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Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2014	Jul. 31, 2014
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Trading Symbol	VNDA
Entity Registrant Name	Vanda Pharmaceuticals Inc.
Entity Central Index Key	0001347178
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		33,877,841

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 16,994	$ 64,764
Marketable securities	46,591	65,586
Accounts receivable, net	2,376	2,031
Inventory	1,093
Prepaid expenses and other current assets	4,166	2,703
Restricted cash		530
Total current assets	71,220	135,614
Property and equipment, net	2,312	2,198
Intangible asset, net	11,855	5,037
Restricted cash, non-current	785	500
Total assets	86,172	143,349
Current liabilities:
Accounts payable	248	661
Accrued liabilities	6,753	5,180
Deferred rent	234	221
Deferred revenues	31,059	26,789
Total current liabilities	38,294	32,851
Deferred rent, non-current	2,853	2,888
Deferred revenues, non-current	44,000	63,486
Other liabilities	140
Total liabilities	85,287	99,225
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized, and no shares issued or outstanding	0	0
Common stock, $0.001 par value; 150,000,000 shares authorized; 33,877,841 and 33,338,543 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively	34	33
Additional paid-in capital	357,119	352,240
Accumulated other comprehensive income	10	21
Accumulated deficit	(356,278)	(308,170)
Total stockholders' equity	885	44,124
Total liabilities and stockholders' equity	$ 86,172	$ 143,349

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2014	Dec. 31, 2013
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	33,877,841	33,338,543
Common stock, shares outstanding	33,877,841	33,338,543

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues:
Product revenue	$ 1,559		$ 1,559
Royalty revenue	1,539	1,641	3,230	3,103
Licensing agreement	7,764	6,678	15,216	13,284
Total revenues	10,862	8,319	20,005	16,387
Operating expenses:
Cost of goods sold	198		198
Research and development	3,514	6,100	10,777	14,211
Selling, general and administrative	28,139	5,260	56,032	9,413
Intangible asset amortization	617	372	1,182	741
Total operating expenses	32,468	11,732	68,189	24,365
Loss from operations	(21,606)	(3,413)	(48,184)	(7,978)
Other income	31	30	76	76
Loss before tax benefit	(21,575)	(3,383)	(48,108)	(7,902)
Tax benefit
Net loss	$ (21,575)	$ (3,383)	$ (48,108)	$ (7,902)
Basic and diluted net loss per share	$ (0.64)	$ (0.12)	$ (1.42)	$ (0.28)
Weighted average shares outstanding, basic and diluted	33,874,625	28,377,254	33,777,207	28,361,340

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Net loss	$ (21,575)	$ (3,383)	$ (48,108)	$ (7,902)
Other comprehensive income (loss):
Change in net unrealized income (loss) on marketable securities	2		(11)	(10)
Tax provision on other comprehensive income (loss)
Other comprehensive income (loss), net of tax:	2		(11)	(10)
Comprehensive loss	$ (21,573)	$ (3,383)	$ (48,119)	$ (7,912)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - 6 months ended Jun. 30, 2014 - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Other Comprehensive Income (Loss)	Accumulated Deficit
Beginning balance (in shares) (As Previously Reported) at Dec. 31, 2013		33,338,543
Beginning balance (in shares) at Dec. 31, 2013		33,338,543
Beginning balance (As Previously Reported) at Dec. 31, 2013	$ 44,124	$ 33	$ 355,432	$ 21	$ (311,362)
Beginning balance (Retrospective Adjustment)			(3,192)		3,192
Beginning balance at Dec. 31, 2013	44,124	$ 33	352,240	21	(308,170)
Issuance of common stock from the exercise of stock options and settlement of restricted stock units (in shares)		571,684
Issuance of common stock from the exercise of stock options and settlement of restricted stock units	$ 2,480	$ 1	2,479
Shares withheld upon settlement of restricted stock units (in shares)	(32,386)	(32,386)
Shares withheld upon settlement of restricted stock units	$ (436)		(436)
Employee and non-employee stock based compensation expense	2,836		2,836
Net loss	(48,108)				(48,108)
Other comprehensive income (loss), net of tax	(11)			(11)
Ending balance (in shares) at Jun. 30, 2014		33,877,841
Ending balance at Jun. 30, 2014	$ 885	$ 34	$ 357,119	$ 10	$ (356,278)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities
Net loss	$ (48,108)	$ (7,902)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment	264	212
Employee and non-employee stock-based compensation	2,836	2,432
Amortization of discounts and premiums on marketable securities	96	121
Intangible asset amortization	1,182	741
Changes in assets and liabilities:
Accounts receivable	(345)	(473)
Prepaid expenses and other current assets	(1,463)	1,316
Inventory	(1,093)
Accounts payable	(413)	880
Accrued liabilities	1,573	(1,417)
Other liabilities	118	206
Deferred revenue	(15,216)	(13,284)
Net cash used in operating activities	(60,569)	(17,168)
Cash flows from investing activities
Acquisition of intangible assets	(8,000)
Purchases of property and equipment	(378)	(72)
Purchases of marketable securities	(20,544)
Proceeds from sale of marketable securities	8,198
Maturities of marketable securities	31,235	31,500
Change in restricted cash	245
Net cash provided by investing activities	10,756	31,428
Cash flows from financing activities
Tax obligations paid in connection with settlement of restricted stock units	(436)	(196)
Proceeds from exercise of employee stock options	2,479	797
Net cash provided by financing activities	2,043	601
Net (decrease) increase in cash and cash equivalents	(47,770)	14,861
Cash and cash equivalents
Beginning of period	64,764	88,772
End of period	16,994	$ 103,633
Non-cash investing activities
Purchases of property and equipment in accrued liabilities	$ 20

Business Organization and Presentation

6 Months Ended

Jun. 30, 2014

Business Organization and Presentation

1. Business Organization and Presentation

Business organization

Vanda Pharmaceuticals Inc. (Vanda or the Company) is a biopharmaceutical company focused on the development and commercialization of products for the treatment of central nervous system disorders. Vanda commenced its operations in 2003. Vanda’s product portfolio includes HETLIOZ^® (tasimelteon), a product for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) and for which a New Drug Application (NDA) was approved by the U.S. Food and Drug Administration (FDA) in January 2014 and launched commercially in the U.S. in April 2014, Fanapt^®(iloperidone), a product for the treatment of schizophrenia, the oral formulation of which is currently being marketed and sold in the U.S. by Novartis Pharma AG (Novartis), and VLY-686, a small molecule neurokinin-1 receptor (NK-1R) antagonist.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements for the fiscal year ended December 31, 2013 included in the Company’s annual report on Form 10-K. The financial information as of June 30, 2014 and for the three and six months ended June 30, 2014 and 2013 is unaudited, but in the opinion of management, all adjustments with the exception of stock-based compensation expense, see Note 3, Change in Method of Accounting for Stock-based Compensation, consist only of normal recurring accruals, considered necessary for a fair statement of the results of these interim periods have been included. The condensed consolidated balance sheet data as of December 31, 2013 was derived from audited financial statements but does not include all disclosures required by GAAP.

The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or for a full fiscal year. The financial information included herein should be read in conjunction with the consolidated financial statements and notes in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2013.

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities at the date of the financial statements, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Inventory

Inventory, which is recorded at the lower of cost or market, includes the cost of third-party manufacturing and other direct and indirect costs and is valued using the first-in, first-out method. The Company capitalizes inventory costs associated with its products upon regulatory approval when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized; otherwise, such costs are expensed as research and development. Inventory is evaluated for impairment by consideration of factors such as lower of cost or market, net realizable value, obsolescence or expiry.

Net Product Revenues

The Company’s 2014 net product revenues consist solely of sales of HETLIOZ^® for the treatment of Non-24. The Company applies the revenue recognition guidance in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 605-15, Revenue Recognition—Products. The Company recognizes revenue from product sales when there is persuasive evidence that an arrangement exists, title to product and associated risk of loss has passed to the customer, the price is fixed or determinable, collectability is reasonably assured and the Company has no further performance obligations. The Company invoices and records revenue when the specialty pharmacies receive HETLIOZ^® from the Company’s third-party logistics warehouse.

In the U.S., HETLIOZ^® is only available for distribution through specialty pharmacies, and is not available in retail pharmacies. In April 2014, the Company launched HETLIOZSolutions™ to support and facilitate the treatment of blind individuals in the U.S. living with Non-24. HETLIOZSolutions™ provides patients with a host of resources including information about Non-24 and HETLIOZ^®, insurance support, overview of financial assistance programs and pharmacy access.

Product Sales Discounts and Allowances

Product sales revenue is recorded net of applicable discounts, chargebacks, rebates, co-pay assistance, service fees and product returns that are applicable for various government and commercial payors. Reserves established for discounts and returns are classified as reductions of accounts receivable if the amount is payable to direct customers, with the exception of service fees. Service fees are classified as a liability. Reserves established for chargebacks, rebates or co-pay assistance are classified as a liability if the amount is payable to a party other than customers. The Company currently records sales allowances for the following:

Rebates: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program. Rebate amounts owed after the final dispensing of the product to a benefit plan participant are based upon contractual agreements or legal requirements with public sector benefit providers, such as Medicaid. The allowance for rebates is based on statutory discount rates and expected utilization. Estimates for the expected utilization of rebates are based in part on actual and pending prescriptions for which the Company has validated the insurance benefits. Rebates are generally invoiced and paid in arrears, such that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarter’s unpaid rebates.

Chargebacks: Chargebacks are discounts that occur when contracted customers purchase directly from specialty pharmacies. Contracted customers, which currently consist primarily of Public Health Service institutions, non-profit clinics, and Federal government entities purchasing via the Federal Supply Schedule, generally purchase the product at a discounted price. The specialty pharmacy, in turn, charges back the difference between the price initially paid by the specialty pharmacy and the discounted price paid to the specialty pharmacy by the contracted customer. The allowance for chargebacks is based on actual and pending prescriptions for which the Company has validated the insurance benefits.

Medicare Part D Coverage Gap: Medicare Part D prescription drug benefit mandates manufacturers to fund 50% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Estimates for expected Medicare Part D coverage gap are based in part on historical invoices received and on actual and pending prescriptions for which the Company has validated the insurance benefits. Funding of the coverage gap is generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarter activity. If actual future funding varies from estimates, the Company may need to adjust accruals, which would affect net revenue in the period of adjustment.

Service Fees: The Company also incurs specialty pharmacy fees for services and their data. These fees are based on contracted terms and are known amounts. The Company accrues service fees at the time of revenue recognition, resulting in a reduction of product sales revenue and the recognition of an accrued liability, unless it receives an identifiable and separate benefit for the consideration and it can reasonably estimate the fair value of the benefit received. In which case, service fees are recorded as selling, general and administrative expense.

Co-payment Assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. Co-pay assistance utilization is based on information provided by the Company’s third-party administrator. The allowance for co-pay assistance is based on actual and pending sales for which the Company has validated the insurance benefits.

Prompt-pay: Specialty pharmacies are offered discounts for prompt payment. The Company expects that the specialty pharmacy will earn prompt payment discounts and, therefore, deducts the full amount of these discounts from total product sales when revenues are recognized.

Product Returns: Consistent with industry practice, the Company generally offers direct customers a limited right to return as defined within the Company’s returns policy. The Company considers several factors in the estimation process, including expiration dates of product shipped to specialty pharmacies, inventory levels within the distribution channel, product shelf life, prescription trends and other relevant factors.

Stock-based Compensation

In January 2014, the Company elected to change its method of accounting for the attribution of compensation cost for stock options with graded-vesting and only service conditions to the straight-line method. Previously, attribution was based on the accelerated attribution method, which treated each vesting tranche as an individual award and amortized them concurrently. Comparative financial statements for prior periods have been adjusted to apply the straight-line method retrospectively. See Note 3, Change in Method of Accounting for Stock-based Compensation, for further information. Beginning in 2014, the Company started using a mid-point scenario to calculate the weighted average expected term of stock options granted, which combines the Company’s historical exercise data with hypothetical exercise data for unexercised stock options. Prior to 2014, the expected term assumption was determined using the simplified method.

Advertising Expense

The Company expenses the costs of advertising, including branded promotional expenses, as incurred. Branded advertising expenses, recorded in selling, general and administrative expenses, were $3.3 million and $4.3 million for the three and six months ended June 30, 2014, respectively. The Company did not incur any advertising expense during the six months ended June 30, 2013.

Recent accounting pronouncements

In May 2014, the FASB issued Accounting Standard Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). This new standards requires companies to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. Under the new standard, revenue is recognized when a customer obtains control of a good or service. The standard allows for two transition methods - entities can either apply the new standard (i) retrospectively to each prior reporting period presented, or (ii) retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial adoption. The new standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption of the standard is prohibited. The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s condensed consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This new standard requires the netting of unrecognized tax benefits against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. Under the new standard, unrecognized tax benefits will be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the unrecognized tax benefits. The new standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2013. Adoption of this new standard did not have a material impact on the Company’s condensed consolidated financial statements.

Change in Method of Accounting for Stock-based Compensation

6 Months Ended

Jun. 30, 2014

Change in Method of Accounting for Stock-based Compensation

3. Change in Method of Accounting for Stock-based Compensation

In January 2014, the Company elected to change its method of accounting for the attribution of compensation cost for stock options with graded-vesting and only service conditions to the straight-line method. Previously, attribution was based on the accelerated attribution method, which treated each vesting tranche as an individual award and amortized them concurrently. The straight-line method of accounting was adopted to better align the Company’s recognition of stock option compensation cost with its peers and to expense stock options and restricted stock units (RSUs) in a consistent manner. Comparative financial statements for prior periods have been adjusted to apply the straight-line method retrospectively. As a result of the change in method of accounting for stock-based compensation, the expense for stock-based compensation related to option awards was $0.5 million and $1.2 million lower than it would have been under the accelerated attribution method for the three and six months ended June 30, 2014, respectively. This resulted in a reduction to the net loss of $0.5 million and $1.2 million, or $0.02 per share and $0.04 per share, respectively, for the three and six months ended June 30, 2014.

There was no adjustment as a result of the change in method of accounting for stock-based compensation to amounts previously reported as assets, liabilities and total stockholders’ equity in the consolidated balance sheets for prior periods. However, amounts previously reported as additional paid-in capital and accumulated deficit for prior periods have been adjusted to reflect the change in method of accounting for stock-based compensation. The cumulative effect of the change on accumulated deficit as of January 1, 2013, the beginning of the earliest period presented in the financial statements was a reduction of $3.2 million. The adjustments as of December 31, 2013 were as follows:


Balance Sheet	December 31, 2013
(in thousands, except for share and per share amounts)	As Previously Reported			Retrospective Adjustment			As Adjusted

Stockholders’ equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized, and no shares issued or outstanding		—						—
Common stock, $0.001 par value; 150,000,000 shares authorized; 33,338,543 shares issued and outstanding at December 31, 2013	$	33		$	—		$	33
Additional paid-in capital		355,432			(3,192	)		352,240
Accumulated other comprehensive income		21			—			21
Accumulated deficit		(311,362	)		3,192			(308,170	)

Total stockholders’ equity	$	44,124		$	—		$	44,124

The amounts previously reported in the consolidated statement of operations for research and development expense, selling, general and administrative expense and net loss for prior periods have been adjusted as a result of the change in method of accounting for stock-based compensation. The adjustments for the three and six months ended June 30, 2013 were as follows:


Statement of Operations	Three Months Ended June 30, 2013									Six Months Ended June 30, 2013
(in thousands, except for share and per share amounts)	As previously Reported			Retrospective Adjustment			As Adjusted			As previously Reported			Retrospective Adjustment			As Adjusted

Revenues:
Licensing agreement	$	6,678		$	—		$	6,678		$	13,284		$	—		$	13,284
Royalty revenue		1,641			—			1,641			3,103			—			3,103

Total revenues		8,319			—			8,319			16,387			—			16,387

Operating expenses:
Research and development		5,982			118			6,100			13,942			269			14,211
Selling, general and administrative		5,074			186			5,260			9,032			381			9,413
Intangible asset amortization		372			—			372			741			—			741

Total operating expenses		11,428			304			11,732			23,715			650			24,365


Loss from operations		(3,109	)		(304	)		(3,413	)		(7,328	)		(650	)		(7,978	)
Other income		30			—			30			76			—			76

Loss before tax benefit		(3,079	)		(304	)		(3,383	)		(7,252	)		(650	)		(7,902	)
Tax benefit		—			—			—			—			—			—

Net loss	$	(3,079	)	$	(304	)	$	(3,383	)	$	(7,252	)	$	(650	)	$	(7,902	)


Basic and diluted net loss per share	$	(0.11	)	$	(0.01	)	$	(0.12	)	$	(0.26	)	$	(0.02	)	$	(0.28	)


Weighted average shares outstanding, basic and diluted		28,377,254			—			28,377,254			28,361,340			—			28,361,340

The amounts previously reported for net loss in the consolidated statement of comprehensive loss for prior periods have been adjusted as a result of the change in method of accounting for stock-based compensation. The adjustment for the three and six months ended June 30, 2013 was as follows:


Statement of Comprehensive Loss	Three Months Ended June 30, 2013									Six Months Ended June 30, 2013
(in thousands)	As Previously Reported			Retrospective Adjustment			As Adjusted			As Previously Reported			Retrospective Adjustment			As Adjusted

Net loss	$	(3,079	)	$	(304	)	$	(3,383	)	$	(7,252	)	$	(650	)	$	(7,902	)

Other comprehensive loss:
Change in net unrealized loss on marketable securities		—			—			—			(10	)		—			(10	)
Tax provision on other comprehensive income (loss)		—			—			—			—			—			—

Other comprehensive loss, net of tax:		—			—			—			(10	)		—			(10	)

Comprehensive loss	$	(3,079	)	$	(304	)	$	(3,383	)	$	(7,262	)	$	(650	)	$	(7,912	)

There was no adjustment to the amounts previously reported for net cash used in operating activities in the consolidated statements of cash flows for prior periods as a result of the change in method of accounting for stock-based compensation. However, the amounts previously reported as net loss and employee and non-employee stock-based compensation expense in cash flows from operating activities have been adjusted to reflect the change in method of accounting for stock-based compensation. The adjustments for the six months ended June 30, 2013 were as follows:


Statement of Cash Flows	Six Months Ended June 30, 2013
(in thousands)	As Previously Reported			Retrospective Adjustment			As Adjusted

Cash flows from operating activities
Net loss	$	(7,252	)	$	(650	)	$	(7,902	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment		212			—			212
Employee and non-employee stock-based compensation		1,782			650			2,432
Amortization of discounts and premiums on marketable securities		121			—			121
Intangible asset amortization		741			—			741
Changes in assets and liabilities, net		(12,772	)		—			(12,772	)

Net cash used in operating activities	$	(17,168	)	$	—		$	(17,168	)

- Definition

The entire disclosure of changes in accounting principles, including adoption of new accounting pronouncements, that describes the new methods, amount and effects on financial statement line items.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=6507316

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Direct Effects of a Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=6510796

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=28359718&loc=d3e22583-107794

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Indirect Effects of a Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=6515603

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=28359718&loc=d3e22580-107794

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 270
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.10-01.(b)(6))
-URI http://asc.fasb.org/extlink&oid=27015980&loc=d3e46468-122699

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Accounting Change
-URI http://asc.fasb.org/extlink&oid=6503790

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=28359718&loc=d3e22499-107794

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Retrospective Application
-URI http://asc.fasb.org/extlink&oid=6523989

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 270
-SubTopic 10
-Section 45
-Paragraph 13
-URI http://asc.fasb.org/extlink&oid=6372559&loc=d3e765-108305

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 270
-SubTopic 10
-Section 45
-Paragraph 12
-URI http://asc.fasb.org/extlink&oid=6372559&loc=d3e725-108305

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 01
-Paragraph b
-Subparagraph 6
-Article 10

+ Details

Earnings per Share

6 Months Ended

Jun. 30, 2014

Earnings per Share

4. Earnings per Share

Basic earnings per share (EPS) is calculated by dividing the net income (loss) by the weighted average number of shares of common stock outstanding. Diluted EPS is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding, plus potential outstanding common stock for the period. Potential outstanding common stock includes stock options and shares underlying RSUs, but only to the extent that their inclusion is dilutive.

The following table presents the calculation of basic and diluted net loss per share of common stock for the three and six months ended June 30, 2014 and 2013:


	Three Months Ended						Six Months Ended
(in thousands, except for share and per share amounts)	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Numerator:
Net loss	$	(21,575	)	$	(3,383	)	$	(48,108	)	$	(7,902	)


Denominator:
Weighted average shares outstanding, basic and diluted		33,874,625			28,377,254			33,777,207			28,361,340


Net loss per share, basic and diluted:
Net loss per share	$	(0.64	)	$	(0.12	)	$	(1.42	)	$	(0.28	)


Antidilutive securities excluded from calculations of diluted net loss per share		3,739,874			4,234,017			3,805,191			4,997,542

The Company incurred net losses for the three and six months ended June 30, 2014 and 2013 causing inclusion of any potentially dilutive securities to have an anti-dilutive effect, resulting in dilutive loss per share and basic loss per share attributable to common stockholders being equivalent.

Marketable Securities

6 Months Ended

Jun. 30, 2014

Marketable Securities

5. Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of June 30, 2014, which all have contract maturities of less than one year:


(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
U.S. Treasury and government agencies	$	24,521	$	2	$	—		$	24,523
Corporate debt	$	22,060	$	10	$	(2	)	$	22,068

	$	46,581	$	12	$	(2	)	$	46,591

The following is a summary of the Company’s available-for-sale marketable securities as of December 31, 2013:


(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
U.S. Treasury and government agencies	$	31,557	$	9	$	—		$	31,566
Corporate debt	$	34,008	$	18	$	(6	)	$	34,020

	$	65,565	$	27	$	(6	)	$	65,586

- Definition

The entire disclosure for investments in certain debt and equity securities.

+ References + Details

Fair Value Measurements

6 Months Ended

Jun. 30, 2014

Fair Value Measurements

6. Fair Value Measurements

Authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

•

Level 1 — defined as observable inputs such as quoted prices in active markets

•

Level 2 — defined as inputs other than quoted prices in active markets that are either directly or indirectly observable

•

Level 3 — defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions

Marketable securities classified in Level 1 and Level 2 as of June 30, 2014 and December 31, 2013 consist of available-for-sale marketable securities. The valuation of Level 1 instruments is determined using a market approach, and is based upon unadjusted quoted prices for identical assets in active markets. The valuation of investments classified in Level 2 also is determined using a market approach based upon quoted prices for similar assets in active markets, or other inputs that are observable for substantially the full term of the financial instrument. Level 2 securities include certificates of deposit, commercial paper and corporate notes that use as their basis readily observable market parameters. The Company did not transfer any assets between Level 2 and Level 1 during the six months ended June 30, 2014.

As of June 30, 2014, the Company held certain assets that are required to be measured at fair value on a recurring basis, as follows:


	Fair Value Measurement as of June 30, 2014 Using
(in thousands)	June 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	$	46,591	$	24,523	$	22,068	$	—

As of December 31, 2013, the Company held certain assets that are required to be measured at fair value on a recurring basis, as follows:


	Fair Value Measurement as of December 31, 2013 Using
(in thousands)	December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	$	65,586	$	31,566	$	34,020	$	—

The Company also has financial assets and liabilities, not required to be measured at fair value on a recurring basis, which primarily consist of cash and cash equivalents, accounts receivable, restricted cash, accounts payable and accrued liabilities, the carrying value of which materially approximate their fair values.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Inventory

6 Months Ended

Jun. 30, 2014

Inventory

7. Inventory

The Company evaluates expiry risk by evaluating current and future product demand relative to product shelf life. The Company builds demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance and patient usage. Inventory consisted of the following as of June 30, 2014 and December 31, 2013:


(in thousands)	June 30, 2014		December 31, 2013
Raw materials	$	145	$	—
Work-in-process		7		—
Finished goods		941		—

Total	$	1,093	$	—

Prepaid Expenses and Other Current Assets

6 Months Ended

Jun. 30, 2014

Prepaid Expenses and Other Current Assets

8. Prepaid Expenses and Other Current Assets

The following is a summary of the Company’s prepaid expenses and other current assets as of June 30, 2014 and December 31, 2013:


(in thousands)	June 30, 2014		December 31, 2013
Prepaid insurance	$	708	$	167
Prepaid manufacturing cost		608		—
Other prepaid expenses and vendor advances		2,616		2,408
Other current assets		234		128

Total prepaid expenses and other current assets	$	4,166	$	2,703

Intangible Assets

6 Months Ended

Jun. 30, 2014

Intangible Assets

9. Intangible Assets

The following is a summary of the Company’s intangible asset as of June 30, 2014:


			June 30, 2014
(in thousands)	Estimated Useful Life (Years)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HETLIOZ^®		19	$	8,000	$	333	$	7,667
Fanapt^®		7.5	$	12,000	$	7,812	$	4,188

The following is a summary of the Company’s intangible asset as of December 31, 2013:


			December 31, 2013
(in thousands)	Estimated Useful Life (Years)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Fanapt^®		8	$	12,000	$	6,963	$	5,037

In January 2014, the Company announced that the FDA had approved the NDA for HETLIOZ^®. As a result of this approval, the Company met a milestone under its license agreement with Bristol-Myers Squibb (BMS) that required the Company to make a license payment of $8.0 million to BMS. The $8.0 million is being amortized on a straight-line basis over the remaining life of the U.S. patent for HETLIOZ^®, which prior to June 2014, the Company expected to last until December 2022. In June 2014, the Company received a notice of allowance from the U.S. Patent and Trademark Office for a patent covering the method of use of HETLIOZ^®. The patent expires in January 2033, thereby potentially extending the exclusivity protection in the U.S. beyond the composition of matter patent. As a result of the patent allowance, the Company extended the estimated useful life from December 2022 to January 2033.

In 2009, the Company announced that the FDA had approved the NDA for Fanapt^®. As a result of this approval, the Company met a milestone under its original sublicense agreement with Novartis that required the Company to make a license payment of $12.0 million to Novartis. The $12.0 million is being amortized on a straight-line basis over the remaining life of the U.S. patent for Fanapt^®, which as of December 31, 2013 the Company expected to last until May 2017. In 2014, the Company became aware of events that led it to believe that Novartis would not complete the ongoing pediatric efficacy studies in a time that would enable it to receive the incremental six-month pediatric term extension. This resulted in a six-month reduction to the estimated patent life from May 2017 to November 2016.

The intangible assets are being amortized over their estimated useful economic life using the straight-line method. Amortization expense was $0.6 million and $0.4 million for the three months ended June 30, 2014 and 2013, respectively. Amortization expense was $1.2 million and $0.7 million for the six months ended June 30, 2014 and 2013, respectively. The following is a summary of future intangible asset amortization as of June 30, 2014:


(in thousands)	Total		Remainder of 2014		2015		2016		2017		2018		Thereafter
HETLIOZ^®	$	7,667	$	205	$	411	$	411	$	411	$	411	$	5,818
Fanapt^®		4,188		866		1,733		1,589		—		—		—

	$	11,855	$	1,071	$	2,144	$	2,000	$	411	$	411	$	5,818

Accrued Liabilities

6 Months Ended

Jun. 30, 2014

Accrued Liabilities

10. Accrued Liabilities

The following is a summary of the Company’s accrued liabilities as of June 30, 2014 and December 31, 2013:


(in thousands)	June 30, 2014		December 31, 2013
Accrued research and development expenses	$	1,845	$	2,324
Accrued consulting and other professional fees		2,708		2,015
Employee benefits		1,255		176
Other accrued liabilities		945		665

	$	6,753	$	5,180

Deferred Revenue

6 Months Ended

Jun. 30, 2014

Deferred Revenue

11. Deferred Revenue

The following is a summary of changes in total deferred revenue for the six months ended June 30, 2014 and 2013:


	Six Months Ended
	June 30,		June 30,
(in thousands)	2014		2013
Balance beginning of period	$	90,275	$	117,064
Licensing revenue recognized		15,216		13,284

Balance end of period	$	75,059	$	103,780

The Company entered into an amended and restated sublicense agreement with Novartis in 2009, pursuant to which Novartis has the right to commercialize and develop Fanapt^® in the U.S. and Canada. Under the amended and restated sublicense agreement, the Company received an upfront payment of $200.0 million. The Company and Novartis established a Joint Steering Committee (JSC) following the effective date of the amended and restated sublicense agreement. The Company concluded that the JSC constitutes a deliverable under the amended and restated sublicense agreement and that revenue related to the upfront payment will be recognized ratably over the term of the JSC; however, the delivery or performance has no term as the exact length of the JSC is undefined. As a result, the Company deems the performance period of the JSC to be the life of the U.S. patent of Fanapt^®. Revenue related to the upfront payment will be recognized ratably from the date the amended and restated sublicense agreement became effective (November 2009) through the expected life of the U.S. patent for Fanapt^® (November 2016). See Note 9 Intangible Assets, for a discussion of the Fanapt^® patent life.

Income Taxes

6 Months Ended

Jun. 30, 2014

Income Taxes

12. Income Taxes

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The fact that the Company has historically generated net operating losses (NOLs) serves as strong evidence that it is more likely than not that deferred tax assets will not be realized in the future. Therefore, the Company has a full valuation allowance against all deferred tax assets as of June 30, 2014 and December 31, 2013. Changes in ownership may limit the amount of NOL carryforwards that can be utilized in the future to offset taxable income.

Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies

13. Commitments and Contingencies

Operating leases

In 2011, the Company entered into an office lease with Square 54 Office Owner LLC (the Landlord) for its current headquarters, consisting of 21,400 square feet at 2200 Pennsylvania Avenue, N.W. in Washington, D.C. (the Lease). Subject to the prior rights of other tenants in the building, the Company has the right to renew the Lease for five years following the expiration of its original term. The Company has the right to sublease or assign all or a portion of the premises, subject to standard conditions. The Lease may be terminated early by the Company or the Landlord upon certain conditions.

In March 2014, the Company and the Landlord entered into a lease amendment (the Lease Amendment). Under the Lease Amendment, the Company has the right to occupy an additional 8,860 square feet in the building. The Lease Amendment has a 12 year and one month term beginning on September 1, 2014, but may be terminated early by either the Landlord or the Company upon certain conditions. The Company will pay approximately $0.4 million in annual rent over the term of the Lease Amendment, however, rent will be abated for the first nine months. The Landlord will provide the Company with an allowance of approximately $0.8 million for construction on the premises to the Company’s specifications, subject to certain conditions. Subject to the prior rights of other tenants in the building, the Company will have the right to renew the Lease Amendment for five years following the expiration of its original term. The Company will also have the right to sublease or assign all or a portion of the premises, subject to standard conditions.

The following is a summary of the minimum annual future payments under operating leases as of June 30, 2014:


			Remainder
(in thousands)	Total		of 2014		2015		2016		2017		2018		Thereafter
Operating leases	$	15,238	$	587	$	1,337	$	1,500	$	1,538	$	1,576	$	8,700

Rent expense under operating leases, was $0.4 million and $0.3 million for the three months ended June 30, 2014 and 2013, respectively. Rent expense under operating leases, was $0.8 million and $0.5 million for the six months ended June 30, 2014 and 2013, respectively.

Consulting fees

The Company engaged a regulatory consultant to assist the Company’s efforts to prepare, file and obtain FDA approval of an NDA for HETLIOZ^®. As a result of the FDA approval of the NDA for HETLIOZ^®, the Company made a milestone payment of $2.0 million, which is included in research and development expenses in the consolidated statement of operations for the six months ended June 30, 2014. In March 2014, the Company terminated the engagement.

License agreements

The Company’s rights to develop and commercialize its products are subject to the terms and conditions of licenses granted to the Company by other pharmaceutical companies.

HETLIOZ^®. In February 2004, the Company entered into a license agreement with BMS under which the Company received an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize HETLIOZ^®. As a result of the FDA approval of the NDA for HETLIOZ^® in January 2014, the Company made a milestone payment of $8.0 million in the first quarter of 2014. The Company will be obligated to make a future milestone payment to BMS of up to $25.0 million in the event that cumulative sales of HETLIOZ^® reach $250.0 million. Additionally, the Company will be obligated to make royalty payments equal to 10% of net sales of HETLIOZ^®. The Company is also obligated under the license agreement to pay BMS a percentage of any sublicense fees, upfront payments and milestone and other payments (excluding royalties) that the Company receives from a third party in connection with any sublicensing arrangement, at a rate which is in the mid-twenties. Under the license agreement with BMS for HETLIOZ^®, the Company is obligated to use commercially reasonable efforts to develop and commercialize HETLIOZ^® and to meet certain milestones in initiating and completing certain clinical work.

Either party may terminate the HETLIOZ^® license agreement under certain circumstances, including a material breach of the agreement by the other. In the event the Company terminates the license, or if BMS terminates the license due to the Company’s breach, all rights licensed and developed by the Company under the license agreement will revert or otherwise be licensed back to BMS on an exclusive basis.

Fanapt^®. The Company acquired exclusive worldwide rights to patents and patent applications for Fanapt^® in 2004 through a sublicense agreement with Novartis. As a result of the FDA’s approval of the NDA for Fanapt^® in May 2009, the Company met a milestone under the sublicense agreement, which required the Company to make a payment of $12.0 million to Novartis.

In 2009, the Company entered into an amended and restated sublicense agreement with Novartis, which amended and restated the 2004 sublicense agreement. Pursuant to the amended and restated sublicense agreement, the Company received an upfront payment of $200.0 million and is eligible for additional payments totaling up to $265.0 million upon Novartis’ achievement of certain commercial and development milestones for Fanapt^® in the U.S. and Canada. Based on the current sales performance of Fanapt^® in the U.S., the Company expects that some or all of these commercial and development milestones will not be achieved by Novartis. The Company also receives royalties, which, as a percentage of net sales, are in the low double-digits, on net sales of Fanapt^® in the U.S. and Canada.

The Company retains exclusive rights to Fanapt^® outside the U.S. and Canada, and the Company has exclusive rights to use any of Novartis’ data for Fanapt^® for developing and commercializing Fanapt^® outside the U.S. and Canada. Novartis has chosen not to co-commercialize Fanapt^® with the Company in Europe and certain other countries and will instead receive a royalty on net sales in those countries. These include, but are not limited to, the countries in the European Union as well as Switzerland, Norway, Liechtenstein and Iceland. The Company has entered into agreements with the following partners for the commercialization of Fanapt^® in the countries set forth below:


Country		Partner
Mexico		Probiomed S.A. de C.V.
Israel		Megapharm Ltd.

In 2012, the Israeli Ministry of Health and Argentina granted market approval for Fanapt^® for the treatment of schizophrenia. In October 2013, the Mexican Federal Commission for Protection Against Sanitary Risks (COFEPRIS) granted market approval for Fanapt^® for the treatment of schizophrenia.

VLY-686. In 2012, the Company entered into a license agreement with Eli Lilly and Company (Lilly) pursuant to which the Company acquired an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize an NK-1R antagonist, VLY-686, for all human indications. The patent describing VLY-686 as a new chemical entity expires in April 2023, except in the U.S., where it expires in June 2024 absent any applicable patent term adjustments.

Pursuant to the license agreement, the Company will be responsible for all development costs, and Lilly is eligible to receive payments based upon achievement of specified development and commercialization milestones as well as tiered-royalties on net sales at percentage rates up to the low double digits. These milestones include $4.0 million for pre-NDA approval milestones and up to $95.0 million for future regulatory approval and sales milestones. The Company is obligated to use its commercially reasonable efforts to develop and commercialize VLY-686.

Either party may terminate the license agreement under certain circumstances, including a material breach of the license agreement by the other. In the event the Company terminates the license agreement, or if Lilly terminates due to the Company’s breach or for certain other reasons set forth in the license agreement, all rights licensed and developed by the Company under the license agreement will revert or otherwise be licensed back to Lilly on an exclusive basis, subject to payment by Lilly to the Company of a royalty on net sales of products that contain VLY-686.

Future milestone payments. No amounts were recorded as liabilities nor were any future contractual obligations relating to the license agreements included in the consolidated financial statements as of June 30, 2014 because the criteria for recording the future milestone payments have not yet been met. These criteria include the successful outcome of future clinical trials, regulatory filings, favorable FDA regulatory approvals, growth in product sales and other factors.

Legal Matters

6 Months Ended

Jun. 30, 2014

Legal Matters

14. Legal Matters

In May 2014, the Company commenced arbitration proceedings with Novartis relating to the license of Fanapt^®. The Company has requested an award of approximately $539.0 million in such proceedings. The Company is vigorously prosecuting its claims in the arbitration as well as defending counterclaims brought by Novartis for approximately $75.0 million, against which the Company believes it has meritorious defenses. The Company does not anticipate that this proceeding will have a material, adverse effect on its business, results of operations or financial condition. While it is not possible to accurately predict or determine the eventual outcome of this matter, these proceedings are subject to inherent uncertainties and the Company may not prevail. The Company currently anticipates that the arbitration proceeding will be completed within 12 to 18 months.

In June 2014, the Company filed suit against Roxane Laboratories, Inc. (Roxane) in the U.S. District Court for the District of Delaware. The suit seeks an adjudication that Roxane has infringed one or more claims of the Company’s U.S. Patent No. 8,586,610 (the Patent) by submitting to the FDA an Abbreviated New Drug Application for generic versions of Fanapt^® oral tablets in 1 mg, 2 mg, 4 mg, 6 mg, 8 mg, 10 mg, and 12 mg strengths. The relief requested by the Company includes a request for a permanent injunction preventing Roxane from infringing the asserted claims of the Patent by engaging in the manufacture, use, offer to sell, sale, importation or distribution of generic versions of Fanapt^® before the expiration of the Patent in 2027.

Employee Stock-Based Compensation

6 Months Ended

Jun. 30, 2014

Employee Stock-Based Compensation

15. Employee Stock-Based Compensation

Compensation costs for all stock-based awards to employees and directors are measured based on the grant date fair value of those awards and recognized over the period during which the employee or director is required to perform service in exchange for the award. The Company generally recognizes the expense over the award’s vesting period.

In January 2014, the Company elected to change its method of accounting for the attribution of compensation cost for stock options with graded-vesting and only service conditions from the accelerated attribution method to the straight-line method. See Note 3, Change in Method of Accounting for Stock-based Compensation for additional discussion. The fair value of stock options granted and RSUs awarded are amortized using the straight-line method. As stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model that uses the assumptions noted in the following table. Expected volatility rates are based on the historical volatility of the Company’s publicly traded common stock and other factors. Beginning in 2014, the Company started using a mid-point scenario to calculate the weighted average expected term of stock options granted, which combines the Company’s historical exercise data with hypothetical exercise data for unexercised stock options. Prior to 2014, the expected term assumption was determined using the simplified method. The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has not paid dividends to its stockholders since its inception (other than a dividend of preferred share purchase rights, which was declared in September 2008) and does not plan to pay dividends in the foreseeable future.

Assumptions used in the Black-Scholes-Merton option pricing model for employee and director stock options granted during the six months ended June 30, 2014 and 2013 were as follows:


	Six Months Ended
	June 30,			June 30,
	2014			2013
Expected dividend yield		0	%		0	%
Weighted average expected volatility		64	%		62	%
Weighted average expected term (years)		5.83			6.03
Weighted average risk-free rate		1.77	%		1.16	%
Weighted average fair value per share	$	7.14		$	3.46

Total employee stock-based compensation expense related to stock-based awards for the three and six months ended June 30, 2014 and 2013 was comprised of the following:


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
(in thousands)	2014		2013		2014		2013
Research and development	$	418	$	461	$	860	$	1,058
Selling, general and administrative		989		646		1,901		1,353

	$	1,407	$	1,107	$	2,761	$	2,411

As of June 30, 2014, the Company had two equity incentive plans, the Second Amended and Restated Management Equity Plan (the 2004 Plan) and the 2006 Equity Incentive Plan (the 2006 Plan). There were 652,810 shares subject to outstanding options granted under the 2004 Plan as of June 30, 2014, and no additional options will be granted under this plan. As of June 30, 2014, there were 10,329,472 shares of common stock reserved for issuance under the 2006 Plan, of which 5,849,373 shares were subject to outstanding options and RSUs granted to employees and non-employees and 2,409,512 shares remained available for future grant.

The Company has granted option awards with service conditions that are subject to terms and conditions established by the compensation committee of the board of directors. Service option awards have 10-year contractual terms and all service option awards granted prior to 2007, service option awards granted to new employees, and certain service option awards granted to existing employees vest and become exercisable on the first anniversary of the grant date with respect to the 25% of the shares subject to service option awards. The remaining 75% of the shares subject to the service option awards vest and become exercisable monthly in equal installments thereafter over three years. Certain service option awards granted to existing employees after December 2006 vest and become exercisable monthly in equal installments over four years. The initial service option awards granted to directors upon their election vest and become exercisable in equal monthly installments over a period of four years, while the subsequent annual service option awards granted to directors vest and become exercisable in equal monthly installments over a period of one year. Certain service option awards to executives and directors provide for accelerated vesting if there is a change in control of the Company. Certain service option awards to employees and executives provide for accelerated vesting if the respective employee’s or executive’s service is terminated by the Company for any reason other than cause or permanent disability. As of June 30, 2014, there was $8.6 million of unrecognized compensation costs related to unvested service option awards expected to be recognized over a weighted average period of 1.5 years. No service option awards are classified as a liability as of June 30, 2014.

A summary of option activity for the 2004 Plan for the six months ended June 30, 2014 follows:


(in thousands, except for share and per share amounts)	Number of Shares			Weighted Average Exercise Price at Grant Date		Weighted Average Remaining Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2013		670,744		$	1.79		1.78	$	7,124
Expired		—
Exercised		(17,934	)

Outstanding at June 30, 2014		652,810			1.74		1.28		9,426

Exercisable at June 30, 2014		652,810			1.74		1.28		9,426

There are no options expected to vest as of June 30, 2014 under the 2004 Plan, given that the Company stopped issuing options from this plan in 2006.

A summary of option activity for the 2006 Plan for the six months ended June 30, 2014 follows:


(in thousands, except for share and per share amounts)	Number of Shares			Weighted Average Exercise Price at Grant Date		Weighted Average Remaining Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2013		5,533,618		$	10.98		6.93	$	21,264
Granted		220,000			12.17
Forfeited		(212,653	)		8.30
Expired		—
Exercised		(344,188	)		7.02				2,672

Outstanding at June 30, 2014		5,196,777			11.40		6.56		34,791

Exercisable at June 30, 2014		3,480,512			12.72		5.41		22,006

Expected to vest at June 30, 2014		1,639,031			8.67		8.87		12,316

Proceeds from the exercise of stock options amounted to $2.5 million for the six months ended June 30, 2014.

An RSU is a stock award that entitles the holder to receive shares of the Company’s common stock as the award vests. The fair value of each RSU is based on the closing price of the Company’s stock on the date of grant. The Company has granted RSUs with service conditions that vest in four equal annual installments provided that the employee remains employed with the Company. As of June 30, 2014, there was $4.8 million of unrecognized compensation costs related to unvested RSUs expected to be recognized over a weighted average period of 2.0 years. No RSUs are classified as a liability as of June 30, 2014.

A summary of RSU activity for the 2006 Plan for the six months ended June 30, 2014 follows:


	Number of Shares Underlying RSUs			Weighted Average Grant Date Fair Value
Unvested at December 31, 2013		883,690		$	7.70
Granted		52,000			13.36
Forfeited		(73,532	)		6.50
Vested		(209,562	)		6.67

Unvested at June 30, 2014		652,596			8.52

The grant date fair value for the 209,562 shares underlying RSUs that vested during the six months ended June 30, 2014 was $1.4 million. In order for certain employees to satisfy the minimum statutory employee tax withholding requirements related to the issuance of common stock underlying certain of the RSUs that vested and settled during the six months ended June 30, 2014, the Company withheld 32,386 shares of common stock and paid employee payroll withholding taxes of $0.4 million relating to the vesting and settlement of the RSUs.

Business Organization and Presentation (Policies)	6 Months Ended
Business Organization and Presentation (Policies)	Jun. 30, 2014
Business organization	*Business organization* Vanda Pharmaceuticals Inc. (Vanda or the Company) is a biopharmaceutical company focused on the development and commercialization of products for the treatment of central nervous system disorders. Vanda commenced its operations in 2003. Vanda’s product portfolio includes HETLIOZ^® (tasimelteon), a product for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) and for which a New Drug Application (NDA) was approved by the U.S. Food and Drug Administration (FDA) in January 2014 and launched commercially in the U.S. in April 2014, Fanapt^®(iloperidone), a product for the treatment of schizophrenia, the oral formulation of which is currently being marketed and sold in the U.S. by Novartis Pharma AG (Novartis), and VLY-686, a small molecule neurokinin-1 receptor (NK-1R) antagonist.
Basis of presentation	*Basis of presentation* The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements for the fiscal year ended December 31, 2013 included in the Company’s annual report on Form 10-K. The financial information as of June 30, 2014 and for the three and six months ended June 30, 2014 and 2013 is unaudited, but in the opinion of management, all adjustments with the exception of stock-based compensation expense, see Note 3, Change in Method of Accounting for Stock-based Compensation, consist only of normal recurring accruals, considered necessary for a fair statement of the results of these interim periods have been included. The condensed consolidated balance sheet data as of December 31, 2013 was derived from audited financial statements but does not include all disclosures required by GAAP. The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or for a full fiscal year. The financial information included herein should be read in conjunction with the consolidated financial statements and notes in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2013.
Use of estimates	*Use of estimates* The preparation of financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities at the date of the financial statements, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Inventory	*Inventory* Inventory, which is recorded at the lower of cost or market, includes the cost of third-party manufacturing and other direct and indirect costs and is valued using the first-in, first-out method. The Company capitalizes inventory costs associated with its products upon regulatory approval when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized; otherwise, such costs are expensed as research and development. Inventory is evaluated for impairment by consideration of factors such as lower of cost or market, net realizable value, obsolescence or expiry.
Net Product Revenues	*Net Product Revenues* The Company’s 2014 net product revenues consist solely of sales of HETLIOZ^® for the treatment of Non-24. The Company applies the revenue recognition guidance in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 605-15, Revenue Recognition—Products. The Company recognizes revenue from product sales when there is persuasive evidence that an arrangement exists, title to product and associated risk of loss has passed to the customer, the price is fixed or determinable, collectability is reasonably assured and the Company has no further performance obligations. The Company invoices and records revenue when the specialty pharmacies receive HETLIOZ^® from the Company’s third-party logistics warehouse. In the U.S., HETLIOZ^® is only available for distribution through specialty pharmacies, and is not available in retail pharmacies. In April 2014, the Company launched HETLIOZSolutions™ to support and facilitate the treatment of blind individuals in the U.S. living with Non-24. HETLIOZSolutions™ provides patients with a host of resources including information about Non-24 and HETLIOZ^®, insurance support, overview of financial assistance programs and pharmacy access. Product Sales Discounts and Allowances Product sales revenue is recorded net of applicable discounts, chargebacks, rebates, co-pay assistance, service fees and product returns that are applicable for various government and commercial payors. Reserves established for discounts and returns are classified as reductions of accounts receivable if the amount is payable to direct customers, with the exception of service fees. Service fees are classified as a liability. Reserves established for chargebacks, rebates or co-pay assistance are classified as a liability if the amount is payable to a party other than customers. The Company currently records sales allowances for the following: Rebates: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program. Rebate amounts owed after the final dispensing of the product to a benefit plan participant are based upon contractual agreements or legal requirements with public sector benefit providers, such as Medicaid. The allowance for rebates is based on statutory discount rates and expected utilization. Estimates for the expected utilization of rebates are based in part on actual and pending prescriptions for which the Company has validated the insurance benefits. Rebates are generally invoiced and paid in arrears, such that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarter’s unpaid rebates. Chargebacks: Chargebacks are discounts that occur when contracted customers purchase directly from specialty pharmacies. Contracted customers, which currently consist primarily of Public Health Service institutions, non-profit clinics, and Federal government entities purchasing via the Federal Supply Schedule, generally purchase the product at a discounted price. The specialty pharmacy, in turn, charges back the difference between the price initially paid by the specialty pharmacy and the discounted price paid to the specialty pharmacy by the contracted customer. The allowance for chargebacks is based on actual and pending prescriptions for which the Company has validated the insurance benefits. Medicare Part D Coverage Gap: Medicare Part D prescription drug benefit mandates manufacturers to fund 50% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Estimates for expected Medicare Part D coverage gap are based in part on historical invoices received and on actual and pending prescriptions for which the Company has validated the insurance benefits. Funding of the coverage gap is generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarter activity. If actual future funding varies from estimates, the Company may need to adjust accruals, which would affect net revenue in the period of adjustment. Service Fees: The Company also incurs specialty pharmacy fees for services and their data. These fees are based on contracted terms and are known amounts. The Company accrues service fees at the time of revenue recognition, resulting in a reduction of product sales revenue and the recognition of an accrued liability, unless it receives an identifiable and separate benefit for the consideration and it can reasonably estimate the fair value of the benefit received. In which case, service fees are recorded as selling, general and administrative expense. Co-payment Assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. Co-pay assistance utilization is based on information provided by the Company’s third-party administrator. The allowance for co-pay assistance is based on actual and pending sales for which the Company has validated the insurance benefits. Prompt-pay: Specialty pharmacies are offered discounts for prompt payment. The Company expects that the specialty pharmacy will earn prompt payment discounts and, therefore, deducts the full amount of these discounts from total product sales when revenues are recognized. Product Returns: Consistent with industry practice, the Company generally offers direct customers a limited right to return as defined within the Company’s returns policy. The Company considers several factors in the estimation process, including expiration dates of product shipped to specialty pharmacies, inventory levels within the distribution channel, product shelf life, prescription trends and other relevant factors.
Stock-based Compensation	*Stock-based Compensation* In January 2014, the Company elected to change its method of accounting for the attribution of compensation cost for stock options with graded-vesting and only service conditions to the straight-line method. Previously, attribution was based on the accelerated attribution method, which treated each vesting tranche as an individual award and amortized them concurrently. Comparative financial statements for prior periods have been adjusted to apply the straight-line method retrospectively. See Note 3, Change in Method of Accounting for Stock-based Compensation, for further information. Beginning in 2014, the Company started using a mid-point scenario to calculate the weighted average expected term of stock options granted, which combines the Company’s historical exercise data with hypothetical exercise data for unexercised stock options. Prior to 2014, the expected term assumption was determined using the simplified method.
Advertising Expense	*Advertising Expense* The Company expenses the costs of advertising, including branded promotional expenses, as incurred. Branded advertising expenses, recorded in selling, general and administrative expenses, were $3.3 million and $4.3 million for the three and six months ended June 30, 2014, respectively. The Company did not incur any advertising expense during the six months ended June 30, 2013.
Recent accounting pronouncements	*Recent accounting pronouncements* In May 2014, the FASB issued Accounting Standard Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). This new standards requires companies to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. Under the new standard, revenue is recognized when a customer obtains control of a good or service. The standard allows for two transition methods - entities can either apply the new standard (i) retrospectively to each prior reporting period presented, or (ii) retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial adoption. The new standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption of the standard is prohibited. The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s condensed consolidated financial statements. In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This new standard requires the netting of unrecognized tax benefits against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. Under the new standard, unrecognized tax benefits will be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the unrecognized tax benefits. The new standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2013. Adoption of this new standard did not have a material impact on the Company’s condensed consolidated financial statements.

- Definition

Disclosure of accounting policy for major classes of inventories, bases of stating inventories (for example, lower of cost or market), methods by which amounts are added and removed from inventory classes (for example, FIFO, LIFO, or average cost), loss recognition on impairment of inventories, and situations in which inventories are stated above cost. If inventory is carried at cost, this disclosure includes the nature of the cost elements included in inventory.

+ References + Details

- Definition

Disclosure of accounting policy for revenue recognition. If the entity has different policies for different types of revenue transactions, the policy for each material type of transaction is generally disclosed. If a sales transaction has multiple element arrangements (for example, delivery of multiple products, services or the rights to use assets) the disclosure may indicate the accounting policy for each unit of accounting as well as how units of accounting are determined and valued. The disclosure may encompass important judgment as to appropriateness of principles related to recognition of revenue. The disclosure also may indicate the entity's treatment of any unearned or deferred revenue that arises from the transaction.

+ References + Details

Change in Method of Accounting for Stock-based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

Adjustments in Balance Sheet

The adjustments as of December 31, 2013 were as follows:


Balance Sheet	December 31, 2013
(in thousands, except for share and per share amounts)	As Previously Reported			Retrospective Adjustment			As Adjusted

Stockholders’ equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized, and no shares issued or outstanding		—						—
Common stock, $0.001 par value; 150,000,000 shares authorized; 33,338,543 shares issued and outstanding at December 31, 2013	$	33		$	—		$	33
Additional paid-in capital		355,432			(3,192	)		352,240
Accumulated other comprehensive income		21			—			21
Accumulated deficit		(311,362	)		3,192			(308,170	)

Total stockholders’ equity	$	44,124		$	—		$	44,124

Adjustments in Statement of Operations

The adjustments for the three and six months ended June 30, 2013 were as follows:


Statement of Operations	Three Months Ended June 30, 2013									Six Months Ended June 30, 2013
(in thousands, except for share and per share amounts)	As previously Reported			Retrospective Adjustment			As Adjusted			As previously Reported			Retrospective Adjustment			As Adjusted

Revenues:
Licensing agreement	$	6,678		$	—		$	6,678		$	13,284		$	—		$	13,284
Royalty revenue		1,641			—			1,641			3,103			—			3,103

Total revenues		8,319			—			8,319			16,387			—			16,387

Operating expenses:
Research and development		5,982			118			6,100			13,942			269			14,211
Selling, general and administrative		5,074			186			5,260			9,032			381			9,413
Intangible asset amortization		372			—			372			741			—			741

Total operating expenses		11,428			304			11,732			23,715			650			24,365


Loss from operations		(3,109	)		(304	)		(3,413	)		(7,328	)		(650	)		(7,978	)
Other income		30			—			30			76			—			76

Loss before tax benefit		(3,079	)		(304	)		(3,383	)		(7,252	)		(650	)		(7,902	)
Tax benefit		—			—			—			—			—			—

Net loss	$	(3,079	)	$	(304	)	$	(3,383	)	$	(7,252	)	$	(650	)	$	(7,902	)


Basic and diluted net loss per share	$	(0.11	)	$	(0.01	)	$	(0.12	)	$	(0.26	)	$	(0.02	)	$	(0.28	)


Weighted average shares outstanding, basic and diluted		28,377,254			—			28,377,254			28,361,340			—			28,361,340

Adjustments in Statement of Comprehensive Loss

The adjustment for the three and six months ended June 30, 2013 was as follows:


Statement of Comprehensive Loss	Three Months Ended June 30, 2013									Six Months Ended June 30, 2013
(in thousands)	As Previously Reported			Retrospective Adjustment			As Adjusted			As Previously Reported			Retrospective Adjustment			As Adjusted

Net loss	$	(3,079	)	$	(304	)	$	(3,383	)	$	(7,252	)	$	(650	)	$	(7,902	)

Other comprehensive loss:
Change in net unrealized loss on marketable securities		—			—			—			(10	)		—			(10	)
Tax provision on other comprehensive income (loss)		—			—			—			—			—			—

Other comprehensive loss, net of tax:		—			—			—			(10	)		—			(10	)

Comprehensive loss	$	(3,079	)	$	(304	)	$	(3,383	)	$	(7,262	)	$	(650	)	$	(7,912	)

Adjustments in Statement of Cash Flows

The adjustments for the six months ended June 30, 2013 were as follows:


Statement of Cash Flows	Six Months Ended June 30, 2013
(in thousands)	As Previously Reported			Retrospective Adjustment			As Adjusted

Cash flows from operating activities
Net loss	$	(7,252	)	$	(650	)	$	(7,902	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment		212			—			212
Employee and non-employee stock-based compensation		1,782			650			2,432
Amortization of discounts and premiums on marketable securities		121			—			121
Intangible asset amortization		741			—			741
Changes in assets and liabilities, net		(12,772	)		—			(12,772	)

Net cash used in operating activities	$	(17,168	)	$	—		$	(17,168	)

Earnings per Share (Tables)

6 Months Ended

Jun. 30, 2014

Basic and Diluted Net Loss Per Share of Common Stock

The following table presents the calculation of basic and diluted net loss per share of common stock for the three and six months ended June 30, 2014 and 2013:


	Three Months Ended						Six Months Ended
(in thousands, except for share and per share amounts)	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Numerator:
Net loss	$	(21,575	)	$	(3,383	)	$	(48,108	)	$	(7,902	)


Denominator:
Weighted average shares outstanding, basic and diluted		33,874,625			28,377,254			33,777,207			28,361,340


Net loss per share, basic and diluted:
Net loss per share	$	(0.64	)	$	(0.12	)	$	(1.42	)	$	(0.28	)


Antidilutive securities excluded from calculations of diluted net loss per share		3,739,874			4,234,017			3,805,191			4,997,542

Marketable Securities (Tables)

6 Months Ended

Jun. 30, 2014

Summary of Available-for-Sale Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of June 30, 2014, which all have contract maturities of less than one year:


(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
U.S. Treasury and government agencies	$	24,521	$	2	$	—		$	24,523
Corporate debt	$	22,060	$	10	$	(2	)	$	22,068

	$	46,581	$	12	$	(2	)	$	46,591

The following is a summary of the Company’s available-for-sale marketable securities as of December 31, 2013:


(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
U.S. Treasury and government agencies	$	31,557	$	9	$	—		$	31,566
Corporate debt	$	34,008	$	18	$	(6	)	$	34,020

	$	65,565	$	27	$	(6	)	$	65,586

- Definition

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

+ References + Details

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

Assets Measured at Fair Value on Recurring Basis

As of June 30, 2014, the Company held certain assets that are required to be measured at fair value on a recurring basis, as follows:


	Fair Value Measurement as of June 30, 2014 Using
(in thousands)	June 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	$	46,591	$	24,523	$	22,068	$	—

As of December 31, 2013, the Company held certain assets that are required to be measured at fair value on a recurring basis, as follows:


	Fair Value Measurement as of December 31, 2013 Using
(in thousands)	December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	$	65,586	$	31,566	$	34,020	$	—

Inventory (Tables)

6 Months Ended

Jun. 30, 2014

Inventory

Inventory consisted of the following as of June 30, 2014 and December 31, 2013:


(in thousands)	June 30, 2014		December 31, 2013
Raw materials	$	145	$	—
Work-in-process		7		—
Finished goods		941		—

Total	$	1,093	$	—

Prepaid Expenses and Other Current Assets (Tables)

6 Months Ended

Jun. 30, 2014

Summary of Prepaid Expenses, and Other Current Assets

The following is a summary of the Company’s prepaid expenses and other current assets as of June 30, 2014 and December 31, 2013:


(in thousands)	June 30, 2014		December 31, 2013
Prepaid insurance	$	708	$	167
Prepaid manufacturing cost		608		—
Other prepaid expenses and vendor advances		2,616		2,408
Other current assets		234		128

Total prepaid expenses and other current assets	$	4,166	$	2,703

Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2014

Summary of Intangible Asset

The following is a summary of the Company’s intangible asset as of June 30, 2014:


			June 30, 2014
(in thousands)	Estimated Useful Life (Years)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HETLIOZ^®		19	$	8,000	$	333	$	7,667
Fanapt^®		7.5	$	12,000	$	7,812	$	4,188

The following is a summary of the Company’s intangible asset as of December 31, 2013:


			December 31, 2013
(in thousands)	Estimated Useful Life (Years)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Fanapt^®		8	$	12,000	$	6,963	$	5,037

Summary of Future Intangible Asset Amortization

The following is a summary of future intangible asset amortization as of June 30, 2014:


(in thousands)	Total		Remainder of 2014		2015		2016		2017		2018		Thereafter
HETLIOZ^®	$	7,667	$	205	$	411	$	411	$	411	$	411	$	5,818
Fanapt^®		4,188		866		1,733		1,589		—		—		—

	$	11,855	$	1,071	$	2,144	$	2,000	$	411	$	411	$	5,818

Accrued Liabilities (Tables)

6 Months Ended

Jun. 30, 2014

Summary of Accrued Liabilities

The following is a summary of the Company’s accrued liabilities as of June 30, 2014 and December 31, 2013:


(in thousands)	June 30, 2014		December 31, 2013
Accrued research and development expenses	$	1,845	$	2,324
Accrued consulting and other professional fees		2,708		2,015
Employee benefits		1,255		176
Other accrued liabilities		945		665

	$	6,753	$	5,180

Deferred Revenue (Tables)

6 Months Ended

Jun. 30, 2014

Summary of Changes in Total Deferred Revenue

The following is a summary of changes in total deferred revenue for the six months ended June 30, 2014 and 2013:


	Six Months Ended
	June 30,		June 30,
(in thousands)	2014		2013
Balance beginning of period	$	90,275	$	117,064
Licensing revenue recognized		15,216		13,284

Balance end of period	$	75,059	$	103,780

Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2014

Summary of Minimum Annual Future Payments under Operating Leases

The following is a summary of the minimum annual future payments under operating leases as of June 30, 2014:


			Remainder
(in thousands)	Total		of 2014		2015		2016		2017		2018		Thereafter
Operating leases	$	15,238	$	587	$	1,337	$	1,500	$	1,538	$	1,576	$	8,700

Employee Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

Black-Scholes-Merton Option Pricing Model for Employee and Director Stock Options Granted

Assumptions used in the Black-Scholes-Merton option pricing model for employee and director stock options granted during the six months ended June 30, 2014 and 2013 were as follows:


	Six Months Ended
	June 30,			June 30,
	2014			2013
Expected dividend yield		0	%		0	%
Weighted average expected volatility		64	%		62	%
Weighted average expected term (years)		5.83			6.03
Weighted average risk-free rate		1.77	%		1.16	%
Weighted average fair value per share	$	7.14		$	3.46

Total Employee Stock-Based Compensation Expense

Total employee stock-based compensation expense related to stock-based awards for the three and six months ended June 30, 2014 and 2013 was comprised of the following:


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
(in thousands)	2014		2013		2014		2013
Research and development	$	418	$	461	$	860	$	1,058
Selling, general and administrative		989		646		1,901		1,353

	$	1,407	$	1,107	$	2,761	$	2,411

Summary of RSU Activity for 2006 Plan

A summary of RSU activity for the 2006 Plan for the six months ended June 30, 2014 follows:


	Number of Shares Underlying RSUs			Weighted Average Grant Date Fair Value
Unvested at December 31, 2013		883,690		$	7.70
Granted		52,000			13.36
Forfeited		(73,532	)		6.50
Vested		(209,562	)		6.67

Unvested at June 30, 2014		652,596			8.52

2004 Plan

Summary of Option Activity Plan

A summary of option activity for the 2004 Plan for the six months ended June 30, 2014 follows:


(in thousands, except for share and per share amounts)	Number of Shares			Weighted Average Exercise Price at Grant Date		Weighted Average Remaining Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2013		670,744		$	1.79		1.78	$	7,124
Expired		—
Exercised		(17,934	)

Outstanding at June 30, 2014		652,810			1.74		1.28		9,426

Exercisable at June 30, 2014		652,810			1.74		1.28		9,426

2006 Plan

Summary of Option Activity Plan

A summary of option activity for the 2006 Plan for the six months ended June 30, 2014 follows:


(in thousands, except for share and per share amounts)	Number of Shares			Weighted Average Exercise Price at Grant Date		Weighted Average Remaining Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2013		5,533,618		$	10.98		6.93	$	21,264
Granted		220,000			12.17
Forfeited		(212,653	)		8.30
Expired		—
Exercised		(344,188	)		7.02				2,672

Outstanding at June 30, 2014		5,196,777			11.40		6.56		34,791

Exercisable at June 30, 2014		3,480,512			12.72		5.41		22,006

Expected to vest at June 30, 2014		1,639,031			8.67		8.87		12,316

Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2013
Summary Of Significant Accounting Policies [Line Items]
Percentage of insurance coverage gap allocated for prescription drugs		50.00%
Advertising expenses	$ 3.3	$ 4.3	$ 0.0

Change in Method of Accounting for Stock-based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accumulated deficit	$ (356,278)	$ (356,278)	$ (308,170)
Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
New Accounting Pronouncement or Change in Accounting Principle, Effect of Change on share based compensation	500	1,200
New Accounting Pronouncement or Change in Accounting Principle, Effect of Change on Net Income	$ 500	$ 1,200
New Accounting Pronouncement or Change in Accounting Principle, Effect of Change on Earnings Per Share	$ 0.02	$ 0.04
Accumulated deficit			(308,170)
Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method \| Retrospective Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accumulated deficit			$ 3,192

- Definition

Amount of the effect of a change in accounting principle on diluted earnings per share.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Retrospective Application
-URI http://asc.fasb.org/extlink&oid=6523989

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Direct Effects of a Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=6510796

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Accounting Change
-URI http://asc.fasb.org/extlink&oid=6503790

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=28359718&loc=d3e22580-107794

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=7655603&loc=d3e1252-109256

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=6507316

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 1
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=28359718&loc=d3e22499-107794

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=28359718&loc=d3e22583-107794

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Indirect Effects of a Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=6515603

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 45
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=7655603&loc=d3e1278-109256

+ Details

Adjustments in Balance Sheet (Detail) - USD ($) $ in Thousands	Jun. 30, 2014	Dec. 31, 2013
Stockholders' equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized, and no shares issued or outstanding	$ 0	$ 0
Common stock, $0.001 par value; 150,000,000 shares authorized; 33,338,543 shares issued and outstanding at December 31, 2013	34	33
Additional paid-in capital	357,119	352,240
Accumulated other comprehensive income	10	21
Accumulated deficit	(356,278)	(308,170)
Total stockholders' equity	$ 885	44,124
Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method
Stockholders' equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized, and no shares issued or outstanding		0
Common stock, $0.001 par value; 150,000,000 shares authorized; 33,338,543 shares issued and outstanding at December 31, 2013		33
Additional paid-in capital		352,240
Accumulated other comprehensive income		21
Accumulated deficit		(308,170)
Total stockholders' equity		44,124
As Previously Reported
Stockholders' equity:
Total stockholders' equity		44,124
As Previously Reported \| Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method
Stockholders' equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized, and no shares issued or outstanding		0
Common stock, $0.001 par value; 150,000,000 shares authorized; 33,338,543 shares issued and outstanding at December 31, 2013		33
Additional paid-in capital		355,432
Accumulated other comprehensive income		21
Accumulated deficit		(311,362)
Total stockholders' equity		44,124
Retrospective Adjustment \| Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method
Stockholders' equity:
Additional paid-in capital		(3,192)
Accumulated deficit		$ 3,192

Adjustments in Balance Sheet (Parenthetical) (Detail) - $ / shares	Jun. 30, 2014	Dec. 31, 2013
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	33,877,841	33,338,543
Common stock, shares outstanding	33,877,841	33,338,543
Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Preferred stock, par value		$ 0.001
Preferred stock, shares authorized		20,000,000
Preferred stock, shares issued		0
Preferred stock, shares outstanding		0
Common stock, par value		$ 0.001
Common stock, shares authorized		150,000,000
Common stock, shares issued		33,338,543
Common stock, shares outstanding		33,338,543
Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method \| As Previously Reported
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Preferred stock, par value		$ 0.001
Preferred stock, shares authorized		20,000,000
Preferred stock, shares issued		0
Preferred stock, shares outstanding		0
Common stock, par value		$ 0.001
Common stock, shares authorized		150,000,000
Common stock, shares issued		33,338,543
Common stock, shares outstanding		33,338,543

Adjustments in Statement of Operations (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues:
Licensing agreement	$ 7,764	$ 6,678	$ 15,216	$ 13,284
Royalty revenue	1,539	1,641	3,230	3,103
Total revenues	10,862	8,319	20,005	16,387
Operating expenses:
Research and development	3,514	6,100	10,777	14,211
Selling, general and administrative	28,139	5,260	56,032	9,413
Intangible asset amortization	617	372	1,182	741
Total operating expenses	32,468	11,732	68,189	24,365
Loss from operations	(21,606)	(3,413)	(48,184)	(7,978)
Other income	31	30	76	76
Loss before tax benefit	(21,575)	(3,383)	(48,108)	(7,902)
Tax benefit
Net loss	$ (21,575)	$ (3,383)	$ (48,108)	$ (7,902)
Basic and diluted net loss per share	$ (0.64)	$ (0.12)	$ (1.42)	$ (0.28)
Weighted average shares outstanding, basic and diluted	33,874,625	28,377,254	33,777,207	28,361,340
Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method
Revenues:
Licensing agreement		$ 6,678		$ 13,284
Royalty revenue		1,641		3,103
Total revenues		8,319		16,387
Operating expenses:
Research and development		6,100		14,211
Selling, general and administrative		5,260		9,413
Intangible asset amortization		372		741
Total operating expenses		11,732		24,365
Loss from operations		(3,413)		(7,978)
Other income		30		76
Loss before tax benefit		(3,383)		(7,902)
Tax benefit
Net loss		$ (3,383)		$ (7,902)
Basic and diluted net loss per share		$ (0.12)		$ (0.28)
Weighted average shares outstanding, basic and diluted		28,377,254		28,361,340
As Previously Reported \| Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method
Revenues:
Licensing agreement		$ 6,678		$ 13,284
Royalty revenue		1,641		3,103
Total revenues		8,319		16,387
Operating expenses:
Research and development		5,982		13,942
Selling, general and administrative		5,074		9,032
Intangible asset amortization		372		741
Total operating expenses		11,428		23,715
Loss from operations		(3,109)		(7,328)
Other income		30		76
Loss before tax benefit		(3,079)		(7,252)
Tax benefit
Net loss		$ (3,079)		$ (7,252)
Basic and diluted net loss per share		$ (0.11)		$ (0.26)
Weighted average shares outstanding, basic and diluted		28,377,254		28,361,340
Retrospective Adjustment \| Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method
Operating expenses:
Research and development		$ 118		$ 269
Selling, general and administrative		186		381
Total operating expenses		304		650
Loss from operations		(304)		(650)
Loss before tax benefit		(304)		(650)
Tax benefit
Net loss		$ (304)		$ (650)
Basic and diluted net loss per share		$ (0.01)		$ (0.02)

Adjustments in Statement of Comprehensive Loss (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net loss	$ (21,575)	$ (3,383)	$ (48,108)	$ (7,902)
Other comprehensive loss:
Change in net unrealized loss on marketable securities	2		(11)	(10)
Tax provision on other comprehensive income (loss)
Other comprehensive loss, net of tax:	2		(11)	(10)
Comprehensive loss	$ (21,573)	(3,383)	$ (48,119)	(7,912)
Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net loss		(3,383)		(7,902)
Other comprehensive loss:
Change in net unrealized loss on marketable securities				(10)
Tax provision on other comprehensive income (loss)
Other comprehensive loss, net of tax:				(10)
Comprehensive loss		(3,383)		(7,912)
As Previously Reported \| Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net loss		(3,079)		(7,252)
Other comprehensive loss:
Change in net unrealized loss on marketable securities				(10)
Tax provision on other comprehensive income (loss)
Other comprehensive loss, net of tax:				(10)
Comprehensive loss		(3,079)		(7,262)
Retrospective Adjustment \| Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net loss		(304)		(650)
Other comprehensive loss:
Tax provision on other comprehensive income (loss)
Comprehensive loss		$ (304)		$ (650)

Adjustments in Statement of Cash Flows (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities
Net loss	$ (21,575)	$ (3,383)	$ (48,108)	$ (7,902)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment			264	212
Employee and non-employee stock-based compensation			2,836	2,432
Amortization of discounts and premiums on marketable securities			(96)	(121)
Intangible asset amortization	$ 617	372	1,182	741
Net cash used in operating activities			$ (60,569)	(17,168)
Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method
Cash flows from operating activities
Net loss		(3,383)		(7,902)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment				212
Employee and non-employee stock-based compensation				2,432
Amortization of discounts and premiums on marketable securities				121
Intangible asset amortization		372		741
Changes in assets and liabilities, net				(12,772)
Net cash used in operating activities				(17,168)
As Previously Reported \| Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method
Cash flows from operating activities
Net loss		(3,079)		(7,252)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment				212
Employee and non-employee stock-based compensation				1,782
Amortization of discounts and premiums on marketable securities				121
Intangible asset amortization		372		741
Changes in assets and liabilities, net				(12,772)
Net cash used in operating activities				(17,168)
Retrospective Adjustment \| Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method
Cash flows from operating activities
Net loss		$ (304)		(650)
Adjustments to reconcile net loss to net cash used in operating activities:
Employee and non-employee stock-based compensation				$ 650

Basic and Diluted Net Loss Per Share of Common Stock (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Numerator:
Net loss	$ (21,575)	$ (3,383)	$ (48,108)	$ (7,902)
Denominator:
Weighted average shares outstanding, basic and diluted	33,874,625	28,377,254	33,777,207	28,361,340
Net loss per share, basic and diluted:
Net loss per share	$ (0.64)	$ (0.12)	$ (1.42)	$ (0.28)
Antidilutive securities excluded from calculations of diluted net loss per share	3,739,874	4,234,017	3,805,191	4,997,542

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Summary of Available-For-Sale Marketable Securities (Detail) - USD ($) $ in Thousands	Jun. 30, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	$ 46,591	$ 65,586
Current Investment
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	46,581	65,565
Gross Unrealized Gains	12	27
Gross Unrealized Losses	(2)	(6)
Fair Market Value	46,591	65,586
Current Investment \| U.S. Treasury and government agencies
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	24,521	31,557
Gross Unrealized Gains	2	9
Fair Market Value	24,523	31,566
Current Investment \| Corporate debt
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	22,060	34,008
Gross Unrealized Gains	10	18
Gross Unrealized Losses	(2)	(6)
Fair Market Value	$ 22,068	$ 34,020

Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Jun. 30, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 46,591	$ 65,586
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	24,523	31,566
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 22,068	$ 34,020

Inventory (Detail) $ in Thousands	Jun. 30, 2014 USD ($)
Inventory [Line Items]
Raw materials	$ 145
Work-in-process	7
Finished goods	941
Total	$ 1,093

Summary of Prepaid Expenses and Other Current Assets (Detail) - USD ($) $ in Thousands	Jun. 30, 2014	Dec. 31, 2013
Prepaid Expenses And Other Current Assets [Line Items]
Prepaid insurance	$ 708	$ 167
Prepaid manufacturing cost	608
Other prepaid expenses and vendor advances	2,616	2,408
Other current assets	234	128
Total prepaid expenses and other current assets	$ 4,166	$ 2,703

Summary of Intangible Assets (Detail) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	$ 11,855	$ 5,037
Hetlioz
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)	19 years
Gross Carrying Amount	$ 8,000
Accumulated Amortization	333
Net Carrying Amount	$ 7,667
Fanapt
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)	7 years 6 months	8 years
Gross Carrying Amount	$ 12,000	$ 12,000
Accumulated Amortization	7,812	6,963
Net Carrying Amount	$ 4,188	$ 5,037

Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Jan. 31, 2014	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2009
Finite-Lived Intangible Assets [Line Items]
Payment for original sublicense agreement				$ 8,000
Intangible asset amortization		$ 617	$ 372	$ 1,182	$ 741
Fanapt
Finite-Lived Intangible Assets [Line Items]
Payment for original sublicense agreement						$ 12,000
Fanapt \| Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Patent life end date						2016-11
Fanapt \| Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Patent life end date						2017-05
Hetlioz
Finite-Lived Intangible Assets [Line Items]
Payment for original sublicense agreement	$ 8,000
Hetlioz \| Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Patent life end date	2022-12
Hetlioz \| Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Patent life end date	2033-01

Summary of Future Intangible Asset Amortization (Detail) - USD ($) $ in Thousands	Jun. 30, 2014	Dec. 31, 2013
Schedule Of Estimated Future Amortization Expense [Line Items]
Net Carrying Amount	$ 11,855	$ 5,037
Remainder of 2014	1,071
2015	2,144
2016	2,000
2017	411
2018	411
Thereafter	5,818
Hetlioz
Schedule Of Estimated Future Amortization Expense [Line Items]
Net Carrying Amount	7,667
Remainder of 2014	205
2015	411
2016	411
2017	411
2018	411
Thereafter	5,818
Fanapt
Schedule Of Estimated Future Amortization Expense [Line Items]
Net Carrying Amount	4,188	$ 5,037
Remainder of 2014	866
2015	1,733
2016	$ 1,589

Summary of Accrued Liabilities (Detail) - USD ($) $ in Thousands	Jun. 30, 2014	Dec. 31, 2013
Accrued Liabilities [Line Items]
Accrued research and development expenses	$ 1,845	$ 2,324
Accrued consulting and other professional fees	2,708	2,015
Employee benefits	1,255	176
Other accrued liabilities	945	665
Accrued liabilities	$ 6,753	$ 5,180

Summary of Changes in Total Deferred Revenue (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Deferred Revenue Arrangement [Line Items]
Balance beginning of period	$ 90,275	$ 117,064
Licensing revenue recognized	15,216	13,284
Balance end of period	$ 75,059	$ 103,780

Deferred Revenue - Additional Information (Detail) $ in Millions	Dec. 31, 2009 USD ($)
Fanapt
Deferred Revenue Arrangement [Line Items]
Upfront payment received	$ 200.0

Commitments and Contingencies - Additional Information (Detail) $ in Millions	1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 31, 2014 USD ($) ft²	Jun. 30, 2014 USD ($)	Jun. 30, 2013 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2013 USD ($)	Dec. 31, 2011 ft²
Commitments and Contingencies Disclosure [Line Items]
Annual rental payment under lease amendment	$ 0.4
Rent expense		$ 0.4	$ 0.3	$ 0.8	$ 0.5
Washington DC Lease Amendment
Commitments and Contingencies Disclosure [Line Items]
Renewal term of Lease agreement	5 years
Square feet leased \| ft²	8,860
Lease term	12 years 1 month
Allowance for tenant improvements	$ 0.8
Washington DC Lease
Commitments and Contingencies Disclosure [Line Items]
Renewal term of Lease agreement						5 years
Square feet leased \| ft²						21,400

Summary of Minimum Annual Future Payments Under Operating Leases (Detail) $ in Thousands	Jun. 30, 2014 USD ($)
Operating Leased Assets [Line Items]
Operating leases, Total	$ 15,238
Operating leases, Remainder of 2014	587
Operating leases, 2015	1,337
Operating leases, 2016	1,500
Operating leases, 2017	1,538
Operating leases, 2018	1,576
Operating leases, Thereafter	$ 8,700

Commitments and Contingencies (Textual 1 - Consulting Agreement) - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Consulting Fees
Research and development	$ 3,514	$ 6,100	$ 10,777	$ 14,211
Consulting Agreement
Consulting Fees
Research and development			$ 2,000

Commitments and Contingencies (Textual 2 - HETLIOZ) - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended	6 Months Ended
	Feb. 28, 2004	Jun. 30, 2014
HETLIOZ
Milestone payment under license agreement		$ 8,000
Percentage of future sublicense fees payable to third-party	Mid-twenties
In the event that cumulative sales of HETLIOZ reach $250.0 million
HETLIOZ
Possible future milestone payment in the event product reaches a certain agreed upon sales threshold	$ 25,000
Hetlioz
HETLIOZ
Royalty payment	10.00%
Hetlioz \| License Agreement
HETLIOZ
Milestone payment under license agreement		$ 8,000

Commitments and Contingencies (Textual 3 - Fanapt) - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended	6 Months Ended
	May 31, 2009	Jun. 30, 2014	Dec. 31, 2009
Fanapt
Milestone payment under license agreement		$ 8,000
Fanapt
Fanapt
Milestone payment under license agreement	$ 12,000
Upfront payment received			$ 200,000
Potential future maximum milestone payments from Novartis			$ 265,000

Commitments and Contingencies (Textual 4 - VLY 686) - Additional Information (Detail) - VLY 686 $ in Millions	12 Months Ended
	Dec. 31, 2012 USD ($)
VLY-686
Future percentage of royalty payments based net sales	Low double digits
Possible future milestone payments	$ 4.0
License Agreement
VLY-686
Possible future milestone payments	$ 95.0

Commitments and Contingencies (Textual 5 - Future Milestone Payments) - Additional Information (Detail)	Jun. 30, 2014 USD ($)
Future milestone payments
Liabilities recorded, future license payments	$ 0
Liabilities recorded, contractual obligations relating to the license agreements	$ 0

Legal Matters - Additional Information (Detail) - Fanapt - USD ($) $ in Millions	1 Months Ended	6 Months Ended
	May 31, 2014	Jun. 30, 2014
Gain Contingencies [Line Items]
Arbitration, defending counterclaims	$ 75.0
Patent expiration year		2027
Positive Outcome of Litigation
Gain Contingencies [Line Items]
Requested award from arbitration proceedings	$ 539.0
Positive Outcome of Litigation \| Minimum
Gain Contingencies [Line Items]
Period of anticipated arbitration proceeding award		12 months
Positive Outcome of Litigation \| Maximum
Gain Contingencies [Line Items]
Period of anticipated arbitration proceeding award		18 months

Black-Scholes-Merton Option Pricing Model for Employee and Director Stock Options Granted (Detail) - $ / shares	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Share Based Payment Award Stock Options Valuation Assumptions [Line Items]
Expected dividend yield	0.00%	0.00%
Weighted average expected volatility	64.00%	62.00%
Weighted average expected term (years)	5 years 9 months 29 days	6 years 11 days
Weighted average risk-free rate	1.77%	1.16%
Weighted average fair value per share	$ 7.14	$ 3.46

Total Employee Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total employee stock-based compensation expense	$ 1,407	$ 1,107	$ 2,761	$ 2,411
Research and development
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total employee stock-based compensation expense	418	461	860	1,058
Selling, General and Administrative Expenses
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total employee stock-based compensation expense	$ 989	$ 646	$ 1,901	$ 1,353

Employee Stock-Based Compensation (Textual 1 - Employee Stock-Based Compensation) - Additional Information (Detail)	Jun. 30, 2014 EquityPlan shares	Dec. 31, 2013 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of equity incentive plans \| EquityPlan	2
2004 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding options granted	652,810	670,744
2006 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding options granted	5,196,777	5,533,618
Common stock reserved for issuance	10,329,472
2006 Plan \| Outstanding options and RSUs granted (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares subject to outstanding options and RSUs	5,849,373
Shares available for future grant	2,409,512

Employee Stock-Based Compensation (Textual 2 Stock Option) - Additional Information (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation option awards contractual term	10 years
Portion of initial stock options granted to employees that vests on employee's first anniversary	25.00%
Portion of initial stock options granted to employees that vests ratably over three years after completion of first year of service	75.00%
Option awards vesting period, after completion of one year of service	3 years
Vesting period	4 years
Vesting period for initial stock options granted to directors	4 years
Vesting period for subsequent stock options granted to directors	1 year
Unrecognized compensation expenses, weighted average period	2 years
Proceeds from exercise of employee stock options	$ 2,479	$ 797
2004 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected to vest at June 30, 2014	0
Service option awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expenses	$ 8,600
Unrecognized compensation expenses, weighted average period	1 year 6 months

Summary of Option Activity for 2004 Plan (Detail) - 2004 Plan - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Number of Shares
Beginning balance	670,744
Expired
Exercised	(17,934)
Ending balance	652,810	670,744
Exercisable	652,810
Weighted Average Exercise Price at Grant Date
Beginning balance	$ 1.79
Expired
Exercised
Ending balance	1.74	$ 1.79
Exercisable	$ 1.74
Weighted Average Remaining Term (Years)
Weighted Average Remaining Term	1 year 3 months 11 days	1 year 9 months 11 days
Exercisable	1 year 3 months 11 days
Aggregate Intrinsic Value
Beginning balance	$ 7,124
Ending balance	9,426	$ 7,124
Exercisable	$ 9,426

Summary of Option Activity for 2006 Plan (Detail) - 2006 Plan - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Number of Shares
Beginning balance	5,533,618
Granted	220,000
Forfeited	(212,653)
Expired
Exercised	(344,188)
Ending balance	5,196,777	5,533,618
Exercisable	3,480,512
Expected to vest at June 30, 2014	1,639,031
Weighted Average Exercise Price at Grant Date
Beginning balance	$ 10.98
Granted	12.17
Forfeited	8.30
Expired
Exercised	7.02
Ending balance	11.40	$ 10.98
Exercisable	12.72
Expected to vest at June 30, 2014	$ 8.67
Weighted Average Remaining Term (Years)
Weighted Average Remaining Term	6 years 6 months 22 days	6 years 11 months 5 days
Exercisable	5 years 4 months 28 days
Expected to vest at June 30, 2014	8 years 10 months 13 days
Aggregate Intrinsic Value
Beginning balance	$ 21,264
Exercised	2,672
Ending balance	34,791	$ 21,264
Exercisable	22,006
Expected to vest at June 30, 2014	$ 12,316

Employee Stock-Based Compensation (Textual 3 RSU) - Additional Information (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period of RSU awards in equal installments	4 years
Unrecognized compensation expenses, weighted average period	2 years
Fair value of common stock vested	$ 1,400
Common shares received in payment of payroll taxes (shares)	32,386
Tax obligations paid in connection with settlement of restricted stock units	$ 436	$ 196
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expenses related to unvested RSUs	$ 4,800
2006 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of common stock vested, shares	209,562

Summary of RSU Activity for 2006 Plan (Detail) - 2006 Plan	6 Months Ended
	Jun. 30, 2014 $ / shares shares
Number of Shares Unvested
Beginning balance \| shares	883,690
Granted \| shares	52,000
Forfeited \| shares	(73,532)
Vested \| shares	(209,562)
Ending balance \| shares	652,596
Weighted Average Price/Share Unvested
Beginning balance \| $ / shares	$ 7.70
Granted \| $ / shares	13.36
Forfeited \| $ / shares	6.50
Vested \| $ / shares	6.67
Ending balance \| $ / shares	$ 8.52