Quarterly report pursuant to Section 13 or 15(d)

Basis of Presentation and Summary of Significant Accounting Policies (Tables)

v3.19.2
Basis of Presentation and Summary of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of Revenue by Source
The following table represents disaggregation of Royalties, Material Sales and License fees, milestone and other (in thousands):

Three months ended Six months ended
June 30, June 30,
2019 2018 2019 2018
Royalties
Promacta $ —  $ 24,806  $ 14,193  $ 40,379 
Kyprolis 4,882  4,730  8,715  8,125 
Evomela 1,144  1,160  2,055  2,760 
Other 600  700  1,201  952 
$ 6,626  $ 31,396  $ 26,164  $ 52,216 
Material Sales
Captisol $ 8,549  $ 7,612  $ 17,508  $ 12,003 
License fees, milestones and other
License Fees $ 1,990  $ 47,981  $ 2,840  $ 74,936 
Milestone 4,175  1,919  16,107  4,744 
Other 3,647  1,135  5,852  2,301 
$ 9,812  $ 51,035  $ 24,799  $ 81,981 
Total $ 24,987  $ 90,043  $ 68,471  $ 146,200 
Schedule of Investment Categories
Our investments consist of the following at June 30, 2019 and December 31, 2018 (in thousands):
June 30, 2019 December 31, 2018
Amortized cost Gross unrealized gains Gross unrealized losses Estimated fair value Amortized cost Gross unrealized gains Gross unrealized losses Estimated fair value
Short-term investments
     Bank deposits $ 582,991  $ 462  $ (13) $ 583,440  $ 311,066  $ 26  $ (29) $ 311,063 
     Corporate bonds 46,360  160  —  46,520  53,223  (45) 53,179 
     Commercial paper 423,578  246  (19) 423,805  225,731  (76) 225,663 
     U.S. Government bonds —  —  —  —  7,982  —  (9) 7,973 
     Municipal bonds —  —  —  —  2,017  —  (4) 2,013 
     Corporate equity securities(1)
4,525  772  (216) 5,081  135  1,191  —  1,326 
     Warrants —  156  —  156  —  —  —  — 
$ 1,057,454  $ 1,796  $ (248) $ 1,059,002  $ 600,154  $ 1,226  $ (163) $ 601,217 
(1) The amortized cost for corporate equity securities represents the original purchase cost of the equity securities.
Schedule of Goodwill and Other Identifiable Intangible Assets
Goodwill and other identifiable intangible assets consist of the following (in thousands):
June 30, December 31,
2019 2018
     Goodwill $ 88,000  $ 86,646 
Definite lived intangible assets
     Complete technology 235,413  235,413 
          Less: accumulated amortization(1)
(41,448) (35,070)
     Trade name 2,642  2,642 
          Less: accumulated amortization (1,114) (1,048)
     Customer relationships 29,600  29,600 
          Less: accumulated amortization (12,484) (11,744)
Total goodwill and other identifiable intangible assets, net $ 300,609  $ 306,439 
(1) accumulated amortization for complete technology includes immaterial amount of foreign currency translation adjustments for the complete technology acquired from the Vernalis acquisition.
Schedule of Commercial License Rights
Commercial license and other economic rights consist of the following (in thousands):

June 30, December 31,
2019 2018
Aziyo and CorMatrix $ 17,696  $ 17,696 
Novan 12,000  — 
Palvella 10,000  10,000 
Selexis 8,602  8,602 
Dianomi 2,000  — 
50,298  36,298 
Less: accumulated amortization attributed to principal or research and development (10,290) (4,838)
   Total commercial license and other economic rights, net $ 40,008  $ 31,460 
Schedule of Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
June 30, December 31,
2019 2018
Compensation $ 2,856  $ 4,045 
Professional fees 738  942 
Amounts owed to former licensees 411  428 
Royalties owed to third parties 872  1,025 
Payments due to broker for share repurchases —  4,613 
Return reserve 3,346  3,590 
Restructuring 1,093 
Current operating lease liabilities 989  — 
Other 2,321  3,464 
     Total accrued liabilities
$ 11,540  $ 19,200 
Schedule of Accounting for Share-Based Compensation The following table summarizes share-based compensation expense recorded as components of research and development expenses and general and administrative expenses for the periods indicated (in thousands):
Three months ended Six months ended
June 30, June 30,
2019 2018 2019 2018
Share-based compensation expense as a component of:
Research and development expenses $ 2,528  $ 2,096  $ 4,655  $ 3,863 
General and administrative expenses 4,043  2,716  7,263  5,504 
$ 6,571  $ 4,812  $ 11,918  $ 9,367 
Schedule of Fair-Value Options Awarded to Employees and Directors
The fair-value for options that were awarded to employees and directors was estimated at the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions:
Three months ended Six months ended
June 30, June 30,
2019 2018 2019 2018
Risk-free interest rate 1.9%    2.8%    2.4%    2.8%   
Dividend yield —    —    —    —   
Expected volatility 40%    36%    43%    34%   
Expected term 5.9 5.8 5.2 5.7
Schedule of Inputs and Assumptions Used to Calculate Fair Value of Derivatives
The following table summarizes the inputs and assumptions used in the Black-Scholes model to calculate the fair value of the derivative assets and liabilities associated with the 2019 Notes:

As of June 30, 2019
Common stock price $114.15 
Exercise price, conversion premium and bond hedge $75.05 
Risk-free interest rate 2.21%   
Volatility 35%   
Dividend yield —   
Remaining contractual term (in years) 0.13
Schedule of Computation of Basic and Diluted Net Income (Loss) per Share
The following table presents the calculation of weighted average shares used to calculate basic and diluted earnings per share (in thousands):
Three months ended Six months ended
June 30, June 30,
2019 2018 2019 2018
Weighted average shares outstanding: 19,558  21,212  20,000  21,209 
Dilutive potential common shares:
     Restricted stock —  60  38  62 
     Stock options —  1,132  761  1,126 
     2019 Convertible Senior Notes —  1,052  —  1,386 
     Warrants —  982  —  835 
Shares used to compute diluted income per share 19,558  24,438  20,799  24,618 
Potentially dilutive shares excluded from calculation due to anti-dilutive effect 7,457  2,092  7,243  1,120