NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
NOTE 1
:
Summary of Significant Accounting Policies
Nature of Operations.
Avadel Pharmaceuticals plc (“Avadel,” the “Company,” “we,” “our,” or “us”) is a specialty pharmaceutical company engaged in identifying, developing, and commercializing niche branded pharmaceutical products mainly in the U.S. Our business model consists of three distinct strategies:
|
|
•
|
the development of differentiated, patent protected products through application of the Company’s proprietary patented drug delivery platforms, Micropump® and LiquiTime®, that target high-value solid and liquid oral and alternative dosages forms through the U.S. Food and Drug Administration (FDA) 505(b)(2) approval process, which allows a sponsor to submit an application that doesn’t depend on efficacy, safety, and toxicity data created by the sponsor. In addition to Micropump® and LiquiTime®, the Company has two other proprietary drug delivery platforms, Medusa™ (hydrogel depot technology for use with large molecules and peptides) and Trigger Lock™ (controlled release of opioid analgesics with potential abuse deterrent properties).
|
|
|
•
|
the identification of Unapproved Marketed Drugs (“UMDs”), which are currently sold in the U.S., but unapproved by the FDA, and the pursuit of approval for these products via a 505(b)(2) New Drug Application (NDA). To date, the Company has received three drug approvals through this “unapproved-to-approved” strategy, including: Bloxiverz® (neostigmine methylsulfate injection), Vazculep® (phenylephrine hydrochloride injection) and Akovaz® (ephedrine sulfate injection). As a potential source of near-term revenue growth, Avadel is working on the development of a fourth product for potential NDA submission and seeks to identify additional product candidates for development with this strategy.
|
|
|
•
|
the acquisition of commercial and or late-stage products or businesses. The Company markets three branded pediatric-focused pharmaceutical products in the primary care space, and a 510(k) approved device all of which were purchased through the acquisition of FSC Laboratories and FSC Pediatrics on February 5, 2016. We will consider further acquisitions and the Company continues to look for assets that could fit strategically into its current or potential future commercial sales force.
|
The Company was incorporated in Ireland on December 1, 2015 as a private limited company, and re-registered as an Irish public limited company on November 21, 2016. Its headquarters are in Dublin, Ireland and it has operations in St. Louis, Missouri, United States, and Lyon, France.
The Company is an Irish public limited company, or plc, and is the successor to Flamel Technologies S.A., a French société anonyme (“Flamel”), as the result of the merger of Flamel with and into the Company which was completed at 11:59:59 p.m., Central Europe Time, on December 31, 2016 (the “Merger”) pursuant to the agreement between Flamel and Avadel entitled Common Draft Terms of Cross-Border Merger dated as of June 29, 2016 (the “Merger Agreement”). Immediately prior to the Merger, the Company was a wholly owned subsidiary of Flamel. As a result of the Merger Agreement:
|
|
•
|
Flamel ceased to exist as a separate entity and the Company continued as the surviving entity and assumed all of the assets and liabilities of Flamel.
|
|
|
•
|
our authorized share capital is
$5,500
divided into
500,000
ordinary shares with a nominal value of
$0.01
each and
50,000
preferred shares with a nominal value of
$0.01
each
|
|
|
◦
|
all outstanding ordinary shares of Flamel,
€0.122
nominal value per share, were canceled and exchanged on a one-for-one basis for newly issued ordinary shares of the Company,
$0.01
nominal value per share. This change in nominal value of our outstanding shares resulted in our reclassifying
$5,937
on our balance sheet from ordinary shares to additional paid-in capital
|
|
|
◦
|
our board of directors is authorized to issue preferred shares on a non-pre-emptive basis, for a maximum period of five years, at which point it may be renewed by shareholders. The board of directors has discretion to dictate terms attached to the preferred shares, including voting, dividend, conversion rights, and priority relative to other classes of shares with respect to dividends and upon a liquidation.
|
|
|
•
|
all outstanding American Depositary Shares (ADSs) representing ordinary shares of Flamel were canceled and exchanged on a one-for-one basis for ADSs representing ordinary shares of the Company.
|
Thus, the Merger changed the jurisdiction of our incorporation from France to Ireland, and an ordinary share of the Company held (either directly or represented by an ADS) immediately after the Merger continued to represent the same proportional interest in our equity owned by the holder of a share of Flamel immediately prior to the Merger.
References in these consolidated financial statements and the notes thereto to “Avadel,” the “Company,” “we,” "our," “us,” and similar terms shall be deemed to be references to Flamel prior to the completion of the Merger, unless the context otherwise requires.
Prior to completion of the Merger, the Flamel ADSs were listed on the Nasdaq Global Market (“Nasdaq”) under the trading symbol “FLML”; and immediately after the Merger the Company’s ADSs were listed for and began trading on Nasdaq on January 3, 2017 under the trading symbol “AVDL.”
Further details about the reincorporation, the Merger and the Merger Agreement are contained in our definitive proxy statement filed with the Securities and Exchange Commission on May 1, 2017, and within the 2016 Annual Report on Form 10-K.
Under Irish law, the Company can only pay dividends and repurchase shares out of distributable reserves, as discussed further in the Company's proxy statement filed with the SEC as of July 5, 2016. Upon completion of the Merger, the Company did not have any distributable reserves. On February 15, 2017, the Company filed a petition with the High Court of Ireland seeking the court's confirmation of a reduction of the Company's share premium so that it can be treated as distributable reserves for the purposes of Irish law. On March 6, 2017, the High Court issued its order approving the reduction of the Company's share premium by
$317,254
which can be treated as distributable reserves.
Basis of Presentation.
The condensed consolidated balance sheet as of December 31, 2016, which is primarily derived from the prior year 2016 audited consolidated financial statements, and the interim condensed consolidated financial statements presented herein, have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP), the requirements of Form 10-Q and Article 10 of Regulation S-X and, consequently, do not include all information or footnotes required by U.S. GAAP for complete financial statements or all the disclosures normally made in an annual report on Form 10-K. Accordingly, the condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s 2016 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 28, 2017.
The condensed consolidated financial statements include the accounts of the Company and its subsidiaries, and reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the dates and periods presented. All material intercompany accounts and transactions have been eliminated. Results for interim periods are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.
Foreign Currency Translation.
The reporting currency of the Company and its wholly-owned subsidiaries is the U.S. dollar. Subsidiaries that do not use the U.S. dollar as their functional currency translate 1) profit and loss accounts at the weighted average exchange rates during the reporting period, 2) assets and liabilities at period end exchange rates and 3) shareholders' equity accounts at historical rates. Resulting translation gains and losses are included as a separate component of shareholders' equity in Accumulated Other Comprehensive Loss. Assets and liabilities, excluding available-for-sale marketable securities, denominated in a currency other than the subsidiary's functional currency are translated to the subsidiary's functional currency at period end exchange rates with resulting gains and losses recognized in the condensed consolidated statements of income (loss).
Reclassifications and Immaterial Corrections of Prior Period Amounts
.
The Company has identified certain immaterial errors related to prior reporting periods. Although the effect of the errors was not material to any previously issued financial statements, the cumulative effect of correcting the error and reclassification would have been material for the period ended March 31, 2016. Consequently, the Company has presented the effects of the error and reclassification on its prior period financial statements in the table below. In future filings the financial statements for comparative periods affected by these errors and reclassifications will be revised.
The impact of the above errors and reclassifications on previously presented line items for the three months ended March 31, 2016, is as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2016
|
|
|
|
|
Correction of Immaterial Errors
|
|
|
Consolidated Statement of Loss:
|
|
As previously filed
|
|
(a)
|
|
(b)
|
|
As revised
|
|
|
|
|
|
|
|
|
|
Cost of products and services sold
|
|
$
|
4,395
|
|
|
$
|
—
|
|
|
$
|
(489
|
)
|
|
$
|
3,906
|
|
Changes in fair value of related party contingent consideration
|
|
7,916
|
|
|
327
|
|
|
—
|
|
|
8,243
|
|
Total operating expenses
|
|
30,674
|
|
|
327
|
|
|
(489
|
)
|
|
30,512
|
|
Operating income
|
|
5,542
|
|
|
(327
|
)
|
|
489
|
|
|
5,704
|
|
Other income (expense) - changes in fair value of related party payable
|
|
(1,861
|
)
|
|
327
|
|
|
—
|
|
|
(1,534
|
)
|
Income before income taxes
|
|
765
|
|
|
—
|
|
|
489
|
|
|
1,254
|
|
Income tax provision
|
|
7,141
|
|
|
—
|
|
|
171
|
|
|
7,312
|
|
Net income (loss)
|
|
(6,376
|
)
|
|
—
|
|
|
318
|
|
|
(6,058
|
)
|
Net income (loss) per share - basic
|
|
$
|
(0.15
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.15
|
)
|
Net income (loss) per share - diluted
|
|
$
|
(0.15
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.15
|
)
|
|
|
(a)
|
Reflects the correction of a
$327
classification error where the change in fair value of related party contingent consideration for FSC should have been classified within Operating expenses rather than within Other expenses during the first quarter of 2016.
|
|
|
(b)
|
Reflects the correction of a
$489
error in the Company’s inventory obsolescence reserve accrual and expense which was recorded in the first quarter of 2016 but should have been recorded in the fourth quarter of 2015.
|
In addition to the specific amounts identified within the table above, the Company also changed the names of the previously-reported “Interest expense – changes in fair value of related party financing related contingent consideration” line on the condensed consolidated statement of income (loss) to “Other expense – changes in fair value of related party payable.”
While the error and reclassification noted in the table above impact their corresponding captions within the cash flows provided by operating activities section of the Company’s condensed consolidated statements of cash flows for the three months ended March 31, 2016, there was no impact to the total net cash provided by operating activities in the period.
Revenue.
Revenue includes sales of pharmaceutical products, amortization of licensing fees, and, if any, milestone payments for R&D achievements.
Product Sales and Services
Revenue is generally realized or realizable and earned when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectability is reasonably assured. The Company records revenue from product sales when title and risk of ownership have been transferred to the customer, which is typically upon delivery to the customer and when the selling price is determinable. As is customary in the pharmaceutical industry, the Company’s gross product sales are subject to a variety of deductions in arriving at reported net product sales. These adjustments include estimates for product returns, chargebacks, payment discounts, rebates, and other sales allowances and are estimated based on analysis of historical data for the product or comparable products, as well as future expectations for such products.
For generic products and branded products sold in mature markets where the ultimate net selling price to customer is estimable, the Company recognizes revenues upon shipment to the wholesaler. For new product launches the Company recognizes revenue once sufficient data is available to determine product acceptance in the marketplace such that product returns may be estimated based on historical data and there is evidence of reorders and consideration is made of wholesaler inventory levels. As part of the third quarter 2016 launch of Akovaz, the Company determined that sufficient data was available to determine the ultimate net selling price to the customer and therefore recognized revenue upon shipment to its wholesaler customers.
Prior to the second quarter 2016, the Company did not have sufficient historical data to estimate certain revenue deductions. As such, it could not accurately estimate the ultimate net selling price of its Éclat portfolio of products and as a result delayed revenue recognition until the wholesaler sold the product through to its customers.
During the second quarter of 2016, the Company determined that it had sufficient evidence, history, data and internal controls to estimate the ultimate selling price of its products upon shipment from its warehouse to its customers, the wholesalers. Accordingly, it discontinued the sell through revenue approach and now recognizes revenue once the product is shipped from its warehouse.
License and Research Revenue
The Company’s license and research revenues consist of fees and milestone payments. Non-refundable fees where we have continuing performance obligations are deferred and are recognized ratably over our projected performance period. We recognize milestone payments, which are typically related to regulatory, commercial or other achievements by us or our licensees and distributors, as revenues when the milestone is accomplished and collection is reasonably assured. For the quarters-ended March 31, 2017 and 2016, the Company recognized
$750
and
$863
of revenue from license agreements, respectively.
NOTE 2 : Newly Issued Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update ("ASU") No. 2017-07, "
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs.
" The standard requires the service component of pension and other postretirement benefit expense to be presented in the same statement of income lines as other employee compensation costs, however, the other components will be presented outside of operating income. In addition, only the service cost component will be eligible for capitalization in assets. The standard is effective starting in 2018, with early adoption permitted. Retrospective application is required for the guidance on the statement of income presentation. Prospective application is required for the guidance on the cost capitalization in assets. The Company does not believe adoption of the standard will have a material impact on our financial statement presentation.
In January 2017, the FASB issued ASU 2017-04, "
Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment."
This update eliminates step 2 from the goodwill impairment test, and requires the goodwill impairment test to be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective for the Company in the first quarter of fiscal 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company will assess the timing of adoption and impact of this guidance to future impairment considerations.
In January, 2017, the FASB issued ASU 2017-01, "
Business Combinations (Topic 805): Clarifying the Definition of a Business
." This update provides a screen to determine whether or not a set of assets is a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets is not a business. If the screen is not met, the amendments in this update (1) require that to be considered a business, a set of assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. This guidance is effective for the Company in the first quarter of fiscal 2018. Early adoption is permitted for transactions not previously reported in the Company's consolidated financial statements. The Company will assess the timing of adoption and impact of this guidance on future transactions.
In October 2016, the FASB issued ASU 2016-16, "
Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory
," which requires companies to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017. The Company elected to early-adopt ASU 2016-16 on a modified-retrospective basis as of January 1, 2017. Adoption of ASU 2016-16 eliminated the
$11,156
income tax deferred charge recorded within the consolidated balance sheet as of December 31, 2016 and such elimination is reflected as an adjustment to accumulated deficit as of January 1, 2017.
In August 2016, the FASB issued ASU 2016-15,
"Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
." ASU 2016-15 identifies how certain cash receipts and cash payments are presented and classified in the Statement of Cash Flows under Topic 230. ASU 2016-15 is effective for the Company for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. ASU 2016-15 should be applied retrospectively and early adoption is permitted, including adoption in an interim period. The Company does not believe this standard will materially impact its consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09 “
Revenue from Contracts with Customers”
which supersedes the most current revenue recognition requirements. This ASU requires entities to recognize revenue in a way that depicts the transfer of goods or services to customers in an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods or services. Through May 2016, the FASB issued ASU 2016-08 “
Principal versus Agent Considerations (Reporting Revenue Gross versus Net),”
ASU 2016-10 “
Identifying Performance Obligations and Licensing,”
and ASU 2016-12, “
Narrow-Scope Improvements and Practical Expedients,”
which provide supplemental adoption guidance and clarification to ASU 2014-09,
respectively. These ASUs will be effective for annual and interim periods beginning after December 15, 2017 with early adoption for annual and interim periods beginning after December 15, 2016 permitted and should be applied retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. The Company is currently evaluating this pronouncement to determine the impact of its adoption on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, “
Improvements to Employee Share-Based Payment Accounting”
which amends Accounting Standards Codification (“ASC”) Topic 718 “
Compensation – Stock Compensation”
. This update simplifies several aspects of accounting for share-based payment awards to employees, including the accounting for income taxes, classification of awards as either equity or liabilities and classification in the statement of cash flows. We adopted the standard on a prospective basis with the effect of adoption reflected for the interim periods after the year beginning January 1, 2017 as required by the standard. The primary effects of adoption were immaterial to the Company's condensed consolidated financial statements for the three months ended March 31, 2017.
In February 2016, the FASB issued ASU 2016-02, “
Leases
” which supersedes ASC 840 “
Leases
” and creates a new topic, ASC 842 “
Leases
.” This update requires lessees to recognize on their balance sheet a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months. The update also expands the required quantitative and qualitative disclosures surrounding leases. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier application permitted. This update will be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the effect of this update on its consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01,
"Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
." The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2017, and requires a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. Early adoption is not permitted. The new guidance will require the change in fair value of equity investments with readily determinable fair values to be recognized through the statement of income. We are currently evaluating the full impact of the standard; however, upon adoption, the change in the fair value of our available-for-sale equity investments will be recognized in our consolidated statement of income (loss) rather than as a component of our consolidated statement of comprehensive income (loss).
NOTE 3 : Fair Value Measurement
The Company is required to measure certain assets and liabilities at fair value, either upon initial recognition or for subsequent accounting or reporting. For example, we use fair value extensively when accounting for and reporting certain financial instruments, when measuring certain contingent consideration liabilities and in the initial recognition of net assets acquired in a business combination. Fair value is estimated by applying the hierarchy described below, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
ASC 820,
Fair Value Measurements and Disclosures
defines fair value as a market-based measurement that should be determined based on the assumptions that marketplace participants would use in pricing an asset or liability. When estimating fair value, depending on the nature and complexity of the asset or liability, we may generally use one or each of the following techniques:
|
|
•
|
Income approach, which is based on the present value of a future stream of net cash flows.
|
|
|
•
|
Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.
|
As a basis for considering the assumptions used in these techniques, the standard establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
|
|
•
|
Level 1 - Quoted prices for identical assets or liabilities in active markets.
|
|
|
•
|
Level 2 - Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means.
|
|
|
•
|
Level 3 - Unobservable inputs that reflect estimates and assumptions.
|
The following table summarizes the financial instruments measured at fair value on a recurring basis classified in the fair value hierarchy (Level 1, 2 or 3) based on the inputs used for valuation in the accompanying consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
Fair Value Measurements:
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities (see Note 4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$
|
11,833
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,033
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate bonds
|
|
—
|
|
|
65,339
|
|
|
—
|
|
|
—
|
|
|
57,348
|
|
|
—
|
|
Government securities - U.S.
|
|
—
|
|
|
58,427
|
|
|
—
|
|
|
—
|
|
|
42,814
|
|
|
—
|
|
Government securities - Non-U.S.
|
|
—
|
|
|
241
|
|
|
—
|
|
|
—
|
|
|
233
|
|
|
—
|
|
Other fixed-income securities
|
|
—
|
|
|
11,138
|
|
|
—
|
|
|
—
|
|
|
10,471
|
|
|
—
|
|
Other securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
81
|
|
|
—
|
|
Total assets
|
|
$
|
11,833
|
|
|
$
|
135,145
|
|
|
$
|
—
|
|
|
$
|
4,033
|
|
|
$
|
110,947
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party payable (see Note 7)
|
|
—
|
|
|
—
|
|
|
153,213
|
|
|
—
|
|
|
—
|
|
|
169,347
|
|
Total liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
153,213
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
169,347
|
|
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. During the periods ended March 31, 2017 and December 31, 2016, respectively, there were no transfers in and out of Level 1, 2, or 3. During the three month periods ended March 31, 2017 and 2016, respectively, we did not recognize any other-than-temporary impairment loss.
Some of the Company's financial instruments, such as cash and cash equivalents, accounts receivable and accounts payable, are reflected in the balance sheet at carrying value, which approximates fair value due to their short-term nature. Additionally, the Company's long-term debt is reflected in the balance sheet at carrying value, which approximates fair value, as these represent non-interest bearing grants from the French government and are repayable only if the research project is technically or commercially successful.
NOTE 4
:
Marketable Securities
The Company has investments in available-for-sale marketable securities which are recorded at fair market value. Unrealized gains and losses are recorded as other comprehensive income (loss) in shareholders’ equity, net of income tax effects.
The following tables show the Company’s available-for-sale securities’ adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category as of March 31, 2017 and December 31, 2016, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
Marketable Securities:
|
|
Adjusted Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$
|
11,107
|
|
|
$
|
804
|
|
|
$
|
(78
|
)
|
|
$
|
11,833
|
|
Corporate bonds
|
|
65,647
|
|
|
151
|
|
|
(459
|
)
|
|
65,339
|
|
Government securities - U.S.
|
|
59,002
|
|
|
37
|
|
|
(612
|
)
|
|
58,427
|
|
Government securities - Non-U.S.
|
|
248
|
|
|
—
|
|
|
(7
|
)
|
|
241
|
|
Other fixed-income securities
|
|
11,158
|
|
|
4
|
|
|
(24
|
)
|
|
11,138
|
|
Total
|
|
$
|
147,162
|
|
|
$
|
996
|
|
|
$
|
(1,180
|
)
|
|
$
|
146,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
Marketable Securities:
|
|
Adjusted Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$
|
3,689
|
|
|
$
|
409
|
|
|
$
|
(65
|
)
|
|
$
|
4,033
|
|
Corporate bonds
|
|
57,871
|
|
|
89
|
|
|
(612
|
)
|
|
57,348
|
|
Government securities - U.S.
|
|
43,049
|
|
|
515
|
|
|
(750
|
)
|
|
42,814
|
|
Government securities - Non-U.S.
|
|
247
|
|
|
—
|
|
|
(14
|
)
|
|
233
|
|
Other fixed-income securities
|
|
10,281
|
|
|
221
|
|
|
(31
|
)
|
|
10,471
|
|
Other securities
|
|
81
|
|
|
—
|
|
|
—
|
|
|
81
|
|
Total
|
|
$
|
115,218
|
|
|
$
|
1,234
|
|
|
$
|
(1,472
|
)
|
|
$
|
114,980
|
|
We determine realized gains or losses on the sale of marketable securities on a specific identification method. We recognized gross realized gains of
$89
and
$11
for the three months ended March 31, 2017, and 2016, respectively. These realized gains were offset by realized losses of
$518
and
$119
for the three months ended March 31, 2017, and 2016, respectively. We reflect these gains and losses as a component of investment income in the accompanying condensed consolidated statements of income (loss).
The following table summarizes the estimated fair value of our investments in marketable debt securities, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities as of March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities
|
Marketable Debt Securities:
|
|
Less than 1 Year
|
|
1-5 Years
|
|
5-10 Years
|
|
Greater than 10 Years
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
16,087
|
|
|
41,098
|
|
|
7,767
|
|
|
387
|
|
|
65,339
|
|
Government securities - U.S.
|
|
2,985
|
|
|
46,242
|
|
|
866
|
|
|
8,334
|
|
|
58,427
|
|
Government securities - Non-U.S.
|
|
—
|
|
|
—
|
|
|
241
|
|
|
—
|
|
|
241
|
|
Other fixed-income securities
|
|
—
|
|
|
11,138
|
|
|
—
|
|
|
—
|
|
|
11,138
|
|
Total
|
|
$
|
19,072
|
|
|
$
|
98,478
|
|
|
$
|
8,874
|
|
|
$
|
8,721
|
|
|
$
|
135,145
|
|
The Company has classified our investment in available-for-sale marketable securities as current assets in the condensed consolidated balance sheets as the securities need to be available for use, if required, to fund current operations. There are no restrictions on the sale of any securities in our investment portfolio.
NOTE 5
:
Inventories
The principal categories of inventories, net reserves of
$3,275
and
$3,223
at March 31, 2017 and December 31, 2016, respectively, are comprised of the following:
|
|
|
|
|
|
|
|
|
|
Inventory:
|
|
March 31, 2017
|
|
December 31, 2016
|
|
|
|
|
|
Finished goods
|
|
$
|
4,094
|
|
|
$
|
2,429
|
|
Raw materials
|
|
1,312
|
|
|
829
|
|
Total
|
|
$
|
5,406
|
|
|
$
|
3,258
|
|
NOTE 6
:
Goodwill and Intangible Assets
The Company's amortizable and unamortizable intangible assets at March 31, 2017 and December 31, 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
Goodwill and Intangible Assets:
|
|
Gross
Value
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|
Gross
Value
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired developed technology - Vazculep
|
|
$
|
12,061
|
|
|
$
|
(9,004
|
)
|
|
$
|
3,057
|
|
|
$
|
12,061
|
|
|
$
|
(8,801
|
)
|
|
$
|
3,260
|
|
Acquired product marketing rights
|
|
16,600
|
|
|
(1,297
|
)
|
|
15,303
|
|
|
16,600
|
|
|
(1,019
|
)
|
|
15,581
|
|
Acquired developed technology
|
|
4,300
|
|
|
(386
|
)
|
|
3,914
|
|
|
4,300
|
|
|
(304
|
)
|
|
3,996
|
|
Total amortizable intangible assets
|
|
$
|
32,961
|
|
|
$
|
(10,687
|
)
|
|
$
|
22,274
|
|
|
$
|
32,961
|
|
|
$
|
(10,124
|
)
|
|
$
|
22,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
18,491
|
|
|
$
|
—
|
|
|
$
|
18,491
|
|
|
$
|
18,491
|
|
|
$
|
—
|
|
|
$
|
18,491
|
|
Total unamortizable intangible assets
|
|
$
|
18,491
|
|
|
$
|
—
|
|
|
$
|
18,491
|
|
|
$
|
18,491
|
|
|
$
|
—
|
|
|
$
|
18,491
|
|
The Company recorded amortization expense related to amortizable intangible assets of
$564
and
$3,514
for the three months ended March 31, 2017 and 2016, respectively.
Amortizable intangible assets are amortized over their estimated useful lives, which range from three to fifteen years. Estimated amortization of intangible assets for the next five years is as follows:
|
|
|
|
|
|
Estimated Amortization Expense:
|
|
Amount
|
|
|
|
2017
|
|
$
|
2,258
|
|
2018
|
|
2,258
|
|
2019
|
|
2,258
|
|
2020
|
|
2,258
|
|
2021
|
|
1,443
|
|
NOTE 7
:
Long-Term Related Party Payable
Long-term related party payable and related activity are reported at fair value and consist of the following at March 31, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity during the Three Months Ended
March 31, 2017
|
|
|
|
|
|
|
|
|
|
Changes in Fair Value of
Related Party Payable
|
|
|
Long-Term Related Party Payable:
|
Balance,
December 31, 2016
|
|
Additions
|
|
Payments to
Related Parties
|
|
Operating
Expense
|
|
Other
Expense
|
|
Balance,
March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related contingent consideration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants - Éclat Pharmaceuticals (a)
|
$
|
11,217
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3,029
|
)
|
|
$
|
—
|
|
|
$
|
8,188
|
|
Earn-out payments - Éclat Pharmaceuticals (b)
|
121,377
|
|
|
—
|
|
|
(7,166
|
)
|
|
(4,280
|
)
|
|
—
|
|
|
109,931
|
|
Royalty agreement - FSC (c)
|
7,291
|
|
|
—
|
|
|
(444
|
)
|
|
338
|
|
|
—
|
|
|
7,185
|
|
Financing-related:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty agreement - Deerfield (d)
|
9,794
|
|
|
—
|
|
|
(679
|
)
|
|
—
|
|
|
(372
|
)
|
|
8,743
|
|
Royalty agreement - Broadfin (e)
|
4,668
|
|
|
—
|
|
|
(324
|
)
|
|
—
|
|
|
(178
|
)
|
|
4,166
|
|
Long-term liability - FSC (f)
|
15,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,000
|
|
Total related party payable
|
169,347
|
|
|
$
|
—
|
|
|
$
|
(8,613
|
)
|
|
$
|
(6,971
|
)
|
|
$
|
(550
|
)
|
|
153,213
|
|
Less: Current portion
|
(34,177
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43,699
|
)
|
Total long-term related party payable
|
$
|
135,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
109,514
|
|
Long-term related party payable and related activity are reported at fair value and consist of the following at March 31, 2017 and December 31, 2016:
|
|
(a)
|
As part of the consideration for the Company’s acquisition of Éclat on March 13, 2012, the Company issued
two
warrants to a related party with a
six
-year term which allow for the purchase of a combined total of
3,300
ordinary shares of Avadel. One warrant is exercisable for
2,200
shares at an exercise price of
$7.44
per share, and the other warrant is exercisable for
1,100
shares at an exercise price of
$11.00
per share.
|
The fair value of the warrants is estimated on a quarterly basis using a Black-Scholes option pricing model with the following assumptions as of March 31:
|
|
|
|
|
|
|
|
|
|
Assumptions for the Warrant Valuation:
|
|
March 31, 2017
|
|
March 31, 2016
|
|
|
|
|
|
Stock price
|
|
$
|
9.68
|
|
|
$
|
11.04
|
|
Weighted average exercise price per share
|
|
8.63
|
|
|
8.63
|
|
Expected term (years)
|
|
1.00
|
|
|
2.00
|
|
Expected volatility
|
|
47.90
|
%
|
|
70.50
|
%
|
Risk-free interest rate
|
|
1.03
|
%
|
|
0.73
|
%
|
Expected dividend yield
|
|
—
|
|
|
—
|
|
These Black-Scholes fair value measurements are based on significant inputs not observable in the market and thus represent a level 3 measurement as defined in ASC 820. The fair value of the warrant consideration is most sensitive to movement in the Company’s share price and expected volatility at the balance sheet date.
Expected term
: The expected term of the options or warrants represents the period of time between the grant date and the time the options or warrants are either exercised or forfeited, including an estimate of future forfeitures for outstanding options or warrants. Given the limited historical data and the grant of stock options and warrants to a limited population, the simplified method has been used to calculate the expected life.
Expected volatility
: The expected volatility is calculated based on an average of the historical volatility of the Company's stock price for a period approximating the expected term.
Risk-free interest rate
: The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and a maturity that approximates the expected term.
Expected dividend yield
: The Company has not distributed any dividends since its inception and has no plan to distribute dividends in the foreseeable future.
At the closing date of the 2012 Éclat acquisition and at March 31, 2017, it was uncertain as to whether the Company would ultimately fulfill its obligation under these warrants using Company shares or cash. Accordingly, pursuant to the guidance of ASC 480, the Company determined that these warrants should be classified as a long-term liability. This classification as a long-term liability was further supported by the Company’s determination, pursuant to the guidance of ASC 815-40-15-7(i), that these warrants could also not be considered as being indexed to the Company’s own stock, on the basis that the exercise price for the warrants is determined in U.S. dollars, although the functional currency of the Company at the closing date of the Éclat acquisition was the Euro.
|
|
(b)
|
In March 2012, the Company acquired all of the membership interests of Éclat from Breaking Stick Holdings, L.L.C. (“Breaking Stick”, formerly Éclat Holdings), an affiliate of Deerfield. Breaking Stick is majority owned by Deerfield, with a minority interest owned by the Company’s CEO, and certain other current and former employees. As part of the consideration, the Company committed to provide quarterly earn-out payments equal to
20%
of any gross profit generated by certain Éclat products. These payments will continue in perpetuity, to the extent gross profit of the related products also continue in perpetuity.
|
|
|
(c)
|
In February 2016, the Company acquired all of the membership interests of FSC from Deerfield. The consideration for this transaction in part included a commitment to pay quarterly a
15%
royalty on the net sales of certain FSC products, up to
$12,500
for a period not exceeding
ten
years.
|
|
|
(d)
|
As part of a February 2013 debt financing transaction conducted with Deerfield, the Company received cash of
$2,600
in exchange for entering into a royalty agreement whereby the Company shall pay quarterly a
1.75%
royalty on the net sales of certain Éclat products until December 31, 2024. In connection with such debt financing transaction, the Company granted Deerfield a security interest in the product registration rights of the Eclat products.
|
|
|
(e)
|
As part of a December 2013 debt financing transaction conducted with Broadfin Healthcare Master Fund, a related party and current shareholder, the Company received cash of
$2,200
in exchange for entering into a royalty agreement whereby the Company shall pay quarterly a
0.834%
royalty on the net sales of certain Éclat products until December 31, 2024.
|
|
|
(f)
|
In February 2016, the Company acquired all of the membership interests of FSC from Deerfield. The consideration for this transaction in part consists of payments totaling
$1,050
annually for
five
years with a final payment in January 2021 of
$15,000
. Substantially all of FSC's, and its subsidiaries, assets are pledged as collateral under this agreement.
|
At March 31, 2017, the fair value of each related party payable listed in (b) through (e) above was estimated using a discounted cash flow model based on estimated and projected annual net revenues or gross profit, as appropriate, of each of the specified Éclat and FSC products using an appropriate risk-adjusted discount rate ranging from
15%
to
22%
. These fair value measurements are based on significant inputs not observable in the market and thus represent a level 3 measurement as defined in ASC 820. Subsequent changes in the fair value of the acquisition-related related party payables, resulting primarily from management’s revision of key assumptions, will be recorded in the consolidated statements of income (loss) in the line items entitled
"Changes in fair value of related party contingent consideration"
for items noted in (b) and (c) above and in
"Other expense - changes in fair value of related party payable"
for items (d) and (e) above. See
Note 1: Summary of Significant Accounting Policies
under the caption Acquisition-related Contingent Consideration and Financing-related Royalty Agreements in Part II, Item 8 of the Company’s 2016 Annual Report on Form 10-K for more information on key assumptions used to determine the fair value of these liabilities.
The Company has chosen to make a fair value election pursuant to ASC 825, “
Financial Instruments
” for its royalty agreements detailed in items (d) and (e) above. These financing-related liabilities are recorded at fair market value on the consolidated balance sheets and the periodic change in fair market value is recorded as a component of “Other expense – change in fair value of related party payable” on the consolidated statements of income (loss).
The following table summarizes changes to the related party payables, a recurring Level 3 measurement, for the three-month periods ended March 31, 2017 and 2016, respectively:
|
|
|
|
|
|
Related Party Payable Rollforward:
|
|
Balance
|
|
|
|
Balance at December 31, 2015
|
|
122,693
|
|
Additions
(2)
|
|
7,695
|
|
Payment of related party payable
|
|
(9,106
|
)
|
Fair value adjustments
(1)
|
|
9,777
|
|
Balance at March 31, 2016
|
|
131,059
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
169,347
|
|
Payment of related party payable
|
|
(8,613
|
)
|
Fair value adjustments
(1)
|
|
(7,521
|
)
|
Balance at March 31, 2017
|
|
153,213
|
|
(1)
Fair value adjustments are reported as Changes in fair value of related party contingent consideration and Other expense - changes in fair value of related party payable in the Consolidated Statements of Income (Loss).
(2)
Relates to the acquisition of FSC. See items (c) and (f) above.
NOTE 8
:
Income Taxe
s
The components of income (loss) before income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
Income (Loss) Before Income Taxes:
|
|
2017
|
|
2016
|
|
|
|
|
|
Ireland
|
|
$
|
5,735
|
|
|
$
|
(5,894
|
)
|
United States
|
|
32,010
|
|
|
13,949
|
|
France
|
|
(4,225
|
)
|
|
(6,801
|
)
|
Other
|
|
929
|
|
|
—
|
|
Total income before income taxes
|
|
$
|
34,449
|
|
|
$
|
1,254
|
|
The items accounting for the difference between the income tax provision computed at the statutory rate and the Company's effective tax rate are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
Income Tax Rate Reconciliation:
|
|
2017
|
|
2016
|
|
|
|
|
|
Statutory tax rate
|
|
12.5
|
%
|
|
33.3
|
%
|
International tax rates differential
|
|
17.0
|
%
|
|
117.1
|
%
|
Change in valuation allowance
|
|
2.0
|
%
|
|
193.6
|
%
|
Nondeductible change in fair value of contingent consideration
|
|
(7.2
|
)%
|
|
221.0
|
%
|
Nondeductible stock-based compensation
|
|
(0.2
|
)%
|
|
17.4
|
%
|
Income tax deferred charge
|
|
—
|
%
|
|
39.4
|
%
|
State and local income taxes, net of federal
|
|
0.1
|
%
|
|
9.6
|
%
|
Other
|
|
0.5
|
%
|
|
(48.2
|
)%
|
Effective income tax rate
|
|
24.7
|
%
|
|
583.2
|
%
|
|
|
|
|
|
Income tax provision - at statutory tax rate
|
|
$
|
4,306
|
|
|
$
|
417
|
|
International tax rates differential
|
|
5,860
|
|
|
1,468
|
|
Change in valuation allowance
|
|
684
|
|
|
2,428
|
|
Nondeductible change in fair value of contingent consideration
|
|
(2,476
|
)
|
|
2,771
|
|
Nondeductible stock-based compensation
|
|
(55
|
)
|
|
218
|
|
Income tax deferred charge
|
|
—
|
|
|
494
|
|
State and local income taxes, net of federal
|
|
34
|
|
|
121
|
|
Other
|
|
186
|
|
|
(605
|
)
|
Income tax provision - at effective income tax rate
|
|
$
|
8,539
|
|
|
$
|
7,312
|
|
In the fourth quarter of 2016, we changed our jurisdiction of incorporation from France to Ireland by merging with and into our wholly owned Irish subsidiary. Accordingly, beginning in the fourth quarter of 2016, the Company reports the Irish tax jurisdiction as its domestic jurisdiction. For periods prior to the fourth quarter of 2016, the French tax jurisdiction was the domestic jurisdiction.
The income tax provision for the three months ended March 31, 2017 and 2016 was
$8,539
and
$7,312
, respectively. The increase in the income tax provision for the three months ended March 31, 2017 is primarily the result of increases in income in the United States and Ireland, and was partially offset by a reduction in the amount of nondeductible contingent consideration when compared to the same period in 2016.
NOTE 9
:
Other Assets and Liabilities
Various other assets and liabilities are summarized as follows:
|
|
|
|
|
|
|
|
|
|
Prepaid Expenses and Other Current Assets:
|
|
March 31, 2017
|
|
December 31, 2016
|
|
|
|
|
|
Valued-added tax recoverable
|
|
$
|
1,393
|
|
|
$
|
736
|
|
Prepaid expenses
|
|
2,579
|
|
|
3,442
|
|
Advance to suppliers and other current assets
|
|
2,103
|
|
|
1,265
|
|
Income tax receivable
|
|
454
|
|
|
451
|
|
Total
|
|
$
|
6,529
|
|
|
$
|
5,894
|
|
|
|
|
|
|
|
|
|
|
|
Other Non-Current Assets:
|
|
March 31, 2017
|
|
December 31, 2016
|
|
|
|
|
|
Deferred tax assets
|
|
$
|
7,432
|
|
|
$
|
7,432
|
|
Other
|
|
101
|
|
|
99
|
|
Total
|
|
$
|
7,533
|
|
|
$
|
7,531
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Expenses:
|
|
March 31, 2017
|
|
December 31, 2016
|
|
|
|
|
|
Accrued compensation
|
|
$
|
2,292
|
|
|
$
|
3,291
|
|
Accrued social charges
|
|
853
|
|
|
794
|
|
Accrued employee severance (see Note 10)
|
|
2,653
|
|
|
—
|
|
Customer allowances
|
|
8,962
|
|
|
7,981
|
|
Accrued contract research organization
|
|
2,699
|
|
|
1,764
|
|
Other
|
|
2,477
|
|
|
3,392
|
|
Total
|
|
$
|
19,936
|
|
|
$
|
17,222
|
|
|
|
|
|
|
|
|
|
|
|
Other Non-Current Liabilities:
|
|
March 31, 2017
|
|
December 31, 2016
|
|
|
|
|
|
Provision for retirement indemnity
|
|
$
|
2,458
|
|
|
$
|
2,431
|
|
Customer allowances
|
|
1,110
|
|
|
905
|
|
Unrecognized tax benefits
|
|
1,657
|
|
|
1,565
|
|
Other
|
|
263
|
|
|
374
|
|
Total
|
|
$
|
5,488
|
|
|
$
|
5,275
|
|
NOTE 10 : Restructuring Costs
During the first quarter of 2017, the Company announced a plan to reduce its workforce at its Lyon, France site by approximately
50%
. This reduction is an effort to align the Company's cost structure with its ongoing and future planned projects. Subject to French regulatory requirements and the outcome of negotiations with the works council, the Company expects the reduction to be substantially complete by the end of the third quarter of 2017 and to incur employee severance, benefits and other costs of up to approximately
$4,000
, which are likely to be recognized through December 31, 2017. Restructuring charges of
$2,653
were recognized during the three months ended March 31, 2017.
The following table sets forth activities for the Company’s cost reduction plan obligations for the three months ended March 31, 2017. There were no restructuring related charges in the three months ended March 31, 2016:
|
|
|
|
|
|
Severance Obligation:
|
|
2017
|
|
|
|
Balance of accrued costs at January 1,
|
|
$
|
—
|
|
Charges
|
|
2,653
|
|
Payments
|
|
—
|
|
Balance of accrued costs at March 31,
|
|
$
|
2,653
|
|
Total accrued employee severance in the Company’s condensed consolidated balance sheet at March 31, 2017 is included under current liabilities in “Accrued expenses.”
NOTE 11
:
Net Income (Loss) Per Share
Basic net income (loss) per share is calculated using the weighted average number of shares outstanding during each period. The diluted net income (loss) per share calculation includes the impact of dilutive equity compensation awards and contingent consideration warrants.
A reconciliation of basic and diluted net income (loss) per share, together with the related shares outstanding in thousands is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
Net Income (Loss) Per Share:
|
|
2017
|
|
2016
|
|
|
|
|
|
Net income (loss
)
|
|
$
|
25,910
|
|
|
$
|
(6,058
|
)
|
|
|
|
|
|
Weighted average shares:
|
|
|
|
|
|
|
Basic shares
|
|
41,374
|
|
|
41,241
|
|
Effect of dilutive securities—options and warrants outstanding
|
|
1,436
|
|
|
—
|
|
Diluted shares
|
|
42,810
|
|
|
41,241
|
|
|
|
|
|
|
Net income (loss) per share - basic
|
|
$
|
0.63
|
|
|
$
|
(0.15
|
)
|
Net income (loss) per share - diluted
|
|
$
|
0.61
|
|
|
$
|
(0.15
|
)
|
Potential common shares of
4,899
and
6,597
were excluded from the calculation of weighted average shares for the three months ended March 31, 2017 and 2016, respectively, because their effect was considered to be anti-dilutive.
NOTE 12
:
Comprehensive Income (Loss)
The following table shows the components of accumulated other comprehensive loss for the three-months ended March 31, 2017 and 2016, respectively, net of tax effects:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
Accumulated Other Comprehensive Loss:
|
|
2017
|
|
2016
|
|
|
|
|
|
Foreign currency translation adjustment:
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(23,336
|
)
|
|
$
|
(22,312
|
)
|
Net other comprehensive income
|
|
130
|
|
|
4,817
|
|
Balance at March 31,
|
|
$
|
(23,206
|
)
|
|
$
|
(17,495
|
)
|
|
|
|
|
|
Unrealized gain (loss) on marketable securities, net
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(229
|
)
|
|
$
|
(345
|
)
|
Net other comprehensive income, net of $51 and $126 tax, respectively
|
|
44
|
|
|
918
|
|
Balance at March 31,
|
|
$
|
(185
|
)
|
|
$
|
573
|
|
Accumulated other comprehensive loss at March 31,
|
|
$
|
(23,391
|
)
|
|
$
|
(16,922
|
)
|
The effect on the Company’s condensed consolidated financial statements of amounts reclassified out of accumulated other comprehensive loss was immaterial for all periods presented.
NOTE 13
:
Shareholders’ Equity
The following table presents a reconciliation of the Company’s beginning and ending balances in shareholders’ equity for the three months ended March 31, 2017:
|
|
|
|
|
|
Shareholders' Equity:
|
|
2017
|
|
|
|
Shareholders' equity - January 1,
|
|
$
|
42,069
|
|
Net income
|
|
25,910
|
|
Adjustment to accumulated deficit (see Note 2)
|
|
(11,156
|
)
|
Other comprehensive income
|
|
174
|
|
Stock option exercised
|
|
38
|
|
Stock-based compensation expense
|
|
2,047
|
|
Shareholders' equity - March 31,
|
|
$
|
59,082
|
|
NOTE 14
:
Company Operations by Product
The Company has determined that it operates in
one
segment, the development and commercialization of pharmaceutical products, including controlled-release therapeutic products based on its proprietary polymer based technology. The Company's Chief Operating Decision Maker is the CEO. The CEO and the Board review profit and loss information on a consolidated basis to assess performance and make overall operating decisions as well as resource allocations. All products are included in one segment because the majority of our products have similar economic and other characteristics, including the nature of the products and production processes, type of customers, distribution methods and regulatory environment.
The following table presents a summary of total revenues by these products:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
Revenues by Product:
|
|
2017
|
|
2016
|
|
|
|
|
|
Bloxiverz
|
|
$
|
13,902
|
|
|
$
|
24,747
|
|
Vazculep
|
|
10,179
|
|
|
9,406
|
|
Akovaz
|
|
25,638
|
|
|
—
|
|
Other
|
|
2,038
|
|
|
1,200
|
|
Total product sales and services
|
|
51,757
|
|
|
35,353
|
|
License and research revenue
|
|
750
|
|
|
863
|
|
Total revenues
|
|
$
|
52,507
|
|
|
$
|
36,216
|
|
NOTE 15
:
Commitments and Contingencies
Litigation
The Company is subject to potential liabilities generally incidental to its business arising out of present and future lawsuits and claims related to product liability, personal injury, contract, commercial, intellectual property, tax, employment, compliance and other matters that arise in the ordinary course of business. The Company accrues for potential liabilities when it is probable that future costs (including legal fees and expenses) will be incurred and such costs can be reasonably estimated. At March 31, 2017 and December 31, 2016, there were no contingent liabilities with respect to any threat of litigation, arbitration or administrative or other proceeding that are reasonably likely to have a material adverse effect on the Company’s consolidated financial position, results of operations, cash flows or liquidity.
Material Commitments
Other than commitments disclosed in Note 14 - Contingent Liabilities and Commitments to the Company's consolidated financial statements included in Part II, Item 8 of the Company’s 2016 Annual Report on Form 10-K, there were no other material commitments outside of the normal course of business. Material commitments in the normal course of business include long-term debt and post-retirement benefit plan obligations which are disclosed in Note 9 - Long-Term Debt and Note 12 – Post-Retirement Benefit Plans, respectively, to the Company's consolidated financial statements included in Part II, Item 8 of the Company’s 2016 Annual Report on Form 10-K and long-term contingent consideration payable as disclosed in Note 7 – Long-Term Related Party Payable, to the Company's condensed consolidated financial statements included in Part I, Item 1 of this report.