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Table of Contents

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2019
Or
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to             .
 
Commission File Number 001-35726
 
Radius Health, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
80-0145732
(State or other jurisdiction of
 
(IRS Employer
Incorporation or organization)
 
Identification Number)
 
950 Winter Street
Waltham, Massachusetts 02451
(Address of Principal Executive Offices and Zip Code)
 
(617) 551-4000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.0001 par value per share
RDUS
The Nasdaq Global Market
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   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No

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


Table of Contents

 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No

Number of shares of the registrant’s Common Stock, $0.0001 par value per share, outstanding as of November 1, 2019: 46,172,356 shares
 
 
 
 
 


Table of Contents

RADIUS HEALTH, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2019
 
TABLE OF CONTENTS
 
PART I FINANCIAL INFORMATION
 

 
 
 


 

 

 

 
7

 




 
 
 


 
 
 








 
 
 




Table of Contents

Item 1. Condensed Consolidated Financial Statements

Radius Health, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except share and per share amounts)
 
September 30,
2019
 
December 31,
2018
 
(unaudited)
 
 
ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
88,925

 
$
59,321

Restricted cash
565

 
560

Marketable securities
79,251

 
177,140

Accounts receivable, net
21,528

 
16,758

Inventory
4,911

 
6,210

Prepaid expenses
15,201

 
13,842

Other current assets
858

 
1,202

Total current assets
211,239

 
275,033

Property and equipment, net
2,616

 
4,003

Intangible assets
6,783

 
7,382

Right of use assets - operating leases
6,443

 

Other assets
412

 
544

Total assets
$
227,493

 
$
286,962

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
4,608

 
$
4,226

Accrued expenses and other current liabilities
49,082

 
42,203

Operating lease liability, current
1,904

 

Total current liabilities
55,594

 
46,429

 
 
 
 
Notes payable
191,444

 
179,806

Operating lease liability, long term
4,681

 

Other non-current liabilities
24

 
95

Total liabilities
251,743

 
226,330

Commitments and contingencies


 


Stockholders’ equity (deficit):
 

 
 

Common stock, $0.0001 par value; 200,000,000 shares authorized, 46,173,170 shares and 45,563,693 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively
5

 
5

Additional paid-in-capital
1,187,623

 
1,165,003

Accumulated other comprehensive loss
21

 
(755
)
Accumulated deficit
(1,211,899
)
 
(1,103,621
)
Total stockholders’ equity (deficit)
(24,250
)
 
60,632

Total liabilities and stockholders’ equity (deficit)
$
227,493

 
$
286,962

See accompanying notes to unaudited condensed consolidated financial statements.

4

Table of Contents

Radius Health, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited, in thousands, except share and per share amounts)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
REVENUES:
 
 
 
 
 
 
 
Product revenue, net
$
46,766

 
$
27,639

 
$
117,652

 
$
64,815

OPERATING EXPENSES:
 

 
 

 
 
 
 
Cost of sales - product
3,971

 
2,193

 
10,809

 
4,884

Cost of sales - intangible amortization
200

 
200

 
599

 
599

Research and development
31,791

 
26,804

 
82,230

 
75,979

Selling, general and administrative
35,617

 
43,661

 
116,918

 
140,266

Other operating expenses

 

 

 
10,801

Loss from operations
(24,813
)
 
(45,219
)
 
(92,904
)
 
(167,714
)
OTHER INCOME (EXPENSE):
 

 
 

 
 

 
 

Other income (expense)
59

 
17

 
21

 
83

Interest expense
(6,298
)
 
(5,793
)
 
(18,500
)
 
(17,041
)
Interest income
1,008

 
1,193

 
3,105

 
4,433

NET LOSS
$
(30,044
)
 
$
(49,802
)
 
$
(108,278
)
 
$
(180,239
)
OTHER COMPREHENSIVE LOSS:
 

 
 

 
 

 
 

Unrealized gain (loss) from available-for-sale debt securities
66

 
442

 
776

 
(534
)
COMPREHENSIVE LOSS
$
(29,978
)
 
$
(49,360
)
 
$
(107,502
)
 
$
(180,773
)
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS - BASIC AND DILUTED (Note 11)
$
(30,044
)
 
$
(49,802
)
 
$
(108,278
)
 
$
(180,239
)
LOSS PER SHARE:
 

 
 

 
 

 
 

Basic and diluted
$
(0.65
)
 
$
(1.09
)
 
$
(2.36
)
 
$
(3.98
)
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE SHARES:
 

 
 

 
 

 
 

Basic and diluted
46,141,217

 
45,498,909

 
45,975,691

 
45,291,176

See accompanying notes to unaudited condensed consolidated financial statements.


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Radius Health, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
 
Nine Months Ended
September 30,
 
2019
 
2018
CASH FLOWS USED IN OPERATING ACTIVITIES:
 

 
 

Net loss
$
(108,278
)
 
$
(180,239
)
Adjustments to reconcile net loss to net cash used in operating activities:
 

 
 

Depreciation and amortization
1,785

 
2,005

Amortization of discount on marketable securities, net
(246
)
 
(199
)
Amortization of debt discount and debt issuance costs
11,638

 
10,174

Impairment loss on operating lease right of use assets
339

 

Stock-based compensation
16,911

 
22,270

(Gain)/Loss on property and equipment disposals
201

 

Changes in operating assets and liabilities:
 

 
 

Inventory
1,299

 
(1,180
)
Accounts receivable, net
(4,770
)
 
(8,467
)
Prepaid expenses
(1,359
)
 
(4,922
)
Other current assets
344

 
998

Operating lease right of use assets
1,507

 

Other long-term assets
132

 
210

Accounts payable
382

 
2,379

Accrued expenses and other current liabilities
6,879

 
(7,455
)
Lease liability, operating leases
(1,704
)
 

Other non-current liabilities
(71
)
 
(71
)
Net cash used in operating activities
(75,011
)
 
(164,497
)
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
 

 
 

Purchases of property and equipment

 
(70
)
Purchases of marketable securities
(36,589
)
 
(499
)
Sales and maturities of marketable securities
135,500

 
97,501

Net cash provided by (used in) investing activities
98,911

 
96,932

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
 

 
 

Proceeds from exercise of stock options and warrant exercises
3,869

 
8,953

Proceeds from issuance of shares under employee stock purchase plan
1,840

 
2,565

Net cash provided by financing activities
5,709

 
11,518

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
29,609

 
(56,047
)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF YEAR
59,881

 
118,619

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD
$
89,490

 
$
62,572

SUPPLEMENTAL DISCLOSURES:
 

 
 

Cash paid for interest
$
9,150

 
$
9,582

Cash paid for income taxes
$

 
$
22

Property and equipment purchases in accrued expenses at period end
$

 
$
298

Right of use assets obtained in exchange for operating lease liability
$
8,289

 
$

See accompanying notes to unaudited condensed consolidated financial statements.


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Radius Health, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited, in thousands, except share and per share amounts)
 
Stockholders’ Equity (Deficit)
 
Common Stock
 
Additional Paid-In Capital
 
Accumulated Other
Comprehensive Income
(Loss)
 
Accumulated
Deficit
 
Total Stockholders’ Equity (Deficit)
 
Shares
 
Amount
 
Amount
 
Amount
 
Amount
 
Amount
Balance at June 30, 2018
45,476,455

 
$
5

 
$
1,150,765

 
$
(1,290
)
 
$
(1,012,721
)
 
$
136,759

Net loss
 
 
 
 
 
 
 
 
(49,802
)
 
(49,802
)
Unrealized gain from available-for-sale securities
 
 
 
 
 
 
442

 
 
 
442

Exercise of options
15,929

 
 
 
127

 
 
 
 
 
127

Exercise of warrants

 
 
 
 
 
 
 
 
 

Share-based compensation expense related to share-based awards for employee stock purchase plan
 
 
 
 
201

 
 
 
 
 
201

Issuance of common stock upon purchase by employee stock purchase plan
47,132

 
 
 
824

 
 
 
 
 
824

Share-based compensation expense
 
 
 
 
6,500

 
 
 
 
 
6,500

Balance at September 30, 2018
45,539,516

 
$
5

 
$
1,158,417

 
$
(848
)
 
$
(1,062,523
)
 
$
95,051

 
 
 
 
 
 
 
 
 
 
 
 
Balance at June 30, 2019
46,125,197

 
$
5

 
$
1,181,761

 
$
(45
)
 
$
(1,181,855
)
 
$
(134
)
Net loss
 
 
 
 
 
 
 
 
(30,044
)
 
(30,044
)
Unrealized gain from available-for-sale securities
 
 
 
 
 
 
66

 
 
 
66

Share-based compensation expense related to share-based awards for employee stock purchase plan
 
 
 
 
20

 
 
 
 
 
20

Issuance of common stock upon purchase by employee stock purchase plan
47,973

 
 
 
813

 
 
 
 
 
813

Share-based compensation expense
 
 
 
 
5,029

 
 
 
 
 
5,029

Balance at September 30, 2019
46,173,170

 
$
5

 
$
1,187,623

 
$
21

 
$
(1,211,899
)
 
$
(24,250
)
See accompanying notes to unaudited condensed consolidated financial statements.


























Radius Health, Inc.

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Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited, in thousands, except share and per share amounts)
 
Stockholders’ Equity (Deficit)
 
Common Stock
 
Additional Paid-In Capital
 
Accumulated Other
Comprehensive Income
(Loss)
 
Accumulated
Deficit
 
Total Stockholders’ Equity (Deficit)
 
Shares
 
Amount
 
Amount
 
Amount
 
Amount
 
Amount
Balance at December 31, 2017
44,616,586

 
$
4

 
$
1,124,630

 
$
(314
)
 
$
(882,284
)
 
$
242,036

Net loss
 
 
 
 
 
 
 
 
(180,239
)
 
(180,239
)
Unrealized loss from available-for-sale securities
 
 
 
 
 
 
(534
)
 
 
 
(534
)
Vesting of restricted shares
24,372

 
 
 
 
 
 
 
 
 

Exercise of options
460,677

 
1

 
8,952

 
 
 
 
 
8,953

Exercise of warrants
336,059

 
 
 
 
 
 
 
 
 

Share-based compensation expense related to share-based awards for employee stock purchase plan
 
 
 
 
615

 
 
 
 
 
615

Issuance of common stock upon purchase by employee stock purchase plan
101,822

 
 
 
2,565

 
 
 
 
 
2,565

Share-based compensation expense
 
 
 
 
21,655

 
 
 
 
 
21,655

Balance at September 30, 2018
45,539,516

 
$
5

 
$
1,158,417

 
$
(848
)
 
$
(1,062,523
)
 
$
95,051

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
45,563,693

 
$
5

 
$
1,165,003

 
$
(755
)
 
$
(1,103,621
)
 
$
60,632

Net loss
 
 
 
 
 
 
 
 
(108,278
)
 
(108,278
)
Unrealized gain from available-for-sale securities
 
 
 
 
 
 
776

 
 
 
776

Vesting of restricted shares
75,331

 
 
 
 
 
 
 
 
 

Exercise of options
341,337

 
 
 
2,869

 
 
 
 
 
2,869

Exercise of warrants
81,104

 
 
 
1,000

 
 
 
 
 
1,000

Share-based compensation expense related to share-based awards for employee stock purchase plan
 
 
 
 
456

 
 
 
 
 
456

Issuance of common stock upon purchase by employee stock purchase plan
111,705

 
 
 
1,840

 
 
 
 
 
1,840

Share-based compensation expense
 
 
 
 
16,455

 
 
 
 
 
16,455

Balance at September 30, 2019
46,173,170

 
$
5

 
$
1,187,623

 
$
21

 
$
(1,211,899
)
 
$
(24,250
)
See accompanying notes to unaudited condensed consolidated financial statements.


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Table of Contents

Radius Health, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Organization
Radius Health, Inc. (“Radius” or the “Company”) is a science-driven fully integrated biopharmaceutical company that is committed to developing and commercializing innovative endocrine therapeutics. In November 2019, the Company announced a strategic plan to focus on targeted endocrine diseases and explore all strategic options for its oncology programs, including elacestrant (RAD1901) and RAD140. In April 2017, the Company’s first commercial product, TYMLOS® (abaloparatide) injection, was approved by the U.S. Food and Drug Administration (“FDA”) for the treatment of postmenopausal women with osteoporosis at high risk for fracture defined as history of osteoporotic fracture, multiple risk factors for fracture, or patients who have failed or are intolerant to other available osteoporosis therapy. In March 2018, the Committee for Medicinal Products for Human Use (“CHMP”) of the European Medicines Agency (“EMA”) adopted a negative opinion on the Company’s European Marketing Authorisation Application (“MAA”) for abaloparatide-SC. In July 2018, following a re-examination procedure, the CHMP maintained its negative opinion and on January 7, 2019, the European Commission adopted a decision refusing approval of the MAA on the basis of the negative opinion of the Committee. In July 2017, the Company entered into a license and development agreement with Teijin Limited (“Teijin”) for abaloparatide for subcutaneous injection (“abaloparatide-SC”) in Japan, under which the Company received an upfront payment and is entitled to receive milestone payments upon the achievement of certain regulatory and sales milestones, and a fixed low double-digit royalty based on net sales of abaloparatide-SC in Japan during the royalty term. In addition, the Company has an option to negotiate for a co-promotion agreement with Teijin for abaloparatide-SC in Japan. The Company is developing an abaloparatide transdermal patch, or abaloparatide-patch, for potential use in the treatment of postmenopausal women with osteoporosis. The Company is also developing an investigational product candidate, elacestrant (“RAD1901”), a selective estrogen receptor degrader (“SERD”), for potential use in the treatment of hormone receptor-positive breast cancer. The Company was developing its internally discovered investigational product candidate, RAD140, a non-steroidal selective androgen receptor modulator (“SARM”) for potential use in the treatment of hormone receptor-positive breast cancer.
The Company is subject to the risks associated with biopharmaceutical companies with a limited operating history, including dependence on key individuals, a developing business model, the necessity of securing regulatory approvals to market its investigational product candidates, market acceptance and the successful commercialization of TYMLOS, or any of the Company’s investigational product candidates following receipt of regulatory approval, competition for TYMLOS or any of the Company’s investigational product candidates following receipt of regulatory approval, and the continued ability to obtain adequate financing to fund the Company’s future operations. The Company has incurred losses and expects to continue to incur additional losses for the foreseeable future. As of September 30, 2019, the Company had an accumulated deficit of $1,211.9 million, and total cash, cash equivalents, restricted cash, marketable securities, and investments of $168.7 million.
Based upon its cash, cash equivalents, marketable securities, and investments as of September 30, 2019, the Company believes that, prior to the consideration of revenue from the potential future sales of any of its investigational product candidates that may receive regulatory approval or proceeds from partnering and/or collaboration activities, it has sufficient capital to fund its development plans, U.S. operational activities, for at least one year from the date of this filing. The Company expects to finance the future development costs of its clinical product portfolio with its existing cash and cash equivalents, marketable securities, and investments, or through strategic financing opportunities that could include, but are not limited to collaboration agreements, future offerings of its equity, or the incurrence of debt. However, there is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If the Company fails to obtain additional future capital, it may be unable to complete its planned clinical trials and obtain approval of certain investigational product candidates from the FDA or foreign regulatory authorities.
2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation—The accompanying unaudited condensed consolidated financial statements and the related disclosures of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included.
When preparing financial statements in conformity with U.S. GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures at the date of the financial statements. Actual

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results could differ from those estimates. Additionally, operating results for the nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2019. Subsequent events have been evaluated up to the date of issuance of these financial statements. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes, which are contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on February 28, 2019.
Significant Accounting Policies—The significant accounting policies identified in the Company’s 2018 Form 10-K that require the Company to make estimates and assumptions include: revenue recognition, inventory obsolescence, long-lived assets and intangible assets, accounting for stock-based compensation, contingencies, tax valuation reserves, fair value measures, and accrued expenses. There were no changes to significant accounting policies during the nine months ended September 30, 2019, except for the adoption of the Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”) detailed below.
Accounting Standards Updates, Recently Adopted—In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 supersedes the lease guidance under FASB ASC Topic 840, Leases, resulting in the creation of FASB Accounting Standards Codification (“ASC”) Topic 842, Leases. ASU 2016-02 requires a lessee to recognize a liability to make lease payments and a right-of-use asset in the statement of financial position, representing its right to use the underlying asset for the lease term for both finance and operating leases.
In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases (“ASU 2018-10”) and ASU No. 2018-11, Target Improvements to Topic 842, Leases (“ASU 2018-11”). The amendments in ASU 2018-10 provide additional clarification and implementation guidance on certain aspects of ASU 2016-02 and have the same effective and transition requirements as ASU 2016-02. ASU 2018-11 gives entities the option to not provide comparative period financial statements and instead apply the transition requirements as of the effective date of ASU 2016-02. ASU 2016-02, ASU 2018-10 and ASU 2018-11 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company adopted the standard effective January 1, 2019 using the optional method under ASU 2018-11 and therefore, prior period financial information has not been retrospectively adjusted.
The Company applied the package of practical expedients to leases that commenced prior to the effective date whereby it elected to not reassess: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. The Company also elected the short-term lease recognition exemption for all leases that qualify, where a right-of-use asset or lease liability will not be recognized for short term leases. Furthermore, for all leases entered into or modified after the effective date, the Company has made an accounting policy election, by class of underlying asset, to not separate nonlease components from lease components. The Company did not elect the use-of-hindsight to estimate the lease term or to assess impairment of right-of-use assets for existing leases.
As summarized in the table below, the standard had a material impact on the Company’s condensed consolidated balance sheet as of September 30, 2019, specifically through recognition of right-of-use assets and lease liabilities for operating leases of $8.3 million on the effective date. However, the standard did not have a material impact on the Company’s condensed consolidated statement of operations and comprehensive loss, as expense for the Company’s existing operating leases continues to be recognized consistent with the recognition pattern before adoption.
Consolidated Balance Sheet Data (in thousands)
January 1, 2019
Prior to ASC 842 Adoption
 
ASC 842 Adjustment
 
January 1, 2019
As Adjusted
Right of use assets - operating leases (1)
$

 
$
8,289

 
$
8,289

Operating lease liability, current (2)
$

 
$
2,245

 
$
2,245

Operating lease liability, long term (2)
$

 
$
6,044

 
$
6,044

(1)                           Represents capitalization of operating lease right of use assets.
(2)                           Represents recognition of operating lease liabilities.
The Company implemented internal controls to enable the preparation of financial information upon adoption.
In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 amends ASC 718, Compensation-Stock Compensation, to expand the scope of the standard to include accounting for share-based payment transactions for acquiring goods and services from non-employees. The amendments in ASU 2018-07 are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. The Company

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adopted ASU 2018-07 on a prospective as of January 1, 2019, and it did not have a material impact on the Company’s condensed consolidated financial statements.
In July 2018, the FASB issued ASU 2018-09, Codification Improvements, or (“ASU 2018-09”). This amendment makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the ASC. The majority of the amendments in ASU 2018-09 will be effective for the Company in annual periods beginning after December 15, 2018. The Company adopted ASU 2018-09 as of January 1, 2019 and it did not have a material impact on the Company’s condensed consolidated financial statements.
On August 17, 2018, the SEC issued an amendment to Rule 3-04 of Regulation S-X, which extended the annual disclosure requirement of reporting changes in stockholders’ equity (deficit) to interim periods. Such disclosures are to be provided in a note to the financial statements or in a separate financial statement and requires both the year-to-date information and subtotals for each interim period. On September 25, 2018, the SEC issued guidance under a Compliance and Disclosure Interpretation (C&DI 105.09) to clarify the effective date of the requirement. Under the guidance in C&DI 105.09, the Company implemented this updated disclosure requirement beginning with its Form 10-Q for the first quarter of 2019, specifically by presenting the Company’s condensed consolidated statements of stockholders’ equity for interim periods.
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808), Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”). The amendments in ASU 2018-18 clarify that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606 when the collaborative arrangement participant is a customer in the context of a unit of account. The amendments under ASU 2018-18 are effective for interim and annual fiscal periods beginning after December 15, 2019, with early adoption permitted. The amendments in ASU 2018-18 should be applied retrospectively to the date of initial application of ASC 606. The Company adopted ASU 2018-18 as of January 1, 2019 and it did not have a material impact on the Company’s condensed consolidated financial statements, as each of the Company’s arrangements detailed within Note 12, “License Agreements,” were previously accounted for under ASC 606 and/or other topics of the ASC, not ASC 808, and the Company has no other arrangements within the scope of ASC 808.
Accounting Standards Updates, Recently Issued—In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, this standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. The amendments under ASU 2016-13 are effective for interim and annual fiscal periods beginning after December 15, 2019. The Company is currently evaluating the effects the adoption of ASU 2016-13 will have on its consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework - Changes to the Disclosure Requirement for Fair Value Measurement, or (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendment under ASU 2018-13 are effective for interim and annual fiscal periods beginning after December 15, 2019, with early adoption permitted. The Company does not expect the adoption of ASU 2018-13 to have a material impact on its results of operations, financial position or cash flows.
In August 2018, the FASB issued ASU 2018-15, Intangible-Goodwill and Other Internal-Use Software (Subtopic 350-40 (“ASU 2018-15”). ASU 2018-15 updates guidance regarding accounting for a cloud computing arrangement that is a service contract. The amendments under ASU 2018-15 are effective for interim and annual fiscal periods beginning after December 15, 2019, with early adoption permitted. The Company does not expect the adoption of ASU 2018-15 to have a material impact on its results of operations, financial position or cash flows.
3. Marketable Securities
Available-for-sale marketable securities and cash and cash equivalents as of September 30, 2019 and December 31, 2018 consist of the following (in thousands):

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September 30, 2019
 
Amortized Cost Value
 
Gross 
Unrealized 
Gains
 
Gross 
Unrealized 
Losses
 
Fair Value
Cash and cash equivalents:
 

 
 

 
 

 
 

Cash
$
42,616

 
$

 
$

 
$
42,616

Money market funds
46,309

 

 

 
46,309

Total
$
88,925

 
$

 
$

 
$
88,925

 
 
 
 
 
 
 
 
Marketable securities:
 

 
 

 
 

 
 

Domestic corporate debt securities
$
47,271

 
$
19

 
$
(1
)
 
$
47,289

Domestic corporate commercial paper
16,945

 
4

 

 
16,949

Agency bonds
15,013

 

 

 
15,013

Total
$
79,229

 
$
23

 
$
(1
)
 
$
79,251

 
 
December 31, 2018
 
Amortized Cost Value
 
Gross 
Unrealized 
Gains
 
Gross 
Unrealized 
Losses
 
Fair Value
Cash and cash equivalents:
 

 
 

 
 

 
 

Cash
$
20,448

 
$

 
$

 
$
20,448

Money market funds
38,873

 

 

 
38,873

Total
$
59,321

 
$

 
$

 
$
59,321

 
 
 
 
 
 
 
 
Marketable securities:
 

 
 

 
 

 
 

Domestic corporate debt securities
$
132,886

 
$

 
$
(530
)
 
$
132,356

Agency bonds
45,009

 

 
(225
)
 
44,784

Total
$
177,895

 
$

 
$
(755
)
 
$
177,140


There were 5 marketable securities with an aggregate fair value of $27.0 million in an unrealized loss position for more than 12 months as of September 30, 2019. There were 24 marketable securities with an aggregate fair value of $177.1 million in an unrealized loss position for more than 12 months as of December 31, 2018. The Company considered the decrease in market value for these securities to be primarily attributable to current economic conditions. As it was not more likely than not that the Company would be required to sell these securities before the recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired as of September 30, 2019.
As of September 30, 2019, all marketable securities mature within one year.
4. Fair Value Measurements
The Company determines the fair value of its financial instruments based upon the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Below are the three levels of inputs that may be used to measure fair value:
Level 1—Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no material transfers between any levels during the nine months ended September 30, 2019. There were no material transfers between any levels during 2018.

12

Table of Contents

The following table summarizes the financial instruments measured at fair value on a recurring basis in the Company’s accompanying condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018 (in thousands):
 
As of September 30, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 

 
 

 
 

 
 

Cash and cash equivalents:
 

 
 

 
 

 
 

Cash
$
42,616

 
$

 
$

 
$
42,616

Money market funds (1)
46,309

 

 

 
46,309

Total
$
88,925

 
$

 
$

 
$
88,925

Marketable Securities
 

 
 

 
 

 
 

Domestic corporate debt securities (2)
$

 
$
47,289

 
$

 
$
47,289

Domestic corporate commercial paper (2)

 
16,949

 

 
16,949

Agency bonds (2)

 
15,013

 

 
15,013

Total
$

 
$
79,251

 
$

 
$
79,251

 
 
As of December 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 

 
 

 
 

 
 

Cash and cash equivalents:
 

 
 

 
 

 
 

Cash
$
20,448

 
$

 
$

 
$
20,448

Money market funds (1)
38,873

 

 

 
38,873

Total
$
59,321

 
$

 
$

 
$
59,321

Marketable Securities
 

 
 

 
 

 
 

Domestic corporate debt securities (2)
$

 
$
132,356

 
$

 
$
132,356

Agency bonds (2)

 
44,784

 

 
44,784

Total
$

 
$
177,140

 
$

 
$
177,140

(1)                           Fair value is based upon quoted market prices.
(2)                           Fair value is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Inputs are obtained from various sources, including market participants, dealers and brokers.
5. Inventory
Inventory consisted of the following as of September 30, 2019 and December 31, 2018 (in thousands):
 
 
September 30,
2019
 
December 31,
2018
Raw materials
 
$
3,858

 
$
4,961

Work in process
 
44

 
490

Finished goods
 
1,009

 
759

Total inventories
 
$
4,911

 
$
6,210


Finished goods manufactured by the Company have a 36-month shelf life from date of manufacture.
6. Intangible Assets
The following table presents intangible assets as of September 30, 2019 and December 31, 2018 (in thousands):

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September 30,
2019
 
December 31,
2018
 
Estimated useful life
Acquired and in-licensed rights
$
8,712

 
$
8,712

 
11 years
Less: accumulated amortization
(1,929
)
 
(1,330
)
 
 
  Total intangible asset, net
$
6,783

 
$
7,382

 
 

Acquired and in-licensed rights as of September 30, 2019 consist of the 8.0 million (approximately $8.7 million on the date paid) milestone paid to Ipsen, which was triggered by FDA approval of TYMLOS on April 28, 2017.
The Company recorded approximately $0.2 million and $0.6 million in amortization expense related to intangible assets, using the straight-line methodology, which is considered the best estimate of economic benefit, during the three and nine months ended September 30, 2019 and 2018, respectively. Estimated future amortization expense for intangible assets as of September 30, 2019 is approximately $0.2 million for the remainder of 2019, and approximately $0.8 million per year over the remaining life of 8.5 years.
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following for the periods set forth below (in thousands):
 
September 30,
2019
 
December 31,
2018
Commercial costs
$
3,179

 
$
2,884

Product revenue reserves
18,561

 
7,620

Royalty payable
2,352

 
1,735

Research and development costs
9,329

 
10,403

Payroll and employee benefits
10,275

 
12,230

Interest
763

 
3,050

Professional fees
4,516

 
3,465

Restructuring costs
12

 
613

Other current liabilities
95

 
203

Total accrued expenses and other current liabilities
$
49,082

 
$
42,203


8. Convertible Notes Payable
On August 14, 2017, in a registered underwritten public offering, the Company issued $300 million aggregate principal amount of 3% Convertible Senior Notes due September 1, 2024 (the “Convertible Notes”). In addition, on September 12, 2017, the Company issued an additional $5.0 million principal amount of Convertible Notes pursuant to the exercise of an over-allotment option granted to the underwriters in the offering. In accordance with accounting guidance for debt with conversion and other options, the Company separately accounted for the liability component (“Liability Component”) and embedded conversion option (the “Equity Component”) of the Convertible Notes by allocating the proceeds between the Liability Component and the Equity Component, due to the Company’s ability to settle the Convertible Notes in cash, common stock or a combination of cash and common stock, at its option. In connection with the issuance of the Convertible Notes, the Company incurred approximately $9.4 million of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees, and allocated these costs to the Liability and Equity Components based on the allocation of the proceeds. Of the total $9.4 million of debt issuance costs, $4.3 million was allocated to the Equity Component and recorded as a reduction to additional paid-in capital and $5.1 million was allocated to the liability component and is now recorded as a reduction of the Convertible Notes in the Company’s condensed consolidated balance sheet. The portion allocated to the liability component is amortized to interest expense using the effective interest method over seven years.
The Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 3.00% per annum, payable semi-annually in arrears on March 1 and September 1, beginning on March 1, 2018. Upon conversion, the Convertible Notes will be convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. Prior to December 31, 2017, the Convertible Notes were not convertible except in connection with a make whole fundamental change, as defined in the respective indentures. The Convertible Notes will be subject to redemption at the Company’s option, on or after September 1, 2021, in whole or in part, if the conditions described below are satisfied. The Convertible Notes will mature on September 1, 2024, unless earlier converted, redeemed or

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repurchased in accordance with their terms. Subject to satisfaction of certain conditions and during the periods described below, the Convertible Notes may be converted at an initial conversion rate of 20.4891 shares of common stock per $1,000 principal amount of the Convertible Notes (equivalent to an initial conversion price of approximately $48.81 per share of common stock).
Holders of the Convertible Notes may convert all or any portion of their notes, in multiples of $1,000 principal amount, at their option at any time prior to the close of business on the business day immediately preceding June 1, 2024 only under the following circumstances:
(1)
during any calendar quarter commencing after the calendar quarter ending on December 31, 2017 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether consecutive or not) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
(2)
during the five-business day period after any five-consecutive trading day period (the “measurement period”) in which the “trading price” per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;
(3)
if the Company calls the Convertible Notes for redemption, until the close of business on the business day immediately preceding the redemption date; or
(4)
upon the occurrence of specified corporate events.
As of September 30, 2019, none of the above circumstances had occurred and, as such, the Convertible Notes were not convertible.
Prior to September 1, 2021, the Company may not redeem the Convertible Notes. On or after September 1, 2021, the Company may redeem for cash all or part of the Convertible Notes if the last reported sale price of the Company’s common stock equals or exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30-consecutive trading day period ending within five trading days prior to the date on which the Company provides notice of the redemption. The redemption price will be the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. In addition, calling any Convertible Note for redemption will constitute a make-whole fundamental change with respect to that Convertible Note, in which case the conversion rate applicable to the conversion of that Convertible Note, if it is converted in connection with the redemption, will be increased in certain circumstances.
The initial carrying amount of the Liability Component of $166.3 million was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The allocation was performed in a manner that reflected the Company’s non-convertible debt borrowing rate for similar debt. The Equity Component of the Convertible Notes of $138.7 million was recognized as a debt discount and represents the difference between the proceeds from the issuance of the Convertible Notes of $305.0 million and the fair value of the Liability of the Convertible Notes of approximately $166.3 million on their respective dates of issuance. The excess of the principal amount of the Liability Component over its carrying amount (the “Debt Discount”) is amortized to interest expense using the effective interest method over seven years. The Equity Component is not remeasured as long as it continues to meet the conditions for equity classification. In connection with issuance of the Convertible Notes, the Company also incurred certain offering costs directly attributable to the offering. Such costs are deferred and amortized over the term of the debt to interest expense using the effective interest method. A portion of the deferred financing costs incurred in connection with the Convertible Notes was deemed to relate to the Equity Component and was allocated to additional paid-in capital.
The outstanding balances of the Convertible Notes as of September 30, 2019 consisted of the following (in thousands):
 
2024 Convertible Notes
Liability component:
 
Principal
$
305,000

Less: debt discount and issuance costs, net
$
(113,556
)
Net carrying amount
$
191,444

Equity component:
$
134,450



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The Company determined the expected life of the Convertible Notes was equal to its seven-year term. The effective interest rate on the Liability Components of the Convertible Notes for the period from the date of issuance through September 30, 2019 was 13.04%. As of September 30, 2019, the “if-converted value” did not exceed the remaining principal amount of the Convertible Notes. The fair values of the Convertible Notes are based on data from readily available pricing sources which utilize market observable inputs and other characteristics for similar types of instruments, and, therefore, the Convertible Notes are classified within Level 2 in the fair value hierarchy. The fair value of the Convertible Notes, which differs from their carrying value, is influenced by interest rates, the Company’s stock price and stock price volatility. The estimated fair value of the Convertible Notes as of September 30, 2019 was approximately $278.8 million.
The following table sets forth total interest expense recognized related to the Convertible Notes during the three and nine months ended September 30, 2019 and 2018 (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Contractual interest expense
$
2,288

 
$
2,287

 
$
6,863

 
$
6,863

Amortization of debt discount
3,865

 
3,379

 
11,216

 
9,804

Amortization of debt issuance costs
145

 
127

 
421

 
370

Total interest expense
$
6,298

 
$
5,793

 
$
18,500

 
$
17,037


Future minimum payments on the Company’s long-term debt as of September 30, 2019 are as follows (in thousands):
Years ended December 31,
Future Minimum Payments
2019
$

2020
9,150

2021
9,150

2022
9,150

2023
9,150

2024 and Thereafter
314,150

Total minimum payments
$
350,750

Less: interest
(45,750
)
Less: unamortized discount
(113,556
)
Less: current portion

Long Term Debt
$
191,444


9. Stock-Based Compensation
Stock Options

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A summary of stock option activity during the nine months ended September 30, 2019 is as follows (in thousands, except for per share amounts):
 
Shares
 
Weighted-
Average
Exercise
Price (in
dollars per
share)
 
Weighted-
Average
Contractual
Life (in
years)
 
Aggregate
Intrinsic
Value
Options outstanding at December 31, 2018
5,463

 
$
36.88

 
 
 
 

Granted
1,044

 
19.72

 
 
 
 

Exercised
(341
)
 
8.40

 
 
 
 

Canceled
(499
)
 
33.99

 
 
 
 

Expired
(806
)
 
40.15

 
 
 
 

Options outstanding at September 30, 2019
4,861

 
$
34.94

 
7.39
 
$
11,716

Options exercisable at September 30, 2019
2,810

 
$
39.87

 
6.40
 
$
4,900



The weighted-average grant-date fair value per share of options granted during the three and nine months ended September 30, 2019 was $14.35 and $12.87, respectively. As of September 30, 2019, there was approximately $30.0 million of total unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of approximately 2.50 years.
Restricted Stock Units
A summary of RSU activity during the nine months ended September 30, 2019 is as follows (in thousands, except for per share amounts):
 
RSUs
 
Weighted-
Average
Grant Date
Fair Value 
(in dollars 
per share)
RSUs Outstanding at December 31, 2018
227

 
$
37.69

Granted
613

 
20.04

Vested
(75
)
 
38.59

Forfeited
(110
)
 
26.35

RSUs Outstanding at September 30, 2019
655

 
$
22.93


As of September 30, 2019, there was approximately $12.1 million of total unrecognized compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately 2.74 years.
Performance Units
During the nine months ended September 30, 2019, the Company awarded 79,000 performance restricted stock units (“PSUs”) to employees. Each PSU entitles the holder to receive one share of the Company’s common stock if and when the PSU vests. The PSUs vest upon achievement of certain performance targets within a pre-specified period from the grant date. The vesting of any earned units is subject to the employee’s continued service relationship with the Company through each vesting date.
A summary of PSU activity during the nine months ended September 30, 2019 is as follows (in thousands, except for per share amounts):

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