Company Quick10K Filing
Quick10K
Intercept Pharmaceuticals
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$83.90 30 $2,500
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-06-20 Shareholder Vote
8-K 2019-05-08 Earnings, Exhibits
8-K 2019-05-08 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-04-11 Other Events, Exhibits
8-K 2019-02-19 Other Events, Exhibits
8-K 2019-01-07 Other Events, Exhibits
8-K 2018-10-31 Earnings, Exhibits
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-06-20 Enter Agreement, Shareholder Vote
8-K 2018-05-08 Earnings, Exhibits
8-K 2018-04-24 Officers, Exhibits
8-K 2018-04-04 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-03-26 Other Events
8-K 2018-02-14 Earnings, Exhibits
8-K 2018-02-13 Enter Agreement
8-K 2017-12-31 Enter Agreement, Leave Agreement
CELG Celgene 67,330
IDXX Idexx Laboratories 21,180
MKC McCormick 20,450
DPZ Domino's Pizza 11,600
CREE Cree 6,650
XHR Xenia Hotels & Resorts 2,550
CTRA Contura Energy 1,140
CSTE Caesarstone 532
CVIA Covia Holdings 494
GLXZ Galaxy Gaming 0
ICPT 2019-03-31
Part I
Item 1. Financial Statements.
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 6. Exhibits.
EX-10.1 icpt-20190331ex10114c549.htm
EX-10.2 icpt-20190331ex10288e628.htm
EX-10.3 icpt-20190331ex103b764bf.htm
EX-31.1 icpt-20190331ex3119f032d.htm
EX-31.2 icpt-20190331ex312658898.htm
EX-32.1 icpt-20190331ex321568279.htm

Intercept Pharmaceuticals Earnings 2019-03-31

ICPT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 icpt-20190331x10q.htm 10-Q icpt_Current_Folio_10Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10‑Q


(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the quarterly period ended March 31, 2019

 

 

OR

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the transition period from                          to                         

Commission file number: 001‑35668


INTERCEPT PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)


 

Delaware

 

22‑3868459

(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

10 Hudson Yards, 37th Floor

New York, NY 10001

(Address of Principal Executive Offices and Zip Code)

(646) 747‑1000

(Registrant’s Telephone Number, Including Area Code)


 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

ICPT

Nasdaq Global Select Market


Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   ☒     No   ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes   ☒     No   ☐

 

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

 

         Large accelerated filer 

                                   Accelerated filer 

         Non-accelerated filer 

                                   Smaller reporting company 

 

                                   Emerging growth company  ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).   Yes   ☐     No   ☒

 

The number of shares of the registrant’s common stock outstanding as of March 31, 2019 was 29,777,078.

 

 

 


 

Intercept Pharmaceuticals, Inc.

INDEX

PART I
FINANCIAL INFORMATION
 

 

   

 

 

 

Item 1. 

 

Financial Statements

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets at March 31, 2019 (Unaudited) and December 31, 2018 (Audited)

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the three-month periods ended March 31, 2019 and 2018 (Unaudited)

 

7

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss for the three-month periods ended March 31, 2019 and 2018 (Unaudited)

 

8

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity for the three-month periods ended March 31, 2019 and 2018 (Unaudited)

 

9

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2019 and 2018 (Unaudited)

 

10

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

11

 

 

 

 

 

Item 2. 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

24

 

 

 

 

 

Item 3. 

 

Quantitative and Qualitative Disclosures About Market Risk

 

31

 

 

 

 

 

Item 4. 

 

Controls and Procedures

 

31

 

 

 

 

 

PART II 

OTHER INFORMATION 

 

 

 

 

 

Item 1. 

 

Legal Proceedings

 

32

 

 

 

 

 

Item 1A. 

 

Risk Factors

 

32

 

 

 

 

 

Item 2. 

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

80

 

 

 

 

 

Item 6. 

 

Exhibits

 

80

 

 

 

 

 

Exhibit Index 

 

81

 

 

 

 

 

Signatures 

 

82

 

Unless the context otherwise requires, references in this Quarterly Report on Form 10‑Q to “we,” “our,” “us” and the “Company” refer, collectively, to Intercept Pharmaceuticals, Inc., a Delaware corporation, and its consolidated subsidiaries.

2


 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10‑Q contains forward-looking statements, including, but not limited to, statements regarding the progress, timing and results of our clinical trials, including our clinical trials for the treatment of nonalcoholic steatohepatitis (“NASH”), the safety and efficacy of our approved product, Ocaliva (obeticholic acid or “OCA”) for primary biliary cholangitis (“PBC”), and our product development candidates, including OCA for NASH, the timing and acceptance of our potential regulatory filings and potential approval of OCA for NASH or any other indications in addition to PBC, the timing and potential commercial success of OCA and any other product candidates we may develop and our strategy, future operations, future financial position, future revenue, projected costs, financial guidance, prospects, plans, objectives of management and expected market growth.

 

These statements constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “possible,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates, and we undertake no obligation to update any forward-looking statement except as required by law. These forward-looking statements are based on estimates and assumptions by our management that, although believed to be reasonable, are inherently uncertain and subject to a number of risks.

The following represent some, but not necessarily all, of the factors that could cause actual results to differ materially from historical results or those anticipated or predicted by our forward-looking statements:

·

our ability to successfully commercialize Ocaliva for PBC;

·

our ability to maintain our regulatory approval of Ocaliva for PBC in the United States, Europe, Canada, Israel, Australia and other jurisdictions in which we have or may receive marketing authorization;

·

the initiation, timing, cost, conduct, progress and results of our research and development activities, preclinical studies and clinical trials, including any issues, delays or failures in identifying patients, enrolling patients, treating patients, meeting specific endpoints in the jurisdictions in which we intend to seek approval or completing and timely reporting the results of our NASH or PBC clinical trials;

·

our ability to timely and cost-effectively file for and obtain regulatory approval of our product candidates, including OCA for NASH, in the United States, Europe and our other target markets;

·

conditions that may be imposed by regulatory authorities on our marketing approvals for our products and product candidates, such as the need for clinical outcomes data (and not just results based on achievement of a surrogate endpoint), and any related restrictions, limitations and/or warnings contained in the label of any of our products or product candidates;

·

any potential side effects associated with Ocaliva for PBC, OCA for NASH or our other product candidates that could delay or prevent approval, require that an approved product be taken off the market, require the inclusion of safety warnings or precautions or otherwise limit the sale of such product or product candidate;

·

our ability to establish and maintain relationships with, and the performance of, third-party manufacturers, contract research organizations and other vendors upon whom we are substantially dependent for,  among other things, the manufacture and supply of our products, including Ocaliva for PBC and, if approved, OCA for NASH, and our clinical trial activities;

·

our ability to identify, develop and successfully commercialize our products and product candidates, including our ability to timely and successfully launch OCA for NASH, if approved;

3


 

·

our ability to obtain and maintain intellectual property protection for our products and product candidates, including our ability to cost-effectively file, prosecute, defend and enforce any patent claims or other intellectual property rights;

·

the size and growth of the markets for our products and product candidates and our ability to serve those markets;

·

the degree of market acceptance of Ocaliva for PBC and, if approved, OCA for NASH or our other product candidates among physicians, patients and healthcare payors;

·

the availability of adequate coverage and reimbursement from governmental and private healthcare payors for our products, including Ocaliva for PBC and, if approved, OCA for NASH, and our ability to obtain adequate pricing for such products;

·

our ability to establish and maintain effective sales, marketing and distribution capabilities, either directly or through collaborations with third parties;

·

competition from existing drugs or new drugs that become available;

·

our ability to prevent system failures, data breaches or violations of data protection laws;

·

costs and outcomes relating to any disputes, governmental inquiries or investigations, legal proceedings or litigation, including any securities, intellectual property, employment, product liability or other litigation;

·

our collaborators’ election to pursue research, development and commercialization activities;

·

our ability to establish and maintain relationships with collaborators with development, regulatory and commercialization expertise;

·

our need for and ability to generate or obtain additional financing;

·

our estimates regarding future expenses, revenues and capital requirements and the accuracy thereof;

·

our use of cash and short-term investments;

·

our ability to acquire, license and invest in businesses, technologies, product candidates and products;

·

our ability to attract and retain key personnel to manage our business effectively;

·

our ability to manage the growth of our operations, infrastructure, personnel, systems and controls;

·

our ability to obtain and maintain adequate insurance coverage;

·

the impact of general U.S. and foreign economic, industry, market, regulatory or political conditions, including the potential impact of Brexit; and

·

the other risks and uncertainties identified under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10‑Q and in our other periodic filings filed with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10‑K for the year ended December 31, 2018.

4


 

NOTE REGARDING TRADEMARKS

The Intercept Pharmaceuticals® name and logo and the Ocaliva® name and logo are either registered or unregistered trademarks or trade names of the Company in the United States and/or other countries. All other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10‑Q are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10‑Q  may appear without the ® and TM symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights to these trademarks and trade names.

5


 

PART I

Item 1. Financial Statements.

INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

 

2019

 

2018

 

 

    

(Unaudited)

    

(Audited)

    

Assets

 

 

  

 

 

  

 

Current assets:

 

 

  

 

 

  

 

Cash and cash equivalents

 

$

54,724

 

$

43,248

 

Investment debt securities, available-for-sale

 

 

298,818

 

 

392,912

 

Accounts receivable, net

 

 

29,440

 

 

25,694

 

Prepaid expenses and other current assets

 

 

19,819

 

 

20,571

 

Total current assets

 

 

402,801

 

 

482,425

 

Fixed assets, net

 

 

7,464

 

 

10,411

 

Inventory, net

 

 

7,370

 

 

7,108

 

Security deposits

 

 

8,340

 

 

9,223

 

Other assets

 

 

12,283

 

 

 —

 

Total assets

 

$

438,258

 

$

509,167

 

Liabilities and Stockholders’ (Deficit) Equity

 

 

  

 

 

  

 

Current liabilities:

 

 

  

 

 

  

 

Accounts payable, accrued expenses and other liabilities

 

$

101,886

 

$

105,109

 

Short-term interest payable

 

 

3,738

 

 

7,475

 

Short-term portion of deferred revenue

 

 

2,717

 

 

1,621

 

Total current liabilities

 

 

108,341

 

 

114,205

 

Long-term liabilities:

 

 

  

 

 

  

 

Long-term debt

 

 

375,351

 

 

371,250

 

Long-term other liabilities

 

 

9,162

 

 

3,771

 

Long-term portion of deferred revenue

 

 

405

 

 

811

 

Total liabilities

 

$

493,259

 

$

490,037

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

Stockholders’ (deficit) equity:

 

 

  

 

 

  

 

Common stock par value $0.001 per share; 45,000,000 shares authorized; 29,777,078 and 29,693,876 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively

 

 

30

 

 

30

 

Additional paid-in capital

 

 

1,815,193

 

 

1,800,144

 

Accumulated other comprehensive loss, net

 

 

(1,169)

 

 

(2,259)

 

Accumulated deficit

 

 

(1,869,055)

 

 

(1,778,785)

 

Total stockholders’ (deficit) equity

 

 

(55,001)

 

 

19,130

 

Total liabilities and stockholders’ (deficit) equity

 

$

438,258

 

$

509,167

 

 

See accompanying notes to the condensed consolidated financial statements.

6


 

INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

    

2019

    

2018

 

 

 

 

 

 

 

 

 

Revenue:

 

 

  

 

 

  

 

Product revenue, net

 

$

51,847

 

$

35,158

 

Licensing revenue

 

 

405

 

 

805

 

Total revenue

 

 

52,252

 

 

35,963

 

Operating expenses:

 

 

  

 

 

  

 

Cost of sales

 

 

574

 

 

280

 

Selling, general and administrative

 

 

77,227

 

 

62,467

 

Research and development

 

 

58,396

 

 

48,672

 

Total operating expenses

 

 

136,197

 

 

111,419

 

Operating loss

 

 

(83,945)

 

 

(75,456)

 

Other income (expense):

 

 

  

 

 

  

 

Interest expense

 

 

(7,839)

 

 

(7,509)

 

Other income, net

 

 

1,514

 

 

1,375

 

 

 

 

(6,325)

 

 

(6,134)

 

Net loss

 

$

(90,270)

 

$

(81,590)

 

Net loss per common and potential common share:

 

 

  

 

 

  

 

Basic and diluted

 

$

(3.03)

 

$

(3.22)

 

Weighted average common and potential common shares outstanding:

 

 

  

 

 

  

 

Basic and diluted

 

 

29,760

 

 

25,309

 

 

See accompanying notes to the condensed consolidated financial statements.

7


 

INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

    

2019

    

2018

 

 

 

 

 

 

 

 

 

Net loss

 

$

(90,270)

 

$

(81,590)

 

Other comprehensive (loss) income:

 

 

  

 

 

  

 

Net changes related to available-for-sale investment debt securities:

 

 

 

 

 

 

 

Unrealized gains (losses) on investment debt securities

 

 

803

 

 

(374)

 

Reclassification adjustment for realized gains on investment debt securities included in other income, net

 

 

 4

 

 

 —

 

Net unrealized gains (losses) on investment debt securities

 

$

807

 

$

(374)

 

Foreign currency translation gains

 

 

283

 

 

517

 

Comprehensive loss

 

$

(89,180)

 

$

(81,447)

 

 

See accompanying notes to the condensed consolidated financial statements.

8


 

INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

Other

 

 

 

 

 

 

 

Common Stock

 

Paid-in

 

Comprehensive

 

Accumulated

 

Stockholders’

 

    

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Deficit

    

Equity (Deficit)

Balance - December 31, 2018

 

29,694

 

$

30

 

$

1,800,144

 

$

(2,259)

 

$

(1,778,785)

 

$

19,130

Stock-based compensation

 

 —

 

 

 —

 

 

14,897

 

 

 —

 

 

 —

 

 

14,897

Net proceeds from exercise of stock options

 

83

 

 

 —

 

 

943

 

 

 —

 

 

 —

 

 

943

Employee withholding taxes related to stock-based awards

 

 —

 

 

 —

 

 

(791)

 

 

 —

 

 

 —

 

 

(791)

Other comprehensive income

 

 —

 

 

 —

 

 

 —

 

 

1,090

 

 

 —

 

 

1,090

Net loss

 

 —

 

 

 —

 

 

 —

 

 

 

 

 

(90,270)

 

 

(90,270)

Balance - March 31, 2019

 

29,777

 

$

30

 

$

1,815,193

 

$

(1,169)

 

$

(1,869,055)

 

$

(55,001)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

Other

 

 

 

 

 

 

 

Common Stock

 

Paid-in

 

Comprehensive

 

Accumulated

 

Stockholders’

 

    

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Deficit

    

Equity (Deficit)

Balance - December 31, 2017

 

25,173

 

$

25

 

$

1,486,690

 

$

(786)

 

$

(1,469,543)

 

$

16,386

Stock-based compensation

 

 —

 

 

 —

 

 

12,305

 

 

 —

 

 

 —

 

 

12,305

Net proceeds from exercise of stock options

 

159

 

 

 —

 

 

481

 

 

 —

 

 

 —

 

 

481

Employee withholding taxes related to stock-based awards

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Other comprehensive income

 

 —

 

 

 —

 

 

 —

 

 

143

 

 

 —

 

 

143

Net loss

 

 —

 

 

 —

 

 

 —

 

 

 

 

 

(81,590)

 

 

(81,590)

Balance - March 31, 2018

 

25,332

 

$

25

 

$

1,499,476

 

$

(643)

 

$

(1,551,133)

 

$

(52,275)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the condensed consolidated financial statements.

9


 

 

INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

    

2019

    

2018

    

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

  

 

 

  

 

Net loss

 

$

(90,270)

 

$

(81,590)

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

  

 

 

  

 

Stock-based compensation

 

 

14,897

 

 

12,305

 

(Accretion) amortization of (discount) premium on investment debt securities

 

 

(299)

 

 

502

 

Amortization of deferred financing costs

 

 

406

 

 

373

 

Depreciation and amortization

 

 

2,400

 

 

1,290

 

Gain on lease termination

 

 

(1,995)

 

 

 —

 

Loss on the disposal of fixed assets

 

 

2,683

 

 

901

 

Accretion of debt discount

 

 

3,695

 

 

3,399

 

Changes in operating assets:

 

 

  

 

 

  

 

Prepaid expenses and other current assets

 

 

752

 

 

(3,920)

 

Accounts receivable

 

 

(3,746)

 

 

(443)

 

Inventory

 

 

(262)

 

 

(4,458)

 

Security deposits

 

 

883

 

 

8,415

 

Other assets

 

 

(19,716)

 

 

 —

 

Changes in operating liabilities:

 

 

  

 

 

  

 

Accounts payable, accrued expenses and other current liabilities

 

 

(800)

 

 

(20,690)

 

Operating lease liabilities

 

 

(1,638)

 

 

 —

 

Long-term other liabilities

 

 

12,632

 

 

(407)

 

Interest payable

 

 

(3,737)

 

 

(3,738)

 

Deferred revenue

 

 

690

 

 

(805)

 

Net cash used in operating activities

 

 

(83,425)

 

 

(88,866)

 

Cash flows from investing activities:

 

 

  

 

 

  

 

Purchases of investment debt securities

 

 

(5,212)

 

 

(28,466)

 

Sales and maturities of investment debt securities

 

 

100,412

 

 

95,273

 

Purchases of equipment, leasehold improvements, and furniture and fixtures

 

 

(733)

 

 

(89)

 

Net cash provided by investing activities

 

 

94,467

 

 

66,718

 

Cash flows from financing activities:

 

 

  

 

 

  

 

Proceeds from exercise of options, net

 

 

943

 

 

481

 

Payments of employee withholding taxes related to stock-based awards

 

 

(791)

 

 

 —

 

Net cash provided by financing activities

 

 

152

 

 

481

 

Effect of exchange rate changes

 

 

282

 

 

525

 

Net increase (decrease) in cash and cash equivalents

 

 

11,476

 

 

(21,142)

 

Cash and cash equivalents – beginning of period

 

 

43,248

 

 

70,013

 

Cash and cash equivalents – end of period

 

$

54,724

 

$

48,871

 

 

See accompanying notes to the condensed consolidated financial statements.

10


 

INTERCEPT PHARMACEUTICALS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.    Overview of Business

Intercept Pharmaceuticals, Inc. (the “Company”) is a biopharmaceutical company focused on the development and commercialization of novel therapeutics to treat progressive non-viral liver diseases, including primary biliary cholangitis (“PBC”) and nonalcoholic steatohepatitis (“NASH”).  The Company currently has one marketed product, Ocaliva (obeticholic acid or “OCA”). Founded in 2002 in New York, the Company has operations in the United States, Europe and Canada.

2.    Basis of Presentation

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany balances and transactions have been eliminated in consolidation. Certain information that is normally required by U.S. GAAP has been condensed or omitted in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”). Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31, 2019.  In the opinion of management, these unaudited condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair presentation of these interim unaudited condensed consolidated financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2018, included in the Company’s Annual Report on Form 10‑K  for the year ended December 31, 2018 filed with the SEC.

Use of Estimates

The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.

3.    Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2 of Notes to Consolidated Financial Statements included in its Annual Report on Form 10‑K for the year ended December 31, 2018.

Leases

The Company determines if an arrangement is a lease at inception and records right-of-use (“ROU”) assets and lease liabilities on the condensed consolidated balance sheets at lease commencement based on the present value of remaining lease payments over the lease term.  The Company only considers payments that are fixed and determinable at the time of commencement. Operating leases are included in other assets, accounts payable, accrued expenses and other liabilities and long-term other liabilities on the condensed consolidated balance sheets.

Operating lease liabilities are recognized based on the present value of the future minimum lease payments discounted by the Company’s incremental borrowing rate. The Company measures ROU assets based on the corresponding lease liability adjusted for (i) payments made to the lessor at or before the commencement date, (ii) initial direct costs incurred and (iii) tenant incentives under the lease. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

11


 

For short-term leases, the Company records rent expense in its consolidated statements of operations on a straight-line basis over the lease term and records variable lease payments as incurred.

Additional information and disclosures are contained in Note 8 —  Operating Leases below.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) established Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), by issuing Accounting Standards Update (“ASU”) No. 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. ASC 842 was subsequently amended by ASU No. 2018-01, “Land Easement Practical Expedient for Transition to Topic 842”; ASU No. 2018-10, “Codification Improvements to Topic 842, Leases”; and ASU No. 2018-11, “Targeted Improvements”. The new standard establishes a ROU model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (i) its effective date or (ii) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Company adopted the new standard on January 1, 2019 using the effective date as the date of initial application. The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients”, which permits the Company to not reassess under the new standard the Company’s prior conclusions about lease identification, lease classification and initial direct costs. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. The Company also elected the practical expedient to not separate lease and non-lease components for all of the Company’s leases. Upon adoption, the Company recognized additional operating liabilities of $25.4 million, with corresponding ROU assets of $19.6 million based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases.

In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” (“ASU 2017-11”). Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating ASC Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company adopted ASU 2017-11 on January 1, 2019 and its adoption did not have any impact on the Company’s consolidated financial statements and related disclosures.

In June 2018, the FASB issued ASU No. 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”), which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under this ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The changes take effect for public companies for fiscal years starting after December 15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after

12


 

December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption date of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). The Company adopted ASU 2018-07 on January 1, 2019 on a modified retrospective basis through a cumulative-effect adjustment to equity by remeasuring, on that date, the fair value of all outstanding unvested stock options that had been granted to nonemployees. The adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Recent Accounting Pronouncements to be Adopted

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which replaces  the incurred loss impairment methodology under current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company will be required to use a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 and must be adopted using a modified retrospective approach, with certain exceptions. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the update. The Company plans to adopt ASU 2018-13 effective January 1, 2020 and does not expect the adoption of this guidance to have a material impact on the Company’s consolidated financial statements and related disclosures.

4.    Significant Agreements

Sumitomo Dainippon Pharma Co., Ltd.

In March 2011, the Company entered into an exclusive license agreement (the “Original Sumitomo Agreement”) with Sumitomo Dainippon Pharma Co., Ltd. (“Sumitomo Dainippon”), pursuant to which the Company granted to Sumitomo Dainippon an exclusive license to research, develop and commercialize OCA for the treatment of PBC and NASH in Japan and China (excluding Taiwan) and an option to research, develop and commercialize OCA in certain countries outside of such territories (the “Country Option”). The Company received an upfront payment from Sumitomo Dainippon of $15.0 million under the terms of the Original Sumitomo Agreement. In May 2014, Sumitomo Dainippon exercised the Country Option in part to add Korea as part of its licensed territories and paid the Company a $1.0 million upfront fee in connection therewith. In February 2018, the Company and Sumitomo Dainippon entered into Amendment No. 3 (the “Sumitomo Amendment”) to the Original Sumitomo Agreement (as amended, the “Sumitomo Agreement”). Pursuant to the Sumitomo Amendment, (i) Sumitomo Dainippon agreed to return the rights to develop and commercialize OCA in Japan and Korea and waived its rights to the Country Option, (ii) the Company agreed to forego any further milestone or royalty payments relating to the development and commercialization of OCA in Japan and Korea and (iii) certain milestone payment obligations with respect to the development and commercialization of OCA were adjusted. In addition, the Company and Sumitomo Dainippon agreed that if certain clinical development milestones in China are not met by December 31, 2020, Sumitomo Dainippon may choose either to make a milestone payment to the Company or terminate the Sumitomo Agreement. Sumitomo Dainippon may also terminate the Sumitomo Agreement in its entirety or on an indication-by-indication basis at any time upon 90 days’ written notice. As of March 31, 2019, the Company had achieved $6.0 million of development milestones under the Sumitomo Agreement. The Company may be eligible to receive additional milestone payments under the Sumitomo Agreement in an aggregate amount of up to approximately $23.0 million based on the occurrence of certain clinical trial and regulatory-related events and tiered royalty payments up to the mid-twenties in percentage terms based on net sales of OCA products in China (excluding Taiwan). Sumitomo Dainippon is responsible for the costs of developing and commercializing OCA in its territory.

13


 

The Company has concluded that Sumitomo Dainippon does not represent a customer of the Company, and therefore the Sumitomo Agreement is outside of the scope of ASC 606. The Company has accounted, and continues to account, for this agreement under the legacy accounting guidance. Under ASC Topic 605, Revenue Recognition, the Company evaluated this agreement and determined that it is a revenue arrangement with multiple deliverables, or performance obligations. The Company’s substantive performance obligations under this agreement include an exclusive license to its technology, technical and scientific support to the development plan and participation on a joint steering committee. The Company determined that these performance obligations represent a single unit of accounting, since, initially, the license does not have stand-alone value to Sumitomo Dainippon without the Company’s technical expertise and steering committee participation during the development of OCA. The development period is currently estimated as continuing through June 2020 and, as such, the $15.0 million upfront payment is being recognized ratably over this period. During the three months ended March 31, 2019 and 2018, the Company recorded licensing revenue of approximately $0.4 million and $0.8 million, respectively, under this agreement. Included in licensing revenue for the three months ended March 31, 2018 is $0.4 million related to the accelerated recognition, as a result of the Sumitomo Amendment, of the remaining portion of deferred revenue associated with the $1.0 million upfront payment that the Company received under the Original Sumitomo Agreement in connection with Sumitomo Dainippon’s exercise of the Country Option with respect to Korea.

The Company recognizes milestone payments when the associated milestones are achieved. As of March 31, 2019 and December 31, 2018, the Company had recorded deferred revenues of $2.0 million and $2.4 million, respectively, under this agreement.

5.    Cash, Cash Equivalents and Investment Debt Securities

The following table summarizes the Company’s cash, cash equivalents and investment debt securities as of March 31, 2019 and December 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2019

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

 

 

 

Unrealized

 

Unrealized

 

 

 

 

    

Amortized Cost

    

Gains

    

Losses

    

Fair Value

 

 

(in thousands)

Cash and cash equivalents:

 

 

  

 

 

  

 

 

  

 

 

  

Cash and money market funds

 

$

54,724

 

$

 —

 

$

 —

 

$

54,724

Investment debt securities:

 

 

  

 

 

  

 

 

  

 

 

  

Commercial paper

 

 

8,987

 

 

 —

 

 

(2)

 

 

8,985

Corporate debt securities

 

 

280,291

 

 

221

 

 

(127)

 

 

280,385

U.S. government and agency securities

 

 

9,438

 

 

12

 

 

(2)

 

 

9,448

Total investment debt securities

 

 

298,716

 

 

233

 

 

(131)

 

 

298,818

Total cash, cash equivalents and investment debt securities

 

$

353,440

 

$

233

 

$

(131)

 

$

353,542

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2018

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

 

 

 

Unrealized

 

Unrealized

 

 

 

 

    

Amortized Cost

    

Gains

    

Losses

    

Fair Value

 

 

(in thousands)

Cash and cash equivalents:

 

 

  

 

 

  

 

 

  

 

 

  

Cash and money market funds

 

$

43,248

 

$

 —

 

$

 —

 

$

43,248

Investment debt securities:

 

 

  

 

 

  

 

 

  

 

 

  

Commercial paper

 

 

34,353

 

 

 —

 

 

(26)

 

 

34,327

Corporate debt securities

 

 

349,854

 

 

27

 

 

(704)

 

 

349,177

U.S. government and agency securities

 

 

9,410

 

 

 5

 

 

(7)

 

 

9,408

Total investment debt securities

 

 

393,617

 

 

32

 

 

(737)

 

 

392,912

Total cash, cash equivalents and investment debt securities

 

$

436,865

 

$

32

 

$

(737)

 

$

436,160

 

14


 

As of March 31, 2019, the Company held a total of twenty positions that were in a continuous unrealized loss position for twelve months or longer. The Company has determined that the unrealized losses are deemed to be temporary impairments as of March 31, 2019. The Company believes that the unrealized losses generally are caused by increases in the risk premiums required by market participants rather than an adverse change in cash flows or a fundamental weakness in the credit quality of the issuer or underlying assets. Because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, it does not consider the investments to be other-than-temporarily impaired at March 31, 2019.

6.    Fixed Assets, Net

Fixed assets are stated at cost and depreciated or amortized using the straight-line method based on useful lives as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Useful lives

 

 

 

 

 

 

 

 

    

(Years)

    

March 31, 2019

    

December 31, 2018

 

 

 

 

 

(in thousands)

 

Office equipment and software

 

3

 

$

4,051

 

$

3,986

 

Leasehold improvements

 

Over life of lease

 

 

10,406

 

 

14,464

 

Furniture and fixtures

 

7

 

 

4,017

 

 

3,907

 

Subtotal

 

 

 

 

18,474

 

 

22,357

 

Less: accumulated depreciation

 

 

 

 

(11,010)

 

 

(11,946)

 

Fixed assets, net

 

 

 

$

7,464

 

$

10,411

 

 

 

7.    Inventory, Net

Inventories are stated at the lower of cost or market. Inventories consisted of the following:

 

 

 

 

 

 

 

 

 

 

March 31, 2019

    

December 31, 2018

 

 

 

(in thousands)

 

Work-in-process

 

$

7,224

 

$

7,019

 

Finished goods

 

 

146

 

 

89

 

Inventory, net

 

$

7,370

 

$

7,108

 

 

 

8. Operating Leases

The Company leases various office spaces under non-cancelable operating leases with original lease periods expiring between 2019 and 2024. The Company subleases one of its office spaces to a third party. The Company also enters into leases for equipment. A number of the Company’s leases include one or more options to renew, with renewal terms that can extend the lease term. The exercise of lease renewal options is typically at the sole discretion of the Company;  therefore, all renewals to extend the lease terms are not included in the ROU assets and lease liabilities as they are not reasonably certain of exercise. The Company regularly evaluates the renewal options and when they are reasonably certain of exercise, includes the renewal period in the lease term. These operating leases do not contain material variable rent payments, residual value guarantees, covenants, or other restrictions.

The Company has elected the practical expedient to exclude short-term leases from its ROU assets and lease liabilities; therefore leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company elected the practical expedient not to separate non-lease components from all leases. As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. The Company’s incremental borrowing rate is the estimated rate that would be required to pay for a collateralized borrowing equal to the total lease payment over the lease term. The Company estimates its incremental borrowing rate based on an analysis of publicly traded debt securities of companies with credit and financial profiles similar to its own.

15


 

Operating lease assets and liabilities are classified on the condensed consolidated balance sheets as follows:

 

 

 

 

 

 

 

 

 

 

 

Leases

 

Classification

 

March 31, 2019

Assets

 

 

 

(in thousands)

Operating lease assets

 

Other assets

 

$

12,283

Total leased assets

 

 

 

$

12,283

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Current

 

 

 

 

 

Operating lease liabilities

 

Accounts payable, accrued expenses and other liabilities

 

$

6,701

Noncurrent

 

 

 

 

 

Operating lease liabilities

 

Long-term other liabilities

 

 

9,158

Total lease liabilities

 

 

 

$

15,859

Operating lease costs for the three months ended March 31, 2019 are as follows:

 

 

 

 

 

 

 

 

 

 

Three Months Ended

Lease Cost

 

Classification

 

March 31, 2019

 

 

 

 

(in thousands)

Operating lease cost

 

Selling, general and administrative expenses

 

$

1,678

Short-term lease cost

 

Selling, general and administrative expenses

 

 

826

Variable lease cost

 

Selling, general and administrative expenses

 

 

224

Sublease income

 

Other income, net

 

 

(180)

Net lease cost

 

 

 

$

2,548

The weighted-average remaining term of the Company’s operating leases was 2.9 years and the weighted-average discount rate used to measure the present value of the Company’s operating lease liabilities was 5.0% as of March 31, 2019.

Maturities of the Company’s operating lease liabilities, which do not include short-term leases, as of March 31, 2019 are as follows:

 

 

 

 

Maturity of Lease Liabilities

 

Operating leases

 

 

(in thousands)

2019

 

$

5,658

2020

 

 

6,194

2021

 

 

2,879

2022

 

 

948

2023

 

 

948

Thereafter

 

 

395

Total lease payments

 

 

17,022

Less: Present value discount

 

 

(1,163)

Total operating lease liabilities

 

$

15,859

Cash payments included in the measurement of the Company’s lease liabilities were $1.9 million for the three months ended March 31, 2019.

 

16


 

9.    Accounts Payable, Accrued Expenses and Other Liabilities

Accounts payable, accrued expenses and other liabilities consisted of the following:

 

 

 

 

 

 

 

 

 

 

March 31, 2019

    

December 31, 2018

    

 

 

(in thousands)

 

Accounts payable

 

$

18,580

 

$

11,765

 

Accrued employee compensation

 

 

11,521

 

 

20,335

 

Accrued contracted services

 

 

46,624

 

 

54,681

 

Other liabilities

 

 

18,460

 

 

18,328

 

Operating lease liabilities

 

 

6,701

 

 

 —

 

Accounts payable, accrued expenses and other liabilities

 

$

101,886

 

$

105,109

 

 

 

10.    Fair Value Measurements

The carrying amounts of the Company’s receivables and payables approximate their fair value due to their short maturities.

Accounting principles provide guidance for using fair value to measure assets and liabilities. The guidance includes a three-level hierarchy of valuation techniques used to measure fair value, defined as follows:

·

Unadjusted Quoted Prices — The fair value of an asset or liability is based on unadjusted quoted prices in active markets for identical assets or liabilities (Level 1).

·

Pricing Models with Significant Observable Inputs — The fair value of an asset or liability is based on information derived from either an active market quoted price, which may require further adjustment based on the attributes of the financial asset or liability being measured, or an inactive market transaction (Level 2).

·

Pricing Models with Significant Unobservable Inputs — The fair value of an asset or liability is primarily based on internally derived assumptions surrounding the timing and amount of expected cash flows for the financial instrument. Therefore, these assumptions are unobservable in either an active or inactive market (Level 3).

The Company considers an active market as one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Conversely, the Company views an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, non-performance risk, or that of a counterparty, is considered in determining the fair values of liabilities and assets, respectively.

The Company’s cash deposits and money market funds are classified within Level 1 of the fair value hierarchy because they are valued using bank balances or quoted market prices. Investments are classified as Level 2 instruments based on market pricing and other observable inputs.

17


 

Financial assets carried at fair value are classified in the tables below in one of the three categories described above:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

    

Total

    

Level 1

    

Level 2

    

Level 3