Company may become involved in various legal proceedings and claims that arise in the ordinary course of business. Such matters are subject to uncertainty and there can be no assurance that such legal proceedings will not have a material adverse effect on its business, results of operations, financial position or cash flows.

Note 5 – Stock-Based Compensation

The Company has adopted certain equity incentive and stock purchase plans as described in the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

In March 2018, our board of directors approved an amendment and restatement of our non-employee director compensation policy, pursuant to which any non-employee director who is first elected to the board of directors is granted an option to purchase 20,000 shares of our common stock on the date of his or her initial election to the board of directors. In addition, on the date of each annual meeting of our stockholders, commencing with the 2018 annual meeting, each non-employee director is eligible to receive an option to purchase 15,000 shares of common stock. Prior to March 2018, under our non-employee director compensation policy, any non-employee director who was first elected to the board of directors was granted an option to purchase 30,000 shares of our common stock on the date of his or her initial election to the board of directors. In addition, on the date of each annual meeting of our stockholders, each non-employee director was eligible to receive an option to purchase 20,000 shares of common stock.

Equity Incentive Awards Activity

Stock Options

The following is a summary of stock option activity for the three months ended March 31, 2018 (in thousands, except per share data):

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	Shares (in thousands)		Weighted- Average Exercise Price per Share
Outstanding at December 31, 2017	3,392		$	14.41
Granted	490		42.37
Exercised	(102	)	19.09
Canceled	(7	)	19.00
Outstanding at March 31, 2018	3,773		$	17.90

Restricted Stock Units

The following is a summary of restricted stock unit activity for the three months ended March 31, 2018 (in thousands, except per share data):

	Shares (in thousands)		Weighted- Average Fair Value per Share at Grant Date
Outstanding as of December 31, 2017	259		$	10.43
Granted	131		42.65
Vested	(97	)	10.38
Canceled	—		—
Outstanding as of March 31, 2018	293		$	24.84

As of March 31, 2018, outstanding restricted stock units included 162,000 granted in March 2017 with performance-based conditions to employees and executives. The restricted stock units vest upon the approval of the Company’s new drug application for ZX008 by the FDA, provided such approval occurs within five years following the grant date. Due to the uncertainties associated with the FDA approval process, approval is not yet probable, as such term is used for accounting purposes, prior to the occurrence of the event. Accordingly, no compensation expense has been recognized to date for these performance-based awards.

Valuation of Equity Awards

The estimated grant date fair value of the stock options was estimated using the Black-Scholes option pricing model, based on the following assumptions:

	Three Months Ended March 31,
	2018	2017
Risk free interest rate	2.3% to 2.7%	2.1% to 2.3%
Expected term	6.0 to 6.1 years	6.0 to 6.1 years
Expected volatility	84.2% to 85.2%	76.4% to 76.6%
Expected dividend yield	—%	—%

The fair value of restricted stock units granted is determined based on the price of the Company’s common stock on the date of grant. 

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Stock-Based Compensation Expense

The following table summarizes the components of total stock-based compensation expense included in the condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
	2018		2017
Cost of contract manufacturing	$	—	$	77
Research and development	681		517
Selling, general and administrative	1,231		1,079
Total	$	1,912	$	1,673

Note 6 – Net Loss Per Share

Basic net loss from continuing operations per share is calculated by dividing net loss from continuing operations by the weighted average number of shares outstanding for the period. Diluted net loss from continuing operations per share is calculated by dividing net loss from continuing operations by the weighted average number of shares of common stock and potential dilutive common stock equivalents outstanding during the period if the effect is dilutive. The Company’s potentially dilutive shares of common stock include outstanding stock options, restricted stock units and warrants to purchase common stock.

A reconciliation of the numerators and denominators used in computing net loss from continuing operations per share is as follows (in thousands, except per share amounts):

	Three Months Ended March 31,
	2018			2017
Numerator:
Net loss from continuing operations	$	(30,180	)	$	(21,126	)
Denominator:
Shares used in per share calculation	34,841			24,813
Net loss from continuing operations per share, basic and diluted	$	(0.87	)	$	(0.85	)

The following table presents the potential shares of common stock outstanding that were excluded from the computation of diluted net loss from continuing operations per share for the periods presented because including them would have been anti-dilutive (in thousands):

	Three Months Ended March 31,
	2018	2017
Shares subject to outstanding common stock options	3,478	3,490
Shares subject to outstanding restricted stock units	266	137
Shares subject to outstanding warrants to purchase common stock	38	1,975
Total	3,782	5,602

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Note 7 – Other

The Company carries out extensive research and development activities that may benefit from the UK’s small and medium-sized enterprise research and development tax credit regime, whereby the Company may either receive an enhanced UK tax deduction on its research and development activities or a refundable cash credit. As of March 31, 2018, the Company has only filed a claim for a refundable cash credit for its 2015 tax year of up to $3.1 million. The Company has not recorded a receivable for this refundable cash credit at March 31, 2018 as collectability was not yet deemed probable or reasonably assured.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements include, but are not limited to, statements about:

• the progress and timing of clinical trials of ZX008;

• the safety and efficacy of our product candidates;

• the timing of submissions to, and decisions made by, the U.S. Food and Drug Administration, or FDA, and other regulatory agencies, including foreign regulatory agencies, with respect to our product candidates and our ability to demonstrate the safety and efficacy of our product candidates to the satisfaction of the FDA and such other regulatory agencies;

• the goals of our development activities and estimates of the potential markets for our product candidates, and our ability to compete within those markets; and

• projected cash needs and our expected future revenues, operations and expenditures.

The forward-looking statements are contained principally in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements relate to future events or our future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. We discuss many of these risks, uncertainties and other factors in this Quarterly Report on Form 10-Q in greater detail under the heading “Item 1A – Risk Factors.”

Given these risks, uncertainties and other factors, we urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. For all forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We undertake no obligation to revise or update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.

DosePro^® and Zogenix™ are our trademarks. All other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. Use or display by us of other parties’ trademarks, trade dress or products is not intended to and does not imply a relationship with, or endorsements or sponsorship of, us by the trademark or trade dress owner.

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Zogenix,” “we,” “us” and “our” refer to Zogenix, Inc., including its consolidated subsidiaries.

The condensed consolidated financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2017 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2017.

Overview

We are a pharmaceutical company developing and commercializing innovative central nervous system (“CNS”) therapies for people living with serious and life-threatening rare CNS disorders and medical conditions. Our current primary area of therapeutic focus is rare, or “orphan” childhood-onset epilepsy disorders.

We currently own and control worldwide development and commercialization rights to ZX008, our lead Phase 3 product candidate. ZX008 is low-dose fenfluramine for the treatment of seizures associated with two rare and catastrophic forms of childhood-onset epilepsy: Dravet syndrome and Lennox-Gastaut syndrome, or LGS.

Dravet syndrome is a rare form of pediatric-onset epilepsy with life threatening consequences for patients and for which current treatment options are very limited. ZX008 has received orphan drug designation in the United States and the European Union (the “EU”) for the treatment of Dravet syndrome. In addition, ZX008 for the treatment of Dravet syndrome received Fast Track designation from the FDA in January 2016 and Breakthrough Therapy designation in February 2018.

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We initiated our Phase 3 clinical trials in North America (“Study 1501”) in January 2016 and in Europe and Australia in June 2016 (“Study 1502”). Study 1501 and Study 1502 are each identical randomized, double-blind placebo-controlled studies of ZX008 as adjunctive therapy for patients with uncontrolled seizures who have Dravet syndrome. In January 2017, we announced our plan to report top-line results from Study 1501 and Study 1502 via a prospective merged study analysis approach whereby top-line results from the first approximately 120 subjects randomized into either Study 1501 or 1502 would have their study results analyzed and be reported initially as “Study 1”. In April 2017, we completed enrollment of Study 1 and, in September 2017, we announced positive top-line results for the 119 patients included in the Study 1 Phase 3 trial. The Study 1 trial met its primary objective of demonstrating that ZX008, at a dose of 0.8 mg/kg/day, is superior to placebo as adjunctive therapy in the treatment of Dravet syndrome in children and young adults based on change in the frequency of convulsive seizures between the 6-week baseline observation period and the 14-week treatment period (p<0.001). In the trial, ZX008 at a dose of 0.8 mg/kg/day also demonstrated statistically significant improvements versus placebo in all key secondary measures, including the proportion of patients with clinically meaningful reductions in seizure frequency (50% or greater) and longest seizure-free interval. The same analyses comparing a 0.2 mg/kg/day ZX008 dose versus placebo also demonstrated statistically significant improvement compared with placebo. ZX008 was generally well tolerated without any signs or symptoms of valvulopathy or pulmonary hypertension. In September 2016, we initiated Part 1 of Study 1504, a two-part, double blind, randomized, two arm pivotal Phase 3 clinical trial of ZX008 in Dravet syndrome patients who are taking stiripentol, valproate and clobazam as part of their baseline standard care. Part 1 investigated the pharmacokinetic profile and safety of ZX008 when co-administered with the stiripentol regimen (stiripentol, valproate and clobazam). Based on the results of the pharmacokinetic and safety portion of the trial, in February 2017 we initiated the safety and efficacy portion of Study 1504, a two-arm study that compares ZX008 versus placebo across the titration and 12-week maintenance periods at multiple sites, which currently includes sites in France, the Netherlands, United States, Canada, Germany, the United Kingdom and Spain. Study 1504 is targeted to enroll approximately 40 patients per treatment group. In January 2018, we completed enrollment of this study and expect to report top-line results from the trial in mid-2018. We believe we are on track to submit applications for regulatory approvals for ZX008 in the United States and Europe in the fourth quarter of 2018.

LGS is another rare, refractory, debilitating pediatric-onset epilepsy with life threatening consequences for patients and for which current treatment options are very limited. Beginning in first quarter of 2016, we funded an open-label, dose-finding, investigator-initiated study of the effectiveness and tolerability of ZX008 as an adjunctive therapy in patients with LGS. In December 2016, we presented initial data from an interim analysis of the first 13 patients to have completed at least 12 weeks of this Phase 2 clinical trial at the 70^th Annual Meeting of the American Epilepsy Society. These data demonstrated that ZX008 provided clinically meaningful improvement in major motor seizure frequency in patients with severe refractory LGS, with 7 out of 13 patients (54%) achieving at least a 50% reduction in the number of major motor seizures, at doses below the 0.8 mg/kg/day maximum allowed dose. In addition, ZX008 was generally well tolerated without any observed signs or symptoms of valvulopathy or pulmonary hypertension. We believe these data indicate that ZX008 has the potential to be a safe and effective adjunctive treatment of major motor seizures for patients with LGS. Based on the strength of the LGS data generated, in the first quarter of 2017, we submitted an investigational new drug (“IND”) application to the FDA to initiate a Phase 3 program of ZX008 in LGS, which became effective in April 2017. In the first half of 2017, ZX008 received orphan drug designation for the treatment of LGS from the FDA in the United States and the European Medicines Agency (“EMA”) in the EU. In November 2017, we announced the initiation of our multicenter global Phase 3 clinical trial of ZX008 as an adjunctive treatment for seizures in patients with LGS (“Study 1601”) with the enrollment of the first patient into the study.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in conformity with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates.

We believe that the assumptions and estimates associated with revenue recognition, the impairment assessments related to goodwill and indefinite-lived intangible assets, estimated fair value of contingent consideration, clinical trials expense accruals and the related prepaid expenses, and stock-based compensation have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2018, as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2017.

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Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements that are of significance or potential significance to us, see Note 2 “Summary of Significant Accounting Policies” in the notes to condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Results of Operations

Comparison of Three Months Ended March 31, 2018 and 2017

Contract Manufacturing Revenue

	Three Months Ended March 31,
(in thousands)	2018		2017		Change
Contract manufacturing revenue	$	—	$	2,696	$	(2,696	)

Through April 2017, we generated contract manufacturing revenue from supplying Sumavel DosePro to Endo International plc (“Endo”), who purchased our Sumavel DosePro business in May 2014. In September 2017, we and Endo terminated the supply agreement. As a result, we did not generate any contract manufacturing revenue in the three months ended March 31, 2018 and no longer have contracts with customers.

Cost of Contract Manufacturing

	Three Months Ended March 31,
(in thousands)	2018		2017		Change
Cost of contract manufacturing	$	—	$	2,487	$	(2,487	)

We did not incur contract manufacturing costs during the three months ended March 31, 2018 as a result of the aforementioned termination of the supply agreement to manufacture and supply Sumavel DosePro to Endo.

Research and Development Expenses

	Three Months Ended March 31,
(in thousands)	2018		2017		Change
Research and development	$	22,980	$	13,341	$	9,639

Research and development expenses consist of expenses incurred in developing, testing and seeking marketing approval of our product candidates, including: license and milestone payments; payments made to third-party clinical research organizations (“CROs”) and investigational sites, which conduct our clinical trials on our behalf, and consultants; expenses associated with regulatory submissions, pre-clinical development and clinical trials; payments to third-party manufacturers, which produce our active pharmaceutical ingredient and finished product; personnel related expenses, such as salaries, benefits, travel and other related expenses, including stock-based compensation; and facility, maintenance, depreciation and other related expenses.

We utilize contract manufacturing organizations, CROs, contract laboratories and independent contractors to produce product candidate material and for the conduct of our pre-clinical studies and clinical trials. We track third-party costs by program. We recognize the expenses associated with the services provided by CROs based on estimated progress toward completion at the end of each reporting period. We coordinate clinical trials through a number of contracted investigational sites and recognize the associated expense based on a number of factors, including actual and estimated subject enrollment and visits, direct pass-through costs and other clinical site fees. The table below sets forth information regarding our research and development costs for our major development programs.

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	Three Months Ended March 31,
(in thousands)	2018		2017		Change
ZX008	$	16,568	$	9,193	$	7,375
Other(1)	6,412		4,148		2,264
Total	$	22,980	$	13,341	$	9,639

(1) Other research and development expenses include employee and infrastructure resources that are not tracked on a program-by-program basis, as well as development costs incurred for other product candidates.

We acquired ZX008 in October 2014 and have since incurred significant expenditures related to conducting clinical trials of ZX008. Research and development expenses for ZX008 increased by $7.4 million for the three months ended March 31, 2018 compared to the same period in 2017. The increase reflects the progression and expansion of our clinical trial activities related to our ongoing Phase 3 development program of ZX008 in Dravet syndrome. The increase was also due to expenditures for our Phase 3 clinical trial of ZX008 as an adjunctive treatment for seizures in patients with LGS, which was initiated in November 2017.

Selling, General and Administrative Expenses

	Three Months Ended March 31,
(in thousands)	2018		2017		Change
Selling	$	2,445	$	1,296	$	1,149
General and administrative	5,625		5,258		367
Total selling, general and administrative	$	8,070	$	6,554	$	1,516

Selling expense consists primarily of salaries and benefits of sales and marketing management and market research expenses for product candidates that are in development. General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, accounting, business development and internal support functions. In addition, general and administrative expenses include professional fees for legal, consulting and accounting services.

Selling expense increased by $1.1 million for the three months ended March 31, 2018 compared to the same period in 2017. The increase was due to costs incurred for market research and commercialization planning as we prepare for the potential commercialization of ZX008.

General and administrative expense increased by $0.4 million in the three months ended March 31, 2018 compared to the same period in 2017 and was primarily attributable to annual employee merit increases and associated payroll taxes.

Impairment Charges

	Three Months Ended March 31,
(in thousands)	2018		2017		Change
Asset impairment charges	$	—	$	813	$	(813	)

Asset impairment charges for the three months ended March 31, 2017 resulted from the wind down of our contract manufacturing operations.

Change in Fair Value of Contingent Consideration

	Three Months Ended March 31,
(in thousands)	2018		2017		Change
Change in fair value of contingent consideration	$	—	$	600	$	(600	)

The contingent consideration liability relates to milestone payments under an existing agreement in connection with our prior acquisition of ZX008. At each reporting period, the estimated fair value of the liability is determined by applying the income approach which utilizes variable inputs, such as anticipated future cash flows, risk-free adjusted discount rates, and nonperformance risk. Any change in the fair value is recorded as contingent consideration (income) expense.

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For the three months ended March 31, 2018, there were no significant changes in the fair value of contingent consideration from December 31, 2017 as the increase in the present value of the financial liability due to the passage of time was offset by an equal amount due to an increase in the discount rate used to reflect current market conditions. For the three months ended March 31, 2017, the change in fair value of contingent consideration expense was primarily due to a shorter discount period to reflect the passage of time. 

Other Income (Expense)

	Three Months Ended March 31,
(in thousands)	2018		2017			Change
Other income (expense)	$	870	$	(10	)	$	880

Other income (expense) primarily consists of interest income, interest expense, changes in fair value of our common stock warrant liabilities and foreign currency gains and losses resulting from transactions denominated in U.K. pounds sterling and euros.

For the three months ended March 31, 2018, other income was attributed to interest income generated from our cash balances. For the three months ended March 31, 2017, other expense consisted of interest expense of $0.7 million, partially offset by a mark-to-market adjustment to our common stock warrant liability, which resulted in the recognition of an unrealized gain of $0.6 million.

Liquidity and Capital Resources

Excluding gains from two discrete business divestitures, we have incurred significant net losses and negative cash flows from operating activities since inception. We had an accumulated deficit of $602.2 million at March 31, 2018. To date, we have relied primarily on the proceeds from equity offerings to finance our operations. We expect to continue to incur significant operating losses and negative cash flows from operations to advance our product candidates through development and commercialization. Additionally, upon acceptance of our regulatory submissions for ZX008 by the FDA or the EMA, if at all, each a milestone event, we will owe milestone payments under an existing agreement in connection with our prior acquisition of ZX008. We currently do not engage in any revenue-generating activities. We do not know when, or if, we will generate any revenue from product sales and do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize ZX008. As of March 31, 2018, we had cash and cash equivalents of $272.0 million.

We currently have an at-the-market sales agreement (“ATM Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) as sales agent, pursuant to which we may offer and sell, from time to time, through Cantor, shares of our common stock having an aggregate offering price of up to $75.0 million under our previously filed and effective registration statement (File No. 333-220759) and a prospective supplement filed in December 2017. Cantor is entitled to a commission at a fixed commission rate of up to 3.0% of the gross proceeds of the sales price of all common stock sold under the ATM Agreement. We and Cantor may each terminate the ATM Agreement at any time upon ten days’ prior notice. As of March 31, 2018, we have not sold any shares of common stock under the 2017 prospectus supplement pursuant to the ATM Agreement.

Our principal uses of cash are research and development expenses, selling, general and administrative expenses and other working capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

• the rate of progress and cost of our clinical trials and other product development programs for ZX008 and our other product candidates and any other product candidates that we may develop, in-license or acquire;

• the timing of regulatory approval for any of our other product candidates and the commercial success of any approved products;

• the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights associated with ZX008 and any of our other product candidates;

• the costs of establishing or outsourcing sales, marketing and distribution capabilities, should we elect to do so;

• the costs, terms and timing of completion of outsourced commercial manufacturing supply arrangements for any product candidate; and

• the effect of competing technological and market developments.

Until such time, if ever, as we can generate a sufficient amount of revenue to finance our cash requirements, we may need to continue to rely on additional financing to achieve our business objectives. However, we may not be able to secure such financing in a timely manner or on favorable terms, if at all. If future funds are raised through issuance of equity or debt securities, these securities may have rights, preferences and privileges senior to those of our existing stockholders. If we raise

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additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our potential products or proprietary technologies, or grant licenses on terms that are not favorable to us. Without additional funds at the time we need such funding, we may be forced to delay, scale back or eliminate some of our research and development activities, or other operations and potentially delay product development in an effort to provide sufficient funds to continue its operations. If any of these events occurs, our ability to achieve the development and commercialization goals could be adversely affected.

The following table presents selected information from our statements of cash flows (in thousands):

	Three Months Ended March 31,
	2018			2017
Cash and cash equivalents, beginning of the period	$	293,503		$	91,551
Net cash used in operating activities	(24,783		)	(11,417		)
Net cash used in investing activities	(65		)	(26		)
Net cash provided by financing activities	3,298			—
Net decrease in cash and cash equivalents	(21,550		)	(11,443		)
Cash and cash equivalents, end of the period	$	271,953		$	80,108

Operating Activities

For the three months ended March 31,2018, net cash used in operating activities was primarily attributable to a net loss of $30.2 million, offset by non-cash charges of $1.9 million and a net cash inflow from changes in operating assets and liabilities of $3.5 million. Non-cash charges were primarily attributable to stock-based compensation. The increase in cash provided by operating assets and liabilities was attributable to a $2.6 million decrease in prepaid expenses and other assets and a $0.9 million increase in accounts payable, accrued and other liabilities. The decrease in prepaid expenses was primarily attributable to the timing of prepaid clinical trial costs. The increase in accounts payable, accrued and other liabilities were due to the timing of payments and an increase in amounts accrued for clinical trial expenses, partially offset by a decrease in accrued compensation due to payments of 2017 incentive compensation.

For the three months ended March 31,2017, net cash used in operating activities consisted of a net loss of $21.3 million, offset by non-cash charges of $3.0 million and a net cash inflow from changes in operating assets and liabilities of $6.9 million.

Investing Activities

For the three months ended March 31,2018, and 2017, net cash used in investing activities was attributable to purchases of property and equipment.

Financing Activities

For the three months ended March 31,2018, net cash provided by financing activities was attributable to $3.6 million of proceeds from common stock issuance pursuant to our equity incentive plans offset by $0.3 million of payments to remit withholding taxes related to the vesting of restricted stock units that were net share-settled to cover the required withholding tax. 

Contractual Obligations

There were no material changes outside the ordinary course of our business during the three months ended March 31, 2018 to the information regarding our contractual obligations that was disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2017.

Off-Balance Sheet Arrangements

As of March 31, 2018, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in market risk from the information provided in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2017.

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Item 4. Controls and Procedures

Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the timelines specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2018 at the reasonable assurance level.

Changes in Disclosure Controls and Procedures

There were no changes in our internal control over financial reporting during the three months ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material updates to the legal proceedings as set forth in “Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017.

Future sales of our common stock or securities convertible or exchangeable for our common stock may depress our stock price.

Persons who were our stockholders prior to the sale of shares in our initial public offering in November 2010 continue to hold a substantial number of shares of our common stock that they are able to sell in the public market, subject in some cases to certain legal restrictions. Significant portions of these shares are held by a small number of stockholders. If these stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline. The perception in the market that these sales may occur could also cause the trading price of our common stock to decline. As of March 31, 2018, we had 34,973,300 shares of common stock outstanding. The majority of these shares are freely tradeable, without restriction, in the public market.

In addition, shares of common stock that are either subject to outstanding options or reserved for future issuance under our employee benefit plans are eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules and Rule 144 and Rule 701 under the Securities Act of 1933, as amended, or the Securities Act, and, in any event, we have filed a registration statement permitting shares of common stock issued on exercise of options to be freely sold in the public market. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

Certain of our directors and executive officers have established, or may establish, programmed selling plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, for the purpose of effecting sales of our common stock. Any sales of securities by these stockholders, warrantholders or executive officers and directors, or the perception that those sales may occur, could have a material adverse effect on the trading price of our common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

EXHIBIT INDEX

Exhibit Number	Description
3.1(2)	Fifth Amended and Restated Certificate of Incorporation of the Registrant
3.2(5)	Certificate of Amendment of Fifth Amended and Restated Certificate of Incorporation of the Registrant
3.3(6)	Certificate of Amendment of Fifth Amended and Restated Certificate of Incorporation of the Registrant
3.4(2)	Amended and Restated Bylaws of the Registrant
4.1(3)	Form of the Registrant’s Common Stock Certificate
4.2(1)	Warrant dated June 30, 2008 issued by the Registrant to Oxford Finance Corporation
4.3(1)	Warrant dated June 30, 2008 issued by the Registrant to CIT Healthcare LLC (subsequently transferred to The CIT Group/Equity Investments, Inc.)
4.4(1)	Transfer of Warrant dated March 24, 2009 from CIT Healthcare LLC to The CIT Group/Equity Investments, Inc.
4.5(4)	Warrant dated July 18, 2011 issued by the Registrant to Healthcare Royalty Partners (formerly Cowen Healthcare Royalty Partners II, L.P.)
10.1†	Independent Director Compensation Policy, as amended and restated effective March 14, 2018
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. §1350, as adopted)
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. §1350, as adopted)
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. §1350, as adopted)
32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. §1350, as adopted)
101	The following financial statements from the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2018 formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss, (iii) Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to Condensed Consolidated Financial Statements.

(1) Filed with the Registrant’s Registration Statement on Form S-1 on September 3, 2010.

(2) Filed with Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 on October 27, 2010.

(3) Filed with Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 on November 4, 2010.

(4) Filed with the Registrant’s Quarterly Report on Form 10-Q on August 12, 2011.

(5) Filed with the Registrant’s Quarterly Report on Form 10-Q on November 8, 2012.

(6) Filed with the Registrant’s Quarterly Report on Form 10-Q on August 10, 2015.

† Management contract or compensatory plan or arrangement.

* These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not subject to the liability of that section. These certifications are not to be incorporated by reference into any filing of Zogenix, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			ZOGENIX, INC.
Date:	May 9, 2018	By:	/s/ Stephen J. Farr
			President and Chief Executive Officer
			(Principal Executive Officer)
Date:	May 9, 2018	By:	/s/ Michael P. Smith
			Executive Vice President, Chief Financial Officer, Treasurer and Secretary
			(Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

ZOGENIX, INC.

INDEPENDENT DIRECTOR COMPENSATION POLICY

(As Amended and Restated Effective March 14, 2018)

Non-employee members of the board of directors (the “Board”) of Zogenix, Inc. (the “Company”) shall be eligible to receive cash and equity compensation as set forth in this Independent Director Compensation Policy. The cash compensation and option grants described in this Independent Director Compensation Policy shall be paid or be made, as applicable, automatically and without further action of the Board, to each member of the Board who is not an employee of the Company or any parent or subsidiary of the Company (each, an “Independent Director”) who may be eligible to receive such cash compensation or options, unless such Independent Director declines the receipt of such cash compensation or options by written notice to the Company. This Independent Director Compensation Policy shall remain in effect until it is revised or rescinded by further action of the Board. The terms and conditions of this Independent Director Compensation Policy shall supersede any prior cash or equity compensation arrangements between the Company and its directors.

1. Cash Compensation. Each Independent Director shall be eligible to receive an annual retainer of $40,000 for service on the Board. In addition, an Independent Director serving as:

(a) chairman of the board shall be eligible to receive an additional annual retainer of $60,000for such service, however the total cash compensation paid to the chairman of the board in all capacities cannot exceed $100,000;

(b) chairman of the Audit Committee shall be eligible to receive an additional annual retainer of $25,000 for such service;

(c) members (other than the chairman) of the Audit Committee shall be eligible to receive an additional annual retainer of $10,000 for such service;

(d) chairman of the Compensation Committee shall be eligible to receive an additional annual retainer of $15,000 for such service;

(e) members (other than the chairman) of the Compensation Committee shall be eligible to receive an additional annual retainer of $7,500for such service;

(f) chairman of the Nominating and Corporate Governance Committee shall be eligible to receive an additional annual retainer of $10,000 for such service; and

(g) members (other than the chairman) of the Nominating and Corporate Governance Committee shall be eligible to receive an additional annual retainer of $5,000for such service.

The annual retainers shall be paid by the Company in quarterly installments or more frequently as deemed advisable by the officers of the Company for administrative or other reasons.

2. Equity Compensation. The Independent Directors shall be granted the following option awards. The options described below shall be granted under and shall be subject to the terms and provisions of the Company’s 2010 Equity Incentive Award Plan (the “2010 Plan”) and shall be granted subject to the execution and delivery of option agreements, including attached exhibits, in substantially the same forms

1

previously approved by the Board, setting forth the vesting schedule applicable to such options and such other terms as may be required by the 2010 Plan.

(a) Initial Options. A person who is initially elected or appointed to the Board, and who is an Independent Director at the time of such initial election or appointment, shall be eligible to receive a non-qualified stock option to purchase 20,000 shares of common stock (subject to adjustment as provided in the 2010 Plan) on the date of such initial election or appointment (each, an “Initial Option”).

(b) Subsequent Options. A person who is an Independent Director automatically shall be eligible to receive a non-qualified stock option to purchase 15,000 shares of common stock (subject to adjustment as provided in the 2010 Plan) on the date of each annual meeting of the Company’s stockholders. The option grants described in this clause 2(b) shall be referred to as “Subsequent Options.” An Independent Director elected for the first time to the Board at an annual meeting of stockholders shall only receive an Initial Option in connection with such election, and shall not receive a Subsequent Option on the date of such meeting as well.

(c) Termination of Employment of Employee Directors. Members of the Board who are employees of the Company or any parent or subsidiary of the Company who subsequently terminate their employment with the Company and any parent or subsidiary of the Company and remain on the Board will not receive an Initial Option grant pursuant to clause 2(a) above, but to the extent that they are otherwise eligible, will be eligible to receive, after termination from employment with the Company and any parent or subsidiary of the Company, Subsequent Options as described in clause 2(b) above.

(d) Terms of Options Granted to Independent Directors

(i) Exercise Price. The per share exercise price of each option granted to an Independent Director shall equal 100% of the Fair Market Value (as defined in the 2010 Plan) of a share of common stock on the date the option is granted.

(ii) Vesting. Initial Options granted to Independent Directors shall become exercisable in thirty-sixequal monthly installments of 1/36of the shares subject to such option on the first day of each calendar month following the date of the Initial Option grant, such that each Initial Option shall be 100% vested on the first day of the 36^th month following the date of grant, subject to the director’s continuing service on the Board through such dates. Subsequent Options granted to Independent Directors shall become vested in twelve equal monthly installments of 1/12 of the shares subject to such option on the first day of each calendar month following the date of the Subsequent Option grant, subject to a director’s continuing service on the Board through such dates. The term of each option granted to an Independent Director shall be ten years from the date the option is granted. Vested options held by Independent Directors at the time of their termination of service shall remain exercisable for a period of one year following such termination of service. No portion of an option which is unexercisable at the time of an Independent Director’s termination of membership on the Board shall thereafter become exercisable.

2

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen J. Farr, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Zogenix, Inc.;

2. Based on my knowledge, this 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 consolidated 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 registrant’s other certifying officer(s) 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 15d-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 subsidiaries, 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 registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.

/s/ Stephen J. Farr

Stephen J. Farr

President and Chief Executive Officer

(Principal Executive Officer)

Date: May 9, 2018

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael P. Smith, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Zogenix, Inc.;

2. Based on my knowledge, this 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 consolidated 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 registrant’s other certifying officer(s) 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 15d-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 subsidiaries, 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 registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.

/s/ Michael P. Smith

Michael P. Smith

Executive Vice President, Chief Financial Officer, Treasurer and Secretary

(Principal Financial Officer)

Date: May 9, 2018

EX-32.1

Exhibit 32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

In connection with the Quarterly Report on Form 10-Q of Zogenix, Inc. (the “Company”) for the period ended March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen J. Farr, as Chief Executive Officer of 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 Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; 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 9, 2018

/s/ Stephen J. Farr

Stephen J. Farr

President and Chief Executive Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

In connection with the Quarterly Report on Form 10-Q of Zogenix, Inc. (the “Company”) for the period ended March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael P. Smith, as Chief Financial Officer of 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 Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; 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 9, 2018

/s/ Michael P. Smith

Michael P. Smith

Executive Vice President, Chief Financial Officer, Treasurer and Secretary

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	Apr. 30, 2018
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Trading Symbol	ZGNX
Entity Registrant Name	ZOGENIX, INC.
Entity Central Index Key	0001375151
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		35,223,373

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 271,953	$ 293,503
Prepaid expenses	8,547	5,994
Other current assets	827	5,206
Total current assets	281,327	304,703
Property and equipment, net	287	245
Intangible assets	102,500	102,500
Goodwill	6,234	6,234
Other assets	1,509	3,931
Total assets	391,857	417,613
Current liabilities:
Accounts payable	2,866	3,356
Accrued expenses	16,024	10,499
Accrued compensation	3,691	6,616
Common stock warrant liabilities	495	512
Total current liabilities	23,076	20,983
Contingent consideration	76,900	76,900
Deferred income taxes	17,425	17,425
Other long-term liabilities	684	784
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value; 50,000 shares authorized; 34,973 and 34,808 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively	35	35
Additional paid-in capital	875,957	873,526
Accumulated deficit	(602,220)	(572,040)
Total stockholders’ equity	273,772	301,521
Total liabilities and stockholders’ equity	$ 391,857	$ 417,613

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Common Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Common Stock, Shares Authorized	50,000,000	50,000,000
Common Stock, Shares, Issued	34,973,000	34,808,000
Common Stock, Shares, Outstanding	34,973,000	34,808,000

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenue:
Contract manufacturing revenue	$ 0	$ 2,696
Costs and expenses:
Cost of contract manufacturing	0	2,487
Research and development	22,980	13,341
Selling, general and administrative	8,070	6,554
Asset impairment charges	0	813
Change in fair value of contingent consideration	0	600
Total costs and expenses	31,050	23,795
Loss from operations	(31,050)	(21,099)
Other income (expense):
Interest income	833	94
Interest expense	(6)	(671)
Change in fair value of common stock warrant liabilities	17	587
Other income (expense)	26	(20)
Total other income (expense)	870	(10)
Loss from continuing operations before income taxes	(30,180)	(21,109)
Income tax expense	0	(17)
Net loss from continuing operations	(30,180)	(21,126)
Loss from discontinued operations, net of taxes	0	(181)
Net loss	$ (30,180)	$ (21,307)
Net loss per share, basic and diluted:
Continuing operations (in dollars per share)	$ (0.87)	$ (0.85)
Discontinued operations (in dollars per share)	0.00	(0.01)
Total (in dollars per share)	$ (0.87)	$ (0.86)
Weighted average shares outstanding, basic and diluted (shares)	34,841	24,813
Statements of Comprehensive Income (Loss)
Comprehensive loss	$ (30,180)	$ (21,307)

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Operating activities:
Net loss	$ (30,180)	$ (21,307)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	1,912	1,673
Depreciation and amortization	23	213
Amortization of debt issuance costs and debt discount	0	252
Asset impairment charges	0	813
Change in fair value of common stock warrant liabilities	(17)	(587)
Change in fair value of contingent consideration	0	600
Changes in operating assets and liabilities:
Trade accounts receivable	0	11,550
Inventory	0	(2,052)
Prepaid expenses and other assets	2,588	226
Accounts payable, accrued expenses and other liabilities	891	(2,525)
Deferred revenue	0	(273)
Net cash used in operating activities	(24,783)	(11,417)
Investing activities:
Purchases of property and equipment	(65)	(26)
Net cash used in investing activities	(65)	(26)
Financing activities:
Proceeds from issuance of common stock under equity incentive plans	3,590	0
Taxes paid related to net share settlement of equity awards	(292)	0
Net cash provided by financing activities	3,298	0
Net decrease in cash and cash equivalents	(21,550)	(11,443)
Cash and cash equivalents, beginning of the period	293,503	91,551
Cash and cash equivalents, end of the period	$ 271,953	$ 80,108

XML

Organization, Basis of Presentation and Liquidity

3 Months Ended

Mar. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Basis of Presentation and Going Concern

Organization and Basis of Presentation

Zogenix, Inc. and its wholly-owned subsidiaries (the “Company”) is a pharmaceutical company developing and commercializing innovative central nervous system (“CNS”) therapies for people living with serious and life-threatening rare CNS disorders and medical conditions. The Company’s current primary area of therapeutic focus is rare, or “orphan” childhood-onset epilepsy disorders and its lead product candidate is ZX008. ZX008 is currently being developed for the treatment of seizures associated with Dravet syndrome and Lennox-Gastaut Syndrome. The Company operates in one business segment—the research, development and commercialization of pharmaceutical products and its headquarters are located in Emeryville, California.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Zogenix, Inc. and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. Certain reclassifications have been made to the prior period amounts to conform to the current year presentation. Previously reported “Interest expense, net” have been reclassified to present interest income and interest expense separately in the accompanying condensed consolidated statements of operations and comprehensive loss. The results of operations for any interim period are not necessarily indicative of results of operations for any future period. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted. Accordingly, these unaudited interim condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on March 6, 2018.

Future Funding Requirements

Excluding gains from two discrete business divestitures, the Company has incurred significant net losses and negative cash flows from operating activities since inception resulting in an accumulated deficit of $602.2 million at March 31, 2018. The Company expects to continue to incur significant operating losses and negative cash flows from operations to advance its product candidates through development and commercialization. Additionally, upon acceptance of the Company’s regulatory submissions for ZX008 by the U.S. Food and Drug Administration (“FDA”) or the European Medicines Agency (“EMA”), if at all, each a milestone event, the Company will owe milestone payments under an existing agreement in connection with the Company’s prior acquisition of ZX008. To date, the Company has relied primarily on the proceeds from equity offerings to finance its operations. Until such time, if ever, the Company can generate a sufficient amount of revenue to finance its cash requirements, the Company may need to continue to rely on additional financing to achieve its business objectives. However, if such financing is not available at adequate levels when needed, the Company may be required to significantly delay, scale back or discontinue one or more of the product development programs or commercialization efforts or other aspects of its business plans, and its operating results and financial condition would be adversely affected.

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates.

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2018, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

Accounting Pronouncements Recently Adopted

Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) and subsequent amendments to the initial guidance (collectively, “Topic 606”) amended the existing accounting standards for revenue recognition. The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The Company adopted Topic 606 effective January 1, 2018 using the modified retrospective approach. The adoption of Topic 606 did not have a material impact on the Company’s condensed consolidated financial statements as the Company does not have any contracts with customers

ASU 2016-15, Statement of Cash Flows (Topic 230) provides guidance on eight specific cash flow issues, thereby reducing the diversity in practice in how certain transactions are classified in the statement of cash flows. The amendments in this ASU are applied using a retrospective transition method to each period presented. The Company adopted ASU 2016-15 effective January 1, 2018. The adoption of this accounting standards update did not have a material impact on the Company’s condensed consolidated financial statements.

ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business narrows the definition of a business and provides additional guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This accounting standards update is required to be applied prospectively to transactions occurring after the date of adoption. The impact of the adoption on the Company's financial position and results of operations will be dependent upon future acquisitions or disposals, if any. The Company adopted ASU 2017-09 effective January 1, 2018.

ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting provides guidance on determining changes to the terms and conditions of share-based payment awards and require an entity to apply modification accounting under Topic 718 unless all of the following conditions are met: (1) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification; (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments should be applied prospectively to an award modified on or after the adoption date. The Company adopted ASU 2017-09 effective January 1, 2018. The adoption of this accounting standards update did not have a material impact on the Company’s condensed consolidated financial statements.

On December 22, 2017, the U.S. federal government enacted the Tax Cuts and Jobs Act (“the Act”). The Tax Act contains, among other things, significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21% for tax years beginning after December 31, 2017, limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, implementing a territorial tax system, and requiring a mandatory one-time tax on U.S. owned undistributed foreign earnings and profits known as the transition tax. In December 2017, SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) to address the accounting implications of recently enacted U.S. federal tax reform. SAB 118 allows companies to record provisional amounts during a measurement period not to extend beyond one year of the enactment date to address ongoing guidance and tax interpretations that are expected over the next 12 months. The Company has adopted SAB 118 and currently considers its accounting of the impact of U.S. federal tax reform to be incomplete but continues to make a reasonable estimate of the effects on our existing deferred tax assets. The Company expects to complete the remainder of the analysis within the measurement period in accordance with SAB 118. Adjustments, if any, are not expected to impact the condensed consolidated statement of operations and comprehensive loss due to the full valuation allowance on the Company’s deferred tax assets.

Accounting Pronouncements Issued But Not Yet Effective

ASU 2016-02, Leases (Topic 842) requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of key information about leasing arrangements. Accordingly, the lessee will recognize a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. Both the asset and the liability will initially be measured at the present value of the future minimum lease payments over the lease term. Subsequent measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. Initial costs directly attributable to negotiating and arranging the lease will be included in the asset. Lessees will also be required to provide additional qualitative and quantitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. The new standard is effective for fiscal years beginning after December 15, 2018, and interim periods therein. Early adoption is permitted. As currently issued, entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. There are additional optional practical expedients that an entity may elect to apply. In January 2018, the FASB issued an exposure draft of the proposed ASU, Leases (Topic 842): Targeted Improvements. The proposed ASU provides an alternative transition method of adoption, permitting the recognition of a cumulative-effect adjustment to retained earnings on the date of adoption. We intend to adopt the standard on the effective date but have not yet selected a transition method. We are in the process of inventorying and scoping our population of leased assets in order to assess the impact Topic 842. Topic 842 is expected to impact the Company’s condensed consolidated financial statements as the Company has certain operating lease arrangements for which the Company is the lessee. Management is currently evaluating the impact of the adoption of Topic 842 will have on the Company’s financial position and results of operations. While the Company is currently evaluating the impact of the adoption of this standard on its financial statements, the Company anticipates the recognition of additional assets and corresponding liabilities on its condensed consolidated balance sheet related to leases.

ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the amendments in ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The updated guidance requires a prospective adoption. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the timing and impact of adopting this accounting standard update on its condensed consolidated financial statements and related disclosures.

XML

Fair Value Measurements (Notes)

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The carrying amount of the Company’s financial instruments, including cash and cash equivalents, other current assets, accounts payable, accrued expenses and accrued compensation approximate their fair value due to their short maturities.

Authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The fair value of cash equivalents was determined based on Level 1 inputs utilizing quoted prices in active markets. The fair value of the Company’s common stock warrant liabilities and contingent consideration liabilities were determined based on Level 3 inputs using valuation models with significant unobservable inputs. Assets and liabilities measured at fair value on a recurring basis at March 31, 2018 and December 31, 2017 were as follows (in thousands):

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
March 31, 2018
Assets
Cash equivalents(1)	$	256,615	$	—	$	—	$	256,615
Liabilities
Common stock warrant liabilities(2)	$	—	$	—	$	495	$	495
Contingent consideration liabilities(3)	$	—	$	—	$	76,900	$	76,900
December 31, 2017
Assets
Cash equivalents(1)	$	289,782	$	—	$	—	$	289,782
Liabilities
Common stock warrant liabilities(2)	$	—	$	—	$	512	$	512
Contingent consideration liabilities(3)	$	—	$	—	$	76,900	$	76,900

(1) Cash equivalents are comprised of money market fund shares and are included as a component of cash and cash equivalents on the condensed consolidated balance sheets.

(2) Represents the fair value of common stock warrants outstanding that may require cash settlement under certain circumstances. The Company estimated the fair value of the warrant liabilities using the Black-Scholes valuation model. As of December 31, 2017 and March 31, 2018, common stock warrant liabilities relate to warrants issued in July 2011 in connection with a debt financing arrangement. The warrants entitle the holder to purchase up to 28,125 shares of common stock at an exercise price of $72.00 per share. The warrants will expire in July 2021.

(3) In connection with a prior acquisition, the Company may be required to pay future consideration that is contingent upon the achievement of specified development, regulatory approval or sales-based milestone events. The Company estimated the fair value of the contingent consideration liabilities on the acquisition date using a probability-weighted income approach, which reflects the probability and timing of future payments. This fair value measurement is based on significant Level 3 inputs such as the anticipated timelines and probability of achieving development, regulatory approval or sales-based milestone events and projected revenues. The resulting probability-weighted cash flows are discounted at risk-adjusted rates. Subsequent to the acquisition date, at each reporting period prior to settlement, the Company revalues these liabilities by performing a review of the assumptions listed above and record increases or decreases in the fair value of these contingent consideration liabilities. In the absence of any significant changes in key assumptions, the quarterly determination of fair values of these contingent consideration liabilities would primarily reflect the passage of time. Significant judgment is used in determining Level 3 inputs and fair value measurements as of the acquisition date and for each subsequent reporting period. Updates to assumptions could have a significant impact on the Company’s results of operations in any given period and actual results may differ from estimates. For example, significant increases in the probability of achieving a milestone or projected revenues would result in a significantly higher fair value measurement while significant decreases in the estimated probability of achieving a milestone or projected revenues would result in a significantly lower fair value measurement. Significant increases in the discount rate or in the anticipated timelines would result in a significantly lower fair value measurement while significant decreases in the discount rate or anticipated timelines would result in a significantly higher fair value measurement. The potential contingent consideration payments required upon achievement of development, regulatory approval and sales-based milestones related to the Company’s acquisition of ZX008 range from zero if none of the milestones are achieved to a maximum of $95.0 million (undiscounted).

There were no transfers between levels during the periods presented.

The following table provides a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months endedMarch 31, 2018 and 2017 (in thousands):

	December 31, 2017		Change in Fair Value			March 31, 2018		December 31, 2016		Change in Fair Value			March 31, 2017
Contingent consideration liabilities	$	76,900	$	—		$	76,900	$	52,800	$	600		$	53,400
Common stock warrant liabilities	512		(17		)	495		809		(587		)	222

The changes in fair value of the liabilities shown in the table above are recorded through change in fair value of contingent consideration liabilities within operating expense and the change in fair value of common stock warrant liabilities within other income (expense) in the condensed consolidated statements of operations.

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Commitments and Contingencies (Notes)

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Leases

The Company has two noncancelable operating leases consisting of administrative and research and development office space for its Emeryville, California headquarters and former headquarters in San Diego, California that expire in November 2022 and March 2020, respectively. The former headquarters has been subleased to an unrelated third party for the remainder of the Company’s original lease term. Future minimum lease payments under our non-cancellable operating leases at March 31, 2018, net of sublease income, were as follows (in thousands):

	Gross Lease Payments		Sublease Income			Net Lease Payments
2018 (remaining 9 months)	$	1,424	$	(379	)	$	1,045
2019	1,955		(576		)	1,379
2020	1,234		(148		)	1,086
2021	1,004		—			1,004
2022	946		—			946
Total	$	6,563	$	(1,103	)	$	5,460

Legal Matters

The Company is not currently involved in any material legal proceedings. The Company may become involved in various legal proceedings and claims that arise in the ordinary course of business. Such matters are subject to uncertainty and there can be no assurance that such legal proceedings will not have a material adverse effect on its business, results of operations, financial position or cash flows.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

The Company has adopted certain equity incentive and stock purchase plans as described in the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

In March 2018, our board of directors approved an amendment and restatement of our non-employee director compensation policy, pursuant to which any non-employee director who is first elected to the board of directors is granted an option to purchase 20,000 shares of our common stock on the date of his or her initial election to the board of directors. In addition, on the date of each annual meeting of our stockholders, commencing with the 2018 annual meeting, each non-employee director is eligible to receive an option to purchase 15,000 shares of common stock. Prior to March 2018, under our non-employee director compensation policy, any non-employee director who was first elected to the board of directors was granted an option to purchase 30,000 shares of our common stock on the date of his or her initial election to the board of directors. In addition, on the date of each annual meeting of our stockholders, each non-employee director was eligible to receive an option to purchase 20,000 shares of common stock.

Equity Incentive Awards Activity

Stock Options

The following is a summary of stock option activity for the three months ended March 31, 2018 (in thousands, except per share data):

	Shares (in thousands)		Weighted- Average Exercise Price per Share
Outstanding at December 31, 2017	3,392		$	14.41
Granted	490		42.37
Exercised	(102	)	19.09
Canceled	(7	)	19.00
Outstanding at March 31, 2018	3,773		$	17.90

Restricted Stock Units

The following is a summary of restricted stock unit activity for the three months ended March 31, 2018 (in thousands, except per share data):

	Shares (in thousands)		Weighted- Average Fair Value per Share at Grant Date
Outstanding as of December 31, 2017	259		$	10.43
Granted	131		42.65
Vested	(97	)	10.38
Canceled	—		—
Outstanding as of March 31, 2018	293		$	24.84

As of March 31, 2018, outstanding restricted stock units included 162,000 granted in March 2017 with performance-based conditions to employees and executives. The restricted stock units vest upon the approval of the Company’s new drug application for ZX008 by the FDA, provided such approval occurs within five years following the grant date. Due to the uncertainties associated with the FDA approval process, approval is not yet probable, as such term is used for accounting purposes, prior to the occurrence of the event. Accordingly, no compensation expense has been recognized to date for these performance-based awards.

Valuation of Equity Awards

The estimated grant date fair value of the stock options was estimated using the Black-Scholes option pricing model, based on the following assumptions:

	Three Months Ended March 31,
	2018	2017
Risk free interest rate	2.3% to 2.7%	2.1% to 2.3%
Expected term	6.0 to 6.1 years	6.0 to 6.1 years
Expected volatility	84.2% to 85.2%	76.4% to 76.6%
Expected dividend yield	—%	—%

The fair value of restricted stock units granted is determined based on the price of the Company’s common stock on the date of grant. 

Stock-Based Compensation Expense

The following table summarizes the components of total stock-based compensation expense included in the condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
	2018		2017
Cost of contract manufacturing	$	—	$	77
Research and development	681		517
Selling, general and administrative	1,231		1,079
Total	$	1,912	$	1,673

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Net Loss Per Share (Notes)

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Net Loss per Share

Net Loss Per Share

Basic net loss from continuing operations per share is calculated by dividing net loss from continuing operations by the weighted average number of shares outstanding for the period. Diluted net loss from continuing operations per share is calculated by dividing net loss from continuing operations by the weighted average number of shares of common stock and potential dilutive common stock equivalents outstanding during the period if the effect is dilutive. The Company’s potentially dilutive shares of common stock include outstanding stock options, restricted stock units and warrants to purchase common stock.

A reconciliation of the numerators and denominators used in computing net loss from continuing operations per share is as follows (in thousands, except per share amounts):

	Three Months Ended March 31,
	2018			2017
Numerator:
Net loss from continuing operations	$	(30,180	)	$	(21,126	)
Denominator:
Shares used in per share calculation	34,841			24,813
Net loss from continuing operations per share, basic and diluted	$	(0.87	)	$	(0.85	)

The following table presents the potential shares of common stock outstanding that were excluded from the computation of diluted net loss from continuing operations per share for the periods presented because including them would have been anti-dilutive (in thousands):

	Three Months Ended March 31,
	2018	2017
Shares subject to outstanding common stock options	3,478	3,490
Shares subject to outstanding restricted stock units	266	137
Shares subject to outstanding warrants to purchase common stock	38	1,975
Total	3,782	5,602

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Other

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

Other

Other

The Company carries out extensive research and development activities that may benefit from the UK’s small and medium-sized enterprise research and development tax credit regime, whereby the Company may either receive an enhanced UK tax deduction on its research and development activities or a refundable cash credit. As of March 31, 2018, the Company has only filed a claim for a refundable cash credit for its 2015 tax year of up to $3.1 million. The Company has not recorded a receivable for this refundable cash credit at March 31, 2018 as collectability was not yet deemed probable or reasonably assured.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates.

Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) and subsequent amendments to the initial guidance (collectively, “Topic 606”) amended the existing accounting standards for revenue recognition. The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The Company adopted Topic 606 effective January 1, 2018 using the modified retrospective approach. The adoption of Topic 606 did not have a material impact on the Company’s condensed consolidated financial statements as the Company does not have any contracts with customers

ASU 2016-15, Statement of Cash Flows (Topic 230) provides guidance on eight specific cash flow issues, thereby reducing the diversity in practice in how certain transactions are classified in the statement of cash flows. The amendments in this ASU are applied using a retrospective transition method to each period presented. The Company adopted ASU 2016-15 effective January 1, 2018. The adoption of this accounting standards update did not have a material impact on the Company’s condensed consolidated financial statements.

ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business narrows the definition of a business and provides additional guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This accounting standards update is required to be applied prospectively to transactions occurring after the date of adoption. The impact of the adoption on the Company's financial position and results of operations will be dependent upon future acquisitions or disposals, if any. The Company adopted ASU 2017-09 effective January 1, 2018.

ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting provides guidance on determining changes to the terms and conditions of share-based payment awards and require an entity to apply modification accounting under Topic 718 unless all of the following conditions are met: (1) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification; (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments should be applied prospectively to an award modified on or after the adoption date. The Company adopted ASU 2017-09 effective January 1, 2018. The adoption of this accounting standards update did not have a material impact on the Company’s condensed consolidated financial statements.

On December 22, 2017, the U.S. federal government enacted the Tax Cuts and Jobs Act (“the Act”). The Tax Act contains, among other things, significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21% for tax years beginning after December 31, 2017, limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, implementing a territorial tax system, and requiring a mandatory one-time tax on U.S. owned undistributed foreign earnings and profits known as the transition tax. In December 2017, SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) to address the accounting implications of recently enacted U.S. federal tax reform. SAB 118 allows companies to record provisional amounts during a measurement period not to extend beyond one year of the enactment date to address ongoing guidance and tax interpretations that are expected over the next 12 months. The Company has adopted SAB 118 and currently considers its accounting of the impact of U.S. federal tax reform to be incomplete but continues to make a reasonable estimate of the effects on our existing deferred tax assets. The Company expects to complete the remainder of the analysis within the measurement period in accordance with SAB 118. Adjustments, if any, are not expected to impact the condensed consolidated statement of operations and comprehensive loss due to the full valuation allowance on the Company’s deferred tax assets.

Accounting Pronouncements Issued But Not Yet Effective

ASU 2016-02, Leases (Topic 842) requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of key information about leasing arrangements. Accordingly, the lessee will recognize a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. Both the asset and the liability will initially be measured at the present value of the future minimum lease payments over the lease term. Subsequent measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. Initial costs directly attributable to negotiating and arranging the lease will be included in the asset. Lessees will also be required to provide additional qualitative and quantitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. The new standard is effective for fiscal years beginning after December 15, 2018, and interim periods therein. Early adoption is permitted. As currently issued, entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. There are additional optional practical expedients that an entity may elect to apply. In January 2018, the FASB issued an exposure draft of the proposed ASU, Leases (Topic 842): Targeted Improvements. The proposed ASU provides an alternative transition method of adoption, permitting the recognition of a cumulative-effect adjustment to retained earnings on the date of adoption. We intend to adopt the standard on the effective date but have not yet selected a transition method. We are in the process of inventorying and scoping our population of leased assets in order to assess the impact Topic 842. Topic 842 is expected to impact the Company’s condensed consolidated financial statements as the Company has certain operating lease arrangements for which the Company is the lessee. Management is currently evaluating the impact of the adoption of Topic 842 will have on the Company’s financial position and results of operations. While the Company is currently evaluating the impact of the adoption of this standard on its financial statements, the Company anticipates the recognition of additional assets and corresponding liabilities on its condensed consolidated balance sheet related to leases.

ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the amendments in ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The updated guidance requires a prospective adoption. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the timing and impact of adopting this accounting standard update on its condensed consolidated financial statements and related disclosures.

Fair Value Measurements

The carrying amount of the Company’s financial instruments, including cash and cash equivalents, other current assets, accounts payable, accrued expenses and accrued compensation approximate their fair value due to their short maturities.

Authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The fair value of cash equivalents was determined based on Level 1 inputs utilizing quoted prices in active markets. The fair value of the Company’s common stock warrant liabilities and contingent consideration liabilities were determined based on Level 3 inputs using valuation models with significant unobservable inputs.

Stock-based Compensation

The Company has adopted certain equity incentive and stock purchase plans as described in the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

Net Loss per Share

Basic net loss from continuing operations per share is calculated by dividing net loss from continuing operations by the weighted average number of shares outstanding for the period. Diluted net loss from continuing operations per share is calculated by dividing net loss from continuing operations by the weighted average number of shares of common stock and potential dilutive common stock equivalents outstanding during the period if the effect is dilutive.

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis at March 31, 2018 and December 31, 2017 were as follows (in thousands):

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
March 31, 2018
Assets
Cash equivalents(1)	$	256,615	$	—	$	—	$	256,615
Liabilities
Common stock warrant liabilities(2)	$	—	$	—	$	495	$	495
Contingent consideration liabilities(3)	$	—	$	—	$	76,900	$	76,900
December 31, 2017
Assets
Cash equivalents(1)	$	289,782	$	—	$	—	$	289,782
Liabilities
Common stock warrant liabilities(2)	$	—	$	—	$	512	$	512
Contingent consideration liabilities(3)	$	—	$	—	$	76,900	$	76,900

(1) Cash equivalents are comprised of money market fund shares and are included as a component of cash and cash equivalents on the condensed consolidated balance sheets.

(2) Represents the fair value of common stock warrants outstanding that may require cash settlement under certain circumstances. The Company estimated the fair value of the warrant liabilities using the Black-Scholes valuation model. As of December 31, 2017 and March 31, 2018, common stock warrant liabilities relate to warrants issued in July 2011 in connection with a debt financing arrangement. The warrants entitle the holder to purchase up to 28,125 shares of common stock at an exercise price of $72.00 per share. The warrants will expire in July 2021.

(3) In connection with a prior acquisition, the Company may be required to pay future consideration that is contingent upon the achievement of specified development, regulatory approval or sales-based milestone events. The Company estimated the fair value of the contingent consideration liabilities on the acquisition date using a probability-weighted income approach, which reflects the probability and timing of future payments. This fair value measurement is based on significant Level 3 inputs such as the anticipated timelines and probability of achieving development, regulatory approval or sales-based milestone events and projected revenues. The resulting probability-weighted cash flows are discounted at risk-adjusted rates. Subsequent to the acquisition date, at each reporting period prior to settlement, the Company revalues these liabilities by performing a review of the assumptions listed above and record increases or decreases in the fair value of these contingent consideration liabilities. In the absence of any significant changes in key assumptions, the quarterly determination of fair values of these contingent consideration liabilities would primarily reflect the passage of time. Significant judgment is used in determining Level 3 inputs and fair value measurements as of the acquisition date and for each subsequent reporting period. Updates to assumptions could have a significant impact on the Company’s results of operations in any given period and actual results may differ from estimates. For example, significant increases in the probability of achieving a milestone or projected revenues would result in a significantly higher fair value measurement while significant decreases in the estimated probability of achieving a milestone or projected revenues would result in a significantly lower fair value measurement. Significant increases in the discount rate or in the anticipated timelines would result in a significantly lower fair value measurement while significant decreases in the discount rate or anticipated timelines would result in a significantly higher fair value measurement. The potential contingent consideration payments required upon achievement of development, regulatory approval and sales-based milestones related to the Company’s acquisition of ZX008 range from zero if none of the milestones are achieved to a maximum of $95.0 million (undiscounted).

There were no transfers between levels during the periods presented.

Assets Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis at March 31, 2018 and December 31, 2017 were as follows (in thousands):

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
March 31, 2018
Assets
Cash equivalents(1)	$	256,615	$	—	$	—	$	256,615
Liabilities
Common stock warrant liabilities(2)	$	—	$	—	$	495	$	495
Contingent consideration liabilities(3)	$	—	$	—	$	76,900	$	76,900
December 31, 2017
Assets
Cash equivalents(1)	$	289,782	$	—	$	—	$	289,782
Liabilities
Common stock warrant liabilities(2)	$	—	$	—	$	512	$	512
Contingent consideration liabilities(3)	$	—	$	—	$	76,900	$	76,900

(1) Cash equivalents are comprised of money market fund shares and are included as a component of cash and cash equivalents on the condensed consolidated balance sheets.

(2) Represents the fair value of common stock warrants outstanding that may require cash settlement under certain circumstances. The Company estimated the fair value of the warrant liabilities using the Black-Scholes valuation model. As of December 31, 2017 and March 31, 2018, common stock warrant liabilities relate to warrants issued in July 2011 in connection with a debt financing arrangement. The warrants entitle the holder to purchase up to 28,125 shares of common stock at an exercise price of $72.00 per share. The warrants will expire in July 2021.

(3) In connection with a prior acquisition, the Company may be required to pay future consideration that is contingent upon the achievement of specified development, regulatory approval or sales-based milestone events. The Company estimated the fair value of the contingent consideration liabilities on the acquisition date using a probability-weighted income approach, which reflects the probability and timing of future payments. This fair value measurement is based on significant Level 3 inputs such as the anticipated timelines and probability of achieving development, regulatory approval or sales-based milestone events and projected revenues. The resulting probability-weighted cash flows are discounted at risk-adjusted rates. Subsequent to the acquisition date, at each reporting period prior to settlement, the Company revalues these liabilities by performing a review of the assumptions listed above and record increases or decreases in the fair value of these contingent consideration liabilities. In the absence of any significant changes in key assumptions, the quarterly determination of fair values of these contingent consideration liabilities would primarily reflect the passage of time. Significant judgment is used in determining Level 3 inputs and fair value measurements as of the acquisition date and for each subsequent reporting period. Updates to assumptions could have a significant impact on the Company’s results of operations in any given period and actual results may differ from estimates. For example, significant increases in the probability of achieving a milestone or projected revenues would result in a significantly higher fair value measurement while significant decreases in the estimated probability of achieving a milestone or projected revenues would result in a significantly lower fair value measurement. Significant increases in the discount rate or in the anticipated timelines would result in a significantly lower fair value measurement while significant decreases in the discount rate or anticipated timelines would result in a significantly higher fair value measurement. The potential contingent consideration payments required upon achievement of development, regulatory approval and sales-based milestones related to the Company’s acquisition of ZX008 range from zero if none of the milestones are achieved to a maximum of $95.0 million (undiscounted).

There were no transfers between levels during the periods presented.

Reconciliation of Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)

The following table provides a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months endedMarch 31, 2018 and 2017 (in thousands):

	December 31, 2017		Change in Fair Value			March 31, 2018		December 31, 2016		Change in Fair Value			March 31, 2017
Contingent consideration liabilities	$	76,900	$	—		$	76,900	$	52,800	$	600		$	53,400
Common stock warrant liabilities	512		(17		)	495		809		(587		)	222

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Commitments and Contingencies Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Payments Under Non-cancelable Operating Leases

Future minimum lease payments under our non-cancellable operating leases at March 31, 2018, net of sublease income, were as follows (in thousands):

	Gross Lease Payments		Sublease Income			Net Lease Payments
2018 (remaining 9 months)	$	1,424	$	(379	)	$	1,045
2019	1,955		(576		)	1,379
2020	1,234		(148		)	1,086
2021	1,004		—			1,004
2022	946		—			946
Total	$	6,563	$	(1,103	)	$	5,460

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Stock-based Compensation Activity

The following is a summary of stock option activity for the three months ended March 31, 2018 (in thousands, except per share data):

	Shares (in thousands)		Weighted- Average Exercise Price per Share
Outstanding at December 31, 2017	3,392		$	14.41
Granted	490		42.37
Exercised	(102	)	19.09
Canceled	(7	)	19.00
Outstanding at March 31, 2018	3,773		$	17.90

The following is a summary of restricted stock unit activity for the three months ended March 31, 2018 (in thousands, except per share data):

	Shares (in thousands)		Weighted- Average Fair Value per Share at Grant Date
Outstanding as of December 31, 2017	259		$	10.43
Granted	131		42.65
Vested	(97	)	10.38
Canceled	—		—
Outstanding as of March 31, 2018	293		$	24.84

Assumptions used in the Black-Scholes Option-Pricing Model

The estimated grant date fair value of the stock options was estimated using the Black-Scholes option pricing model, based on the following assumptions:

	Three Months Ended March 31,
	2018	2017
Risk free interest rate	2.3% to 2.7%	2.1% to 2.3%
Expected term	6.0 to 6.1 years	6.0 to 6.1 years
Expected volatility	84.2% to 85.2%	76.4% to 76.6%
Expected dividend yield	—%	—%

Stock-Based Compensation Expense

The following table summarizes the components of total stock-based compensation expense included in the condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
	2018		2017
Cost of contract manufacturing	$	—	$	77
Research and development	681		517
Selling, general and administrative	1,231		1,079
Total	$	1,912	$	1,673

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Net Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Basic and Diluted Net Loss Per Share

A reconciliation of the numerators and denominators used in computing net loss from continuing operations per share is as follows (in thousands, except per share amounts):

	Three Months Ended March 31,
	2018			2017
Numerator:
Net loss from continuing operations	$	(30,180	)	$	(21,126	)
Denominator:
Shares used in per share calculation	34,841			24,813
Net loss from continuing operations per share, basic and diluted	$	(0.87	)	$	(0.85	)

Schedule of Antidilutive Securities Excluded from Computation of Diluted Net Loss per Share

The following table presents the potential shares of common stock outstanding that were excluded from the computation of diluted net loss from continuing operations per share for the periods presented because including them would have been anti-dilutive (in thousands):

	Three Months Ended March 31,
	2018	2017
Shares subject to outstanding common stock options	3,478	3,490
Shares subject to outstanding restricted stock units	266	137
Shares subject to outstanding warrants to purchase common stock	38	1,975
Total	3,782	5,602

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Organization, Basis of Presentation and Going Concern - Narrative (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit	$ 602,220	$ 572,040

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Fair Value Measurements - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Shares of common stock exercisable through warrants	28,125
Warrants exercise price per share (usd per share)	$ 72.00
Money market fund shares
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a recurring basis	$ 256,615,000	$ 289,782,000
Money market fund shares | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a recurring basis	256,615,000	289,782,000
Money market fund shares | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a recurring basis	0	0
Money market fund shares | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a recurring basis	0	0
Common Stock Warrant Liabilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value on a recurring basis	495,000	512,000
Common Stock Warrant Liabilities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value on a recurring basis	0	0
Common Stock Warrant Liabilities | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value on a recurring basis	0	0
Common Stock Warrant Liabilities | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value on a recurring basis	495,000	512,000
Contingent Consideration Liabilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value on a recurring basis	76,900,000	76,900,000
Contingent Consideration Liabilities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value on a recurring basis	0	0
Contingent Consideration Liabilities | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value on a recurring basis	0	0
Contingent Consideration Liabilities | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value on a recurring basis	76,900,000	$ 76,900,000
ZX008
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Potential contingent consideration payment, minimum	0
Potential contingent consideration payment, maximum	$ 95,000,000

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Fair Value Measurements - Reconciliation of Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Details) - Significant Unobservable Inputs (Level 3) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Contingent Consideration Liabilities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	$ 76,900	$ 52,800
Changes in fair value	0	600
Ending Balance	76,900	53,400
Common Stock Warrant Liabilities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	512	809
Changes in fair value	(17)	(587)
Ending Balance	$ 495	$ 222

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Commitments and Contingencies (Details)	Dec. 31, 2017 lease
Commitments and Contingencies Disclosure [Abstract]
Number of Noncancelable Leases	2

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Commitments and Contingencies - Future Minimum Lease Payments (Details) $ in Thousands	Mar. 31, 2018 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2018 (remaining 9 months) gross lease payment due	$ 1,424
2019 gross lease payment due	1,955
2020 gross lease payment due	1,234
2021 gross lease payment due	1,004
2022 gross lease payment due	946
Total gross lease payment due	6,563
2018 (remaining 9 months) sublease income	(379)
2019 sublease income	(576)
2020 sublease income	(148)
2021 sublease income	0
2022 sublease income	0
Total sublease income	(1,103)
2018 (remaining 9 months) net lease payments	1,045
2019 net lease payments	1,379
2020 net lease payments	1,086
2021 net lease payments	1,004
2022 net lease payments	946
Total net lease payments	$ 5,460

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Stock-Based Compensation - Options Activity (Details) shares in Thousands	3 Months Ended
	Mar. 31, 2018 $ / shares shares
Shares (in thousands)
December 31, 2017 (in shares) | shares	3,392
Granted (in shares) | shares	490
Exercised (in shares) | shares	(102)
Canceled (in shares) | shares	(7)
March 31, 2018 (in shares) | shares	3,773
Weighted- Average Exercise Price per Share
Outstanding weighted average exercise price, beginning balance (in usd per share) | $ / shares	$ 14.41
Granted weighted average exercise price (in usd per share | $ / shares	42.37
Exercised weighted average exercise price (in usd per share | $ / shares	19.09
Canceled weighted average exercise price (in usd per share | $ / shares	19.00
Outstanding weighted average exercise price, ending balance (in usd per share | $ / shares	$ 17.90

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Stock-Based Compensation - Restricted Stock Unit Activity (Details) - Restricted stock units shares in Thousands	3 Months Ended
	Mar. 31, 2018 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Outstanding at December 31, 2017 (in shares) | shares	259
Granted (in shares) | shares	131
Vested (in shares) | shares	(97)
Canceled (in shares) | shares	0
Outstanding at March 31, 2018 (in shares) | shares	293
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Nonvested at December 31, 2017 - Weighted average fair value per share at grant date (in usd per share) | $ / shares	$ 10.43
Granted - Weighted average fair value per share at grant date (in usd per share) | $ / shares	42.65
Vested - Weighted average fair value per share at grant date (in usd per share) | $ / shares	10.38
Canceled - Weighted average fair value per share at grant date (in usd per share) | $ / shares	0.00
Nonvested at March 31, 2018 - Weighted average fair value per share at grant date (in usd per share) | $ / shares	$ 24.84

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Stock-Based Compensation - Assumptions used in Black-Scholes Option-Pricing Model (Detail) - Stock Options	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate, minimum	2.30%	2.10%
Risk free interest rate, maximum	2.70%	2.30%
Expected volatility, minimum	84.20%	76.40%
Expected volatility, maximum	85.20%	76.60%
Expected dividend yield	0.00%	0.00%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term	6 years	6 years
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term	6 years 1 month	6 years 1 month

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Stock-Based Compensation - Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 1,912	$ 1,673
Cost of contract manufacturing
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	0	77
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	681	517
Selling, general and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 1,231	$ 1,079

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Stock-Based Compensation - Additional Information (Detail) - shares	Mar. 31, 2018	Feb. 28, 2018	Dec. 31, 2017
Restricted stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding RSUs at March 31, 2018 (in shares)	293,000		259,000
Non-employee Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options granted upon initial election to board (shares)	20,000	30,000
Additional number of options available for grant annually (shares)	15,000	20,000
Employees and Executives | Restricted stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding RSUs at March 31, 2018 (in shares)	162,000

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Net Loss Per Share - Reconciliation of Numerator and Denominators in Computing Net Loss per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Earnings Per Share [Abstract]
Net loss from continuing operations	$ (30,180)	$ (21,126)
Shares used in per share calculation (in shares)	34,841	24,813
Net loss from continuing operations per share, basic and diluted (in dollars per share)	$ (0.87)	$ (0.85)

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Net Loss Per Share - Antidilutive Securities (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share amount	3,782	5,602
Shares subject to outstanding common stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share amount	3,478	3,490
Shares subject to outstanding restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share amount	266	137
Shares subject to outstanding warrants to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share amount	38	1,975

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Other (Details) $ in Millions	Mar. 31, 2018 USD ($)
Income Tax Disclosure [Abstract]
Claim for refundable cash credit	$ 3.1