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 |
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93-0797222 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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215 First Street, Suite 415 Cambridge, MA |
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02142 |
(Address of principal executive offices) |
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(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 |
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x |
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Accelerated filer |
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¨ |
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Non-accelerated filer |
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¨ (Do not check if a smaller reporting company) |
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Smaller Reporting Company |
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¨ |
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 |
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45,271,301 |
(Class) |
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(Outstanding as of October 30, 2015) |
FORM 10-Q
INDEX
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Page |
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Item 1. |
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3 |
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Condensed Consolidated Balance Sheets — As of September 30, 2015 and December 31, 2014 |
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3 |
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4 |
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5 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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6 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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14 |
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Item 3. |
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24 |
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Item 4. |
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25 |
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Item 1. |
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25 |
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Item 1A. |
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26 |
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Item 2. |
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41 |
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Item 3. |
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41 |
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Item 4. |
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41 |
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Item 5. |
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42 |
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Item 6. |
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42 |
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43 |
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44 |
2
PART I — FINANCIAL INFORMATION
SAREPTA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share amounts)
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As of September 30, 2015 |
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As of December 31, 2014 |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
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$ |
55,819 |
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$ |
73,551 |
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Short-term investments |
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44,090 |
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136,793 |
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Accounts receivable |
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2,733 |
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2,416 |
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Other current assets |
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19,466 |
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35,036 |
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Total Current Assets |
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122,108 |
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247,796 |
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Restricted cash and investments |
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11,478 |
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782 |
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Property and equipment, net of accumulated depreciation of $23,368 and $19,896 as of September 30, 2015 and December 31, 2014, respectively |
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37,379 |
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38,501 |
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Patent costs, net of accumulated amortization of $2,486 and $2,081 as of September 30, 2015 and December 31, 2014, respectively |
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6,116 |
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5,891 |
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Other assets |
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7,670 |
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2,063 |
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Total Assets |
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$ |
184,751 |
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$ |
295,033 |
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Liabilities and Stockholders’ Equity |
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Current Liabilities: |
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Accounts payable |
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$ |
7,431 |
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$ |
12,408 |
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Accrued expenses |
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19,761 |
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17,366 |
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Current portion of long-term debt |
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3,435 |
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98 |
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Current portion of notes payable |
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2,454 |
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2,492 |
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Deferred revenue |
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3,303 |
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3,318 |
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Other current liabilities |
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1,283 |
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1,185 |
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Total Current Liabilities |
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37,667 |
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36,867 |
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Long-term debt |
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17,397 |
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1,476 |
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Notes payable |
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— |
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2,262 |
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Deferred rent and other |
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6,451 |
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6,775 |
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Total Liabilities |
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61,515 |
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47,380 |
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Commitments and contingencies |
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Stockholders’ Equity: |
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Preferred stock, $.0001 par value, 3,333,333 shares authorized; none issued and outstanding |
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— |
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— |
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Common stock, $.0001 par value, 99,000,000 shares authorized; 41,963,151 and 41,311,512 issued and outstanding at September 30, 2015 and December 31, 2014, respectively |
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4 |
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4 |
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Additional paid-in capital |
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957,607 |
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926,769 |
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Accumulated other comprehensive loss |
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(1 |
) |
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(95 |
) |
Accumulated deficit |
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(834,374 |
) |
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(679,025 |
) |
Total Stockholders’ Equity |
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123,236 |
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247,653 |
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Total Liabilities and Stockholders’ Equity |
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$ |
184,751 |
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$ |
295,033 |
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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)
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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2015 |
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2014 |
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2015 |
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2014 |
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Revenue from research contracts and other grants |
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$ |
— |
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$ |
1,059 |
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$ |
— |
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$ |
9,730 |
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Operating expenses: |
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Research and development |
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36,673 |
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21,852 |
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105,018 |
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63,399 |
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General and administrative |
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15,090 |
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12,882 |
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50,714 |
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35,398 |
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Total operating expenses |
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51,763 |
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34,734 |
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155,732 |
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98,797 |
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Operating loss |
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(51,763 |
) |
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(33,675 |
) |
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(155,732 |
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(89,067 |
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Other income (loss): |
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Interest (expense) income and other, net |
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(176 |
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193 |
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383 |
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473 |
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Gain (loss) on change in warrant valuation |
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— |
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4,256 |
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— |
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(2,779 |
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Total other (loss) income |
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(176 |
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4,449 |
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383 |
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(2,306 |
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Net loss |
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$ |
(51,939 |
) |
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$ |
(29,226 |
) |
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$ |
(155,349 |
) |
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$ |
(91,373 |
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Other comprehensive income (loss): |
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Unrealized gain (loss) on short-term securities - available-for-sale |
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18 |
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(21 |
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94 |
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(55 |
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Total other comprehensive income (loss) |
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18 |
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(21 |
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94 |
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(55 |
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Comprehensive loss |
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$ |
(51,921 |
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$ |
(29,247 |
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$ |
(155,255 |
) |
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$ |
(91,428 |
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Net loss per share — basic and diluted |
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$ |
(1.25 |
) |
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$ |
(0.71 |
) |
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$ |
(3.75 |
) |
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$ |
(2.31 |
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Weighted average number of shares of common stock outstanding for computing basic and diluted net loss per share |
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41,565 |
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41,066 |
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41,416 |
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39,595 |
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See accompanying notes to unaudited condensed consolidated financial statements.
4
SAREPTA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
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For the Nine Months Ended September 30, |
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2015 |
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2014 |
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Cash flows from operating activities: |
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Net loss |
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$ |
(155,349 |
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$ |
(91,373 |
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Adjustments to reconcile net income to cash flows in operating activities: |
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Depreciation and amortization |
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3,883 |
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2,532 |
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Amortization of premium on available-for-sale securities and non-cash interest |
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805 |
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1,848 |
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Loss on abandonment of patents |
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180 |
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52 |
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Stock-based compensation |
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25,769 |
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14,578 |
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Increase in warrant valuation |
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— |
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2,779 |
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Changes in operating assets and liabilities, net: |
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Net (increase) decrease in accounts receivable |
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(317 |
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168 |
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Net decrease (increase) in other assets |
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9,963 |
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(29,168 |
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Net decrease in accounts payable, accrued expenses, deferred revenue and other liabilities |
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(3,127 |
) |
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(4,506 |
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Net cash used in operations |
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(118,193 |
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(103,090 |
) |
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Cash flows from investing activities: |
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Release and maturity of restricted investments |
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— |
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3,250 |
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Purchase of restricted investments |
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(10,695 |
) |
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— |
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Purchase of property and equipment |
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(2,316 |
) |
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(22,305 |
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Patent costs |
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(982 |
) |
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(1,062 |
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Purchase of available-for-sale securities |
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(49,632 |
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(272,189 |
) |
Maturity of available-for-sale securities |
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141,854 |
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86,599 |
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Net cash from (used in) investing activities |
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78,229 |
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(205,707 |
) |
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Cash flows from financing activities: |
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Proceeds from borrowings, net of debt issuance costs |
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19,601 |
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— |
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Repayments of long-term debt and notes payable |
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(2,573 |
) |
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(70 |
) |
Proceeds from exercise of options and warrants and the sale of common stock, net of offering costs |
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5,204 |
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104,201 |
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Net cash from financing activities |
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22,232 |
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104,131 |
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Decrease in cash and cash equivalents |
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(17,732 |
) |
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(204,666 |
) |
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Cash and cash equivalents: |
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Beginning of period |
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73,551 |
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|
256,965 |
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End of period |
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$ |
55,819 |
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$ |
52,299 |
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Supplemental disclosure of cash flow information: |
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Cash paid during the period for interest |
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$ |
359 |
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$ |
60 |
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Supplemental schedule of non-cash investing activities and financing activities: |
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Accrued debt issuance costs related to the senior secured term loan |
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$ |
400 |
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$ |
— |
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Property and equipment included in accrued expenses |
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$ |
211 |
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$ |
1,165 |
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Patent costs included in accrued expenses |
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$ |
105 |
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$ |
187 |
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Accrued legal and other fees for the October 9, 2015 common stock offering (See Note 11, Subsequent Event) |
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$ |
135 |
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$ |
— |
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Capitalized interest |
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$ |
99 |
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$ |
36 |
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Issuance of common stock in satisfaction of warrants |
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$ |
— |
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$ |
11,785 |
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Tenant improvement paid by Landlord |
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$ |
— |
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$ |
154 |
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Issuance of note payable in relation to the purchase of certain real and personal property located in Andover, Massachusetts |
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$ |
— |
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$ |
4,613 |
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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.
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Level 1 — quoted prices for identical instruments in active markets; |
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· |
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 |
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· |
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:
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Fair Value Measurement as of September 30, 2015 |
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Total |
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Level 1 |
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Level 2 |
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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 |