FORM 10-Q
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British Columbia, Canada
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N/A
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large Accelerated Filer
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◻
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Accelerated Filer
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☒
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Non-Accelerated Filer
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◻ (Do not check if a smaller reporting company)
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Smaller Reporting Company
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◻
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Emerging growth company
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◻
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Page
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September 30, 2017
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December 31, 2016
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||||
Assets
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Current assets:
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||||
Cash and cash equivalents
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$
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70,501
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$
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108,927
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Restricted cash
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503
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390
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Accounts receivable, net
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14,516
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9,339
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Inventories - current
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15,711
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15,718
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Insurance proceeds receivable
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22,000
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22,000
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Prepaid expenses and other current assets
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7,641
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9,762
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Total current assets
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130,872
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166,136
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Inventories - non-current
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40,150
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59,003
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Property and equipment, net
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3,450
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4,159
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Intangible assets, net
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231,546
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250,324
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Other assets
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2,303
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1,160
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Total assets
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$
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408,321
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$
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480,782
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Liabilities and stockholders’ equity
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Current liabilities:
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Accounts payable
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$
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15,744
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$
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17,609
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Accrued liabilities
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40,932
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37,180
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Provision for legal settlement - current
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33,336
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64,010
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Total current liabilities
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90,012
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118,799
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Long-term liabilities:
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Convertible notes, net
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249,789
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225,584
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Provision for legal settlement - non-current
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29,714
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—
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Other liabilities
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539
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612
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Total liabilities
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370,054
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344,995
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Commitments and contingencies (Note 12)
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Stockholders’ equity:
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Common stock, without par value, 100,000 shares authorized at September 30, 2017 and December 31, 2016; 18,652 and 18,530 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively
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551,925
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551,259
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Additional paid-in-capital
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72,129
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69,149
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Accumulated deficit
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(689,406
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)
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(587,208
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)
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Accumulated other comprehensive income
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103,619
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102,587
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Total stockholders’ equity
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38,267
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135,787
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Total liabilities and stockholders’ equity
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$
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408,321
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$
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480,782
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2017
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2016
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2017
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2016
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Net revenues
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$
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28,669
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$
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—
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$
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99,530
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$
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—
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Cost of product sales
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29,505
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—
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60,227
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—
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Operating expenses
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Selling, general and administrative
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21,395
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3,162
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72,360
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13,572
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Research and development
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17,112
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2,855
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37,236
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8,774
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Restructuring charges
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56
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—
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2,541
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—
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Total operating expenses
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38,563
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6,017
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112,137
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22,346
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Loss from operations
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(39,399
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)
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(6,017
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)
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(72,834
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)
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(22,346
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)
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Interest (expense) income, net
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(9,897
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)
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110
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(28,722
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)
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240
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Fair value gain (loss) on investment
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—
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—
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—
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(10,704
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)
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Other income (expense), net
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49
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(144
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176
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(244
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)
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Loss before provision for income taxes
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(49,247
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(6,051
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(101,380
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)
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(33,054
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)
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(Provision for) recovery of income taxes
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(497
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)
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115
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(762
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)
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104
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Net loss
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$
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(49,744
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)
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$
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(5,936
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)
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$
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(102,142
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)
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$
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(32,950
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)
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Net loss per common share—basic and diluted
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$
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(2.67
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)
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$
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(0.56
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$
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(5.49
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)
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$
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(3.12
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)
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Weighted-average shares outstanding—basic and diluted
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18,648
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10,565
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18,599
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10,565
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2017
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2016
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2017
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2016
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Net loss
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$
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(49,744
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)
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$
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(5,936
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)
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$
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(102,142
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)
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$
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(32,950
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)
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Other comprehensive income:
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Foreign currency translation
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(124
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—
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1,032
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—
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Other comprehensive income
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(124
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—
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1,032
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—
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Comprehensive loss
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$
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(49,868
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)
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$
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(5,936
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$
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(101,110
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$
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(32,950
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)
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Nine Months Ended
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September 30,
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||||||
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2017
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2016
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Cash used in operating activities
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Net loss
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$
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(102,142
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)
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$
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(32,950
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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Depreciation
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1,452
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85
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Amortization of intangible assets
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18,778
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—
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Stock-based compensation
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3,419
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253
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Non-cash interest expense
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24,205
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—
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Provision for inventory excess and obsolescence
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18,859
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—
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Unrealized foreign exchange gain
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(195
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)
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233
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Gain on sale of long-lived assets
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—
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42
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Fair value loss on investment
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—
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10,704
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Deferred income taxes
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106
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(252
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)
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Deferred rent
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16
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—
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Changes in assets and liabilities, excluding the effect of acquisition:
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Accounts receivable
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(5,177
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)
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7
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Inventories
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1
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—
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Prepaid expenses and other assets
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757
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161
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Accounts payable
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(1,887
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)
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1,603
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Accrued liabilities and other liabilities
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2,704
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(677
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)
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Net cash used in operating activities
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(39,104
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)
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(20,791
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)
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Cash used in investing activities
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Net proceeds from sales of long-lived assets
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—
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203
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Purchases of property and equipment
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(723
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)
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(115
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)
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Loan receivable
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—
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(3,000
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)
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Net cash used in investing activities
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(723
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)
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(2,912
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)
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Cash provided by (used in) financing activities
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Issuance of common shares
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174
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—
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Cash distribution to common shareholders
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—
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(15,000
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)
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Settlement of Backstop Agreement
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—
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15,000
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Aralez investment
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—
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(45,000
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)
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Net cash provided by (used in) financing activities
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174
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(45,000
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)
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Exchange rate effect on cash
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1,227
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(65
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)
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Net decrease in cash and cash equivalents
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(38,426
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)
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(68,768
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)
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Cash and cash equivalents, beginning of period
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$
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108,927
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$
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141,824
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Cash and cash equivalents, end of period
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$
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70,501
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$
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73,056
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Supplemental disclosures of cash flow information
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Cash paid for interest
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$
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3,250
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|
$
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—
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Cash paid for taxes
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$
|
1,386
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|
|
$
|
—
|
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Non-cash investing activities
|
|
|
|
||||
Purchases of property and equipment included in accounts payable
|
$
|
22
|
|
|
$
|
—
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Three months ended
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Nine months ended
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||||
(in millions, except for per share information)
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September 30, 2016
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September 30, 2016
|
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Net revenues
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$
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35.4
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$
|
115.6
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Net loss
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(32.5
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)
|
|
(171.9
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)
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Basic and diluted loss per share
|
$
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(3.08
|
)
|
|
$
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(16.27
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)
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September 30,
|
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December 31,
|
||||
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2017
|
|
2016
|
||||
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(in thousands)
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||||||
Work-in-process
|
$
|
21,926
|
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$
|
20,219
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Finished goods
|
33,935
|
|
|
54,502
|
|
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Total
|
55,861
|
|
|
74,721
|
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Less: Inventories - current
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(15,711
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)
|
|
(15,718
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)
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Inventories - non-current
|
$
|
40,150
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|
$
|
59,003
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|
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September 30, 2017
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Gross Carrying Value
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Accumulated Amortization
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Net Carrying Value
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||||||
Developed technology - JUXTAPID
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$
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42,300
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$
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(3,279
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)
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$
|
39,021
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Developed technology - MYALEPT
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210,158
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(17,633
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)
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|
192,525
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Total intangible assets
|
$
|
252,458
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|
|
$
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(20,912
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)
|
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$
|
231,546
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|
|
December 31, 2016
|
||||||||||
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Gross Carrying Value
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|
Accumulated Amortization
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|
Net Carrying Value
|
||||||
Developed technology - JUXTAPID
|
$
|
42,300
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|
|
$
|
(328
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)
|
|
$
|
41,972
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|
Developed technology - MYALEPT
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210,158
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|
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(1,806
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)
|
|
208,352
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Total intangible assets
|
$
|
252,458
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|
|
$
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(2,134
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)
|
|
$
|
250,324
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Years Ending December 31,
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Amount
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2017 (remaining 3 months)
|
$
|
6,275
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|
2018
|
25,096
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|
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2019
|
25,096
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|
|
2020
|
25,096
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|
|
2021 and thereafter
|
149,983
|
|
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Total intangible assets subject to amortization
|
$
|
231,546
|
|
|
September 30,
2017 |
|
December 31,
2016 |
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(in thousands)
|
||||||
Accrued employee compensation and related costs
|
$
|
6,741
|
|
|
$
|
7,920
|
|
Accrued sales allowances
|
12,074
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|
|
7,849
|
|
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Other accrued liabilities
|
22,117
|
|
|
21,411
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|
||
Total
|
$
|
40,932
|
|
|
$
|
37,180
|
|
|
September 30, 2017
|
|
December 31, 2016
|
||||
Principal
|
$
|
324,998
|
|
|
$
|
324,998
|
|
Less: debt discount, net
|
(75,209
|
)
|
|
(99,414
|
)
|
||
Net carrying amount of Convertible Notes
|
$
|
249,789
|
|
|
$
|
225,584
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
September 30, 2017
|
|
September 30, 2016
|
|
September 30, 2017
|
|
September 30, 2016
|
||||||||
Contractual interest expense
|
$
|
1,625
|
|
|
$
|
—
|
|
|
$
|
4,875
|
|
|
$
|
—
|
|
Amortization of debt discount
|
8,399
|
|
|
—
|
|
|
24,205
|
|
|
—
|
|
||||
Total
|
$
|
10,024
|
|
|
$
|
—
|
|
|
$
|
29,080
|
|
|
$
|
—
|
|
Years Ending December 31,
|
Amount
|
||
2017 (3 months remaining)
|
$
|
—
|
|
2018
|
6,500
|
|
|
2019
|
331,498
|
|
|
|
337,998
|
|
|
Less amounts representing interest
|
(13,000
|
)
|
|
Less debt discount, net
|
(75,209
|
)
|
|
Net carrying amount of Convertible Notes
|
$
|
249,789
|
|
|
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
|
Significant
Other Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
|
Balance at September 30, 2017
|
||||||||
|
(in thousands)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
30,038
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
30,038
|
|
Restricted cash
|
503
|
|
|
—
|
|
|
—
|
|
|
503
|
|
||||
Total assets
|
$
|
30,541
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
30,541
|
|
|
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
|
Significant
Other Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
|
Balance at December 31, 2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
68,234
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
68,234
|
|
Restricted cash
|
390
|
|
|
—
|
|
|
—
|
|
|
390
|
|
||||
Total assets
|
$
|
68,624
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
68,624
|
|
|
Restructuring Charges
|
||
|
(in thousands)
|
||
Restructuring balance at December 31, 2016
|
$
|
—
|
|
Costs incurred
|
2,541
|
|
|
Cash paid
|
(2,651
|
)
|
|
Other adjustments
|
282
|
|
|
Restructuring balance at September 30, 2017
|
$
|
172
|
|
|
As of September 30,
|
||||
|
2017
|
|
2016
|
||
Stock options
|
1,838
|
|
|
498
|
|
Unvested restricted stock units
|
705
|
|
|
46
|
|
Warrants
|
14,515
|
|
|
—
|
|
Convertible notes
|
1,619
|
|
|
—
|
|
Total
|
18,677
|
|
|
544
|
|
|
U.S.
|
|
Brazil
|
|
Other Foreign Countries
|
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
Lomitapide
|
$
|
10,304
|
|
|
$
|
—
|
|
|
$
|
4,888
|
|
|
$
|
15,192
|
|
Metreleptin
|
11,311
|
|
|
96
|
|
|
2,070
|
|
|
13,477
|
|
||||
Total
|
$
|
21,615
|
|
|
$
|
96
|
|
|
$
|
6,958
|
|
|
$
|
28,669
|
|
|
U.S.
|
|
Brazil
|
|
Other Foreign Countries
|
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
Lomitapide
|
$
|
32,236
|
|
|
$
|
5,939
|
|
|
$
|
13,755
|
|
|
$
|
51,930
|
|
Metreleptin
|
37,652
|
|
|
5,082
|
|
|
4,866
|
|
|
47,600
|
|
||||
Total
|
$
|
69,888
|
|
|
$
|
11,021
|
|
|
$
|
18,621
|
|
|
$
|
99,530
|
|
Insurance Proceeds Receivable
|
|
||
Class action lawsuit insurance proceeds
|
$
|
22,000
|
|
|
|
|
|
Provision for Legal Settlement
|
|
|
|
Class action lawsuit settlement
|
$
|
(22,250
|
)
|
SEC settlement
|
(4,100
|
)
|
|
DOJ settlement
|
(36,700
|
)
|
|
Total provision for legal settlement
|
$
|
(63,050
|
)
|
•
|
Lomitapide is marketed in the U.S. under the brand name JUXTAPID (lomitapide) capsules ("JUXTAPID"). JUXTAPID is approved in the United States ("U.S.") as an adjunct to a low-fat diet and other lipid-lowering treatments, including low-density lipoprotein ("LDL") apheresis where available, to reduce low-density lipoprotein cholesterol ("LDL-C"), total cholesterol ("TC"), apolipoprotein B ("apo B") and non-high-density lipoprotein cholesterol ("non-HDL-C") in adult patients with homozygous familial hypercholesterolemia ("HoFH"). Lomitapide is approved in the European Union ("EU"), under the brand name LOJUXTA (lomitapide) hard capsules ("LOJUXTA") for the treatment of adult patients with HoFH, as well as in Japan, Canada, and a small number of other countries. In December 2016, Aegerion out-licensed the rights to commercialize LOJUXTA in the EU and certain other jurisdictions to Amryt Pharma plc ("Amryt") and will receive sales milestones and royalties on net sales in those jurisdictions. In December 2016, Aegerion launched JUXTAPID as a treatment for HoFH in Japan, after receiving reimbursement approval. Lomitapide is also sold, on a named patient basis, in Brazil and in a limited number of other countries outside the U.S. where such sales are permitted as a result of the approval of lomitapide in the U.S. or the EU. In June 2017, in connection with our implementation of the modified JUXTAPID Risk Evaluation Management Strategy ("REMS") program in the U.S., the FDA approved our proposal to extend the timeframe to December 29, 2017 to meet the requirements concerning recertification of all current JUXTAPID prescribers and pharmacies and completion of a new patient prescriber acknowledgment form and new prescription authorization form for each existing and new JUXTAPID patient, so long as we provide the FDA monthly status reports, including an assessment as to whether our activities are on track to be completed by December 29, 2017, along with other information.
|
•
|
Metreleptin, a recombinant analog of human leptin, is marketed in the U.S. under the brand name MYALEPT (metreleptin) for injection ("MYALEPT"). MYALEPT is approved in the U.S. as an adjunct to diet as replacement therapy to treat the complications of leptin deficiency in patients with congenital or acquired generalized lipodystrophy ("GL"). In December 2016, we submitted a marketing authorization application ("MAA") to the European Medicines Agency ("EMA") to seek approval for metreleptin in the EU, under the brand name MYALEPTA, as replacement therapy to treat complications of leptin deficiency in patients with GL and in a subset of patients with partial lipodystrophy ("PL"). To address a question raised by the EMA in its Day 120 List of Questions (“Day 120 Questions”) regarding the potential risk of medication errors with MYALEPTA due to its current presentation, in July 2017, we proposed to develop new patient administration kits for MYALEPTA, including a revised package leaflet; conduct user testing on the new kits; and provide patients with education and training risk minimization materials as part of the MYALEPTA risk management plan. In October 2017, we submitted our responses to the Day 120 Questions, and we expect the EMA to respond with a List of Outstanding Issues in December 2017. Given that we expect the EMA will respond with additional questions in December, and that a meeting with the EMA may be required in the first quarter of 2018, we expect that the potential approval date of our MAA might be delayed until the second quarter of 2018. In May 2017, we received feedback from the U.S. Food and Drug Administration ("FDA") that a prospective placebo-controlled study will be required to support a marketing application in the U.S. for the use of metreleptin to treat a subset of the PL indication, and we are evaluating next steps. We plan to file for formal regulatory approvals for metreleptin in GL and, subject to EMA feedback on the PL subset indication, the PL subset in the second half of 2018 in other key markets, including Brazil and Colombia. We offer metreleptin through expanded access programs in countries where permitted by applicable regulatory authorities and under applicable laws, and generate revenue in certain markets where named patient sales are permitted based on the approval of metreleptin in the U.S. We plan to use our knowledge of the diverse effects of leptin on various physiologic functions to explore new opportunities for metreleptin as a platform drug to potentially treat patients suffering from a range of low-leptin mediated metabolic diseases. We are evaluating and prioritizing these potential opportunities, and reviewing options for raising capital to fund such opportunities, upon which such opportunities are largely dependent.
|
•
|
stabilizing sales of JUXTAPID as a treatment for adult HoFH patients in the U.S. despite competition from PCSK9 inhibitor products, among other factors, which have had a significant adverse impact on sales of JUXTAPID, and gaining market acceptance in the other countries, including Japan, where lomitapide is approved and being commercialized, or may in the future receive approval and be commercialized;
|
•
|
evaluating the potential for future clinical development of metreleptin and clinical development pathway in additional indications, including certain low-leptin mediated metabolic diseases, and working to raise capital to fund the development of such additional indications;
|
•
|
managing our costs and expenses to better align with our revenues, and strengthening our capital structure with the primary goal of funding development work for additional indications of metreleptin, by, among other things, Aegerion’s potential refinancing of the Convertible Notes, while supporting approved products in a compliant manner;
|
•
|
continuing to support patient access to and reimbursement for our products in the U.S. without significant restrictions, particularly given the availability of PCSK9 inhibitor products in the U.S., which has adversely impacted reimbursement of JUXTAPID, and given the considerable number of eligible JUXTAPID patients in the U.S. who are on Medicare Part D and the significant percentage of such patients who may not be able to afford their out-of-pocket co-payments for our products, given that the only source of financial support for some of the patients may be through patient assistance programs operated by independent charitable 501(c)(3) organizations that may not provide adequate financial assistance;
|
•
|
implementing the modified JUXTAPID REMS program in the U.S., which includes requirements to recertify all prescribers and pharmacies and a new patient counseling and acknowledgment requirement for existing and new patients, by the new December 29, 2017 implementation deadline, while working to limit adult HoFH patient attrition from JUXTAPID as a result of such new requirements;
|
•
|
supporting the commercialization of JUXTAPID in Japan;
|
•
|
continuing to support sales of lomitapide as a treatment for HoFH in Brazil on a named patient basis, particularly in light of the economic challenges, ongoing government investigations, and ongoing court proceeding reviewing the regulatory framework for named patient sales in Brazil, and in other key countries where named patient sales are permitted, despite the availability of PCSK9 inhibitors on a named patient sales basis in such countries;
|
•
|
building and maintaining market acceptance for MYALEPT in the U.S. for the treatment of complications of leptin deficiency in GL patients, and supporting named patient sales of metreleptin in GL in Brazil, particularly in light of local economic challenges and ongoing governmental investigations, and other key countries, including Turkey, where such sales are permitted as a result of the U.S. approval or under local law;
|
•
|
gaining regulatory, pricing and reimbursement approvals to market our products in countries in which the products are not currently approved and/or reimbursed or for new indications, including obtaining approval of the MAA seeking marketing approval of metreleptin in the EU as a treatment for complications of leptin deficiency in GL patients and a subset of PL, and seeking approval of metreleptin in Brazil and other key markets as a treatment for complications of leptin deficiency in GL patients, and subject to EMA feedback on the PL subset indication, PL subset patients;
|
•
|
preparing for the launch of metreleptin in Europe as a treatment for complications of leptin deficiency in GL patients and a subset of PL, in the event we obtain regulatory, pricing and reimbursement approvals in the EU for metreleptin;
|
•
|
Aegerion complying with the various agreements and judgments entered into with the DOJ and SEC in September 2017, including a plea agreement with the DOJ, a civil settlement agreement with the DOJ, separate civil settlement agreements with multiple U.S. states, a final judgment entered in connection with a complaint filed by the SEC, a three-year deferred prosecution agreement with the DOJ, a five-year corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services (the "CIA"), and a civil consent decree with the FDA and the DOJ relating to the JUXTAPID REMS, and managing other ongoing government investigations pertaining to its products;
|
•
|
Aegerion receiving final court approval of its proposed criminal plea in accordance with the terms of the DOJ Plea Agreement entered into in September 2017, despite concern expressed by the U.S. District Court judge assigned to the matter about the fact that the Plea Agreement does not allow the court to alter the sentence;
|
•
|
Aegerion receiving final court approval of its ongoing securities class action in accordance with the terms of agreement in principle;
|
•
|
working on the potential out-license of zuretinol;
|
•
|
engaging in possible further development efforts related to our existing products, and assessing, and possibly acquiring, potential new product candidates targeted at rare diseases where we believe we can leverage our infrastructure and expertise;
|
•
|
minimizing the number of patients who are eligible to receive but decide not to commence treatment with our products, or who discontinue treatment, by supporting activities such as patient support programs, to the extent permitted in a particular country;
|
•
|
continuing to embed a culture of compliance, ethics and integrity throughout Novelion and its subsidiaries;
|
•
|
defending challenges to the patents or our claims of exclusivity for lomitapide in the U.S., including against potential generic submission with the FDA with respect to lomitapide; and expanding the intellectual property portfolio for our products; and
|
•
|
effectively transitioning distribution of JUXTAPID in the U.S. to the specialty pharmacy that distributes MYALEPT in the U.S., with which Aegerion signed a contract for JUXTAPID distribution in October 2017, without patient drop outs or interruptions or delays to patient prescriptions during the transition process, or similar challenges at the time the use of JUXTAPID by a patient next comes up for review or prior authorization by a payer.
|
•
|
Net revenues were
$28.7 million
and
$99.5 million
for the
three and nine months ended September 30, 2017
, respectively, representing revenue from lomitapide and metreleptin.
|
•
|
Costs of product sales were
$29.5 million
and
$60.2 million
for the
three and nine months ended September 30, 2017
, representing costs of selling lomitapide and metreleptin and the reserves recorded for excess and obsolete inventory, which are derived from projected sales activities, respective product shelf-life and their respective fair value.
|
•
|
Selling, general and administrative expenses increased from
$3.2 million
in the
three months ended September 30, 2016
to
$21.4 million
in the
three months ended September 30, 2017
, and from
$13.6 million
in the
nine months ended September 30, 2016
to
$72.4 million
in the
nine months ended September 30, 2017
. This increase was primarily due to our recognition of 100% of Aegerion’s financial performance in the
nine months ended September 30, 2017
partially offset by a $4.0 million banker advisory fee incurred in the prior year, and not included in the current year, in connection with the completion of the Aralez Investment.
|
•
|
Research and development expenses increased from
$2.9 million
in the
three months ended September 30, 2016
to
$17.1 million
in the
three months ended September 30, 2017
, and from
$8.8 million
in the
nine months ended September 30, 2016
to
$37.2 million
in the
nine months ended September 30, 2017
. This increase was primarily driven by our recognition of 100% of Aegerion’s financial performance in the
nine months ended September 30, 2017
.
|
•
|
We used
$39.1 million
of net cash from operations for the
nine months ended September 30, 2017
, due largely to a
$102.1 million
net loss,
$6.9 million
in nonrecurring payments associated with the Merger, and $
3.6 million
used in cash related to the changes in other assets and liabilities, offset by non-cash adjustments of
$66.6 million
. Cash and cash equivalents totaled approximately
$70.5 million
as of
September 30, 2017
.
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||
|
2017
|
|
2016
|
|
Change
|
|
%
|
|||||||
|
(in thousands)
|
|
|
|||||||||||
Net revenues
|
$
|
28,669
|
|
|
$
|
—
|
|
|
$
|
28,669
|
|
|
nm
|
|
Cost of product sales
|
29,505
|
|
|
—
|
|
|
29,505
|
|
|
nm
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|||||||
Selling, general and administrative
|
21,395
|
|
|
3,162
|
|
|
18,233
|
|
|
577
|
%
|
|||
Research and development
|
17,112
|
|
|
2,855
|
|
|
14,257
|
|
|
499
|
%
|
|||
Restructuring charges
|
56
|
|
|
—
|
|
|
56
|
|
|
nm
|
|
|||
Total operating expenses
|
38,563
|
|
|
6,017
|
|
|
32,546
|
|
|
541
|
%
|
|||
Loss from operations
|
(39,399
|
)
|
|
(6,017
|
)
|
|
(33,382
|
)
|
|
555
|
%
|
|||
Interest (expense) income, net
|
(9,897
|
)
|
|
110
|
|
|
(10,007
|
)
|
|
nm
|
|
|||
Other income (expense), net
|
49
|
|
|
(144
|
)
|
|
193
|
|
|
(134
|
)%
|
|||
Loss before provision for income taxes
|
(49,247
|
)
|
|
(6,051
|
)
|
|
(43,196
|
)
|
|
714
|
%
|
|||
(Provision for) recovery of income taxes
|
(497
|
)
|
|
115
|
|
|
(612
|
)
|
|
(532
|
)%
|
|||
Net loss
|
$
|
(49,744
|
)
|
|
$
|
(5,936
|
)
|
|
$
|
(43,808
|
)
|
|
738
|
%
|
|
Three Months Ended September 30,
|
||||||
|
2017
|
|
2016
|
||||
|
(in thousands)
|
||||||
Lomitapide
|
$
|
15,192
|
|
|
$
|
—
|
|
Metreleptin
|
13,477
|
|
|
—
|
|
||
Total net revenues
|
$
|
28,669
|
|
|
$
|
—
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|||||||||
|
2017
|
|
2016
|
|
Change
|
|
%
|
|||||||
|
(in thousands)
|
|
|
|||||||||||
Net revenues
|
$
|
99,530
|
|
|
$
|
—
|
|
|
$
|
99,530
|
|
|
nm
|
|
Cost of product sales
|
60,227
|
|
|
—
|
|
|
60,227
|
|
|
nm
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|||||||
Selling, general and administrative
|
72,360
|
|
|
13,572
|
|
|
58,788
|
|
|
433
|
%
|
|||
Research and development
|
37,236
|
|
|
8,774
|
|
|
28,462
|
|
|
324
|
%
|
|||
Restructuring charges
|
2,541
|
|
|
—
|
|
|
2,541
|
|
|
nm
|
|
|||
Total operating expenses
|
112,137
|
|
|
22,346
|
|
|
89,791
|
|
|
402
|
%
|
|||
Loss from operations
|
(72,834
|
)
|
|
(22,346
|
)
|
|
(50,488
|
)
|
|
226
|
%
|
|||
Interest (expense) income, net
|
(28,722
|
)
|
|
240
|
|
|
(28,962
|
)
|
|
nm
|
|
|||
Fair value gain (loss) on investment
|
—
|
|
|
(10,704
|
)
|
|
10,704
|
|
|
—
|
%
|
|||
Other income (expense), net
|
176
|
|
|
(244
|
)
|
|
420
|
|
|
(172
|
)%
|
|||
Loss before provision for income taxes
|
(101,380
|
)
|
|
(33,054
|
)
|
|
(68,326
|
)
|
|
207
|
%
|
|||
(Provision for) recovery of income taxes
|
(762
|
)
|
|
104
|
|
|
(866
|
)
|
|
(833
|
)%
|
|||
Net loss
|
$
|
(102,142
|
)
|
|
$
|
(32,950
|
)
|
|
$
|
(69,192
|
)
|
|
210
|
%
|
|
Nine Months Ended September 30,
|
||||||
|
2017
|
|
2016
|
||||
|
(in thousands)
|
||||||
Lomitapide
|
$
|
51,930
|
|
|
$
|
—
|
|
Metreleptin
|
47,600
|
|
|
—
|
|
||
Total net product sales
|
$
|
99,530
|
|
|
$
|
—
|
|
|
Nine Months Ended September 30,
|
||||||
|
2017
|
|
2016
|
||||
|
(in thousands)
|
||||||
Net cash provided by/(used in):
|
|
|
|
||||
Operating activities
|
$
|
(39,104
|
)
|
|
$
|
(20,791
|
)
|
Investing activities
|
(723
|
)
|
|
(2,912
|
)
|
||
Financing activities
|
174
|
|
|
(45,000
|
)
|
||
Effect of exchange rates on cash
|
1,227
|
|
|
(65
|
)
|
||
Net decrease in cash and cash equivalents
|
$
|
(38,426
|
)
|
|
$
|
(68,768
|
)
|
•
|
A significant increase in the net loss recognized by the Company quarter over quarter.
|
•
|
A negative operating cash flow variance in the
nine months ended September 30, 2016
of
$10.7 million
related to a loss recorded based on the mark-to-market adjustment on the Aralez Investment to reflect changes in value from the acquisition date of February 5, 2016 through
September 30, 2016
.
|
•
|
Negative operating cash flows in the
nine months ended September 30, 2017
as a result of the Merger. These negative operating cash outflows were offset by non-cash expenses, including non-cash interest expense of
$24.2 million
, the amortization of intangible assets acquired of
$18.8 million
, the reserves for excess and obsolete inventory of $
18.9 million
, which are derived from projected sales activities, respective product shelf-life and their respective fair value, and stock-based compensation of
$3.4 million
.
|
•
|
Changes in net working capital, which included, in the
nine months ended September 30, 2017
, a decrease in cash of
$38.4 million
and legal settlement of
$30.7 million
, offset by an increase in accounts receivable of $
5.2 million
and accrued liabilities of $
3.4 million
.
|
•
|
the timing and cost of seeking regulatory approvals and conducting potential future clinical development of metreleptin in additional indications, including the timing and cost of securing and supplying drug substance and drug product to support such activities, and the timing and cost of activities related to pursuing additional indications, such as those related to potential improvements to the manufacturing, supply, formulation, and method of delivery of metreleptin;
|
•
|
the timing and costs of satisfying our debt obligations, including interest payments and any amounts due upon the maturity of such debt, including under the Convertible Notes;
|
•
|
the success of our commercialization efforts and the level of revenues generated from sales of lomitapide and metreleptin in the U.S.;
|
•
|
the level of revenue received from named patient sales of lomitapide and metreleptin in Brazil and other key countries where a mechanism exists to sell the product on a pre-approval basis in such country based on U.S. approval of such products or EU approval of lomitapide, particularly in light of the availability of a PCSK9 inhibitor product in Brazil, the recently published Brazilian requirements for named patient sales, and the ongoing court proceedings in Brazil reviewing the regulatory framework for named patient sales;
|
•
|
the level of physician, patient and payer acceptance of lomitapide and metreleptin;
|
•
|
the extent of the negative impact of the availability of PCSK9 inhibitor products on sales of JUXTAPID in the U.S., which, among other factors, have caused a significant number of JUXTAPID patients to discontinue JUXTAPID and switch to a PCSK9 inhibitor product, and significantly decreased the rate at which new HoFH patients start treatment with lomitapide;
|
•
|
the provision of free PCSK9 inhibitor drug to adult HoFH patients by the companies that are commercializing PCSK9 inhibitor products, which such companies may have ceased, but which historically has had a negative impact on the rate at which new patients start treatment with lomitapide and has caused more patients than we expected to discontinue lomitapide and switch their treatment to PCSK9 inhibitor products;
|
•
|
requirements of insurance companies, managed care organizations, other private payers, and government entities that provide reimbursement for medical costs in the U.S. to require that newly diagnosed adult HoFH patients be treated with PCSK9 inhibitor products prior to JUXTAPID, that current JUXTAPID patients switch to PCSK9 inhibitor products, and that patients fail to adequately respond to PCSK9 inhibitor products before providing reimbursement for JUXTAPID at the prices at which we offer JUXTAPID;
|
•
|
our ability to manage our costs and expenses to better align with our revenues and strengthen our capital structure, while supporting approved products in a compliant manner;
|
•
|
gaining regulatory and pricing and reimbursement approvals to market our products in countries in which the products are not currently approved and/or reimbursed, where it makes business sense to seek such approval, without significant restrictions, discounts, caps or other cost containment measures, including regulatory and pricing and reimbursement approval of metreleptin in the EU, in connection with which we filed an MAA in the EMA in December 2016;
|
•
|
the willingness of insurance companies, managed care organizations, other private payers, and government entities that provide reimbursement for medical costs in the U.S. to continue to provide reimbursement for our products at the prices at which we offer our products without imposing any additional major hurdles to access or other significant restrictions or limitations, and the ability and willingness of HoFH and GL patients to pay, or to arrange for payment assistance with respect to, any patient cost-sharing amounts for our products applicable under their insurance coverage, particularly in light of recent reductions in contributions to 501(c)(3) patient organizations by pharmaceutical companies;
|
•
|
the cost of building and maintaining the sales and marketing capabilities necessary for the commercialization of our products for their targeted indications in the market(s) in which each has received regulatory approval and we elect to commercialize such products, to the extent reimbursement and pricing approvals are obtained, and certain other key international markets, if approved;
|
•
|
the timing and costs of future business development opportunities;
|
•
|
the timing and terms of potential out-licensing opportunities for zuretinol, or, in the alternative, the timing and cost of conducting potential development of the zuretinol program;
|
•
|
the cost of filing, prosecuting and enforcing patent claims, including the cost of defending any challenges to the patents or our claims of exclusivity;
|
•
|
the status of government investigations and lawsuits, including the disclosure of possible or actual outcomes, including regarding the agreements that have been reached with the DOJ and the SEC, and the status of the final approvals of such agreements;
|
•
|
the costs of our manufacturing-related activities and the other costs of commercializing our products;
|
•
|
the costs associated with government investigations and lawsuits, including any damages, settlement amounts, fines or other payments, or implementation of compliance related agreements or consent decrees, that may result from settlements or enforcement actions related to government investigations or whether we are successful in our efforts to defend ourselves in, or to settle on acceptable terms, ongoing or future litigation;
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•
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the levels, timing and collection of revenue received from sales of our products in the future;
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•
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the cost of our observational cohort studies and other post-marketing commitments, including to the FDA and in any other countries where our products are ultimately approved; and
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•
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the timing and cost of other clinical development activities.
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•
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Business combination transactions will continue to be considered and evaluated by senior finance management; and
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•
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Management will seek the advice of outside consultants to assist in the design of precise controls to effectively review and approve business combination transactions.
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•
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compliance with the terms of the Settlement will divert resources away from developing and commercializing lomitapide and metreleptin, and our ability to meet expectations with respect to sales of these products may be negatively impacted;
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•
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despite remedial efforts, the reputational harm from the Settlement could subject us to increased governmental, industry and public scrutiny or criticism, which could negatively impact physicians’ inclination to prescribe (or patients’ willingness to use) JUXTAPID and/or MYALEPT, or dissuade vendors, distributors, partners or other third parties from working or collaborating with us or Aegerion;
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•
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the investigations have diverted, and compliance with the Settlement may continue to divert, the attention of management from operating our business, and may to be disruptive to our employees, including resulting in employee attrition and making it more difficult to attract qualified candidates for employment;
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•
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our business development efforts may be limited as we will have fewer resources available to pursue potential strategic acquisitions or licensing arrangements, and because certain payments under the Settlement could be accelerated in connection with certain transfers of Aegerion’s rights in JUXTAPID or MYALEPT or other business combinations;
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•
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even if the Court accepts the proposed resolutions covered by the Settlement, we may be subject to investigations by foreign governments, further claims by third parties, or investigations by U.S. federal, state or local agencies for activities that were not covered by the releases provided in the Settlement or our other operations (including international operations), especially in light of the government’s recitation of its assessment of the background of the investigation in the criminal Informations and in the Civil Settlement Agreement. Any additional claims or investigations could distract management, and may not be covered by our D&O insurance and accordingly could cause our legal costs it increase,
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•
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the Settlement or any further investigation or claims could have adverse effects on Aegerion’s existing class action litigation, commercial operations and contracts and could subject us or Aegerion to third party payor litigation, product liability litigation or potential investigations by consumer protection agencies or groups; and
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•
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our stock price may suffer, or we may not be able to fundraise on favorable terms or at all, depending on the perception of the terms of the Settlement (and in connection with underlying investigations) and any adverse consequences that may result from the Settlement, including if the Court refuses to approve the monetary penalty specified in the Plea Agreement
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NOVELION THERAPEUTICS INC.
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(Registrant)
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Date: November 9, 2017
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By:
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/s/ Gregory D. Perry
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Gregory D. Perry
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Principal Executive Officer
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Date: November 9, 2017
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By:
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/s/ Gregory D. Perry
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Gregory D. Perry
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Chief Financial and Administrative Officer (principal financial officer)
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i.
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you providing the Company will all necessary information for the preparation of a tax equalization calculation when required; and
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ii.
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you providing written confirmation after 2017 that you have not established your primary residence in Canada (a pro-rated adjustment will be made if you established your primary residence in Canada at any point during 2017).
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1.
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Defined Terms:
In the Employment Agreement, references to the “
Agreement
” or the “
Employment Agreement
” (or any other references to the terms and conditions of your employment) will mean the Employment Agreement as modified and supplemented by this Amendment Agreement.
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2.
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Relocation and Temporary Living Assistance:
The second paragraph of Section 6 of the Aegerion Agreement, which is incorporated into the Employment Agreement, shall be deleted and replaced in its entirety by the following:
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5.
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The capitalized terms in this Amendment Agreement that are not defined herein have the same meaning as in the Employment Agreement. This Amendment Agreement will be effective as of the date this letter is signed by you.
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1.
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I have reviewed this quarterly report on Form 10-Q of Novelion Therapeutics Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Gregory D. Perry
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Name:
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Gregory D. Perry
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Title:
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Principal Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of Novelion Therapeutics Inc.;
|
2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Gregory D. Perry
|
|
Name:
|
Gregory D. Perry
|
Title:
|
Chief Financial and Administrative Officer (principal financial officer)
|
Date: November 9, 2017
|
/s/ Gregory D. Perry
|
|
|
Name:
|
Gregory D. Perry
|
|
Title:
|
Principal Executive Officer
|
Date: November 9, 2017
|
/s/ Gregory D. Perry
|
|
|
Name:
|
Gregory D. Perry
|
|
Title:
|
Chief Financial and Administrative Officer
(principal financial officer)
|