Amounts include the assets and liabilities of SRX Cardio, LLC, a consolidated variable interest entity (“VIE”). Portola’s interests and obligations with respect to the VIE’s assets and liabilities are limited to those accorded to Portola in its agreement with the VIE. See Note 8, “Asset Acquisition and License Agreements,” to these condensed consolidated financial statements.
See accompanying notes
to the unaudited condensed consolidated financial statements
.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization
Portola Pharmaceuticals, Inc.
®
(the “Company” or “we” or “our” or “us”) is a biopharmaceutical company focused on the development and commercialization of novel therapeutics in the areas of thrombosis, other hematologic diseases and inflammation for patients who currently have limited or no approved treatment options. We were incorporated in September 2003 in Delaware. Our headquarters and operations are located in South San Francisco, California and we operate in one segment.
We are a biopharmaceutical company focused on the development and commercialization of novel therapeutics in the areas of thrombosis, other hematologic disorders and inflammation for patients who currently have limited or no approved treatment options. Our two U.S. Food and Drug Administration (“FDA”)-approved medicines are Bevyxxa® (betrixaban), the first and only oral, once-daily Factor Xa inhibitor, and Andexxa® [coagulation factor Xa (recombinant), inactivated-zhzo], the first and only antidote for the Factor Xa inhibitors rivaroxaban and apixaban. We received approval for Bevyxxa and Andexxa in June 2017 and May 2018, respectively. We are also advancing cerdulatinib, a spleen tyrosine kinase, or Syk, and
Janus
kinases, or JAK, inhibitor in development to treat hematologic cancers and have a partnered program, which is focused on developing selective Syk inhibitors for inflammatory conditions.
We refer to our two approved drugs in this report as Andexxa and Bevyxxa. If approved in the EU or other parts of the world we expect each drug may be marketed under different brand names. In addition, an international nonproprietary name (“INN”) has been designated for each drug. Our previous INN for Andexxa was andexanet alfa; however, in the United States this INN has been replaced with “coagulation factor Xa (recombinant), inactivated-zhzo.” For the EU and other parts of the world, andexanet alfa could remain the INN for Andexxa. Our use of Andexxa or Bevyxxa in this document in the context of continued development activities for which we have not yet received regulatory approval should not be read to imply that we have received regulatory approval for any indication or in any jurisdiction not reflected in our product labels.
2. Summary of Significant Accounting Policies
Consolidation and Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the amounts of Portola and its wholly-owned subsidiaries and a development partner that is a variable interest entity (a “VIE”) for which Portola is deemed, under applicable accounting guidance, to be the primary beneficiary as of March 31, 2018. The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These condensed consolidated financial statements have been prepared on the same basis as our annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments that are necessary for a fair statement of our financial information.
The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for any other interim period or for any other future year. The condensed consolidated balance sheet as of December 31, 2017 has been derived from the audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements.
The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2017 included in our Annual Report on Form 10-K filed on March 1, 2018 with the SEC.
Reclassification
Certain prior period amounts on the accompanying condensed consolidated financial statements have been reclassified to conform to current period presentation. This reclassification did not have an impact on our results of operations or financial condition as of December 31, 2017.
F-5
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities and the reported amounts of revenues and expenses in the condensed consolidated financial statements and the accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, inventory, clinical trial accruals, fair value of assets and liabilities, income taxes, in-process research and development, carrying value of notes payable and long term debt, the consolidation of VIEs and deconsolidation of VIEs, and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results may differ from those estimates.
Variable Interest Entities
We review agreements we enter into with third party entities, pursuant to which we may have a variable interest in that entity, in order to determine if the entity is a VIE. If the entity is a VIE, we assess whether or not we are the primary beneficiary of that entity. In determining whether we are the primary beneficiary of an entity, we apply a qualitative approach that determines whether we have both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. If we determine we are the primary beneficiary of a VIE, we consolidate the operations and financial position of the VIE into our consolidated financial statements.
Our determination as to whether we should consolidate such VIEs is made continuously as changes to existing relationships or future transactions may result in a consolidation or deconsolidation event.
Intangible Assets
Intangible assets include an in-process research and development asset related to our consolidated VIE and a milestone payment made to Millennium Pharmaceuticals, Inc. (“Millennium”) upon FDA approval of Bevyxxa.
The in-process research and development asset is considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts. If the project is completed, which generally occurs if and when regulatory approval to market a product is obtained, the carrying value of the related intangible asset is amortized as a part of cost of sales over the remaining estimated life of the asset beginning in the period in which the project is completed. If the asset becomes impaired or is abandoned, the carrying value of the related intangible asset is written down to its fair value and an impairment charge is taken in the period in which the impairment occurs. The in-process research and development asset is tested for impairment on an annual basis, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist. Please refer to Note 8, “Asset Acquisition and License Agreement” for further information.
A milestone payment made pursuant to the regulatory approval of Bevyxxa in the United States is considered to be finite-lived and will be amortized on a straight-line basis over the remaining estimated patent life. The intangible asset with a finite useful life is reviewed for impairment when facts or circumstances suggest that the carrying value of the asset may not be recoverable.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and other highly liquid investments with original maturities of three months or less from the date of purchase.
F-6
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Cash as Reported in
Condensed
Consolidated Statements of Cash Flows
Cash as reported in the condensed consolidated statements of cash flows includes the aggregate amounts of cash and cash equivalents and the restricted cash, and consists of following (in thousands):
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Cash and cash equivalents
|
$
|
168,414
|
|
|
$
|
181,568
|
|
|
$
|
135,669
|
|
|
$
|
188,480
|
|
Restricted cash (SRX Cardio)
|
|
47
|
|
|
|
173
|
|
|
|
174
|
|
|
|
178
|
|
Total cash balance in condensed consolidated
statements of cash flows
|
$
|
168,461
|
|
|
$
|
181,741
|
|
|
$
|
135,843
|
|
|
$
|
188,658
|
|
Inventories
Inventories are stated at the lower of cost or estimated net realizable value, on a first-in, first-out, or FIFO, basis. We primarily use actual costs to determine our cost basis for inventories.
Prior to the regulatory approval of our product candidates, we incur expenses for the manufacture of drug product that could potentially be available to support the commercial launch of our products. Until the first reporting period when regulatory approval has been received, we record all such costs as research and development expense. Beginning in the fourth quarter of 2017, we began to capitalize inventory costs associated with Bevyxxa when it was determined that the inventory had a probable future economic benefit. We periodically analyze our inventory levels, and write down inventory that has become obsolete, inventory that has a cost basis in excess of its estimated realizable value and inventory in excess of expected sales requirements as cost of sales. No such write downs have been recorded to date.
The active pharmaceutical ingredient (“API”) in Bevyxxa is currently produced by a single supplier. As the API has undergone significant manufacturing specific to its intended purpose at the point it is purchased by us, we classify the API as work-in-process inventory.
Investments in Marketable Securities
All investments in marketable securities have been classified as “available-for-sale” and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Management determines the appropriate classification of our investments in debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Unrealized gains and losses are excluded from earnings and were reported as a component of accumulated comprehensive income (loss). Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in interest and other income, net. The cost of securities sold is based on the specific-identification method. Interest on marketable securities is included in interest and other income, net.
Fair Value Measurements
Fair value accounting is applied for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis.
Property and Equipment
Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, ranging from two to five years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease term.
F-7
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Impairment of Long-Lived Assets
We review long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Specific potential indicators of impairment include a significant decrease in the fair value of an asset, a significant change in the extent or manner in which an asset is used or a significant physical change in an asset, a significant adverse change in legal factors or in the business climate that affects the value of an asset, an adverse action or assessment by the FDA or another regulator or a projection or forecast that demonstrates continuing losses associated with an income producing asset. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Impairment, if any, is assessed using discounted cash flows or other appropriate measures of fair value. Through March 31, 2018, there have been no such losses.
Deferred Rent
We recognize rent expense on a straight-line basis over the noncancelable term of our operating lease and, accordingly, record the difference between cash rent payments and the recognition of rent expense as a deferred rent liability. We also record lessor-funded lease incentives, such as reimbursable leasehold improvements, as a deferred rent liability, which is amortized as a reduction of rent expense over the noncancelable term of our operating lease.
Concentration of Risk
Financial instruments that potentially subject us to concentrations of credit risk consist of cash, cash equivalents, receivables related to our product revenue and collaborations, and investments. Our investment policy limits investments to certain types of debt securities issued by the U.S. government, its agencies and institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and investments and issuers of investments to the extent recorded on the condensed consolidated balance sheets.
Receivables related to our product revenue and collaborations are typically unsecured and are concentrated in the pharmaceutical industry. Accordingly, we may be exposed to credit risk generally associated with pharmaceutical companies or specific to our collaboration agreements. To date, we have not experienced any losses related to these receivables.
Collaboration
Customer Concentration
Collaboration customers who accounted for 10% or more of total revenues were as follows:
|
|
Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Bayer Pharma, AG and Janssen Pharmaceuticals, Inc.
|
|
47%
|
|
|
16%
|
|
Daiichi Sankyo, Inc.
|
|
27%
|
|
|
43%
|
|
Bristol-Myers Squibb Company and Pfizer Inc.
|
|
17%
|
|
|
34%
|
|
Revenue Recognition
On January 1, 2018, we adopted Accounting Standards Codification, or ASC, Topic 606 (ASC 606),
Revenue from Contracts with Customers
, using the modified retrospective method to all contracts that were not completed as of January 1, 2018. We recognized the cumulative effect of applying the new revenue standard as an adjustment to the opening balance of accumulated deficit at the beginning of 2018. The results for our reporting period beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period.
F-8
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Pursuant to ASC
606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements th
at we determine are within the scope of
ASC
606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transact
ion price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled
to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of
ASC
606, we assess the goods or services promised within each contract and determine those that are perfo
rmance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfi
ed.
Product Revenue, Net
To date, our only source of product revenue has been from the U.S. sales of Bevyxxa, which we began shipping to customers in January 2018. We sell Bevyxxa to a limited number of wholesalers in the United States ("Customers"). These Customers subsequently resell our products to hospitals, pharmacies and long-term care centers. In addition to distribution agreements with Customers, we enter into arrangements with group purchasing organizations and payors that provide for privately negotiated rebates, chargebacks, and discounts with respect to the purchase of our products.
We recognize revenue on product sales when the Customer obtains control of our product, which occurs at a point in time (upon delivery). Product revenues are recorded net of applicable reserves for variable consideration, including discounts and allowances. We expense incremental costs of obtaining a contract when incurred, if the expected amortization period of the asset that we would have recognized is one year or less. To date, we have not incurred such costs.
Reserves for Variable Consideration
Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from discounts, returns, chargebacks, rebates, copay assistance and other allowances that are offered within contracts between us and our Customers, group purchasing organizations, payors and other indirect customers relating to our product sales. These reserves as detailed below are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the Customer) or a current liability (if the amount is payable to a party other than a Customer). Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted
in accordance with the expected value method in ASC 606 for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and/or forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the respective underlying contracts.
The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known
.
Trade Discounts and Allowances:
We generally provide Customers with discounts which include incentive fees that are explicitly stated in our contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, we compensate our Customers and indirect customers for sales order management, data, administrative and distribution services. However, we have determined such services received to date are not distinct from our sale of products to the Customer and may not reasonably represent fair value for these services, therefore, these payments have been recorded as a reduction of revenue within the condensed consolidated statement of operations for the three months ended March 31, 2018.
Product Returns:
We generally offer Customers a right of return based on the product’s expiration date or other market-based factors for product that has been purchased from us. We estimate the amount of our product sales that may be returned by our Customers and record this estimate as a reduction of revenue in the period the related product revenue is recognized. We currently estimate product return liabilities using available industry data, our own sales information and our visibility into the inventory remaining in the distribution channel.
We have not received any returns to date and estimate that product returns in future periods will be minimal.
F-9
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Chargebacks
:
Chargebacks are discounts that occur when contracted customers, which currently consist primarily of group purchasing organizations purchase directly from our wholesalers at a discounted price. The special
ty wholesalers, in t
urn, charge us
back the difference between the price initially paid by the wholesaler and the discounted price paid to the wholesaler by the healthcare providers. These reserves are established in the same period that the related revenue is recognized, res
ulting in a reduction of product revenue and
receivables
. Chargeback amounts are generally determined at the time of resale to the qualified healthcare provider by Customers, and we generally issue credits for such amounts within a few weeks of the Custome
r’s notification to us of the resale. Reserves for chargebacks consist of credits that we expect to issue for units that remain in the distribution channel inventories at each reporting period end that we expect will be sold to qualified healthcare provide
rs, and chargebacks that Customers have claimed but for which we have not yet issued a credit.
Payor Rebates:
We contract with various private payor organizations, primarily insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of our products. We estimate these rebates and record such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.
Collaboration and License Revenue
We enter into collaboration and license agreements for the development and commercialization of our products that are within the scope of ASC 606. The terms of collaboration and license agreements typically include payments to us of one or more of the following: non-refundable or partially refundable upfront or license fees; development, regulatory and commercial milestone payments; manufacturing supply services; partial or complete reimbursement of research and development costs; and royalties on net sales of licensed products. Each of these payments results in collaboration and license revenue, except for royalties on net sales of licensed products, which are classified as royalty revenues.
In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under each of its agreements, we perform the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation. As part of the accounting for these arrangements, we must apply judgment to determine whether the performance obligations are distinct, and develop assumptions in determining the stand-alone selling price for each distinct performance obligation identified in the contract. To determine the stand-alone selling price, we rely on assumptions which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.
Licenses of Intellectual Property:
If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from nonrefundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.
Milestone Payments:
At the inception of each arrangement that includes development milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or that of the licensee, such as regulatory approvals, are constrained until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration and license revenue in the period of adjustment.
F-10
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Manufacturing Supply Services:
Arrangements that include a promise for f
uture supply of drug substance or drug
product for either clinical development or commercial supply at the licensee’s discretion are generally considered as
options.
We
assess
whether
these options provide a material right to the licensee and if so, they a
re accounted for as
separate performance obligations. If
we are
entitled to additional payments when the licensee exercises these
options, any additional payments are recorded in
collaboration and
license
revenue when the licensee obtains control
of the go
ods, which is upon delivery.
Royalties:
For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any royalty revenue resulting from any of our out-licensing arrangements.
Research and Development Activities:
Amounts related to research and development and regulatory activities are recognized as the related services or activities are performed, in accordance with the contract terms. Payments may be made to or by us based on the number of full-time equivalent researchers assigned to the collaboration project and the related research and development expenses incurred.
We receive payments from our collaborators based on billing schedules established in each contract. Upfront payments and fees are recorded as deferred revenue upon receipt or when due, and may require deferral of revenue recognition to a future period until we perform our obligations under these arrangements. Amounts are recorded as accounts receivable when our right to consideration is unconditional. We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the collaborators and the transfer of the promised goods or services to the collaborators will be one year or less.
Cost of Sales – Intangible Asset Amortization
Cost of sales for intangible asset amortization consists of the amortization of a capitalized milestone payment made to Millennium upon FDA approval of Bevyxxa. The milestone payment is amortized on a straight-line basis over the estimated remaining patent life of Bevyxxa.
Research and Development
Research and development costs are expensed as incurred and consist of salaries and benefits, lab supplies, materials and facility costs, as well as fees paid to nonemployees and entities that conduct certain research and development and manufacturing activities on our behalf. Amounts incurred in connection with collaboration and license agreements are also included in research and development expense. Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods are received or services are rendered.
Clinical Trial Accruals
Clinical trial costs are a component of research and development expenses. We accrue and expense clinical trial activities performed by third parties based upon actual work completed in accordance with agreements established with clinical research organizations and clinical sites. We determine the actual costs through monitoring patient enrollment and discussions with internal personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. We have not experienced any material deviations between the accrued clinical trial expenses and actual clinical trial expenses. However, actual services performed, number of patients enrolled and the rate of patient enrollment may vary from our estimates, resulting in adjustments to clinical trial expense in futures periods.
We also accrue costs for manufacturing activities performed by third parties based upon actual work completed in accordance with our manufacturing agreements.
Stock-Based Compensation
Employee stock-based compensation cost is measured at the grant date, based on the fair value of the award. The compensation cost is recognized as expense on a straight-line basis over the vesting period for options and restricted stock units (“RSUs”) and on an accelerated basis for performance stock options (“PSOs”), market-based performance stock units (“M-PSUs”) and performance-based
F-11
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
stock units (“PSUs”). For stock option grants including PSOs, we use the Black-Scholes option pricing model to determine the fair value of stock options. This model requires us to make assumptions such as expected term and volati
lity that determine the stock options fair value. We are also required to make estimates as to the probability of achieving the specific performance criteria underlying the PSOs and PSUs. For M-PSU
s
, we use the Monte-Carlo option pricing model to determine
the fair value of awards at the date of issue. The Monte-Carlo option-pricing model uses similar input assumptions as the Black-Scholes model; however, it further incorporates into the fair-value determination the possibility that the performance-based ma
rket condition may not be satisfied. Compensation costs related to awards with a market-based condition are recognized regardless of whether the market condition is ultimately satisfied. Compensation cost is not reversed if the achievement of the market co
ndition does n
ot occur. For RSUs and PSU
s, we base the fair value of awards on the closing market value of our common stock at the date of grant.
Equity instruments issued to nonemployees, consisting of stock options granted to consultants and restricted stock units and performance stock units granted to employees that have converted to nonemployees, are valued using the Black-Scholes option-pricing model for stock options and period-end market price for restricted stock units and performance stock units. Stock-based compensation expense for nonemployee services is subject to remeasurement as the underlying equity instruments vest and is recognized as an expense over the period during which services are received.
Interest Expense
Notes payable and long-term debt are eligible to be repaid based on royalties from our soon to be marketed product, Andexxa. The recognition of interest expense requires us to estimate the total amount of future royalty payments to be generated from product sales by jurisdiction over the life of the agreement. Consequently, we impute interest on the carrying value of the notes payable and long-term debt and record interest expense using an imputed effective interest rate. We reassess the expected royalty payments each reporting period and account for any changes through an adjustment to the effective interest rate on a prospective basis, with a corresponding impact to the classification of our debt and note payable liabilities. The assumptions used in determining the expected repayment term of the debt and amortization period of the issuance costs requires that we make estimates that could impact the short and long term classification of these costs, as well as the period over which these costs will be amortized.
Income Taxes
We provide for income taxes under the asset and liability method. Current income tax expense or benefit represents the amount of income taxes expected to be payable or refundable for the current year. Deferred income tax assets and liabilities are determined based on differences between the condensed consolidated financial statement reporting and tax basis of assets and liabilities and net operating loss and credit carryforwards, and are measured using the enacted tax rates and laws that will be in effect when such items are expected to reverse. Deferred income tax assets are reduced, as necessary, by a valuation allowance when management determines it is more likely than not that some or all of the tax benefits will not be realized. The recognition, derecognition and measurement of a tax position is based on management’s best judgment given the facts, circumstances and information available at the reporting date. Our policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. To date, there have been no interest or penalties charged in relation to the underpayment of income taxes.
Foreign Currency Transactions
We have financial transactions denominated in foreign currencies, primarily the Euro and British Pound, and, as a result, are exposed to changes in foreign currency exchange rates.
Net Loss per Share Attributable to Portola Common Stockholders
Basic net loss per share attributable to Portola Common Stockholders is calculated by dividing the net loss attributable to Portola Common Stockholders by the weighted-average number of shares of Common Stock outstanding for the period. Diluted net loss per share attributable to Portola Common Stockholders is the same as basic net loss per share attributable to Portola Common Stockholders, since the effects of potentially dilutive securities are antidilutive.
Recent Accounting Pronouncements Not Adopted
F-12
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
In February 2016, the
Financial Accounting Standards Board
(“
FASB
”)
issued
Accounting Standards Update
(“
ASU
”)
No. 2016-02, Leases (Topic 842), which amends the existing accounting standards for leases. The new standard requires lessees to record a right-of-use asset and a corresponding lease liability on the balance sheet (with
the exception of short-term leases). For lessees, leases will continue to be classified as either operating or financing in the income statement. This ASU becomes effective in the first quarter of fiscal year 2019 and early adoption is permitted. This ASU
is required to be applied with a modified retrospective approach and requires application of the new standard at the beginning of the earliest comparative period presented. We are currently evaluating the impact that ASU 2016-02 will have on our condensed
consolidated financial statements.
Recent Accounting Pronouncements Adopted
In May 2017, the FASB issued ASU No. 2017-09,
Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting
. This ASU includes guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. This guidance is effective for annual and interim periods of public entities beginning after December 15, 2017, with early adoption permitted. We adopted this guidance on January 1, 2018, and the adoption had no impact on our condensed consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows: Restricted Cash
. This ASU
requires changes in restricted cash during the period to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. If cash, cash equivalents and restricted cash are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the total in the statement of cash flows to the related captions in the balance sheet.
This guidance is effective for annual and interim periods of public entities beginning after December 15, 2017, with early adoption permitted
. The amendments in this ASU should be applied retrospectively to all periods presented.
We adopted this guidance on January 1, 2018.
The adoption of this ASU
increased
our beginning and ending cash balances within our condensed consolidated statements of cash flows. The adoption had no other material impacts to our condensed consolidated statements of cash flows and had no impact on our results of operations or financial position.
In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments
. The pronouncement addresses the presentation of certain items on the statement of cash flows including among other things settlement of zero coupon debt instruments or other debt instruments with coupon interest rates that are insignificant to the effective interest rate of the borrowing.
Pursuant to the new guidance, at the settlement of our promissory notes to Bristol-Myers Squibb Company (“BMS”) and Pfizer Inc. (“Pfizer”) and funding received from HeatlthCare Royalty Partners and its Affiliates, we should classify the portion of the cash payment attributable to the accreted interest related to the debt discount as cash outflows for operating activities, and the portion of the cash payment attributable to the principal as cash outflows for financing activities.
This guidance is effective for annual and interim periods of public entities beginning after December 15, 2017, with early adoption permitted
.
We adopted this guidance on January 1, 2018, and the adoption had no impact on our condensed consolidated financial statements for the period ended March 31, 2018.
F-13
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts
with Customers
(Topic 606), which amends the existing accounting standards for revenue recognition.
We adopted the new revenue standard effective January 1, 2018
using the modified retrospective method to all contracts that were not completed as of January
1, 2018. The cumulative effect of applying the new guidance was recorded as an adjustment to accumulated deficit as of the adoption date. As a result, the following adjustments were made to the condensed consolidated balance sheet as of January 1, 2018:
|
|
As of January 1, 2018
|
|
|
|
As revised under
ASC 606
|
|
|
As originally
reported
|
|
|
Effect of change
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unbilled - collaboration and license revenue
|
|
$
|
6,694
|
|
|
$
|
—
|
|
|
$
|
6,694
|
|
Trade and other receivables, net
|
|
|
2,706
|
|
|
|
—
|
|
|
|
2,706
|
|
Prepaid expenses and other current assets
|
|
|
—
|
|
|
|
2,706
|
|
|
|
(2,706
|
)
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue, current portion
|
|
|
6,354
|
|
|
|
11,169
|
|
|
|
(4,815
|
)
|
Deferred revenue, long-term
|
|
|
1,269
|
|
|
|
18,798
|
|
|
|
(17,529
|
)
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
$
|
(1,175,481
|
)
|
|
$
|
(1,204,519
|
)
|
|
$
|
29,038
|
|
The following table compares the reported condensed consolidated balance sheet and statement of operations information to the balances that do not reflect the adoption of ASC 606 as of and for the three months ended March 31, 2018:
|
|
As of March 31, 2018
|
|
|
|
As reported
|
|
|
Balances without the adoption of ASC 606
|
|
|
Effect of change
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unbilled - collaboration and license revenue
|
|
$
|
4,660
|
|
|
$
|
—
|
|
|
$
|
4,660
|
|
Trade and other receivables, net
|
|
|
968
|
|
|
|
—
|
|
|
|
968
|
|
Prepaid expenses and other current assets
|
|
|
—
|
|
|
|
968
|
|
|
|
(968
|
)
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue, current portion
|
|
|
3,861
|
|
|
|
9,547
|
|
|
|
(5,686
|
)
|
Deferred revenue, long-term
|
|
|
5,412
|
|
|
|
23,064
|
|
|
|
(17,652
|
)
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
(1,259,660
|
)
|
|
|
(1,287,659
|
)
|
|
|
27,999
|
|
|
|
Three Months Ended March 31, 2018
|
|
|
|
As reported
|
|
|
Balances without the adoption of ASC 606
|
|
|
Effect of change
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Collaboration and license revenue
|
|
$
|
6,038
|
|
|
$
|
6,354
|
|
|
$
|
(316
|
)
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
60,067
|
|
|
|
59,345
|
|
|
|
722
|
|
Loss from operations
|
|
|
(85,300
|
)
|
|
|
(84,262
|
)
|
|
|
(1,038
|
)
|
Net loss
|
|
|
(84,510
|
)
|
|
|
(83,472
|
)
|
|
|
(1,038
|
)
|
Net loss attributable to Portola
|
|
|
(84,178
|
)
|
|
|
(83,140
|
)
|
|
|
(1,038
|
)
|
Net loss per share attributable to Portola common stockholders: Basic and diluted
|
|
$
|
(1.28
|
)
|
|
$
|
(1.27
|
)
|
|
$
|
(0.01
|
)
|
Our financial position with respect to product revenues would not have been materially different without the adoption of ASC 606, however, we would have deferred revenue recognition under ASC Topic 605 until product sold through to the end customer.
F-14
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
3. Revenue
Recognition
Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
The following table presents our revenues, disaggregated by timing of transfer of goods or services (in thousands):
|
|
Three Months Ended March 31, 2018
|
|
|
|
Product Revenue, net
|
|
|
Collaboration and
License Revenue
|
|
|
Total
|
|
Timing of revenue recognition:
|
|
|
|
|
|
|
|
|
|
|
|
|
Transferred at a point in time
|
|
$
|
606
|
|
|
$
|
—
|
|
|
$
|
606
|
|
Transferred over time
|
|
|
—
|
|
|
|
6,038
|
|
|
|
6,038
|
|
Total
|
|
$
|
606
|
|
|
$
|
6,038
|
|
|
$
|
6,644
|
|
The following table presents changes in our contract assets and liabilities for the three months ended March 31, 2018 (in thousands):
|
|
Balance at
Beginning of
Period
|
|
|
Addition
|
|
|
Deduction
|
|
|
Balance at End
of Period
|
|
Contract assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unbilled - collaboration and license revenue
|
|
$
|
6,694
|
|
|
$
|
2,761
|
|
|
$
|
(4,795
|
)
|
|
$
|
4,660
|
|
Total contract assets
|
|
$
|
6,694
|
|
|
$
|
2,761
|
|
|
$
|
(4,795
|
)
|
|
$
|
4,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
$
|
7,623
|
|
|
$
|
5,173
|
|
|
$
|
(3,523
|
)
|
|
$
|
9,273
|
|
Total contract liabilities
|
|
$
|
7,623
|
|
|
$
|
5,173
|
|
|
$
|
(3,523
|
)
|
|
$
|
9,273
|
|
During the three months ended March 31, 2018, we recognized $1.8 million in collaboration and license revenue as a cumulative catch-up adjustment related to a change in our estimated transaction price. Additionally, $3.5 million of collaboration and license revenue was recognized during the three months ended March 31, 2018 related to amounts included in the beginning contract liability balance.
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2018 (in thousands):
Collaborator
|
|
Transaction Price
Allocated to the
Remaining
Performance
Obligation as of
March 31, 2018
|
|
|
Expected Year
By Which Revenue
Recognition Will
Be Completed
|
|
|
Percentage of
Revenue
Recognized
|
|
BMS and Pfizer - 2014 agreement
|
|
$
|
909
|
|
|
|
2019
|
|
|
|
94
|
%
|
BMS and Pfizer - 2016 agreement
|
|
|
4,131
|
|
|
|
2021
|
|
|
|
73
|
%
|
Daiichi Sankyo - 2014 agreement
|
|
|
3,173
|
|
|
|
2019
|
|
|
|
91
|
%
|
Daiichi Sankyo - 2016 agreement
|
|
|
3,818
|
|
|
|
2021
|
|
|
|
69
|
%
|
Bayer and Janssen - 2014 agreement
|
|
|
1,420
|
|
|
|
2019
|
|
|
|
94
|
%
|
Bayer - 2016 agreement
|
|
|
3,389
|
|
|
|
2021
|
|
|
|
73
|
%
|
Total
|
|
$
|
16,840
|
|
|
|
|
|
|
|
|
|
F-15
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Milestone payments that are not considered probable of being achieved are excluded from the transaction price until th
ey are probable
.
Sales-based royalties, including milestone payments based on the level of sales, related to license arrangements are excluded from variable consideration and will be recognized at the later of (a) when the related sales occur, or (b) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any royalty revenue resulting from any of our licensing arrangements.
Product Revenue, Net
To date, our only source of product revenue has been from the U.S. sales of Bevyxxa, which we began shipping to customers in January 2018.
No costs to obtain or fulfill the contracts have been capitalized.
For the three months ended March 31, 2018 we recorded a total of $0.7 million as a reduction to trade and other receivables consisting primarily of chargebacks.
Collaboration and License Revenue
BMS and Pfizer
Agreement Terms
In January 2014, we entered into an agreement with BMS and Pfizer to further study Andexxa as a reversal agent for their jointly-owned, FDA-approved oral Factor Xa inhibitor, apixaban, through Phase 3 studies (the “2014 BMS and Pfizer Agreement”). We are responsible for the cost of conducting this clinical study. Pursuant to our agreement with BMS and Pfizer we are obligated to provide research, development and regulatory approval services and participate in the Joint Collaboration Committee (“JCC”) in exchange for a partially refundable upfront fee of $13.0 million and up to $12.0 million of contingent milestone payments due upon achievement of certain development and regulatory events. All consideration received and to be earned under this agreement is subject to a 50% refund contingent upon certain regulatory and/or clinical events.
In February 2016, we entered into a collaboration and license agreement with BMS and Pfizer whereby BMS and Pfizer obtained exclusive rights to develop and commercialize Andexxa in Japan (the “2016 BMS and Pfizer Agreement”). BMS and Pfizer are responsible for all development, regulatory and commercial activities in Japan and we will reimburse BMS and Pfizer for expenses they incur for research and development activities specific to Factor Xa inhibitors other than apixaban. Pursuant to this agreement, we are obligated to provide certain research and development activities outside of Japan, provide clinical drug supply and related manufacturing services and to participate on various committees in exchange for a non-refundable upfront fee of $15.0 million. We are also eligible to receive, contingent payments totaling up to $20.0 million which may be earned upon achievement of certain regulatory events and up to $70.0 million which may be earned upon achievement of specified annual net sales volumes in Japan. We are also entitled to receive royalties ranging from 5% to15% on net sales of Andexxa in Japan.
Revenue Recognition
We assessed the 2014 BMS and Pfizer Agreement and the 2016 BMS and Pfizer Agreement in accordance with ASC 606 and concluded that BMS and Pfizer are customers.
We identified the following performance obligations under the 2014 BMS and Pfizer Agreement: (1) to provide research, development and regulatory services, and (2) to provide manufacturing and supply services. We determined that the research, development and regulatory services can only provide benefit to BMS and Pfizer in combination with the manufacture and supply of Andexxa and because the manufacturing know-how is proprietary to us and cannot be provided by other vendors, the services do not qualify as distinct performance obligations. As the manufacturing and supply services are a required input to the research, development and regulatory services, we have combined all activities into a single performance obligation. The nature of the combined performance obligation is to provide research, development and regulatory services necessary to obtain approval of Andexxa as a reversal agent to apixaban in both the United States and Europe.
For revenue recognition purposes, we determined that the duration of the contract began on the effective date in January 2014 and ends upon Andexxa approval in United States and Europe, expected to be achieved by the first quarter of 2019. The contract duration is defined as the period in which parties to the contract have present enforceable rights and obligations. We analyzed the impact of BMS and Pfizer terminating the agreement prior to Andexxa approval and determined that there were substantive non-monetary penalties to BMS and Pfizer for doing so. We considered quantitative and qualitative factors to reach this conclusion.
F-16
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
We determined that the transaction price of the 2014 BMS and Pfizer Agreement was $16.5 million as of March 31, 2018.
In order to determine the
transaction price, we evaluated all the payments to be received during the duration of the contract
and whether t
he 50% refundable
feature associated with such payments was probable of occurrence. We have concluded that no portion of the cash receipts sho
uld be constrained related to the refund provision because the activities that would trigger a refund are under our control and considered to be remote.
As of March 31, 2018,
there are
no
additional
payments eligible
to be earned.
We are utilizing a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize. We believe this is the best measure of progress because other measures do not reflect how we transfer the performance obligation to our counter party. In applying the cost based input methods of revenue recognition, we use actual costs incurred relative to budgeted costs to fulfill the combined performance obligation. These costs consist primarily of third-party contract costs and internal full-time equivalent effort. A cost-based input method of revenue recognition requires us to make estimates of costs to complete the performance obligations. The cumulative effect of revisions to estimated costs to complete the performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.
For the three months ended March 31, 2018, we have recognized $0.6 million as license and collaboration revenue under the 2014 BMS and Pfizer Agreement and $0.9 million is recorded in deferred revenue under contract liabilities as of March 31, 2018 on the condensed consolidated balance sheets.
There were no costs incurred to obtain or fulfill the contract.
We identified the following performance obligations under the 2016 BMS and Pfizer Agreement: 1) grant of intellectual property license in Japan, 2) provide research and development services, and 3) provide manufacturing services and supply Andexxa for development and commercial purposes. Because the Andexxa program had already progressed into a late-phase of development at inception of the 2016 BMS and Pfizer Agreement, we concluded that the Japan license has standalone functionality and is capable of being distinct. However, we determined that the license is not distinct from the other obligations within the context of the agreement because the research and development services and manufacture and supply services are necessary to increase the utility of the intellectual property and the performance of such services requires our unique expertise and experience. Accordingly, we have concluded that research and development services and manufacturing and supply services are not distinct from the license within the context of the contract and therefore the license, research and development services, manufacture and supply services are combined into a single performance obligation.
In addition, we have identified the following customer options that will create a manufacturing obligation for us upon exercise by BMS and Pfizer: 1) commercial supply of Andexxa for sale in Japan and 2) BMS and Pfizer’s participation in manufacturing capacity expansion. We considered the status of Andexxa approval in the United States and Europe and its impact on Japan, Andexxa’s manufacturing complexities, Andexxa’s expansion plan with our existing vendors and BMS and Pfizer’s manufacturing capabilities to determine if these options constituted options with material rights. These options are not options with material rights because the $15.0 million upfront payment received by us was not negotiated to provide incremental discount for the commercial supplies payments and BMS and Pfizer’s payment for capacity expansion to be received in the future.
For revenue recognition purposes, we have determined that the duration of the contract begins on the effective date in February 2016 and ends upon completion of the Andexxa phase 4 expansion clinical trial in Japan. The contract duration is defined as the period in which parties to the contract have present enforceable rights and obligations. We analyzed the impact of BMS and Pfizer terminating the agreement prior to the completion of Andexxa phase 4 expansion clinical trial in Japan and determined that there were substantive non-monetary penalties to BMS and Pfizer for doing so. We considered quantitative and qualitative factors to reach this conclusion.
We determined that the transaction price of the 2016 BMS and Pfizer Agreement was $15.1million as of March 31, 2018. In order to determine the transaction price, we evaluated all the payments to be received during the duration of the contract. As of March 31, 2018, transaction price includes, $15.0 million of upfront payment, $5.0 million for acceptance of the Japan New Drug Application (“JNDA”) in Japan, as management expects it to be probable of achievement, $3.3 million of estimated variable consideration for cost-sharing payments from BMS and Pfizer for agreed upon research and development services for clinical trials outside of Japan, $0.2 million for the estimated costs of Andexxa clinical supplies to BMS and Pfizer for Andexxa phase 4 expansion clinical trial in Japan, and the transaction price is reduced by $8.4 million payable to BMS and Pfizer for estimated costs they will incur in developing Andexxa in Japan. Regulatory approval milestones were fully constrained and therefore are not included in the transaction price, as the receipts of such milestones are outside of our control. In determining whether to constrain other milestones, we considered numerous factors, including whether receipt of the milestones is within our control, contingent upon success in future clinical trials
F-17
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
and
/or
the licensee’s efforts. Any con
sideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to BMS and Pfizer and therefore have also been excluded from the trans
action price. We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
We are responsible to perform certain clinical trials outside of Japan and BMS and Pfizer are responsible to perform research and development services in Japan. Outside of Japan, we are primarily responsible to perform an ethnic sensitivity study (“ESS-Study”) of Japanese ethnicity. BMS and Pfizer are responsible to expand our current phase 3/4 clinical trial of Andexxa into Japan and to perform any further studies requested by the Japanese regulatory authorities. BMS and Pfizer will reimburse us for 33% of our costs and expenses incurred to conduct the ESS-Study and we will reimburse 66% of costs and expenses incurred by BMS and Pfizer related to research and development services in Japan specific to Factor Xa inhibitors other than apixaban under the terms of the arrangement.
All parties to this agreement will make quarterly cost-sharing payments to one another in amounts necessary to ensure that each party bears its contractual share of the overall shared costs incurred. We account for cost-sharing payments received from BMS and Pfizer as increases to our transaction price while cost-sharing payments we make to BMS and Pfizer are accounted for as reductions to our transaction price. Costs incurred by us related to agreed upon services under the agreement are recorded as research and development expenses in our consolidated condensed statements of operations.
We are utilizing a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize. We believe this is the best measure of progress because other measures do not reflect how we transfer the performance obligation to our counter party. In applying the cost based input methods of revenue recognition, we use actual costs incurred relative to budgeted costs to fulfill the combined performance obligation. These costs consist primarily of third-party contract costs and internal full-time equivalent effort. A cost-based input method of revenue recognition requires management to make estimates of costs to complete the performance obligations. The cumulative effect of revisions to estimated costs to complete the performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.
For the three months ended March 31, 2018, we have recognized $0.6 million as license and collaboration revenue under the 2016 BMS and Pfizer Agreement and have $8.2 million recorded as deferred revenue under contract liabilities as of March 31, 2018 on the condensed consolidated balance sheets.
There were no costs incurred to obtain or fulfill the contract.
Daiichi Sankyo, Inc. (“Daiichi Sankyo”)
Agreement Terms
In July 2014, we entered into an agreement with Daiichi Sankyo to study the safety and efficacy of Andexxa as a reversal agent to edoxaban, in our Phase 3 and Phase 4 studies (the “2014 Daiichi Sankyo Agreement”). We are responsible for the cost of conducting these clinical studies. Pursuant to our agreement with Daiichi Sankyo we are obligated to provide research, development and regulatory services and to manufacture and supply Andexxa in exchange for an upfront nonrefundable fee of $15.0 million, up to two contingent payments totaling $5.0 million which are payable upon the initiation of our Phase 3 study and achievement of certain events associated with scaling up our manufacturing process to support a commercial launch, and up to four payments totaling $20.0 million which are payable upon acceptance of filing and regulatory approval of Andexxa as a reversal agent to edoxaban by the FDA and EMA.
In October 2016, we amended this agreement to expedite the expansion of our Phase 4 trial in exchange for an upfront fee of $15.0 million, $8.0 million of which is payable back to Daiichi Sanko based solely on quarterly royalty payments of 1% of world-wide net sales of Andexxa. We are also eligible to receive up to three contingent payments totaling $10.0 million payable upon achieving specified clinical site activation and patient enrollment targets. Additionally, the $2.5 million contingent payment associated with scaling up our manufacturing process from the original agreement has been removed by this amendment.
F-18
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
In March 2016, we entered into an agreement with Daiichi Sankyo to per
form an ethnic sensitivity study (“ESS-Study”) of Japanese ethnicity, perform any further studies requested by the Japanese regulatory authorities and to deliver services in connection with our collaboration agreement to commercialize
Andexxa
in Japan with
BMS and Pfizer (the “2014 Daiichi Sankyo Agreement”). Daiichi Sankyo will reimburse us for 33% of our costs and expenses incurred to conduct the ESS-Study and between 33% and 100% of costs and expenses we incur for other studies that involve edoxaban unde
r the terms of the arrangement.
Revenue Recognition
We assessed the 2014 Daiichi Sankyo Agreement as amended in October 2016 and the 2016 Daiichi Sankyo Agreement in accordance with ASC 606 and concluded that the Daiichi Sankyo is a customer.
We concluded that the 2014 Daiichi Sankyo Agreement and the October 2016 amendment are linked and should be accounted for as a combined agreement. We identified the following performance obligations under the combined agreement: (1) to provide research, development and regulatory services, and (2) to provide manufacturing and supply services. We determined that the research, development and regulatory services can only provide benefit to Daiichi Sankyo in combination with the manufacture and supply of Andexxa and because the manufacturing know-how is proprietary to us and cannot be provided by other vendors, the services do not qualify as distinct performance obligations. As the manufacturing and supply services are a required input to the research, development and regulatory services, we have combined all activities into a single performance obligation. The nature of the combined performance obligation is to provide research, development and regulatory services necessary to obtain approval of Andexxa as a reversal agent to edoxaban in both the United States and Europe.
For revenue recognition purposes, we determined that the duration of the contract begins on the effective date in July 2014 and ends upon Andexxa approval in United States and Europe for edoxaban, expected to be achieved in 2019. The contract duration is defined as the period in which parties to the contract have present enforceable rights and obligations. We analyzed the impact of Daiichi Sankyo’s terminating the agreement prior to Andexxa approval and determined that there were substantive non-monetary penalties to Daiichi Sankyo for doing so. We considered quantitative and qualitative factors to reach this conclusion.
We determined that the transaction price of the Daiichi Sankyo combined 2014 Daiichi Sankyo Agreement and October 2016 amendment was $34.0 million as of March 31, 2018. In order to determine the transaction price, we evaluated all the payments to be received during the duration of the contract. As of March 31, 2018, transaction price includes $22.0 million of upfront payments, $9.0 million in milestones already received upon achievement of specified events and a $3.0 million milestone related to clinical metrics we have determined is probable of achievement. As of March 31, 2018, we have $5.5 million of further milestone payments eligible to be included in transaction price but have determined they are not probable of achievement and therefore constrained. As part of our evaluation of the constraint, we considered numerous factors, including whether receipt of the milestones is outside of our control and/or contingent upon success in future clinical trial. We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
We are utilizing a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize. We believe this is the best measure of progress because other measures do not reflect how we transfer the performance obligation to our counter party. In applying the cost based input method of revenue recognition, we use actual costs incurred relative to budgeted costs to fulfill the combined performance obligation. These costs consist primarily of third-party contract costs and internal full-time equivalent effort. A cost-based input method of revenue recognition requires management to make estimates of costs to complete the performance obligations. The cumulative effect of revisions to estimated costs to complete the performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.
For the three months ended March 31, 2018, we have recognized $1.3 million as license and collaboration revenue under the combined 2014 Daiichi Sankyo Agreement and October 2016 amendment and have $0.2 million recorded as deferred revenue under contract liabilities as of March 31, 2018 on the condensed consolidated balance sheets.
There were no costs incurred to obtain or fulfill the contract.
F-19
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
We identified the following performance obligations under the
2016 Daiichi Sankyo Agreement
: 1) the obligation to provide research and development services 2) the obligation to provide regulatory approval services,
and
3) the obligation to manufacture and provide clinical supply of
Andexxa
. We
determined that
our obl
igation to provide research and development
and regulatory
services can only provide benefit to Daiichi Sankyo in combination with our supply of clinical
Andexxa
for the phase 4 expansion clinical study. The
Andexxa
manufacturing know-how is
specialized an
d
proprietary to us and cannot be provided by other vendors. Therefore, we have
concluded that the research
,
development,
regulatory and
Andexxa
supply services are not distinct within the context of the contract, and thus these obligations are combined in
to a single performance obligation.
We have exclusive rights to develop Andexxa outside of Japan and are solely responsible for performing such activities, including the ESS-Study, in support of the JNDA. Development activities occurring in Japan, including the expansion of our Phase 4 clinical trial, are the responsibility of BMS and Pfizer, however, the costs of such activities related to Factor Xa inhibitors other than apixaban are borne by us. Pursuant to this agreement, we are responsible to ensure edoxaban is included in all development activities related to Andexxa and Daiichi Sankyo will compensate us accordingly. We account for the expected cost-sharing payments from Daiichi Sankyo as an increase to our transaction price.
We determined that the transaction price of the 2016 Daiichi Sankyo Agreement was $12.5 million as of March 31, 2018. In order to determine the transaction price, we evaluated all the payments to be received during the duration of the contract. As of March 31, 2018, transaction price includes $5.0 million of upfront payment and $3.3 million of estimated variable consideration for cost-sharing payments from Daiichi Sankyo for ESS-study, and $4.2 million of estimated variable consideration for cost-sharing payments from Daiichi Sankyo associated with the development of Andexxa in Japan. As of March 31, 2018, we have $10.0 million of further regulatory milestone payments eligible for achievement, however, regulatory milestones have been fully constrained and thus are not included in the transaction price. In determining whether to constrain these milestones, we considered numerous factors, including whether receipt of the milestones is within our control and/or contingent upon success in future clinical trials. We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
We are utilizing a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize. We believe this is the best measure of progress because other measures do not reflect how we transfer the performance obligation to our counter party. In applying the cost based input methods of revenue recognition, we use actual costs incurred relative to budgeted costs to fulfill the combined performance obligation. These costs consist primarily of third-party contract costs and internal full-time equivalent effort. A cost-based input method of revenue recognition requires management to make estimates of costs to complete the performance obligations. The cumulative effect of revisions to estimated costs to complete the performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.
For the three months ended March 31, 2018, we have recognized $0.5 million as license and collaboration revenue under the 2016 Daiichi Sankyo Agreement and have $1.8 million recorded as Unbilled - collaboration and license revenue as of March 31, 2018 on the condensed consolidated balance sheets.
None of the costs to obtain or fulfill the contract were capitalized.
Bayer Pharma, AG (“Bayer”) and Janssen Pharmaceuticals, Inc. (“Janssen”)
Agreement Terms
In January 2014, we entered into an agreement with Bayer and Janssen to study Andexxa as a reversal agent to rivaroxaban in our Phase 3 studies and to seek regulatory approval in the United States and Europe (the “2014 Bayer and Janssen Agreement”). We are responsible for the costs associated with this agreement. We are obligated to provide research, development, manufacturing and regulatory services in exchange for an upfront nonrefundable fee of $10.0 million, up to three payments totaling $7.0 million which are payable upon achievement of certain events associated with scaling up our manufacturing process to support a commercial launch, and up to three payments totaling $8.0 million which are payable upon initiation of our Phase 3 study and regulatory approval of Andexxa as a reversal agent to rivaroxaban in United States and Europe.
F-20
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Revenue Recogniti
on
We assessed the 2014 Bayer and Janssen Agreement in accordance with ASC 606 and concluded that Bayer and Janssen are customers.
We identified the following performance obligation under the 2014 Bayer and Janssen Agreement: (1) the obligation to provide research and development services, (2) to provide manufacturing services and to supply Andexxa, and (3) the obligation to provide regulatory approval services. We determined that the research, development and regulatory services can only provide benefit to Bayer and Janssen in combination with the manufacture and supply of Andexxa and because the manufacturing know-how is specialized and proprietary to us and cannot be provided by other vendors, the services do not qualify as distinct performance obligations. As the manufacturing and supply services are a required input to the research, development and regulatory services, we have combined all activities into a single performance obligation. The nature of the combined performance obligation is to provide research, development and regulatory services necessary to obtain approval of Andexxa as a reversal agent to rivaroxaban in both the United States and Europe.
For revenue recognition purposes, we determined that the duration of the contract begins on the effective date in 2014 Bayer and Janssen Agreement ends upon Andexxa approval in the United States and Europe for rivaroxaban, expected to be achieved in 2019. The contract duration is defined as the period in which parties to the contract have present enforceable rights and obligations. We analyzed the impact of Bayer and Janssen terminating the agreement prior to Andexxa approval and determined that there were substantive non-monetary penalties to Bayer and Janssen Pfizer for doing so. We considered quantitative and qualitative factors to reach this conclusion.
We determined that the transaction price of the 2014 Bayer and Janssen Agreement was $25.0 million as of March 31, 2018. In order to determine the transaction price, we evaluated all the payments to be received during the duration of the contract. As of March 31, 2018, transaction price includes, $10 million of upfront payment, $13 million in milestones that have already been achieved and a $2 million milestone that we deem probable of achievement following the CHMP’s positive trend vote and subsequent discussions with the EMA during the quarter ended March 31, 2018. There is no further consideration eligible to be included in transaction price.
We are utilizing a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize. We believe this is the best measure of progress because other measures do not reflect how we transfer the performance obligation to our counter party. In applying the cost based input method of revenue recognition, we use actual costs incurred relative to budgeted costs to fulfill the combined performance obligation. These costs consist primarily of third-party contract costs and internal full-time equivalent effort. A cost-based input method of revenue recognition requires management to make estimates of costs to complete the performance obligations. The cumulative effect of revisions to estimated costs to complete the performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.
For the three months ended March 31, 2018, we have recognized $2.7 million as license and collaboration revenue under the 2014 Bayer and Janssen Agreement and have $0.6 million recorded as Unbilled - collaboration and license revenue as of March 31, 2018 on the condensed consolidated balance sheets.
None of the costs to obtain or fulfill the contract were capitalized.
Bayer Pharma, AG (“Bayer”)
Agreement Terms
In February 2016, we entered into an agreement with Bayer to perform an ESS-Study of Japanese ethnicity, perform any further studies requested by the Japanese regulatory authorities and to deliver services, in connection with our collaboration agreement to commercialize Andexxa in Japan with BMS and Pfizer (the “2016 Bayer Agreement”). Bayer will reimburse us 33% of our costs and expenses incurred to conduct the ESS-Study and between 33% and 100% of costs and expenses we incur for other studies that involve rivaroxaban under the terms of the arrangement.
We are obligated to provide research and development services, provide clinical drug supply and related manufacturing services and to provide regulatory approval services in exchange for an upfront nonrefundable fee of $5.0 million. We are also eligible to receive,
F-21
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
one payment of $10.0 million which is payable upon the initial regulatory approval for
Andexxa
for rivaroxaban in Japan. The $10.0 million payment will be reduced to $7.0 million if Japanese reg
ulatory approval is attained based only upon the ESS study results.
Revenue Recognition
We assessed the 2016 Bayer Agreement in accordance with ASC 606 and concluded that Bayer is a customer.
We identified the following performance obligations under the 2016 Bayer Agreement: 1) the obligation to provide research and development services 2) the obligation to provide regulatory approval services, and 3) the obligation to manufacture and provide clinical supply of Andexxa. We determined that our obligation to provide research and development and regulatory services can only provide benefit to Bayer in combination with our supply of clinical Andexxa for the phase 4 expansion clinical study. The Andexxa manufacturing know-how is specialized and proprietary to us and cannot be provided by other vendors. Therefore, we have concluded that the research, development, regulatory and Andexxa supply services are not distinct within the context of the contract, and thus these obligations are combined into a single performance obligation.
We have exclusive rights to develop Andexxa outside of Japan and are solely responsible for performing such activities, including the ESS-Study, in support of the JNDA. Development activities occurring in Japan, including the expansion of our Phase 4 clinical trial, are the responsibility of BMS and Pfizer, however, the costs of such activities related to Factor Xa inhibitors other than apixaban are borne by us. Pursuant to this agreement, we are responsible to ensure rivaroxaban is included in all development activities related to Andexxa and Bayer will compensate us accordingly. We account for the expected cost-sharing payments from Bayer as an increase to our transaction price.
We determined that the transaction price of the 2016 Bayer Agreement was $12.5 million as of March 31, 2018. In order to determine the transaction price, we evaluated all the payments to be received during the duration of the contract. As of March 31, 2018, the transaction price includes a $5.0 million upfront payment, $3.3 million of estimated variable consideration for cost-sharing payments from Bayer for the ESS-study and $4.2 million of estimated variable consideration for cost-sharing payments from Bayer associated with the development of Andexxa in Japan. As of March 31, 2018, we have $10.0 million of further regulatory milestone payments eligible for achievement, however, regulatory milestones have been fully constrained and thus are not included in the transaction price. In determining whether to constrain these milestones, we considered numerous factors, including whether receipt of the milestones is within our control and/or contingent upon success in future clinical trials. We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
We are utilizing a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize. We believe this is the best measure of progress because other measures do not reflect how we transfer the performance obligation to our counter party. In applying the cost based input methods of revenue recognition, we use actual costs incurred relative to budgeted costs to fulfill the combined performance obligation. These costs consist primarily of third-party contract costs and internal full-time equivalent effort. A cost-based input method of revenue recognition requires management to make estimates of costs to complete the performance obligations. The cumulative effect of revisions to estimated costs to complete the performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.
For the three months ended March 31, 2018, we have recognized $0.4 million as license and collaboration revenue under the 2016 Bayer Agreement and have $2.3 million recorded as Unbilled - collaboration and license revenue as of March 31, 2018 on the condensed consolidated balance sheets.
There were no costs incurred to obtain or fulfill the contract.
4. Fair Value Measurements
Financial assets and liabilities are recorded at fair value. The carrying amounts of certain of our financial instruments, including cash and cash equivalents, restricted cash, short-term investments, receivables from collaborations, prepaid research and development, prepaid expenses and other current assets and accounts payable, accrued research and development, accrued compensation and employee benefits, accrued and other liabilities and deferred revenue and approximate their fair value due to their
F-22
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
short maturities. The acc
ounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received
in the sale of
an ass
et or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies i
n measuring fair value as follows:
|
Level 1 –
|
Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
|
|
Level 2 –
|
Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
|
|
Level 3 –
|
Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
|
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Where quoted prices are available in an active market, securities are classified as Level 1. We classify money market funds as Level 1. When quoted market prices are not available for the specific security, we estimate fair value by using quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs obtained from various third-party data providers, including but not limited to, benchmark yields, interest rate curves, reported trades, broker/dealer quotes and market reference data. We classify our corporate notes, commercial paper, U.S. Treasury bills and government agency securities and foreign currency forward contracts as Level 2. Level 2 inputs for the valuations are limited to quoted prices for similar assets or liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability. Mid-market pricing is used as a practical expedient for fair value measurements. The fair value measurement of any asset or liability must reflect the non-performance risk of the entity and the counterparty to the transaction. Therefore, the impact of the counterparty’s creditworthiness, when in an asset position, and our creditworthiness, when in a liability position, has also been factored into the fair value measurement.
In certain cases where there is limited activity or less transparency around inputs to valuation, the related assets or liabilities are classified as Level 3. Our embedded derivative liabilities are measured at fair value using a Monte Carlo simulation model and are included as a component of other long-term liabilities on the consolidated balance sheets. The embedded derivative liabilities are subject to remeasurement at the end of each reporting period, with changes in fair value recognized as a component of interest and other income (expense), net, in our condensed consolidated statements of operations. The assumptions used in the Monte Carlo simulation model include: 1) our estimates of both the probability and timing of regulatory approval of Andexxa by geographical region and other related events; 2) the probability-weighted net sales of Andexxa; 3) our risk adjusted discount rate that includes a company specific risk premium; 4) our cost of debt; 5) volatility; 6) the probability of a change in control occurring during the term of the note; and 7) the probability of an event of default. The valuation of our embedded derivative liabilities is most sensitive to the probability of Andexxa achieving regulatory approval given the binary nature of such an approval event and the correlation to other assumptions included in the model.
There were no transfers between Level 1, Level 2 and Level 3 during the periods presented.
In certain cases where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3. Our noncontrolling interest in SRX Cardio includes the fair value of the contingent milestone and royalty payments, which is valued based on Level 3 inputs.
See
Note 7, "
Asset Acquisition and License Agreements
,"
to these condensed consolidated financial statements for further information.
The following table sets forth the fair value of our financial assets and liabilities (excluding consolidated VIE’s cash), allocated into Level 1, Level 2 and Level 3, that was measured on a recurring basis (in thousands):
|
|
March 31, 2018
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-23
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Money market funds
|
|
$
|
19,507
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,507
|
|
Corporate notes and commercial paper
|
|
—
|
|
|
|
260,950
|
|
|
|
—
|
|
|
|
260,950
|
|
U.S. Treasury bills and government agency securities
|
|
|
—
|
|
|
|
154,412
|
|
|
|
—
|
|
|
|
154,412
|
|
Total financial assets
|
|
$
|
19,507
|
|
|
$
|
415,362
|
|
|
$
|
—
|
|
|
$
|
434,869
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Embedded derivatives liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,220
|
|
|
$
|
7,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
31,836
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31,836
|
|
Corporate notes and commercial paper
|
|
|
—
|
|
|
|
313,164
|
|
|
|
—
|
|
|
|
313,164
|
|
U.S. Treasury bills and government agency securities
|
|
|
—
|
|
|
|
170,458
|
|
|
|
—
|
|
|
|
170,458
|
|
Total financial assets
|
|
$
|
31,836
|
|
|
$
|
483,622
|
|
|
$
|
—
|
|
|
$
|
515,458
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Embedded derivatives liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,854
|
|
|
$
|
8,854
|
|
Level 3 liabilities are comprised of embedded derivatives liabilities as described in Note 8 “Asset Acquisition and License Agreements.” The following table sets forth a summary of the changes in the estimated fair value of our embedded derivatives liabilities, which were measured at fair value on a recurring basis (in thousands):
Balance as of December 31, 2017
|
|
$
|
8,854
|
|
Net decrease in fair value included in interest and other income, net
|
|
|
(1,634
|
)
|
Balance as of March 31, 2018
|
|
$
|
7,220
|
|
We estimate the fair values of our corporate notes and commercial paper and U.S government agency securities by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry-standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs.
There were no transfers between any of the levels of the fair value hierarchy during the periods presented.
F-24
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
5
.
Financial Instruments
Cash equivalents and investments, all of which are classified as available-for-sale securities, consisted of the following (in thousands):
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gain
|
|
|
(Loss)
|
|
|
Value
|
|
|
Cost
|
|
|
Gain
|
|
|
(Loss)
|
|
|
Value
|
|
Money market funds
|
|
$
|
19,507
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,507
|
|
|
$
|
31,836
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31,836
|
|
Corporate notes and
commercial paper
|
|
|
261,375
|
|
|
|
—
|
|
|
|
(425
|
)
|
|
|
260,950
|
|
|
|
313,307
|
|
|
|
2
|
|
|
|
(145
|
)
|
|
|
313,164
|
|
U.S. Treasury bills and
government agency
securities
|
|
|
154,787
|
|
|
|
—
|
|
|
|
(375
|
)
|
|
|
154,412
|
|
|
|
170,724
|
|
|
|
—
|
|
|
|
(266
|
)
|
|
|
170,458
|
|
|
|
$
|
435,669
|
|
|
$
|
—
|
|
|
$
|
(800
|
)
|
|
$
|
434,869
|
|
|
$
|
515,867
|
|
|
$
|
2
|
|
|
$
|
(411
|
)
|
|
$
|
515,458
|
|
Classified as:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
152,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
162,793
|
|
Short-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
240,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
281,589
|
|
Long-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,076
|
|
Total cash equivalents and
investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
434,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
515,458
|
|
At March 31, 2018,
the remaining contractual maturities of available-for-sale securities were less than two years
. There have been no significant realized losses on available-for-sale securities for the periods presented. Available-for-sale debt securities that were in a continuous loss position but were not deemed to be other than temporarily impaired were immaterial at both March 31, 2018 and December 31, 2017.
6. Balance Sheet Components
Inventories
Inventories consisted of the following (in thousands):
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
Current:
|
|
|
|
|
|
|
|
|
Work in process
|
|
$
|
3,185
|
|
|
$
|
1,032
|
|
Finished goods
|
|
|
63
|
|
|
|
67
|
|
Total inventories
|
|
$
|
3,248
|
|
|
$
|
1,099
|
|
We began capitalizing inventory during the quarter ended December 31, 2017 as a result of the FDA’s approval of Bevyxxa, as the related costs are expected to be recoverable through the commercialization of the product. As of March 31, 2018 and December 31, 2017, prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets include prepayments of $8.2 million and $2.3 million, respectively, made to a manufacturer for the purchase of inventories which we expect to be converted to finished goods within the next twelve months. Prepayments of $4.8 million and $9.6 million as of March 31, 2018 and December 31, 2017, respectively, is classified as prepaid and other long-term assets as the production is expected after the next twelve months and the amount is deemed recoverable.
No amounts have been capitalized as inventory for Andexxa as of March 31, 2018.
No losses were incurred on valuation of inventories at lower of cost or market value or write-off of obsolete inventories during the three months ended March 31, 2018.
F-25
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Accrued and Other Liabilities
Accrued and other liabilities consist of the following (in thousands):
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
Commercial related
|
|
$
|
2,663
|
|
|
$
|
1,694
|
|
Legal and accounting fees
|
|
|
329
|
|
|
|
256
|
|
Deferred rent
|
|
|
899
|
|
|
|
879
|
|
Product revenue provision
|
|
|
53
|
|
|
|
–
|
|
Other
|
|
|
1,697
|
|
|
|
723
|
|
Total accrued liabilities
|
|
$
|
5,641
|
|
|
$
|
3,552
|
|
7. Purchase Commitments
Bevyxxa Manufacturing Agreement
In 2016 we entered into a Manufacturing Agreement, as amended, with Hovione, Limited, (“Hovione”), pursuant to which Hovione will manufacture active pharmaceutical ingredient (“API”) for Bevyxxa at commercial scale and perform process validation during the term of the agreement.
As of March 31, 2018, we have recorded $8.2 million in prepaid expenses and other current assets and $4.8 million in prepaid and other long-term under the agreement, and will make up to $8.6 million of additional payments over the remaining term of the
Hovione
Agreement, ending June 2019.
Lonza Manufacturing Services Agreement
In August 2017, we executed a Manufacturing Services Agreement with Lonza AG (“Lonza”) to develop a higher-capacity and lower cost process (“generation 2 process”) for Andexxa bulk drug substance. The manufacturing commitments included therein are contingent upon marketing approval by either the FDA or the European Medicines Agency (“EMA”) of Andexxa manufactured at the current Porrino facility under the generation 2 process and will remain in effect for a period of ten years. Additionally, the agreement provides Lonza with two separate rights to purchase shares of our common stock at a purchase price of one dollar per share, contingent upon certain events. The first purchase right will be earned by Lonza upon the approval of the generation 2 process and the commencement of process transfer activities to an additional, new facility in Switzerland. The second purchase right will be earned by Lonza upon the approval of the drug substance manufactured at the new facility and the number of shares will be determined based on the achievement of specified performance metrics at the new facility. The number of shares subject to the first and the second purchase right, each, will be the lesser of either the number of shares with an aggregate market value of $15.0 million based on a 20 day trailing market value average from the date the first or the second purchase right is earned by Lonza, or 500,000 shares.
We measure the fair value of the equity instrument contingently issuable to Lonza by using the stock price and other measurement assumptions as of the earlier of the date at which either: (1) a commitment for performance by the counterparty has been reached; or (2) the counterparty’s performance is complete. We determined that Lonza does not have a performance commitment in this arrangement because there is no substantive disincentive for nonperformance. As such, our measurement date for the contingently issuable equity awards will be when the specified performance criteria have been achieved. Until such achievement, the contingently issuable equity awards will be measured at their then-current lowest aggregate fair value at each financial reporting date. As of
March 31, 2018, the lowest aggregate fair value of the awards was zero.
8. Asset Acquisition and License Agreements
SRX Cardio, LLC
In December 2015, we entered into an option agreement with SRX Cardio to explore a novel approach to develop a drug in the field of hypercholesterolemia. This agreement provided us an option to enter into an exclusive license agreement as well as responsibility to lead and fund the development effort during the option period. We made an upfront payment of $0.5 million.
F-26
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
In Sept
ember 2016, we exercised our right to enter into an exclusive license agreement. Pursuant to the terms of the agreement, we made an upfront payment of $2.2 million to acquire the license and are obligated to pay up to $152.5 million in research and develop
ment milestones related to the advancement of the program and royalties in the range of 2% to 6% of worldwide net sales. We may terminate the license agreement upon 90 days’ notice for convenience and the agreement may also be terminated by either party fo
r a material breach by the other party.
We determined that SRX Cardio is and continues to be a variable interest entity and that we hold a variable interest in SRX Cardio’s intellectual property assets and the related potential future product candidates these assets may produce. Due to the absence of other significant development programs at SRX Cardio, we concluded that the variable interest was in the entity as a whole. Given the stage of development, we concluded that SRX Cardio is not considered a business as they lack the processes required to generate outputs. Further, because we control those activities most significant to SRX Cardio, we are considered to be the primary beneficiary of SRX Cardio. Accordingly, SRX Cardio is subject to consolidation and we have consolidated the financial statements of SRX Cardio by (a) eliminating all intercompany balances and transactions; and (b) allocating income or loss attributable to the noncontrolling interest in SRX Cardio to net income or loss attributable to noncontrolling interest in our consolidated statement of operations and reflecting noncontrolling interest on our consolidated balance sheet. Our interest in SRX Cardio is limited to the development of the intellectual property asset. The upfront payments of $0.5 million and $2.2 million and the obligation to fund the development plan represent our maximum exposure to loss under the agreement. We did not acquire any equity interest in SRX Cardio, any interest in SRX Cardio's cash and cash equivalents or any control over their activities that do not relate to the exclusive license agreement. SRX Cardio does not have any right to our assets except as provided in the exclusive license agreement.
At the inception of the agreement, the identifiable assets, assumed liabilities and non-controlling interest of SRX Cardio were recorded at their estimated fair value upon the initial consolidation of SRX Cardio, including the in-process research and development intangible asset. We estimated the fair value of these indefinite lived intangible assets to be $3.2 million and the noncontrolling interest to be $2.9 million. The fair value was estimated using present-value models on potential contingent milestones and royalty payments (“contingent future payments”), based on assumptions regarding the probability of achieving the development milestones, estimate of time to develop the drug candidate, estimates of future cash flows from potential product sales and assumptions regarding the appropriate discount rate.
As of March 31, 2018, we have not provided financial or other support to SRX Cardio that was not previously contracted or required. We recorded SRX Cardio’s $47,000 and $
173,000
of cash as restricted cash as of March 31, 2018 and December 31, 2017, because (a) we do not have any interest in or control over SRX Cardio's cash and (b) the agreement does not provide for these assets to be used for the development of the intellectual property assets developed pursuant to this agreement.
We recorded $332,000 as net loss attributable to noncontrolling interest (SRX Cardio) for the three months ended March 31, 2018 on our condensed consolidated statements of operations, reflecting a change in fair value of our contingent future payments liability to SRX Cardio as of March 31, 2018.
Millennium Pharmaceuticals, Inc.
In August 2004, we entered into an agreement with Millennium to license certain exclusive rights to research, develop and commercialize certain compounds that inhibit Factor Xa, including Bevyxxa. The license agreement requires us to make license fee, milestone, royalty and sublicense sharing payments to Millennium as we develop, commercialize or sublicense Bevyxxa. The license agreement will continue in force, on a country-by-country basis, until the expiration of the relevant patents or ten years after the launch, whichever is later, or termination by either party pursuant to the agreement. This license agreement may be terminated by either party for the other party’s uncured material breach. In addition, we may terminate this agreement for convenience with 30 days’ advance written notice.
Under the agreement, milestone payments are determined based on the indication included in our filing and become payable upon acceptance of our new drug application, or NDA, and regulatory approval in the United States and Europe. In December 2016, the FDA accepted our NDA for Bevyxxa for extended-duration prophylaxis of venous thromboembolism, triggering a $2.0 million milestone payment to Millennium which is recorded as a research and development expense in our condensed consolidated statement of operations. In June 2017, Bevyxxa received regulatory approval in the United States, triggering a $5.0 million milestone payment to Millennium which is recorded as finite-lived intangible assets in
our
condensed consolidated balance sheet and will be amortized on a straight-line basis over the remaining estimated patent life. Amortization expenses were $141,000 for the three months ended March 31, 2018. These amortization expenses were recorded as cost of sales. Should Bevyxxa receive regulatory approval in Europe, another $5.0 million will become payable to Millennium by us. Future net product sales generated by us will be subject to a tier royalty ranging between 2% and 8%.
F-27
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
An additional $23.0
million
in milestone payments would become due if
Bevyxxa
i
s approved
for other indications specified in the agreement
in the United States and Europe.
Astellas Pharma, Inc. (“Astellas”)
In 2010, we amended and restated the license agreement we executed with Astellas in August 2005. The amended and restated license agreement provides us certain exclusive rights to research, develop and commercialize Syk inhibitors. Pursuant to the agreement, we may be required to pay Astellas up to $71.5 million in milestone payments upon the achievement of certain regulatory, approval and sales events for each Syk inhibitor we develop. Additionally, in the event that we enter into an agreement with a third party to develop and commercialize Syk inhibitors, we would be required to pay Astellas 20% of any payments (excluding royalties) received under the collaboration. These payments would be creditable against the aforementioned milestone payments. In addition, we are required to pay Astellas royalties for worldwide sales for any commercial Syk inhibitor product.
In December 2016, we out-licensed exclusive rights to cerdulatinib in topical formulation, excluding oncology, to Dermavant Sciences GmbH (“Dermavant”). Twenty percent of the milestone payments received from Dermavant are payable to Astellas. We recognized zero research and development expense in our condensed consolidated statement of operations for the three months ended March, 31, 2018 and 2017, respectively, associated with our payment obligations to Astellas.
9. Notes Payable
BMS and Pfizer Promissory Notes
In December 2016, we entered into a supplemental funding support agreement with BMS and Pfizer whereby we received $50.0 million in exchange for two promissory notes totaling $65.0 million that become due in December 2024 (“Notes”). The use of funds is restricted to development activities needed for regulatory approval of Andexxa by the FDA and European Medicines Agency (“EMA”) as provided for in the agreement.
Pursuant to the terms of the agreement, we are required to pay down the Notes each quarter in an amount equal to 5% of net sales of Andexxa in the United States and European Union (“EU”). Should the initial regulatory approval of Andexxa in the United States and EU not be achieved by January 1, 2019, one hundred percent of payments due to us under the Japan License agreement and fifty percent of all other Andexxa license fees and milestone payments received from third-party collaborators will be applied to the Notes. In addition, if the approval of Andexxa in the United States and EU is not achieved by January 1, 2019, we are able to reduce the repayment amount to $60.0 million if such amount is paid by December 31, 2021 and regardless of the timing of regulatory approval, we may reduce the repayment amount to $62.5 million if such amount is paid by December 31, 2023. Any unpaid amounts shall become immediately due upon: 1) a change of control of our company; 2) an event of default; and 3) termination for breach. We have the right to prepay the repayment amount at any time without any penalty.
The accounting for such funding agreement requires us to make certain estimates and assumptions, including timing of Andexxa approval, timing of royalty payments due to BMS and Pfizer, the expected rate of return to BMS and Pfizer, the split between current and long-term portions of the obligation and accretion of related interest expense.
The upfront cash receipt of $50.0 million is recorded as Notes payable, long term at issuance. We are accruing for interest over the term of the related note. The carrying values of the Notes payable at March 31, 2018 and December 31, 2017, including accrued interest of $5.1 million and $
4.2
million, are $51.4 million and $50.6 million, respectively. The total carrying value of the Notes, including accrued interest, will be classified as long-term on the condensed consolidated balance sheet until we receive regulatory approval of Andexxa or until amounts are contractually payable to BMS and Pfizer.
F-28
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
We evaluated the features of the Notes and determined that certain features require acceleration of payments such as pursuant to a change of control or an event of default, as well as the terms that adju
st the total amount of interest required to be paid based upon the timing of initial regulatory approval in the United States and EU. We determined that these features (embedded derivatives) require bifurcation and fair value recognition. We determined the
fair value of each derivative using a Monte Carlo simulation model taking into account the probability of these events occurring and potential repayment amounts and timing of such payments that would result under various scenarios (see Note 3
“Revenue Rec
ognition” to these condensed consolidated financial statements
). We will remeasure the embedded derivatives to fair value each reporting period until the repayment, termination or maturity of the long-term note payable. For the three months ended March 31
, 2018, we recognized $0.
6
million loss upon remeasu
rement of the embedded derivativ
es.
The estimated fair value of the Notes payable at March 31, 2018 and December 31, 2017 was $54.0 million and $55.5 million, respectively, and the fair value was measured using Level 3 inputs. The estimated fair market value was calculated using a Monte Carlo simulation model with inputs consistent with those used in determining the embedded derivative values as described in Note 3 “Revenue Recognition” to these condensed consolidated financial statements.
Royalty-based Financing
In February 2017, we entered into a purchase and sale agreement (the “Royalty Sales Agreement”) with HealthCare Royalty Partners and its affiliates. (“HCR”) whereby HCR acquired a royalty interest in future worldwide net sales of Andexxa. We received $50.0 million upon closing and are due to receive an additional $100.0 million following the U.S. regulatory approval of Andexxa in May 2018.
We are required to pay HCR a royalty of 2.0% based on tiered net worldwide sales of Andexxa. Upon the second closing and receipt of $100.0 million from HCR, the tiered royalty rate will increase to a range of 7.85% to 3.58%, as the applicable rate decreases starting at worldwide net sales levels above $150.0 million. Total royalty payments are capped at 195% of the funded amount, however, the royalty rates are subject to increase based on the timing of manufacturing approvals from the FDA and/or EMA. We have evaluated the terms of the Royalty Sales Agreement and concluded that the features of the funded amount are similar to those of a debt instrument. Accordingly, we have accounted for the transaction as long-term debt.
As the repayment of the
funded amount is contingent upon the sales volumes of Andexxa, the repayment term may be shortened or extended depending on the actual sales of Andexxa. The repayment period is commencing from the first commercial sale of Andexxa in any country and expiring on the date when HCR has received cash payments totaling an aggregate of 195% of the funded amount
s
.
We evaluated the terms of the debt and determined that certain features, such as the increase in the repayment amount up to $125.0 million upon a change of control and the variability in the royalty payments based upon the timing of initial regulatory approval in the United States and EU, are embedded derivatives that require bifurcation from the debt instrument and fair value recognition. We determined the fair value of each derivative using a Monte Carlo simulation model taking into account the probability of these events occurring and potential repayment amounts and timing of such payments that would result under various scenarios, as further described in Note 3 “Revenue Recognition” to these condensed consolidated financial statements.
We will remeasure the embedded derivatives to fair value each reporting period until the time the features lapse and/or termination of the Royalty Sales Agreement.
For the three months ended March 31, 2018, we recognized a gain of $2.2 million upon remeasurement of the embedded derivatives.
The effective interest rate as of March 31, 2018 was 14.0%. For the three months ended March 31, 2018 and 2017, accrued interest in the amount of $1.8 million and $0.9 million, respectively, were added to the principal balance of the debt.
F-29
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
In connection with the Royalty Sales Agreement, we paid HCR a fee of
$2.0
million and incurred additional debt issuance costs tota
ling $0.6 million, which includes expenses that we paid on behalf of HCR and expenses incurred directly by us.
Debt issuance costs have been netted against the debt as of
March 31, 2018
and are being amortized over the estimated term of the debt using the
effective interest method. For the
three months ended March 31, 2018
and 2017
,
we
recognized interest expense, including amortization of the debt discount, related to the debt of
$1.8
million
and $0.9
million
, respectively
. The assumptions used in determin
ing the expected repayment term of the debt and amortization period of the issuance costs requires that we make estimates that could impact the short and long-term classification of these costs, as well as the period over which these costs will be amortize
d. The carrying value of the
long-term
debt as of
March 31, 2018
and December 31, 2017
was
$56.0
million
and $54.3
million
, respectively
, inclusive of accrued interest expense of
$9.2
million
and $7.4
million
, respectively,
and net o
f unamortized debt discount of
$2.3
million
and $2.3
million
, respectively
.
The total carrying value of the debt, including accrued interest, will be classified as long-term on the consolidated balance sheet until we achieve regulatory approval of
Andexxa
.
The estimated fair value of long-term debt at March 31, 2018 and December 31, 2017 was $57.8 million and $58.8 million, respectively, and the fair value was measured using Level 3 inputs. The estimated fair market value was calculated using a Monte Carlo simulation model with inputs consistent with those used in determining the embedded derivative values as described in Note 3 “Revenue Recognition” to these condensed consolidated financial statements.
10. Stock Based Compensation
Stock Options
The following table summarizes stock option activity under our 2013 Equity Incentive Plan (the “2013 Plan”) and an Inducement Plan, and related information during the three months ended March 31, 2018:
|
|
Shares
|
|
|
|
|
|
|
|
Subject to
|
|
|
Weighted-
|
|
|
|
Outstanding
|
|
|
Average Exercise
|
|
|
|
Options
|
|
|
Price Per Share
|
|
Balance at December 31, 2017
|
|
|
6,514,538
|
|
|
$
|
31.36
|
|
Options granted
|
|
|
1,144,976
|
|
|
|
47.83
|
|
Options exercised
|
|
|
(185,664
|
)
|
|
|
22.30
|
|
Options canceled
|
|
|
(180,117
|
)
|
|
|
37.37
|
|
Balance at March 31, 2018
|
|
|
7,293,733
|
|
|
$
|
34.03
|
|
Performance Stock Options (“PSOs”)
The following table summarizes PSO activities under our 2013 Plan and related information
during the three months ended March 31, 2018:
|
|
Shares
|
|
|
|
|
|
|
|
Subject to
|
|
|
Weighted-
|
|
|
|
Outstanding
|
|
|
Average Exercise
|
|
|
|
PSOs
|
|
|
Price Per Share
|
|
Balance at December 31, 2017
|
|
|
164,783
|
|
|
$
|
23.76
|
|
Options granted
|
|
|
—
|
|
|
|
—
|
|
Options exercised
|
|
|
(1,302
|
)
|
|
|
23.76
|
|
Options canceled
|
|
|
—
|
|
|
|
—
|
|
Balance at March 31, 2018
|
|
|
163,481
|
|
|
$
|
23.76
|
|
F-30
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Restricted Stock Units (“RSUs”)
The following table summarizes RSU activity under our 2013 Plan and Inducement Plan, and related information during the three months ended March 31, 2018:
|
|
Shares
|
|
|
|
|
|
|
|
Subject to
|
|
|
Weighted-
|
|
|
|
Outstanding
|
|
|
Average Grant Date
|
|
|
|
RSUs
|
|
|
Fair Value Per Share
|
|
Balance at December 31, 2017
|
|
|
600,334
|
|
|
$
|
27.87
|
|
RSUs granted
|
|
|
359,057
|
|
|
|
48.78
|
|
RSUs released
|
|
|
(279,555
|
)
|
|
|
28.49
|
|
RSUs canceled
|
|
|
(33,711
|
)
|
|
|
34.11
|
|
Balance at March 31, 2018
|
|
|
646,125
|
|
|
$
|
38.90
|
|
Performance Stock Units
(“PSUs”)
In March 2018, the Compensation Committee of our Board of Directors approved a program to award up to 102,600 PSUs to the management team based on the achievement of certain regulatory and revenue goals
related to Andexxa.
The following table summarizes PSU activity under our 2013 Plan and related information during the three months ended March 31, 2018:
|
|
Shares
|
|
|
|
|
|
|
|
Subject to
|
|
|
Weighted-
|
|
|
|
Outstanding
|
|
|
Average Grant Date
|
|
|
|
PSUs
|
|
|
Fair Value Per Share
|
|
Balance at December 31, 2017
|
|
|
304,754
|
|
|
$
|
25.34
|
|
PSUs granted
|
|
|
102,600
|
|
|
|
32.66
|
|
PSUs released
|
|
|
(6,004
|
)
|
|
|
49.83
|
|
PSUs canceled
|
|
|
(8,125
|
)
|
|
|
25.54
|
|
Balance at March 31, 2018
|
|
|
393,225
|
|
|
$
|
26.87
|
|
The table below sets forth the functional classification of stock-based compensation expense for the periods presented (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Research and development
|
|
$
|
4,452
|
|
|
$
|
4,150
|
|
Selling, general and administrative
|
|
|
6,528
|
|
|
|
4,884
|
|
Total stock-based compensation
|
|
$
|
10,980
|
|
|
$
|
9,034
|
|
F-31
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1
1
. Net Loss per Share Attributable to Portola Common Stockholders
Basic net loss per share attributable to Portola Common Stockholders has been computed by dividing the net loss attributable to Portola Common Stockholders by the weighted-average number of shares of Common Stock outstanding during the period. Diluted net loss per share attributable to Portola Common Stockholders is calculated by dividing net loss attributable to Portola Common Stockholders by the weighted average number of shares of Common Stock and potential dilutive securities outstanding during the period.
The following outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share attributable to Portola common stockholders for the periods presented because including them would have been antidilutive:
|
|
Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Stock options to purchase common stock
|
|
|
7,293,733
|
|
|
|
6,585,143
|
|
Performance stock options
|
|
|
163,481
|
|
|
|
180,752
|
|
Common stock warrants
|
|
|
1,500
|
|
|
|
1,500
|
|
Restricted stock units
|
|
|
646,125
|
|
|
|
631,743
|
|
Performance stock units
|
|
|
393,225
|
|
|
|
369,118
|
|
Employee stock purchase plan
|
|
|
12,391
|
|
|
|
5,816
|
|
Up to one million shares may be contingently issued, if certain performance conditions are met under an agreement with one of our contract manufacturers
.
F-32