10-Q 1 srpt-10q_20150930.htm 10-Q srpt-10q_20150930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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 September 30, 2015

OR

o

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 001-14895

 

SAREPTA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

93-0797222

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

215 First Street, Suite 415

Cambridge, MA

 

02142

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (617) 274-4000

 

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.    Yes  x     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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer

 

x

  

Accelerated filer

 

¨

 

 

 

 

Non-accelerated filer

 

¨  (Do not check if a smaller reporting company)

  

Smaller Reporting Company

 

¨

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Common Stock with $0.0001 par value

  

45,271,301

(Class)

  

(Outstanding as of October 30, 2015)

 

 

 

 

 


 

SAREPTA THERAPEUTICS, INC.

FORM 10-Q

INDEX

 

 

 

 

 

Page

PART I — FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (unaudited)

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets — As of September 30, 2015 and December 31, 2014

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss — For the Three and Nine Months Ended September 30, 2015 and 2014

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows — For the Nine Months Ended September 30, 2015
and 2014

 

5

 

 

 

 

 

 

 

Notes to Unaudited 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

 

24

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

25

 

 

 

 

 

PART II — OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

25

 

 

 

 

 

Item 1A.

 

Risk Factors

 

26

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

41

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

41

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

41

 

 

 

 

 

Item 5.

 

Other Information

 

42

 

 

 

 

 

Item 6.

 

Exhibits

 

42

 

 

 

 

 

Signatures

 

43

 

 

 

 

 

Exhibits

 

44

 

 

2


 

PART I — FINANCIAL INFORMATION

 

 

Item 1. Financial Statements

SAREPTA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except per share amounts)

 

 

 

As of

September 30,

2015

 

 

As of

December 31,

2014

 

Assets

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

55,819

 

 

$

73,551

 

Short-term investments

 

 

44,090

 

 

 

136,793

 

Accounts receivable

 

 

2,733

 

 

 

2,416

 

Other current assets

 

 

19,466

 

 

 

35,036

 

Total Current Assets

 

 

122,108

 

 

 

247,796

 

Restricted cash and investments

 

 

11,478

 

 

 

782

 

Property and equipment, net of accumulated depreciation of $23,368

   and $19,896 as of September 30, 2015 and December 31, 2014, respectively

 

 

37,379

 

 

 

38,501

 

Patent costs, net of accumulated amortization of $2,486 and $2,081 as of

   September 30, 2015 and December 31, 2014, respectively

 

 

6,116

 

 

 

5,891

 

Other assets

 

 

7,670

 

 

 

2,063

 

Total Assets

 

$

184,751

 

 

$

295,033

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

7,431

 

 

$

12,408

 

Accrued expenses

 

 

19,761

 

 

 

17,366

 

Current portion of long-term debt

 

 

3,435

 

 

 

98

 

Current portion of notes payable

 

 

2,454

 

 

 

2,492

 

Deferred revenue

 

 

3,303

 

 

 

3,318

 

Other current liabilities

 

 

1,283

 

 

 

1,185

 

Total Current Liabilities

 

 

37,667

 

 

 

36,867

 

Long-term debt

 

 

17,397

 

 

 

1,476

 

Notes payable

 

 

 

 

 

2,262

 

Deferred rent and other

 

 

6,451

 

 

 

6,775

 

Total Liabilities

 

 

61,515

 

 

 

47,380

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Preferred stock, $.0001 par value, 3,333,333 shares authorized; none issued and

   outstanding

 

 

 

 

 

 

Common stock, $.0001 par value, 99,000,000 shares authorized; 41,963,151

   and 41,311,512 issued and outstanding at September 30, 2015 and

   December 31, 2014, respectively

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

957,607

 

 

 

926,769

 

Accumulated other comprehensive loss

 

 

(1

)

 

 

(95

)

Accumulated deficit

 

 

(834,374

)

 

 

(679,025

)

Total Stockholders’ Equity

 

 

123,236

 

 

 

247,653

 

Total Liabilities and Stockholders’ Equity

 

$

184,751

 

 

$

295,033

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

3


 

SAREPTA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited, in thousands, except per share amounts)

 

 

 

For the Three Months Ended

September 30,

 

 

For the Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Revenue from research contracts and other grants

 

$

 

 

$

1,059

 

 

$

 

 

$

9,730

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

36,673

 

 

 

21,852

 

 

 

105,018

 

 

 

63,399

 

General and administrative

 

 

15,090

 

 

 

12,882

 

 

 

50,714

 

 

 

35,398

 

Total operating expenses

 

 

51,763

 

 

 

34,734

 

 

 

155,732

 

 

 

98,797

 

Operating loss

 

 

(51,763

)

 

 

(33,675

)

 

 

(155,732

)

 

 

(89,067

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest (expense) income and other, net

 

 

(176

)

 

 

193

 

 

 

383

 

 

 

473

 

Gain (loss) on change in warrant valuation

 

 

 

 

 

4,256

 

 

 

 

 

 

(2,779

)

Total other (loss) income

 

 

(176

)

 

 

4,449

 

 

 

383

 

 

 

(2,306

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(51,939

)

 

$

(29,226

)

 

$

(155,349

)

 

$

(91,373

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on short-term

   securities - available-for-sale

 

 

18

 

 

 

(21

)

 

 

94

 

 

 

(55

)

Total other comprehensive income (loss)

 

 

18

 

 

 

(21

)

 

 

94

 

 

 

(55

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

$

(51,921

)

 

$

(29,247

)

 

$

(155,255

)

 

$

(91,428

)

Net loss per share — basic and diluted

 

$

(1.25

)

 

$

(0.71

)

 

$

(3.75

)

 

$

(2.31

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares of common stock

   outstanding for computing basic and diluted net loss  per

   share

 

 

41,565

 

 

 

41,066

 

 

 

41,416

 

 

 

39,595

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

4


 

SAREPTA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 

 

 

For the Nine Months Ended September 30,

 

 

 

2015

 

 

2014

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(155,349

)

 

$

(91,373

)

Adjustments to reconcile net income to cash flows in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,883

 

 

 

2,532

 

Amortization of premium on available-for-sale securities and non-cash interest

 

 

805

 

 

 

1,848

 

Loss on abandonment of patents

 

 

180

 

 

 

52

 

Stock-based compensation

 

 

25,769

 

 

 

14,578

 

Increase in warrant valuation

 

 

 

 

 

2,779

 

Changes in operating assets and liabilities, net:

 

 

 

 

 

 

 

 

Net (increase) decrease in accounts receivable

 

 

(317

)

 

 

168

 

Net decrease (increase) in other assets

 

 

9,963

 

 

 

(29,168

)

Net decrease in accounts payable, accrued expenses, deferred revenue and

   other liabilities

 

 

(3,127

)

 

 

(4,506

)

Net cash used in operations

 

 

(118,193

)

 

 

(103,090

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Release and maturity of restricted investments

 

 

 

 

 

3,250

 

Purchase of restricted investments

 

 

(10,695

)

 

 

 

Purchase of property and equipment

 

 

(2,316

)

 

 

(22,305

)

Patent costs

 

 

(982

)

 

 

(1,062

)

Purchase of available-for-sale securities

 

 

(49,632

)

 

 

(272,189

)

Maturity of available-for-sale securities

 

 

141,854

 

 

 

86,599

 

Net cash from (used in) investing activities

 

 

78,229

 

 

 

(205,707

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from borrowings, net of debt issuance costs

 

 

19,601

 

 

 

 

Repayments of long-term debt and notes payable

 

 

(2,573

)

 

 

(70

)

Proceeds from exercise of options and warrants and the sale of common

   stock, net of offering costs

 

 

5,204

 

 

 

104,201

 

Net cash from financing activities

 

 

22,232

 

 

 

104,131

 

 

 

 

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

 

(17,732

)

 

 

(204,666

)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Beginning of period

 

 

73,551

 

 

 

256,965

 

End of period

 

$

55,819

 

 

$

52,299

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

359

 

 

$

60

 

Supplemental schedule of non-cash investing activities and financing activities:

 

 

 

 

 

 

 

 

Accrued debt issuance costs related to the senior secured term loan

 

$

400

 

 

$

 

Property and equipment included in accrued expenses

 

$

211

 

 

$

1,165

 

Patent costs included in accrued expenses

 

$

105

 

 

$

187

 

Accrued legal and other fees for the October 9, 2015 common stock offering

   (See Note 11, Subsequent Event)

 

$

135

 

 

$

 

Capitalized interest

 

$

99

 

 

$

36

 

Issuance of common stock in satisfaction of warrants

 

$

 

 

$

11,785

 

Tenant improvement paid by Landlord

 

$

 

 

$

154

 

Issuance of note payable in relation to the purchase of certain real and personal

   property located in Andover, Massachusetts

 

$

 

 

$

4,613

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

5


 

SAREPTA THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

1. BUSINESS AND BASIS OF PRESENTATION

Business

Sarepta Therapeutics, Inc. (together with its wholly-owned subsidiaries “Sarepta” or the “Company”) is a biopharmaceutical company focused on the discovery and development of unique RNA-targeted therapeutics for the treatment of rare, infectious and other diseases. Applying its proprietary, highly-differentiated and innovative platform technologies, the Company is able to target a broad range of diseases and disorders through distinct RNA-targeted mechanisms of action. The Company is primarily focused on rapidly advancing the development of its potentially disease-modifying Duchenne muscular dystrophy (“DMD”) drug candidates, including its lead DMD product candidate, eteplirsen, designed to skip exon 51. On August 25, 2015, the Company announced the filing by the Food and Drug Administration (“FDA”) of its new drug application (“NDA”) for eteplirsen for the treatment of DMD amenable to exon 51 skipping. Eteplirsen is under priority review with a Prescription Drug User Fee Act (“PDUFA”) action date of February 26, 2016. The Company is also developing therapeutics using its technology for the treatment of drug resistant bacteria and infectious, rare and other human diseases.

The Company has not generated any revenue from product sales to date and there can be no assurance that revenue from product sales will be achieved. Even if it does achieve revenue from product sales, the Company is likely to continue to incur operating losses in the near term.

On October 9, 2015, the Company completed a public offering whereby the Company sold 3,250,000 shares of common stock at a price of $39.00 per share.  In addition, the Company granted the underwriters a 30-day option to purchase an additional 487,500 shares of common stock at a price of $39.00 per share. There can be no assurance that the underwriters will exercise the option. The Company received aggregate net proceeds from the offering of approximately $120.0 million, after deducting the underwriting discounts and offering-related transaction costs.

As of September 30, 2015, the Company had approximately $111.4 million of cash, cash equivalents and investments, consisting of $55.8 million of cash and cash equivalents, $44.1 million of short-term investments and $11.5 million of restricted cash and investments. The Company believes that its balance of cash, cash equivalents and investments as of September 30, 2015, together with the net proceeds of approximately $120.0 million received from the Company’s common stock offering completed on October 9, 2015, is sufficient to fund its current operational plan for the next twelve months, though it may pursue additional cash resources through public or private financings, seek additional government contracts and establish collaborations with or license its technology to other companies.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), reflect the accounts of Sarepta Therapeutics, Inc. and its wholly-owned subsidiaries. All inter-company transactions between and among its consolidated subsidiaries have been eliminated. Management has determined that the Company operates in one segment: the development of pharmaceutical products on its own behalf or in collaboration with others. The information included in this quarterly report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Estimates and Uncertainties

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the valuation of stock-based awards, research and development expenses, revenue recognition and income taxes.

 

 

2. RECENT ACCOUNTING PRONOUNCEMENTS

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs”. The amendments in this update require that debt issuance costs related to a

6


 

recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU No. 2015-03 will be effective for fiscal years beginning after December 15, 2015, with early adoption permitted. The Company has elected to adopt this ASU early and the adoption of this guidance did not have a material effect on its consolidated financial statements. For additional information, please read Note 7, Long-term Debt of the unaudited condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. This update requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued and to provide related disclosures. ASU No. 2014-15 is effective for the annual period ending after December 15, 2016, with early adoption permitted. The Company has not adopted this guidance as of September 30, 2015, and based on the Company's financial condition as of the date these financial statements were issued or available for issuance, the Company does not expect the adoption of this guidance to have any impact on the current period financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, Revenue Recognition, and creates a new Topic 606, Revenue from Contracts with Customers. Under the new guidance, a company is required to recognize revenue when it transfers goods or renders services to customers at an amount that it expects to be entitled to in exchange for these goods or services. This guidance is effective for the fiscal years beginning after December 15, 2016, with early adoption not permitted. In August 2015, the FASB issued ASU No. 2015-14, “Deferral of the Effective Date”, which states that the mandatory effective date of this new revenue standard will be delayed by one year, with early adoption only permitted in fiscal year 2017. Two adoption methods are permitted: (i) retrospectively to all prior reporting periods presented, with certain practical expedients permitted; or (ii) retrospectively with the cumulative effect of initially adopting the ASU recognized at the date of initial application. The Company has not yet determined which adoption method it will utilize or the effect that the adoption of this guidance will have on its consolidated financial statements.

 

 

3. FAIR VALUE MEASUREMENTS

The Company has certain financial assets that are recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.

 

·

Level 1 — quoted prices for identical instruments in active markets;

 

·

Level 2 — quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

 

·

Level 3 — valuations derived from valuation techniques in which one or more significant value drivers are unobservable.

The tables below present information about the Company’s financial assets that are measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation techniques it utilizes to determine such fair value:

 

 

 

Fair Value Measurement as of September 30, 2015

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(in thousands)

 

Money market funds

 

$

140

 

 

$

140

 

 

$

 

 

$

 

Commercial paper

 

 

11,099

 

 

 

 

 

 

11,099

 

 

 

 

Government and government agency bonds

 

 

28,249

 

 

 

 

 

 

28,249

 

 

 

 

Corporate bonds

 

 

15,841

 

 

 

 

 

 

15,841

 

 

 

 

Certificates of deposit

 

 

11,343

 

 

 

11,343

 

 

 

 

 

 

 

Total assets

 

$

66,672

 

 

$

11,483

 

 

$

55,189

 

 

$

 

7


 

 

 

 

Fair Value Measurement as of December 31, 2014

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(in thousands)

 

Money market funds

 

$

47,740

 

 

$

47,740

 

 

$

 

 

$

 

Commercial paper

 

 

2,997

 

 

 

 

 

 

2,997

 

 

 

 

Government and government agency bonds

 

 

75,250

 

 

 

 

 

 

75,250

 

 

 

 

Corporate bonds

 

 

58,546

 

 

 

 

 

 

58,546

 

 

 

 

Certificates of deposit

 

 

647

 

 

 

647

 

 

 

 

 

 

 

Total assets

 

$

185,180

 

 

$

48,387

 

 

$

136,793

 

 

$

 

 

The Company’s assets with fair value categorized as Level 1 within the fair value hierarchy include money market funds and certificates of deposit. Money market funds are publicly traded mutual funds and are presented as cash equivalents on the unaudited condensed consolidated balance sheets as of September 30, 2015.

The Company’s assets with fair value categorized as Level 2 within the fair value hierarchy consist of commercial paper, government and government agency bonds and corporate bonds. These assets have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, through income-based approaches utilizing observable market data.

The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amounts for long-term debt and notes payable approximate fair value based on market activity for other debt instruments with similar characteristics and comparable risk.

 

 

4. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

It is the Company’s policy to mitigate credit risk in its financial assets by maintaining a well-diversified portfolio that limits the amount of exposure as to maturity and investment type. The weighted average maturity of the Company’s available-for-sale securities as of September 30, 2015 and December 31, 2014 was less than 1 and 4 months, respectively.

The following tables summarize the Company’s cash, cash equivalents and short-term investments for each of the periods indicated:

 

 

 

As of September 30, 2015

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Market

Value

 

 

 

(in thousands)

 

Cash and money market funds

 

$

44,720

 

 

$

 

 

$

 

 

$

44,720

 

Commercial paper

 

 

11,099

 

 

 

 

 

 

 

 

 

11,099

 

Government and government agency bonds

 

 

28,248

 

 

 

1

 

 

 

 

 

 

28,249

 

Corporate bonds

 

 

15,843

 

 

 

 

 

 

(2

)

 

 

15,841

 

Total assets

 

$

99,910

 

 

$

1

 

 

$

(2

)

 

$

99,909

 

As reported:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

55,819

 

 

$

 

 

$

 

 

$

55,819

 

Short-term investments

 

 

44,091

 

 

 

1

 

 

 

(2

)

 

 

44,090

 

Total assets

 

$

99,910

 

 

$

1

 

 

$

(2

)

 

$

99,909

 

8


 

 

 

 

As of December 31, 2014

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Market

Value

 

 

 

(in thousands)

 

Cash and money market funds

 

$

73,551

 

 

$

 

 

$

 

 

$

73,551

 

Commercial paper

 

 

2,997

 

 

 

 

 

 

 

 

 

2,997

 

Government and government agency bonds

 

 

75,289

 

 

 

 

 

 

(39

)

 

 

75,250

 

Corporate bonds

 

 

58,602

 

 

 

 

 

 

(56

)

 

 

58,546

 

Total assets

 

$

210,439

 

 

$

 

 

$

(95

)

 

$

210,344

 

As reported:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

73,551

 

 

$

 

 

$

 

 

$

73,551

 

Short-term investments

 

 

136,888

 

 

 

 

 

 

(95

)

 

 

136,793

 

Total assets

 

$

210,439

 

 

$

 

 

$

(95

)

 

$

210,344

 

 

 

5. OTHER CURRENT ASSETS

The following table summarizes the Company’s other current assets for each of the periods indicated:

 

 

 

As of

September 30,

2015

 

 

As of

December 31,

2014

 

 

 

(in thousands)

 

Manufacturing-related deposits

 

$

14,450

 

 

$

30,668

 

Prepaid expenses

 

 

4,382

 

 

 

2,797

 

Other

 

 

634

 

 

 

1,571

 

Total other current assets

 

$

19,466

 

 

$

35,036

 

 

 

6. ACCRUED EXPENSES

The following table summarizes the Company’s accrued expenses for each of the periods indicated: 

 

 

 

As of

September 30,

2015

 

 

As of

December 31,

2014

 

 

 

(in thousands)

 

Accrued employee compensation costs

 

$

6,262

 

 

$

6,170

 

Accrued clinical and preclinical costs

 

 

5,972

 

 

 

3,471

 

Accrued professional fees

 

 

3,349

 

 

 

3,403

 

Accrued contract manufacturing costs

 

 

2,145

 

 

 

3,271

 

Accrued research costs

 

 

565

 

 

 

311

 

Accrued facility-related costs

 

 

168

 

 

 

300

 

Other

 

 

1,300

 

 

 

440

 

Total accrued expenses

 

$

19,761

 

 

$

17,366

 

 

 

7. LONG-TERM DEBT

On June 26, 2015, the Company entered into a credit and security agreement (the “Credit Agreement”) with MidCap Financial that provides a senior secured term loan of $20.0 million. The principal amount may be increased by an additional $20.0 million, for an aggregate amount not to exceed $40.0 million. All obligations under the Credit Agreement are secured by substantially all of the Company’s assets, excluding, without limitation, the Company’s intellectual property, certain equity interests relating to foreign subsidiaries and all assets owned by foreign subsidiaries, among others.

Borrowings under the Credit Agreement bear interest at a rate per annum equal to 7.75%, with only interest payments due through June 30, 2016. In addition to paying interest on the outstanding principal under the Credit Agreement, the Company will pay an origination fee equal to 0.50% of the amount of the term loan when advanced under the Credit Agreement, as well as a final payment fee equal to 2.00% of the amount borrowed under the Credit Agreement when the term loan is fully repaid. Commencing on

9


 

July 1, 2016 and continuing for the remaining twenty-four months of the facility, the Company will be required to make monthly principal payments of approximately $0.8 million, or $1.7 million if the facility is increased by the additional $20.0 million referenced above.

The Company may voluntarily prepay outstanding loans under the Credit Agreement at any time, provided that the amount is not less than the total of all of the credit extensions and other related obligations under the Credit Agreement then outstanding. In the event of a voluntary prepayment, the Company is obligated to pay a prepayment fee equal to 2.95% of the outstanding principal of such advance if the prepayment is made within twelve months after the closing date, or 2.00% of the outstanding principal of such advance if the prepayment is made on or after the date that is twelve months after the closing date.

The Credit Agreement contains affirmative covenants that include government compliance, reporting requirements, maintaining property, making tax payments, maintaining insurance and cooperating during litigation. Additionally, the Company is required to maintain a minimum cash balance as collateral within its operating bank account with cash and cash equivalents of no less than the greater of the outstanding principal amount or $15.0 million. Negative covenants include restrictions on asset dispositions, acquisitions, indebtedness, liens, dividends and share purchases, amendments to material contracts and other restrictions.

The Credit Agreement includes customary events of default, including cross defaults, a change of control and a material adverse change. Additionally, the Company's failure to be compliant with the affirmative or negative covenants or make payments when they become due will result in an event of default.

In connection with the senior secured term loan, the Company recorded $20.0 million as long-term debt in the unaudited condensed consolidated balance sheets as of September 30, 2015. In addition, the Company incurred approximately $0.8 million in debt issuance costs that were recorded as a direct deduction to the carrying value of the term loan in the unaudited condensed consolidated balance sheets. These costs are being amortized to interest expense using the effective interest method over the term of the loan. For the three and nine months ended September 30, 2015, the Company recognized $0.4 million and $0.5 million of interest expense related to the term loan, respectively.

The following table summarizes the components of the long-term debt recorded for the period indicated:

 

 

 

As of

September 30, 2015

(in thousands)

 

Principal amount

 

$

20,000

 

Unamortized debt issuance costs

 

 

(668

)

Net carrying value of senior secured term loan

 

 

19,332

 

Other long-term debt

 

 

1,500

 

Total long-term debt

 

$

20,832

 

 

 

8. STOCK-BASED COMPENSATION

The following table summarizes the Company’s stock awards granted for each of the periods indicated:

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

Grants

 

 

Weighted Average Grant Date Fair Value

 

 

Grants

 

 

Weighted Average Grant Date Fair Value

 

 

Grants

 

 

Weighted Average Grant Date Fair Value

 

 

Grants

 

 

Weighted Average Grant Date Fair Value

 

Stock options*

 

 

702,067

 

 

$

24.05

 

 

 

237,050

 

 

$

16.19

 

 

 

2,676,778

 

 

$

14.67

 

 

 

1,540,085

 

 

$

19.24

 

Restricted stock awards**

 

 

65,000

 

 

$

33.81

 

 

 

 

 

$

 

 

 

181,783

 

 

$

20.80

 

 

 

6,000

 

 

$

29.03

 

 

*

A majority of the stock options granted during the periods presented in the table have only service-based criteria and vest over four years.

**

In September 2015, the Company granted certain employees restricted stock awards (“RSAs”) with performance conditions. If certain performance milestones are achieved within the required time frame, the number of RSAs with performance conditions may be increased from 65,000 to 97,500 shares. As a result, the Company may recognize up to $3.3 million of stock-based compensation related to these grants when performance is deemed probable.

10


 

Stock-based Compensation Expense

For the three months ended September 30, 2015 and 2014, total stock-based compensation expense was $5.7 million and $4.6 million, respectively. For the nine months ended September 30, 2015 and 2014, total stock-based compensation expense was $25.8 million and $14.6 million, respectively. Included in the amount for the nine months ended September 30, 2015 is $8.6 million of stock-based compensation expense incurred in connection with the resignation of the Company’s former Chief Executive Officer (“CEO”). The following table summarizes stock-based compensation expense by function included within the unaudited condensed consolidated statements of operations and comprehensive loss: 

 

 

 

For the Three Months Ended

September 30,

 

 

For the Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(in thousands)

 

Research and development

 

$

2,631

 

 

$

1,668

 

 

$

7,639

 

 

$

5,886

 

General and administrative

 

 

3,052

 

 

 

2,981

 

 

 

18,130

 

 

 

8,692

 

Total stock-based compensation expense

 

$

5,683

 

 

$

4,649

 

 

$

25,769

 

 

$

14,578

 

 

The following table summarizes stock-based compensation expense by grant type included within the unaudited condensed consolidated statements of operations and comprehensive loss:

 

 

 

For the Three Months Ended

September 30,

 

 

For the Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(in thousands)

 

Stock options

 

$

4,801

 

 

$

4,217

 

 

$

23,451

 

 

$

13,170

 

Restricted stock awards

 

 

136

 

 

 

33

 

 

 

310

 

 

 

169

 

Restricted stock units

 

 

 

 

 

 

 

 

 

 

 

1

 

Stock appreciation rights

 

 

115

 

 

 

147

 

 

 

377

 

 

 

440

 

Employee stock purchase plan

 

 

631

 

 

 

252

 

 

 

1,631

 

 

 

798

 

Total stock-based compensation expense

 

$

5,683

 

 

$

4,649

 

 

$

25,769

 

 

$

14,578

 

 

 

9. NET LOSS PER SHARE

Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding. Given that the Company generated a net loss for each of the periods presented, there is no difference between basic and diluted net loss per share since the effect of common stock equivalents would be anti-dilutive and, therefore, would be excluded from the diluted net loss per share calculation.

 

 

 

For the Three Months Ended

September 30,

 

 

For the Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(in thousands, except per share amounts)

 

Net loss

 

$

(51,939

)

 

$

(29,226

)

 

$

(155,349

)

 

$

(91,373

)

Weighted-average number of shares of common

   stock and common stock equivalents outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares of common

   stock outstanding for computing basic loss per share

 

 

41,565

 

 

 

41,066

 

 

 

41,416

 

 

 

39,595

 

Dilutive effect of outstanding stock

   awards and stock options after application of

   the treasury stock method*

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares of common

   stock and dilutive common stock equivalents

   outstanding for computing diluted loss per share

 

 

41,565

 

 

 

41,066

 

 

 

41,416