$ 69,719

$ (1,426)

$ (21,575)

$ (26,533)

$ (7,747)

^[1]

$ (5,406)

^[1]

$ (3,383)

^[1]

$ (4,519)

^[1]

$ 20,186

$ (21,055)

$ (28,617)

Change in net unrealized gain (loss) on marketable securities

(5)

(11)

Comprehensive income (loss)

(5)

(11)

$ 20,181

$ (21,044)

$ (28,628)

[1]

In the first quarter of 2014, the Company elected to change its method of accounting for stock-based compensation from the accelerated attribution method to the straight-line method. The consolidated financial data above for the year ended 2013 has been adjusted to reflect this change. See Note 4, Change in Method of Accounting for Stock-based Compensation, for further discussion.

Business Organization and Presentation

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

+ References+ Details

Statements of Changes in Stockholders' Equity (USD $) In Thousands, except Share data	Total	Common Stock	Additional Paid-in Capital	Other Comprehensive Income (Loss)	Accumulated Deficit
Beginning balance at Dec. 31, 2011 (As Previously Reported)	$ 33,474	$ 28	$ 296,868	$ 21	$ (263,443)
Beginning balance (Retrospective Adjustment)			(4,945)		4,945
Beginning balance at Dec. 31, 2011	33,474	28	291,923	21	(258,498)
Beginning balance (in shares) at Dec. 31, 2011 (As Previously Reported)		28,117,026
Beginning balance (in shares) at Dec. 31, 2011		28,117,026
Issuance of common stock from the exercise of stock options and settlement of restricted stock units (in shares)		124,717
Issuance of common stock from the exercise of stock options and settlement of restricted stock units	12		12
Employee and non-employee stock based compensation expense	5,047		5,047
Net income (loss)	(28,617)				(28,617)
Other comprehensive income (loss), net of tax	(11)			(11)
Ending balance at Dec. 31, 2012	9,905	28	296,982	10	(287,115)
Ending balance (in shares) at Dec. 31, 2012		28,241,743
Net proceeds from public offering of common stock (in shares)		4,680,000
Net proceeds from public offering of common stock	48,505	5	48,500
Issuance of common stock from the exercise of stock options and settlement of restricted stock units (in shares)		466,320
Issuance of common stock from the exercise of stock options and settlement of restricted stock units	1,550		1,550
Shares withheld upon settlement of restricted stock units (in shares)		(49,520)
Shares withheld upon settlement of restricted stock units	(196)		(196)
Employee and non-employee stock based compensation expense	5,404		5,404
Net income (loss)	(21,055)				(21,055)
Other comprehensive income (loss), net of tax	11			11
Ending balance at Dec. 31, 2013	44,124	33	352,240	21	(308,170)
Ending balance (in shares) at Dec. 31, 2013		33,338,543
Net proceeds from public offering of common stock (in shares)		5,750,000
Net proceeds from public offering of common stock	62,313	5	62,308
Issuance of common stock to Novartis Pharma AG (in shares)		1,808,973
Issuance of common stock to Novartis Pharma AG	25,905	2	25,903
Issuance of common stock from the exercise of stock options and settlement of restricted stock units (in shares)		621,231
Issuance of common stock from the exercise of stock options and settlement of restricted stock units	2,852	1	2,851
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	5,878		5,878
Net income (loss)	20,186				20,186
Other comprehensive income (loss), net of tax	(5)			(5)
Ending balance at Dec. 31, 2014	$ 160,817	$ 41	$ 448,744	$ 16	$ (287,984)
Ending balance (in shares) at Dec. 31, 2014		41,486,361

Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Cash flows from operating activities
Net income (loss)	$ 20,186	$ (21,055)	$ (28,617)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment	530	432	633
Employee and non-employee stock-based compensation	5,878	5,404	5,047
Amortization of discounts and premiums on marketable securities	174	155	560
Intangible asset amortization	2,254	1,495	1,495
Gain on arbitration settlement with Novartis Pharma AG	(77,616)
Landlord contributions for tenant improvements			1,826
Changes in assets and liabilities:
Accounts receivable	(1,623)	(863)	450
Prepaid expenses and other current assets	(290)	1,264	(884)
Inventory	(2,210)
Other assets	(28)
Accounts payable	174	374	(709)
Accrued liabilities	1,322	(113)	1,806
Other liabilities	267	104	265
Deferred revenue	(30,572)	(26,789)	(26,789)
Net cash used in operating activities	(81,554)	(39,592)	(44,917)
Cash flows from investing activities
Acquisition of intangible assets	(8,000)
Purchases of property and equipment	(769)	(176)	(2,017)
Purchases of marketable securities	(93,343)	(65,598)	(60,866)
Proceeds from sale of marketable securities	8,948		2,497
Maturities of marketable securities	80,882	31,499	106,140
Change in restricted cash	245
Net cash (used in) provided by investing activities	(12,037)	(34,275)	45,754
Cash flows from financing activities
Net proceeds from offering of common stock	62,313	48,505
Tax obligations paid in connection with settlement of restricted stock units	(436)	(196)
Proceeds from exercise of employee stock options	2,851	1,550	12
Net cash provided by financing activities	89,728	49,859	12
Net increase (decrease) in cash and cash equivalents	(3,863)	(24,008)	849
Cash and cash equivalents
Beginning of period	64,764	88,772	87,923
End of period	60,901	64,764	88,772
Non-cash investing and financing activities
Intangible asset related to re-acquired right to Fanapt ®	(15,940)
Inventories	2,960
Prepaid services	91
Purchase of property and equipment in accrued liabilities		106
Novartis Pharma AG
Cash flows from financing activities
Net proceeds from offering of common stock	$ 25,000

Business Organization and Presentation

12 Months Ended

Dec. 31, 2014

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 and the Company’s portfolio includes the following products.

•

HETLIOZ^® (tasimelteon), a product for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) 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 was being marketed and sold in the U.S. by Novartis Pharma AG (Novartis) until December 31, 2014. On December 31, 2014, Novartis transferred all the U.S. and Canadian commercial rights to the Fanapt^® franchise to the Company. See Note 3, Settlement Agreement with Novartis, for further information. Additionally, the Company’s distribution partners launched Fanapt^® in Israel and Mexico in 2014.

•

Tradipitant (VLY-686), a small molecule neurokinin-1 receptor (NK-1R) antagonist, which is presently in clinical development for the treatment of chronic pruritus in atopic dermatitis. Results from a Phase II study for the treatment of chronic pruritus in atopic dermatitis were announced in March 2015. Clinical evaluation is ongoing to assess potential future development activities.

•

Trichostatin A, a small molecule histone deacetylase (HDAC) inhibitor.

•

AQW051, a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist.

Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. All intercompany accounts and transactions have been eliminated in consolidation.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2014

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalents

For purposes of the consolidated balance sheets and consolidated statements of cash flows, cash equivalents represent highly-liquid investments with a maturity date of three months or less at the date of purchase.

Marketable securities

The Company classifies all of its marketable securities as available-for-sale securities. The Company’s investment policy requires the selection of high-quality issuers, with bond ratings of AAA to A1+/P1. Available-for-sale securities are carried at fair market value, with unrealized gains and losses reported as a component of stockholders’ equity in accumulated other comprehensive income/loss. Interest and dividend income is recorded when earned and included in interest income. Premiums and discounts on marketable securities are amortized and accreted, respectively, to maturity and included in interest income. The Company uses the specific identification method in computing realized gains and losses on the sale of investments, which would be included in the consolidated statements of operations when generated. Marketable securities with a maturity of more than one year as of the balance sheet date and which the Company does not intend to sell within the next twelve months are classified as non-current. All other marketable securities are classified as current.

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.

Intangible asset

Costs incurred for products not yet approved by the FDA and for which no alternative future use exists are recorded as expense. In the event a product has been approved by the FDA or an alternative future use exists for a product, patent and license costs are capitalized and amortized over the expected patent life of the related product. Milestone payments to the Company’s partners are recognized when it is deemed probable that the milestone event will occur.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. The costs of leasehold improvements funded by or reimbursed by the lessor are capitalized and amortized as leasehold improvements along with a corresponding deferred rent liability. Depreciation of property and equipment is provided on a straight-line basis over the estimated useful lives of the assets. Amortization of leasehold improvements is provided on a straight-line basis over the shorter of their estimated useful life or the lease term. The costs of additions and improvements are capitalized, and repairs and maintenance costs are charged to operations in the period incurred. Upon retirement or disposition of property and equipment, the cost and accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in the statement of operations for that period.

Accrued liabilities

The Company’s management is required to estimate accrued liabilities as part of the process of preparing financial statements. The estimation of accrued liabilities involves identifying services that have been performed on the Company’s behalf, and then estimating the level of service performed and the associated cost incurred for such services as of each balance sheet date in the financial statements. Accrued liabilities include professional service fees, such as lawyers and accountants, contract service fees, such as those under contracts with clinical monitors, data management organizations and investigators in conjunction with clinical trials, fees to contract manufacturers in conjunction with the production of clinical materials, and fees for marketing and other commercialization activities. Pursuant to management’s assessment of the services that have been performed on clinical trials and other contracts, the Company recognizes these expenses as the services are provided. Such management assessments include, but are not limited to: (i) an evaluation by the project manager of the work that has been completed during the period, (ii) measurement of progress prepared internally and/or provided by the third-party service provider, (iii) analyses of data that justify the progress, and (iv) management’s judgment. In the event that the Company does not identify certain costs that have begun to be incurred or the Company under- or over-estimates the level of services performed or the costs of such services, the Company’s reported expenses for such period would be too low or too high.

Net Product Sales

The Company’s 2014 net product sales consist of U.S. sales of HETLIOZ^® for the treatment of Non-24 and sales of Fanapt^® in Israel. 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.

In the U.S., HETLIOZ^® is only available for distribution through a limited number of specialty pharmacies, and is not available in retail pharmacies. The Company invoices and records revenue when the specialty pharmacies receive HETLIOZ^® from the third-party logistics warehouse.

The Company has entered into distribution agreements with Probiomed S.A. de C.V. (Probiomed) for the commercialization of Fanapt^® in Mexico and Megapharm Ltd. for the commercialization of Fanapt^® in Israel. With the exception of sales to Probiomed, the Company invoices and records revenue upon delivery of Fanapt^® to the distribution partner. The Probiomed distribution agreement contains a contracted delivery price plus a revenue sharing provision based on Probiomed’s sales of Fanapt^®. As a result, the selling price of Fanapt^® is not fixed or determinable upon delivery of Fanapt^® to Probiomed. The Company defers revenue recognition until the revenue sharing provision is calculated. As of December 31, 2014, the Company recorded $0.2 million of deferred revenue related to Fanapt^® sales.

Product Sales Discounts and Allowances

HETLIOZ^® 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 approximately 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.

There were no discounts or rebates associated with Fanapt^® product sales recognized in the period. The Company’s partners have a limited right to return Fanapt^®. Once Fanapt^® has been delivered to the partners it generally may not be returned for any reason other than product recall.

License Revenue

The Company’s license revenues were derived from the amended and restated sublicense agreement with Novartis and include an upfront payment and future milestone and royalty payments. Pursuant to the amended and restated sublicense agreement, Novartis had 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. Revenue related to the upfront payment was recognized ratably from the date the amended and restated sublicense agreement became effective (November 2009) through the expected duration of the Novartis commercialization of Fanapt^® in the U.S. which was estimated to be through the expiry of the Fanapt^® composition of patent, including a granted Hatch-Waxman extension (November 2016). In connection with the Settlement Agreement with Novartis, the Company recognized the remaining deferred revenue as of December 31, 2014 as part of the gain on arbitration settlement. See Note 3, Settlement Agreement with Novartis, for further discussion.

Cost of goods sold

Cost of goods sold includes royalties payable, the cost of inventory sold, manufacturing and supply chain costs and product shipping and handling costs related to U.S. sales of HETLIOZ^® and sales of Fanapt^® to the Company’s distribution partners.

Research and development expenses

Research and development expenses consist primarily of fees for services provided by third parties in connection with the clinical trials, costs of contract manufacturing services, milestone payments, costs of materials used in clinical trials and research and development, costs for regulatory consultants and filings, depreciation of capital resources used to develop products, related facilities costs, and salaries, other employee-related costs and stock-based compensation for research and development personnel. The Company expenses research and development costs as they are incurred for products in the development stage, including manufacturing costs and milestone payments made under license agreements prior to FDA approval. Upon and subsequent to FDA approval, manufacturing and milestone payments related to license agreements are capitalized. Milestone payments are accrued when it is deemed probable that the milestone event will be achieved. Costs related to the acquisition of intellectual property are expensed as incurred if the underlying technology is developed in connection with the Company’s research and development efforts and has no alternative future use.

Selling, general and administrative expenses

Selling, general and administrative expenses consist of salaries, including employee stock-based compensation, facilities and third party expenses. Selling, general and administrative expenses are associated with the activities of the executive, finance, accounting, information technology, business development, commercial support, trade and distribution, sales, marketing, legal, medical affairs and human resource functions.

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 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. See Note 4, Change in Method of Accounting for Stock-based Compensation, for further information. The fair value of restricted stock units (RSUs) awarded is also amortized using the straight line method. Stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest. Therefore, 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.

Total employee stock-based compensation expense recognized for the years ended December 31, 2014, 2013 and 2012 was comprised of the following:


	Year Ended December 31,
*(in thousands)*	2014		2013		2012
Research and development	$	1,810	$	2,098	$	1,673
Selling, general and administrative		3,945		3,238		3,353

	$	5,755	$	5,336	$	5,026

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 years ended December 31, 2014, 2013 and 2012 were as follows:


	Year Ended December 31,
	2014			2013			2012
Expected dividend yield		0	%		0	%		0	%
Weighted average expected volatility		62	%		65	%		68	%
Weighted average expected term (years)		5.90			6.03			6.03
Weighted average risk-free rate		1.73	%		1.59	%		0.94	%
Weighted average fair value per share	$	6.99		$	6.10		$	2.08

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 $5.0 million for the year ended December 31, 2014. The Company did not incur any advertising expense during the years ended December 31, 2013 and 2012.

Income taxes

The Company accounts for income taxes in accordance with the authoritative guidance on accounting for income taxes, which requires companies to account for deferred income taxes using the asset and liability method. Under the asset and liability method, current income tax expense or benefit is the amount of income taxes expected to be payable or refundable for the current year. A deferred income tax asset or liability is recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carryforwards. 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 December 31, 2014 and 2013, respectively. Tax rate changes are reflected in income during the period such changes are enacted. Changes in ownership may limit the amount of NOL carryforwards that can be utilized in the future to offset taxable income.

Certain risks and uncertainties

The Company’s products under development require approval from the FDA or other international regulatory agencies prior to commercial sales. There can be no assurance the products will receive the necessary clearance. If the Company is denied clearance or clearance is delayed, it may have a material adverse impact on the Company.

The Company’s products are concentrated in rapidly-changing, highly-competitive markets, which are characterized by rapid technological advances, changes in customer requirements and evolving regulatory requirements and industry standards. Any failure by the Company to anticipate or to respond adequately to technological developments in its industry, changes in customer requirements or changes in regulatory requirements or industry standards or any significant delays in the development or introduction of products or services could have a material adverse effect on the Company’s business, operating results and future cash flows.

The Company depends on single source suppliers for critical raw materials for manufacturing, as well as other components required for the administration of its products. The loss of these suppliers could delay the clinical trials or prevent or delay commercialization of the products.

Concentrations of credit risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company places its cash, cash equivalents and marketable securities with highly-rated financial institutions. At December 31, 2014, the Company maintained all of its cash, cash equivalents and marketable securities in two financial institutions. Deposits held with these institutions may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand, and the Company believes there is minimal risk of losses on such balances.

Segment information

The Company’s management has determined that the Company operates in one business segment which is the development and commercialization of pharmaceutical products.

Recent accounting pronouncements

In January 2015, the FASB issued Accounting Standards Update (ASU) 2015-01, Income Statement-Extraordinary and Unusual Items, to simplify income statement classification by removing the concept of extraordinary items from U.S. GAAP. As a result, items that are both unusual and infrequent will no longer be separately reported net of tax after continuing operations. The new standard is effective for both public and private companies for periods beginning after December 15, 2015. Adoption of this new standard is not expected to have a material impact on the Company’s condensed consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern. The new standard requires management of public and private companies to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and, if so, disclose that fact. Management will also be required to evaluate and disclose whether its plans alleviate that doubt. The new standard is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Adoption of this new standard is not expected to have a material impact on the Company’s condensed consolidated financial statements.

In May 2014, the FASB issued 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.

Settlement Agreement with Novartis

The entire disclosure for all significant accounting policies of the reporting entity.

+ References+ Details

Settlement Agreement with Novartis

12 Months Ended

Dec. 31, 2014

3. Settlement Agreement with Novartis

In May 2014, the Company commenced arbitration proceedings with Novartis relating to the license of Fanapt^® (the Fanapt^® Arbitration). In December 2014, the Company entered into a settlement agreement with Novartis and certain of its affiliates (the Settlement Agreement). Pursuant to the terms of the Settlement Agreement, the Company and Novartis dismissed the Fanapt^® Arbitration and released each other from any related claims. In addition, in connection with the Settlement Agreement, Novartis (i) transferred all U.S. and Canadian rights in the Fanapt^® franchise to the Company, (ii) purchased $25.0 million of the Company’s common stock at a price per share equal to $13.82, and (iii) granted to the Company an exclusive worldwide license to AQW051, a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist.

Pursuant to the stock purchase agreement entered into as part of the Settlement Agreement, Novartis purchased $25.0 million of the Company’s common stock. The Company issued to Novartis an aggregate of 1,808,973 shares at $13.82 per share, which per share represented a 10% premium to the average closing prices of the Company’s common stock for the ten trading days prior to December 22, 2014. The Company recorded a loss of $0.9 million as part of gain on arbitration settlement in the consolidated statement of operations for the period ending December 31, 2014 related to the issuance of stock, which was valued using the Company’s closing stock price on December 31, 2014, the effective date of the transaction.

In connection with the Settlement Agreement, the Company received an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize AQW051. Under the AQW051 license agreement, the Company is obligated to use its commercially reasonable efforts to develop and commercialize AQW051 and is responsible for all development costs under the AQW051 license agreement. Novartis is eligible to receive tiered-royalties on net sales at percentage rates up to the mid-teens. The Company evaluated AQW051 and determined that the asset is both incomplete and has substance. However, given the early stage of AQW051 and the future costs of development, no transaction value was allocated to this asset.

The Company accounted for the Settlement Agreement in accordance with the provisions of ASC Subtopic 805, Business Combinations (ASC 805). Under the provisions of ASC 805, the acquisition date for a business is the date on which the company obtains control of the acquiree. The Company obtained control on December 31, 2014, the effective date of the Settlement Agreement. The following summarizes the fair value of consideration exchanged as part of the Settlement Agreement:


*(in thousands)*
Equity issued	$	25,904
Cash received		(25,000	)
Settlement of pre-existing non-contractual relationship		18,087

	$	18,991

Assets acquired and recorded at fair value as of December 31, 2014 were as follows:


*(in thousands)*
Inventory	$	2,960
Intangible—Re-acquired right		15,940
Prepaid services		91

	$	18,991

The Company recorded the reacquired right as an intangible asset as of December 31, 2014. The Company is amortizing the reacquired right on a straight-line basis through November 2016. See Note 11, Intangible Assets, for further discussion.

Due to the effective date of the Settlement Agreement being December 31, 2014, the Company did not recognize any revenue or operating expenses related to U.S. or Canadian commercial sales of Fanapt^® in the consolidated statement of operations for the period ending December 31, 2014. Non-recurring transaction costs of $0.6 million related to the acquisition are recorded in selling, general and administrative expenses in the consolidated statement of operations for the period ending December 31, 2014.

In connection with the Settlement Agreement, the Company and Novartis terminated the 2009 Amended Sublicense Agreement (the 2009 Agreement). Given the termination of this pre-existing contractual relationship and that there is no further obligations under the 2009 Agreement, the Company recognized a gain of $59.5 million, representing the remaining deferred revenue related to the $200.0 million upfront payment received from Novartis under the 2009 Agreement. This amount is included in gain on arbitration settlement in the consolidated statement of operations for the period ending December 31, 2014.

The Settlement Agreement provided for mutual release of claims and dismissed the Fanapt^® Arbitration, which effectively settled a pre-existing non-contractual relationship. As a result, the Company recorded an $18.1 million gain on the settlement of arbitration, which represented the value of a potential future arbitration outcome. This amount was valued based on a probability weighted scenario analysis that took into consideration the probability of each potential future alternative outcomes of the arbitration between the parties. This amount is included in gain on arbitration settlement in the consolidated statement of operations for the period ending December 31, 2014.

Unaudited Pro forma Information

The following supplemental pro forma information summarizes the combined results of operations of the Company and the Fanapt^® business as though the acquisition occurred on January 1, 2013. These supplemental pro forma results of operations are provided for illustrative purposes only and do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future. The pro forma results do not include any cost savings or other synergies that may result from the Fanapt^® acquisition or any estimated costs that will be incurred to integrate Fanapt^® into the Company. Future results may vary significantly from the results in this pro forma information because of future unknown events.


	Year Ended December 31,
(in thousands, except per share amounts)	2014			2013
Revenue	$	79,335		$	75,270
Net income (loss)	$	(100,742	)	$	41,048
Basic income (loss) per share	$	(2.90	)	$	1.35
Diluted income (loss) per share	$	(2.90	)	$	1.29

The Company’s historical financial information was adjusted to give effect to the pro forma events that were directly attributable to the Fanapt^® business. The pro forma consolidated results include historical revenues and expenses for the both the Company and the Fanapt^® business with the following adjustments:

•

The timing of the gain on arbitration settlement as of January 1, 2013.

•

The increase to the gain on arbitration settlement due to the larger deferred revenue balance associated with the license agreement as of January 1, 2013.

•

The removal of licensing revenue from the Company’s revenue associated with the up-front license fee received from Novartis.

•

The inclusion of intangible asset amortization expense associated with the intangible asset recorded as part of the acquisition.

•

The removal of the royalty associated with U.S. sales of Fanapt^® from both the Company’s revenue and the expenses of the Fanapt^® business.

•

The difference between the cost of inventory that Novartis incurred and the Company’s recorded fair value of inventory.

Change in Method of Accounting for Stock-based Compensation

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

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+ Details

Change in Method of Accounting for Stock-based Compensation

12 Months Ended

Dec. 31, 2014

4. 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 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 $2.2 million lower than it would have been under the accelerated attribution method for the year ended December 31, 2014. This resulted in an increase to net income of $2.2 million, or $0.06 per basic and diluted share for the year ended December 31, 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, 2012, the beginning of the earliest period presented in the financial statements was a reduction of $4.9 million. The adjustments as of December 31, 2011 were as follows:

Balance Sheet


	December 31, 2011
*(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; 28,117,026 shares issued and outstanding at December 31, 2011	$	28		$	—		$	28
Additional paid-in capital		296,868			(4,945	)		291,923
Accumulated other comprehensive income		21			—			21
Accumulated deficit		(263,443	)		4,945			(258,498	)

Total stockholders’ equity	$	33,474		$	—		$	33,474

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 years ended December 31, 2013 and 2012 were as follows:

Statement of Operations


*(in thousands, except for share and* *per share amounts)*	Year Ended December 31, 2013									Year Ended December 31, 2012
	As previously Reported			Retrospective Adjustment			As Adjusted			As previously Reported			Retrospective Adjustment			As Adjusted
Revenues:
Licensing agreement	$	26,789		$	—		$	26,789		$	26,789		$	—		$	26,789
Royalty revenue		7,090			—			7,090			5,938			—			5,938

Total revenues		33,879			—			33,879			32,727			—			32,727
Operating expenses:
Cost of goods sold		—			—			—			129			—			129
Research and development		28,190			312			28,502			45,446			318			45,764
Selling, general and administrative		24,594			488			25,082			13,882			635			14,517
Intangible asset amortization		1,495			—			1,495			1,495			—			1,495

Total operating expenses		54,279			800			55,079			60,952			953			61,905

Loss from operations		(20,400	)		(800	)		(21,200	)		(28,225	)		(953	)		(29,178	)
Other income		145			—			145			561			—			561

Loss before tax benefit		(20,255	)		(800	)		(21,055	)		(27,664	)		(953	)		(28,617	)
Tax benefit		—			—			—			—			—			—

Net loss	$	(20,255	)	$	(800	)	$	(21,055	)	$	(27,664	)	$	(953	)	$	(28,617	)

Basic and diluted net loss per share	$	(0.67	)	$	(0.02	)	$	(0.69	)	$	(0.98	)	$	(0.03	)	$	(1.01	)

Weighted average shares outstanding, basic and diluted		30,351,353			—			30,351,353			28,228,409			—			28,228,409

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 adjustments for the years ended December 31, 2013 and 2012 were as follows:

Statement of Comprehensive Loss


	Year Ended December 31, 2013									Year Ended December 31, 2012
*(in thousands)*	As Previously Reported			Retrospective Adjustment			As Adjusted			As Previously Reported			Retrospective Adjustment			As Adjusted
Net loss	$	(20,255	)	$	(800	)	$	(21,055	)	$	(27,664	)	$	(953	)	$	(28,617	)

Other comprehensive income (loss):
Change in net unrealized loss on marketable securities		11			—			11			(11	)		—			(11	)
Tax provision on other comprehensive income (loss)		—			—			—			—			—			—

Other comprehensive income (loss), net of tax:		11			—			11			(11	)		—			(11	)

Comprehensive loss	$	(20,244	)	$	(800	)	$	(21,044	)	$	(27,675	)	$	(953	)	$	(28,628	)

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 years ended December 31, 2013 and 2012 were as follows:

Statement of Cash Flows


	Year Ended December 31, 2013									Year Ended December 31, 2012
*(in thousands)*	As Previously Reported			Retrospective Adjustment			As Adjusted			As Previously Reported			Retrospective Adjustment			As Adjusted
Cash flows from operating activities
Net loss	$	(20,255	)	$	(800	)	$	(21,055	)	$	(27,664	)	$	(953	)	$	(28,617	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment		432			—			432			633			—			633
Employee and non-employee stock-based compensation		4,604			800			5,404			4,094			953			5,047
Amortization of discounts and premiums on marketable securities		155			—			155			560			—			560
Intangible asset amortization		1,495			—			1,495			1,495			—			1,495
Landlord contributions for tenant improvements		—			—			—			1,826			—			1,826
Changes in assets and liabilities, net		(26,023	)		—			(26,023	)		(25,861	)		—			(25,861	)

Net cash used in operating activities	$	(39,592	)	$	—		$	(39,592	)	$	(44,917	)	$	—		$	(44,917	)

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 SEC

-Name Regulation S-X (SX)

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+ Details

Earnings per Share

12 Months Ended

Dec. 31, 2014

Earnings per Share

5. 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 income (loss) per share of common stock for the years ended December 31, 2014, 2013, and 2012:


	Year Ended December 31,
*(in thousands, except for share and per share amounts)*	2014		2013			2012
Numerator:
Net income (loss)	$	20,186	$	(21,055	)	$	(28,617	)

Denominator:
Weighted average shares outstanding: Basic		34,774,163		30,351,353			28,228,409
Effect of dilutive securities		1,912,560		—			—

Weighted average shares outstanding: Diluted		36,686,723		30,351,353			28,228,409

Net income (loss) per share, basic and diluted:
Basic	$	0.58	$	(0.69	)	$	(1.01	)

Diluted	$	0.55	$	(0.69	)	$	(1.01	)

Antidilutive securities excluded from calculations of diluted net income (loss) per share		3,524,656		4,409,811			5,462,476

The Company incurred a net loss for each of the years ended December 31, 2013 and 2012 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.

The entire disclosure for earnings per share.

+ References+ Details

Marketable Securities

12 Months Ended

Dec. 31, 2014

Marketable Securities

6. Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of December 31, 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	$	30,618	$	4	$	(4	)	$	30,618
Corporate debt	$	38,287	$	25	$	(9	)	$	38,303

	$	68,905	$	29	$	(13	)	$	68,921

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

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

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+ Details

Accounts Receivable

12 Months Ended

Dec. 31, 2014

Accounts Receivable

7. Accounts Receivable

Accounts receivable are recorded for product sales and royalty income and do not bear interest. As of December 31, 2014 and 2013, the Company recorded a royalty receivable from Novartis of $1.6 million and $2.0 million, respectively. The Company determines an allowance for doubtful accounts based on assessed customers’ ability to pay and economic trends. Such allowance is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company did not record any bad debt expense for the years ended December 31, 2014 2013 and 2012. At December 31, 2014 and 2013 the allowance for doubtful accounts was zero.

Inventory

12 Months Ended

Dec. 31, 2014

Inventory

8. 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 December 31, 2014 and December 31, 2013:


	December 31,
*(in thousands)*	2014		2013
Raw materials	$	198	$	—
Work-in-process		1,326		—
Finished goods		3,394		—
Deferred cost of goods sold		252		—

Total	$	5,170	$	—

Prepaid Expenses and Other Current Assets

The entire disclosure for inventory. This may include, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the major classes of inventory, and the nature of the cost elements included in inventory. If inventory is stated above cost, accrued net losses on firm purchase commitments for inventory and losses resulting from valuing inventory at the lower-of-cost-or-market may also be included. For LIFO inventory, may disclose the amount and basis for determining the excess of replacement or current cost over stated LIFO value and the effects of a LIFO quantities liquidation that impacts net income.

+ References+ Details

Prepaid Expenses and Other Current Assets

12 Months Ended

Dec. 31, 2014

9. Prepaid Expenses and Other Current Assets

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


	December 31,
*(in thousands)*	2014		2013
Prepaid insurance	$	270	$	167
Prepaid manufacturing cost		358		—
Other prepaid expenses and vendor advances		2,302		2,408
Other current assets		154		128

Total prepaid expenses and other current assets	$	3,084	$	2,703

Property and Equipment

12 Months Ended

Dec. 31, 2014

Property and Equipment

10. Property and Equipment

The following is a summary of the Company’s property and equipment-at cost, as of December 31, 2014 and 2013:


	Estimated Useful Life (Years)		December 31,
*(in thousands)*	Estimated Useful Life (Years)		2014			2013
Computer equipment		3	$	1,316		$	983
Furniture and fixtures		7		765			580
Leasehold improvements		11		2,089			1,884

			$	4,170		$	3,447
Accumulated depreciation and amortization			$	(1,733	)	$	(1,249	)

			$	2,437		$	2,198

Depreciation and amortization expense for the years ended December 31, 2014, 2013 and 2012 was $0.5 million, $0.4 million and $0.6 million, respectively.

Commitments and Contingencies

The entire disclosure for long-lived, physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, accounting policies and methodology, roll forwards, depreciation, depletion and amortization expense, including composite depreciation, accumulated depreciation, depletion and amortization expense, useful lives and method used, income statement disclosures, assets held for sale and public utility disclosures.

+ References+ Details

Intangible Assets

12 Months Ended

Dec. 31, 2014

Intangible Assets

11. Intangible Assets

The following is a summary of the Company’s intangible assets as of December 31, 2014 and 2013:


	Estimated Useful Life	December 31, 2014
(in thousands)	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HETLIOZ^®	January 2033	$	8,000	$	539	$	7,461
Fanapt^®	November 2016	$	27,941	$	8,678	$	19,263

	Estimated Useful Life	December 31, 2013
(in thousands)	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Fanapt^®	November 2016	$	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 of the U.S. patent for HETLIOZ^® 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. This reflected the expected duration of the Novartis commercialization of Fanapt^® in the U.S. which was estimated to be through the expiry of the Fanapt^® composition of matter patent, including a granted Hatch-Waxman extension and an assumed additional six month pediatric extension. In February 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.

Pursuant to the Settlement Agreement, Novartis transferred all U.S. and Canadian rights in the Fanapt^® franchise to the Company. As a result, the Company recognized an intangible asset of $15.9 million on December 31, 2014 related to the reacquired right to Fanapt^®, which is being amortized on a straight-line basis through November 2016. The useful life estimation for the Fanapt^® intangible asset is based on the market participant methodology prescribed by ASC 805, and therefore does not reflect the impact of the Fanapt^® patent number 8,586,610, which is solely owned by the Company and expires in 2027. See Note 3, Settlement Agreement with Novartis, for further discussion.

The intangible assets are being amortized over their estimated useful economic life using the straight line method. Amortization expense was $2.3 million, $1.5 million and $1.5 million for the years ended December 31, 2014, 2013 and 2012, respectively.

The following is a summary of the future intangible asset amortization schedule as of December 31, 2014:


*(in thousands)*	Total		2015		2016		2017		2018		2019		Thereafter
HETLIOZ^®	$	7,461	$	411	$	411	$	411	$	411	$	411	$	5,406
Fanapt^®		19,263		10,050		9,213		—		—		—		—

	$	26,724	$	10,461	$	9,624	$	411	$	411	$	411	$	5,406

Deferred Revenue

12 Months Ended

Dec. 31, 2014

Deferred Revenue

13. Deferred Revenue

The following is a summary of changes in total deferred revenue for the years ended December 31, 2014 and 2013:


	Year Ended December 31,
*(in thousands)*	2014		2013
Balance beginning of period	$	90,275	$	117,064
Deferred Fanapt^® product sales		174		—
Licensing revenue recognized		30,746		26,789
Recognized as part of gain on arbitration settlement		59,529		—

Balance end of period	$	174	$	90,275

The Company entered into an amended and restated sublicense agreement with Novartis in 2009, pursuant to which Novartis had 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 had no term as the exact length of the JSC is undefined. As a result, the Company deemed the performance period of the JSC to be the life of the U.S. patent of Fanapt^®. Revenue related to the upfront payment was recognized ratably from the date the amended and restated sublicense agreement became effective (November 2009) through the expected duration of the Novartis commercialization of Fanapt^® in the U.S. which was estimated to be through the expiry of the Fanapt^® composition of patent, including a granted Hatch-Waxman extension (November 2016). During the years ended December 31, 2014, 2013 and 2012, the Company recognized revenue of $30.7 million, $26.8 million and $26.8 million, respectively, related to the license agreement.

In connection with the Settlement Agreement with Novartis, the Company recognized the remaining deferred revenue balance of $59.5 million as part of the gain on arbitration settlement. See Note 3, Settlement Agreement with Novartis, for further discussion.

Commitments and Contingencies

12 Months Ended

Dec. 31, 2014

14. Commitments and Contingencies

Operating leases

The following is a summary of the minimum annual future payments under operating leases as of December 31, 2014:


*(in thousands)*	Total		2015		2016		2017		2018		2019		Thereafter
Operating leases	$	14,710	$	1,395	$	1,500	$	1,538	$	1,576	$	1,616	$	7,085

The minimum annual future payments for operating leases consists of the lease for office space for the Company’s headquarters located in Washington, D.C., which expires in 2023.

In 2011, the Company entered into an office lease with Square 54 Office Owner LLC (the Landlord) for Vanda’s current headquarters, consisting of 21,400 square feet at 2200 Pennsylvania Avenue, N.W. in Washington, D.C. (the Lease). Under the Lease, rent payments were abated for the first 12 months. The Landlord provided the Company with a cash contribution of $1.9 million for tenant improvements that was reflected in the consolidated financial statements as an increase to capitalized leasehold improvements and an increase to deferred rent for the year ended December 31, 2012. 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 additional 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.

Rent expense under operating leases, was $1.7 million, $1.1 million and $2.0 million for the years ended December 31, 2014, 2013 and 2012, 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 in 2014. In 2013, as a result of the FDA acceptance of the NDA filing for HETLIOZ^® for the treatment of Non-24, the Company made a milestone payment of $0.5 million to the regulatory consultant. These payments are included as research and development expense in the consolidated statements of operations for the years ended December 31, 2014 and 2013, respectively. In March 2014, the Company terminated the engagement.

Guarantees and indemnifications

The Company has entered into a number of standard intellectual property indemnification agreements in the ordinary course of its business. Pursuant to these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners or customers, in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. The term of these indemnification agreements is generally perpetual from the date of execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. Since inception, the Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements. The Company also indemnifies its officers and directors for certain events or occurrences, subject to certain conditions.

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 Bristol-Myers Squibb Company (BMS) under which it received an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize HETLIOZ^®. In partial consideration for the license, the Company paid BMS an initial license fee of $0.5 million. The Company made a milestone payment to BMS of $1.0 million under the license agreement in 2006 relating to the initiation of its first Phase III clinical trial for HETLIOZ^®. As a result of the FDA acceptance of the Company’s NDA for HETLIOZ^® for the treatment of Non-24 in July 2013, the Company incurred a $3.0 million milestone obligation under the license agreement with BMS. As a result of the FDA’s approval of the HETLIOZ^® NDA in January 2014, the Company incurred an $8.0 million milestone obligation in the first quarter of 2014 under the same license agreement that was capitalized as an intangible asset and is being amortized over the expected HETLIOZ^® patent life in the U.S. The Company is obligated to make a future milestone payment to BMS of $25.0 million in the event that cumulative worldwide sales of HETLIOZ^® reach $250.0 million. Additionally, the Company is obligated to make royalty payments on HETLIOZ^® net sales to BMS in any territory where it commercializes HETLIOZ^® for a period equal to the greater of 10 years post the first commercial sale in the territory or the expiry of the new chemical entity patent in that territory. During the period prior to the expiry of the new chemical entity patent in a territory, the Company is obligated to pay a 10% royalty on net sales in that territory. The royalty rate is decreased by half for countries in which no new chemical entity patent existed or for the remainder of the 10 years after the expiry of the new chemical entity patent. 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 it receives from a third party in connection with any sublicensing arrangement, at a rate which is in the mid-twenties. The Company has agreed with BMS in our license agreement for HETLIOZ^® to use our commercially reasonable efforts to develop and commercialize HETLIOZ^®.

The license agreement was amended in April 2013 to add a process that would allow BMS to waive the right to develop and commercialize HETLIOZ^® in those countries not covered by a development and commercialization agreement. Subsequent to the execution of the April 2013 amendment, BMS provided the Company with formal written notice that it irrevocably waived the option to exercise the right to reacquire any or all rights to any product (as defined in the license agreement) containing HETLIOZ^®, or to develop or commercialize any such product, in the countries not covered by a development and commercialization agreement.

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^®. Pursuant to the terms of the Settlement Agreement with Novartis, Novartis transferred all U.S. and Canadian rights in the Fanapt^® franchise to the Company on December 31, 2014.

A predecessor company of Sanofi, Hoechst Marion Roussel, Inc. (HMRI), discovered Fanapt^® and completed early clinical work on the product. In 1996, following a review of its product portfolio, HMRI licensed its rights to the Fanapt^® patents and patent applications to Titan Pharmaceuticals, Inc. (Titan) on an exclusive basis. In 1997, soon after it had acquired its rights, Titan sublicensed its rights to Fanapt^® on an exclusive basis to Novartis. In June 2004, the Company acquired exclusive worldwide rights to these patents and patent applications, as well as certain Novartis patents and patent applications to develop and commercialize Fanapt^®, through a sublicense agreement with Novartis. In partial consideration for this sublicense, the Company paid Novartis an initial license fee of $0.5 million and was obligated to make future milestone payments to Novartis of less than $100.0 million in the aggregate (the majority of which were tied to sales milestones), as well as royalty payments to Novartis at a rate which, as a percentage of net sales, was in the mid-twenties. 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 it to make a payment of $12.0 million to Novartis.

In October 2009, the Company entered into an amended and restated sublicense agreement with Novartis, which amended and restated the June 2004 sublicense agreement. Pursuant to the amended and restated sublicense agreement, Novartis has exclusive commercialization rights to all formulations of Fanapt^® in the U.S. and Canada. Novartis began selling Fanapt^® in the U.S. during the first quarter of 2010. Novartis was responsible for the further clinical development activities in the U.S. and Canada. Pursuant to the amended and restated sublicense agreement, the Company received an upfront payment of $200.0 million and was 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. The Company also received royalties, which, as a percentage of net sales, were in the low double-digits, on net sales of Fanapt^® in the U.S. and Canada. The Company retained exclusive rights to Fanapt^® outside the U.S. and Canada and is obligated to make royalty payments to Sanofi S.A. on Fanapt^® sales outside the U.S. and Canada.

The Company has entered into agreements with the following partners for the commercialization of Fanapt^® in the countries set forth below:


Country	Partner	Market Approval Date
Mexico	Probiomed S.A. de C.V.	October 2013
Israel	Megapharm Ltd.	August 2012

Pursuant to the terms of the Settlement Agreement with Novartis, Novartis transferred all U.S. and Canadian rights in the Fanapt^® franchise to the Company on December 31, 2014. The Company is obligated to make royalty payments to Sanofi, S.A. and Titan, at a percentage rate equal to 23% on annual U.S. net sales of Fanapt^® up to $200 million, and at a percentage in the mid-twenties on sales over $200 million through November 2016. After the expiration of the new chemical entity patent in major markets (US, United Kingdom, Germany, France, Italy, Spain and Japan) and some non-major markets, the Company will have a fixed royalty obligation to Sanofi on Fanapt^® net sales of up to 9%. See Note 3, Settlement Agreement with Novartis, for further information.

Tradipitant. In April 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, tradipitant, for all human indications. The patent describing tradipitant 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 paid Lilly an initial license fee of $1.0 million and will be responsible for all development costs. The initial license fee was recognized as research and development expense in the consolidated statement of operations for the year ended December 31, 2012. Lilly is also eligible to receive additional 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. Vanda is obligated to use its commercially reasonable efforts to develop and commercialize tradipitant.

Either party may terminate the license agreement under certain circumstances, including a material breach of the license agreement by the other. In the event that Vanda terminates the license agreement, or if Lilly terminates due to Vanda’s breach or for certain other reasons set forth in the license agreement, all rights licensed and developed by Vanda 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 tradipitant.

AQW051. In connection with the Settlement Agreement, the Company received an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize AQW051, a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist.

Pursuant to the license agreement, the Company is obligated to use its commercially reasonable efforts to develop and commercialize AQW051 and is responsible for all development costs under the AQW051 license agreement. The Company has no milestone obligations; however, Novartis is eligible to receive tiered-royalties on net sales at percentage rates up to the mid-teens.

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 December 31, 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.

Research and development and marketing agreements

In the course of its business, the Company regularly enters into agreements with clinical organizations to provide services relating to clinical development and clinical manufacturing activities under fee service arrangements. The Company’s current agreements for clinical services may be terminated on at most 60 days’ notice without incurring additional charges, other than charges for work completed but not paid for through the effective date of termination and other costs incurred by the Company’s contractors in closing out work in progress as of the effective date of termination.

The entire disclosure for commitments and contingencies.

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Income Taxes

12 Months Ended

Dec. 31, 2014

Income Taxes

15. Income Taxes

As of December 31, 2014 and 2013, the Company has provided a valuation allowance for the full amount of its net deferred tax asset since realization of any future benefit from deductible temporary differences and NOLs could not be sufficiently assured.

The following is a summary of the Company’s current and deferred income tax provision (benefit) for years ended December 31, 2014, 2013 and 2012:

Year Ended December 31,

(in thousands)

2014

2013

2012

Current income tax expense (benefit):

Federal

—

State

—

Deferred income tax expense (benefit):

Federal

—

State

—

Total income tax expense (benefit)

—

The following is a reconciliation between the Company’s statutory tax rate and effective tax rate for the years ended December 31, 2014, 2013 and 2012:


	Year Ended December 31,
	2014			2013			2012
Federal tax at statutory rate		34.0	%		-34.0	%		-34.0	%
State taxes		7.2	%		-4.0	%		-3.3	%
Change in valuation allowance		-59.7	%		43.9	%		70.3	%
Research and development credit		1.3	%		-1.1	%		0.8	%
Orphan drug credit		8.5	%		-22.7	%		-30.3	%
Stock options		0.0	%		0.0	%		1.4	%
Section 162(m) limitation		1.1	%		1.2	%		0.0	%
Stock issuance cost		1.6	%		0.0	%		0.0	%
Tax rate change		4.8	%		-0.3	%		-7.0	%
Change in Maryland NOL		0.0	%		18.5	%		0.0	%
Other non-deductible items		1.2	%		-1.5	%		2.1	%

Effective tax rate		0.0	%		0.0	%		0.0	%

The following is a summary of the components of the Company’s deferred tax assets, net, and the related valuation allowance as of December 31, 2014 and 2013:


	December 31,
*(in thousands)*	2014			2013
Deferred tax assets:
Net operating loss carry forwards	$	73,626		$	48,206
Stock-based compensation		17,160			17,626
Deferred revenue		—			36,670
Accrued and deferred expenses		532			566
Research and development and orphan drug credit carryforwards		36,772			38,597
Depreciation and amortization, net		118			110
Contributions carryforward		420			—
Reacquired rights		182			—
Licensing agreements		86			—

Total deferred tax assets		128,896			141,775

Deferred tax liabilities:
Licensing agreements		—			(616	)
Unrealized gain on available for sale securities		(6	)		(9	)

Total deferred tax liabilities		(6	)		(625	)

Deferred tax assets		128,890			141,150
Valuation allowance		(128,890	)		(141,150	)

Net deferred tax assets	$	—		$	—

The fact that the Company has historically generated 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 December 31, 2014 and 2013. The net decrease in the tax valuation allowance was $12.3 million for the year ended December 31, 2014. The net increase in the tax valuation allowance was $7.9 million and $19.4 million for the years ended December 31, 2013 and 2012, respectively.

As of December 31, 2014, the Company had federal NOL carryforwards of $197.4 million, state NOL carryforwards of $201.3 million, which include $4.2 million of excess windfall benefits generated from stock options. The Company also has research and development credits of $6.2 million and orphan drug carryforward credits of $30.6 million. These NOL carryforwards and credits will begin to expire in 2028 and 2024, respectively.

Because the Company has generated NOLs from inception through December, 31, 2014, all income tax returns filed by the Company are open to examination by tax jurisdictions. As of December 31, 2014, the Company’s income tax returns have not been under examination by any federal or state tax jurisdictions.

The Company’s tax attributes, including NOLs and credits, are subject to any ownership changes as defined under IRC Section 382. A change in ownership could affect the Company’s ability to use its NOLs and credit carryforwards (tax attributes). Ownership changes did occur as of December 31, 2014 and December 31, 2008. However, the Company believes that it had sufficient Built-In-Gain to offset the IRC Section 382 limitation generated by the ownership changes. Any future ownership changes may cause the Company’s existing tax attributes to have additional limitations. Additionally, the Company maintains a valuation allowance on its tax attributes, therefore, any IRC Section 382 limitation would not have a material impact on the Company’s provision for income taxes as of December 31, 2014.

As of December 31, 2014 and 2013, the Company had no uncertain tax positions.

The valuation allowance activity on deferred tax assets was as follows:


*(in thousands)*	Balance At Beginning Of Period		Additions Charged To Income Tax Expense		Reductions Credited To Income Tax Expense		Balance At End Of Period
Calendar year ended:
December 31, 2012	$	113,823	$	28,102	$	8,654	$	133,271
December 31, 2013	$	133,271	$	22,998	$	15,119	$	141,150
December 31, 2014	$	141,150	$	27,893	$	40,153	$	128,890

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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Fair Value Measurements

12 Months Ended

Dec. 31, 2014

Fair Value Measurements

16. 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 at December 31, 2014 and 2013 are 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, corporate notes and U.S. government agency notes that use as their basis readily observable market parameters.

As of December 31, 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 December 31, 2014 Using
*(in thousands)*	December 31, 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	$	68,921	$	30,618	$	38,303	$	—

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. During the years ended December 31, 2014 and 2013, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.

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.

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Restricted Cash

12 Months Ended

Dec. 31, 2014

Restricted Cash

17. Restricted Cash

The following is a summary of the Company’s restricted cash used to collateralize various letters of credit as of December 31, 2014 and 2013:


	December 31,
*(in thousands)*	2014		2013
Current:
Rockville, Maryland office lease	$	—	$	430
Maryland Board of Pharmacy license		—		100

Total current	$	—	$	530

Non-current:
Washington, D.C. office lease	$	785	$	500
Maryland Board of Pharmacy license		—		—

Total non-current	$	785	$	500

The entire disclosure for cash and cash equivalent footnotes, which may include the types of deposits and money market instruments, applicable carrying amounts, restricted amounts and compensating balance arrangements. Cash and equivalents include: (1) currency on hand (2) demand deposits with banks or financial institutions (3) other kinds of accounts that have the general characteristics of demand deposits (4) short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only investments maturing within three months from the date of acquisition qualify.

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Equity Incentive Plans

12 Months Ended

Dec. 31, 2014

Equity Incentive Plans

19. Equity Incentive Plans

As of December 31, 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) that were adopted in December 2004 and April 2006, respectively. An aggregate of 652,810 shares were subject to outstanding options granted under the 2004 Plan as of December 31, 2014, and no additional options will be granted under this plan. As of December 31, 2014, there were 10,329,472 shares of the Company’s common stock reserved for issuance under the 2006 Plan, of which 7,253,073 shares were subject to outstanding options and RSUs granted to employees and non-employees and 956,265 shares remained available for future grant. On January 1 of each year, the number of shares reserved under the 2006 Plan is automatically increased by the lesser of 4% of the total number of shares of common stock that are outstanding at that time or 1,500,000 shares (or such lesser number as may be approved by the Company’s board of directors). As of January 1, 2015, the number of shares of common stock that may be issued under the 2006 Plan was automatically increased by 1,500,000 shares, increasing the number of shares of common stock available for issuance under the Plan to 11,829,472 shares.

The Company has granted option awards with service conditions (service option awards) 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 December 31, 2006, 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 31, 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 December 31, 2014, $14.0 million of unrecognized compensation costs related to unvested service option awards are expected to be recognized over a weighted average period of 1.7 years. No option awards are classified as a liability as of December 31, 2014.

The following is a summary of option activity for the 2004 Plan for the years ended December 31, 2014, 2013, and 2012:


*(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, 2011		677,145		$	1.78		3.78	$	2,016
Exercised		(5,000	)		0.33				14

Outstanding at December 31, 2012		672,145			1.79		2.78		1,512
Exercised		(115	)		4.73
Expired		(1,286	)		3.67

Outstanding at December 31, 2013		670,744			1.79		1.78		7,124
Exercised		(17,934	)		3.57

Outstanding at December 31, 2014		652,810			1.74		0.78		8,212

Exercisable at December 31, 2014		652,810			1.74		0.78		8,212

There are no options expected to vest as of December 31, 2014 under the 2004 Plan, given that the Company stopped issuing options from this plan in 2006.

The following is a summary of option activity for the 2006 Plan for the years ended December 31, 2014, 2013, and 2012:


*(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, 2011		4,254,681		$	12.16		7.65	$	396
Granted		846,000			3.42
Forfeited		(149,091	)		7.50
Expired		(76,103	)		10.68
Exercised		(10,000	)		1.02				22

Outstanding at December 31, 2012		4,865,487			10.83		7.15		634
Granted		1,245,500			10.18
Forfeited		(54,226	)		6.14
Expired		(259,295	)		10.65
Exercised		(263,848	)		5.86				1,545

Outstanding at December 31, 2013		5,533,618			10.98		6.93		21,264
Granted		1,324,337			12.17
Forfeited		(237,108	)		8.35
Exercised		(393,735	)		7.08				2,923

Outstanding at December 31, 2014		6,227,112			11.58		6.71		28,523

Exercisable at December 31, 2014		3,822,302			12.31		5.18		19,110

Expected to vest at December 31, 2014		2,263,369			10.34		9.12		9,034

Proceeds from the exercise of stock options amounted to $2.9 million, $1.6 million and $0.01 million for the years ended December 31, 2014, 2013 and 2012, respectively.

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 (service RSUs) that vest in four equal annual installments provided that the employee remains employed with the Company. As of December 31, 2014, $8.3 million of unrecognized compensation costs related to unvested service RSUs are expected to be recognized over a weighted average period of 2.2 years. No service RSUs are classified as a liability as of December 31, 2014.

The following is a summary of RSU activity for the 2006 Plan for the years ended December 31, 2014, 2013, and 2012:


	Number of Shares Underlying RSUs			Weighted Average Grant Date Fair Value
Unvested at December 31, 2011		522,346		$	7.43
Granted		245,000			3.28
Forfeited		(61,970	)		7.64

Unvested at December 31, 2012		705,376			5.91
Granted		400,500			10.29
Forfeited		(21,000	)		6.41
Vested		(201,186	)		6.71

Unvested at December 31, 2013		883,690			7.70
Granted		436,115			12.28
Forfeited		(84,282	)		6.75
Vested		(209,562	)		6.67

Unvested at December 31, 2014		1,025,961			9.94

The grant date fair value for the 209,562 shares underlying RSUs that vested during the year ended December 31, 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 year ended December 31, 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.

Quarterly Financial Data (unaudited)

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References+ Details

Legal Matters

12 Months Ended

Dec. 31, 2014

Legal Matters

21. Legal Matters

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.

Pursuant to the Settlement Agreement with Novartis, the Company assumed Novartis’ patent infringement action against Roxane in the U.S. District Court for the District of Delaware. The suit alleges that Roxane’s filing of an ANDA for generic iloperidone with a paragraph IV certification infringes Sanofi’s new chemical entity patent. Roxane is defending on the grounds that the patent claims are invalid or unenforceable or that certain patent claims are not infringed. Roxane also filed a motion to dismiss on the grounds that the court lacks jurisdiction.

Quarterly Financial Data (unaudited)

12 Months Ended

Dec. 31, 2014

22. Quarterly Financial Data (unaudited)


*(in thousands, except for per share amounts)*	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
2014
Revenue	$	9,143		$	10,862		$	14,782		$	15,370
Income (loss) from operations		(26,578	)		(21,606	)		(1,448	)		69,693
Net income (loss)		(26,533	)		(21,575	)		(1,426	)		69,719
Net income (loss) per share:
Basic	$	(0.79	)	$	(0.64	)	$	(0.04	)	$	1.85
Diluted	$	(0.79	)	$	(0.64	)	$	(0.04	)	$	1.77
2013 ⁽¹⁾

Revenue	$	8,068		$	8,319		$	8,709		$	8,783
Loss from operations		(4,565	)		(3,413	)		(5,431	)		(7,791	)
Net loss		(4,519	)		(3,383	)		(5,406	)		(7,747	)
Net loss per share, basic and diluted	$	(0.16	)	$	(0.12	)	$	(0.17	)	$	(0.23	)

The Company’s results for the fourth quarter of 2014 include a gain on arbitration settlement of $77.6 million, or $2.06 and $1.97 per basic and diluted share, respectively. See Note 3, Settlement Agreement with Novartis, for further discussion.

(1)

In the first quarter of 2014, the Company elected to change its method of accounting for stock-based compensation from the accelerated attribution method to the straight-line method. The consolidated financial data above for the year ended 2013 has been adjusted to reflect this change. See Note 4, Change in Method of Accounting for Stock-based Compensation, for further discussion.

Cash and cash equivalents

The entire disclosure for the quarterly financial data in the annual financial statements. The disclosure may include a tabular presentation of financial information for each fiscal quarter for the current and previous year, including revenues, gross profit, income or loss before extraordinary items and earnings per share data. It also includes an indication if the information in the note is unaudited, comments on the aggregate effect of year-end adjustments, and an explanation of matters or transactions that affect comparability or are pertinent to an understanding of the information furnished.

+ References+ Details

Business Organization and Presentation (Policies)

12 Months Ended

Dec. 31, 2014

Business organization

Business organization

•

Trichostatin A, a small molecule histone deacetylase (HDAC) inhibitor.

•

AQW051, a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist.

Basis of presentation

Basis of presentation

Use of estimates

Use of estimates

Cash and cash equivalents

Marketable securities

Marketable securities

Inventory

Inventory

Intangible asset

Intangible asset

Property and equipment

Property and equipment

Accrued liabilities

Accrued liabilities

Net Product Sales

Net Product Sales

Product Sales Discounts and Allowances

License Revenue

Research and development expenses

Cost of goods sold

Research and development expenses

Selling general and administrative expenses

Selling, general and administrative expenses

Employee stock-based compensation

Employee stock-based compensation

Total employee stock-based compensation expense recognized for the years ended December 31, 2014, 2013 and 2012 was comprised of the following:


	Year Ended December 31,
*(in thousands)*	2014		2013		2012
Research and development	$	1,810	$	2,098	$	1,673
Selling, general and administrative		3,945		3,238		3,353

	$	5,755	$	5,336	$	5,026

Assumptions used in the Black-Scholes-Merton option pricing model for employee and director stock options granted during the years ended December 31, 2014, 2013 and 2012 were as follows:


	Year Ended December 31,
	2014			2013			2012
Expected dividend yield		0	%		0	%		0	%
Weighted average expected volatility		62	%		65	%		68	%
Weighted average expected term (years)		5.90			6.03			6.03
Weighted average risk-free rate		1.73	%		1.59	%		0.94	%
Weighted average fair value per share	$	6.99		$	6.10		$	2.08

Advertising Expense

Advertising Expense

Income taxes

Income taxes

Certain risks and uncertainties

Certain risks and uncertainties

Concentrations of credit risk

Concentrations of credit risk

Segment information

Segment information

The Company’s management has determined that the Company operates in one business segment which is the development and commercialization of pharmaceutical products.

Recent accounting pronouncements

Recent accounting pronouncements

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2014

Total Employee Stock-Based Compensation Expense

Total employee stock-based compensation expense recognized for the years ended December 31, 2014, 2013 and 2012 was comprised of the following:


	Year Ended December 31,
*(in thousands)*	2014		2013		2012
Research and development	$	1,810	$	2,098	$	1,673
Selling, general and administrative		3,945		3,238		3,353

	$	5,755	$	5,336	$	5,026

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 years ended December 31, 2014, 2013 and 2012 were as follows:


	Year Ended December 31,
	2014			2013			2012
Expected dividend yield		0	%		0	%		0	%
Weighted average expected volatility		62	%		65	%		68	%
Weighted average expected term (years)		5.90			6.03			6.03
Weighted average risk-free rate		1.73	%		1.59	%		0.94	%
Weighted average fair value per share	$	6.99		$	6.10		$	2.08

Settlement Agreement with Novartis (Tables)

12 Months Ended

Dec. 31, 2014

Fair Value of Consideration Exchanged as Part of Settlement Agreement

The following summarizes the fair value of consideration exchanged as part of the Settlement Agreement:


*(in thousands)*
Equity issued	$	25,904
Cash received		(25,000	)
Settlement of pre-existing non-contractual relationship		18,087

	$	18,991

Assets Acquired and Recorded at Fair Value

Assets acquired and recorded at fair value as of December 31, 2014 were as follows:


*(in thousands)*
Inventory	$	2,960
Intangible—Re-acquired right		15,940
Prepaid services		91

	$	18,991

Supplemental Pro Forma Information for Combined Results of Operations of Company and Fanapt® Business

Future results may vary significantly from the results in this pro forma information because of future unknown events.


	Year Ended December 31,
(in thousands, except per share amounts)	2014			2013
Revenue	$	79,335		$	75,270
Net income (loss)	$	(100,742	)	$	41,048
Basic income (loss) per share	$	(2.90	)	$	1.35
Diluted income (loss) per share	$	(2.90	)	$	1.29

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

12 Months Ended

Dec. 31, 2014

Adjustments in Balance Sheet

The adjustments as of December 31, 2011 were as follows:

Balance Sheet


	December 31, 2011
*(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; 28,117,026 shares issued and outstanding at December 31, 2011	$	28		$	—		$	28
Additional paid-in capital		296,868			(4,945	)		291,923
Accumulated other comprehensive income		21			—			21
Accumulated deficit		(263,443	)		4,945			(258,498	)

Total stockholders’ equity	$	33,474		$	—		$	33,474

Adjustments in Statement of Operations

The adjustments for the years ended December 31, 2013 and 2012 were as follows:

Statement of Operations


*(in thousands, except for share and* *per share amounts)*	Year Ended December 31, 2013									Year Ended December 31, 2012
	As previously Reported			Retrospective Adjustment			As Adjusted			As previously Reported			Retrospective Adjustment			As Adjusted
Revenues:
Licensing agreement	$	26,789		$	—		$	26,789		$	26,789		$	—		$	26,789
Royalty revenue		7,090			—			7,090			5,938			—			5,938

Total revenues		33,879			—			33,879			32,727			—			32,727
Operating expenses:
Cost of goods sold		—			—			—			129			—			129
Research and development		28,190			312			28,502			45,446			318			45,764
Selling, general and administrative		24,594			488			25,082			13,882			635			14,517
Intangible asset amortization		1,495			—			1,495			1,495			—			1,495

Total operating expenses		54,279			800			55,079			60,952			953			61,905

Loss from operations		(20,400	)		(800	)		(21,200	)		(28,225	)		(953	)		(29,178	)
Other income		145			—			145			561			—			561

Loss before tax benefit		(20,255	)		(800	)		(21,055	)		(27,664	)		(953	)		(28,617	)
Tax benefit		—			—			—			—			—			—

Net loss	$	(20,255	)	$	(800	)	$	(21,055	)	$	(27,664	)	$	(953	)	$	(28,617	)

Basic and diluted net loss per share	$	(0.67	)	$	(0.02	)	$	(0.69	)	$	(0.98	)	$	(0.03	)	$	(1.01	)

Weighted average shares outstanding, basic and diluted		30,351,353			—			30,351,353			28,228,409			—			28,228,409

Adjustments in Statement of Comprehensive Loss

The adjustments for the years ended December 31, 2013 and 2012 were as follows:

Statement of Comprehensive Loss


	Year Ended December 31, 2013									Year Ended December 31, 2012
*(in thousands)*	As Previously Reported			Retrospective Adjustment			As Adjusted			As Previously Reported			Retrospective Adjustment			As Adjusted
Net loss	$	(20,255	)	$	(800	)	$	(21,055	)	$	(27,664	)	$	(953	)	$	(28,617	)

Other comprehensive income (loss):
Change in net unrealized loss on marketable securities		11			—			11			(11	)		—			(11	)
Tax provision on other comprehensive income (loss)		—			—			—			—			—			—

Other comprehensive income (loss), net of tax:		11			—			11			(11	)		—			(11	)

Comprehensive loss	$	(20,244	)	$	(800	)	$	(21,044	)	$	(27,675	)	$	(953	)	$	(28,628	)

Adjustments in Statement of Cash Flows

The adjustments for the years ended December 31, 2013 and 2012 were as follows:

Statement of Cash Flows


	Year Ended December 31, 2013									Year Ended December 31, 2012
*(in thousands)*	As Previously Reported			Retrospective Adjustment			As Adjusted			As Previously Reported			Retrospective Adjustment			As Adjusted
Cash flows from operating activities
Net loss	$	(20,255	)	$	(800	)	$	(21,055	)	$	(27,664	)	$	(953	)	$	(28,617	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment		432			—			432			633			—			633
Employee and non-employee stock-based compensation		4,604			800			5,404			4,094			953			5,047
Amortization of discounts and premiums on marketable securities		155			—			155			560			—			560
Intangible asset amortization		1,495			—			1,495			1,495			—			1,495
Landlord contributions for tenant improvements		—			—			—			1,826			—			1,826
Changes in assets and liabilities, net		(26,023	)		—			(26,023	)		(25,861	)		—			(25,861	)

Net cash used in operating activities	$	(39,592	)	$	—		$	(39,592	)	$	(44,917	)	$	—		$	(44,917	)

Earnings per Share (Tables)

12 Months Ended

Dec. 31, 2014

Basic and Diluted Net Income (Loss) Per Share of Common Stock

The following table presents the calculation of basic and diluted net income (loss) per share of common stock for the years ended December 31, 2014, 2013, and 2012:


	Year Ended December 31,
*(in thousands, except for share and per share amounts)*	2014		2013			2012
Numerator:
Net income (loss)	$	20,186	$	(21,055	)	$	(28,617	)

Denominator:
Weighted average shares outstanding: Basic		34,774,163		30,351,353			28,228,409
Effect of dilutive securities		1,912,560		—			—

Weighted average shares outstanding: Diluted		36,686,723		30,351,353			28,228,409

Net income (loss) per share, basic and diluted:
Basic	$	0.58	$	(0.69	)	$	(1.01	)

Diluted	$	0.55	$	(0.69	)	$	(1.01	)

Antidilutive securities excluded from calculations of diluted net income (loss) per share		3,524,656		4,409,811			5,462,476

Marketable Securities (Tables)

12 Months Ended

Dec. 31, 2014

Summary of Available-for-Sale Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of December 31, 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	$	30,618	$	4	$	(4	)	$	30,618
Corporate debt	$	38,287	$	25	$	(9	)	$	38,303

	$	68,905	$	29	$	(13	)	$	68,921

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

Summary of Prepaid Expenses, and Other Current Assets

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

Inventory (Tables)

12 Months Ended

Dec. 31, 2014

Inventory

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


	December 31,
*(in thousands)*	2014		2013
Raw materials	$	198	$	—
Work-in-process		1,326		—
Finished goods		3,394		—
Deferred cost of goods sold		252		—

Total	$	5,170	$	—

Prepaid Expenses and Other Current Assets (Tables)

12 Months Ended

Dec. 31, 2014

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


	December 31,
*(in thousands)*	2014		2013
Prepaid insurance	$	270	$	167
Prepaid manufacturing cost		358		—
Other prepaid expenses and vendor advances		2,302		2,408
Other current assets		154		128

Total prepaid expenses and other current assets	$	3,084	$	2,703

Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2014

Summary of Property and Equipment-at Cost

The following is a summary of the Company’s property and equipment-at cost, as of December 31, 2014 and 2013:


	Estimated Useful Life (Years)		December 31,
*(in thousands)*	Estimated Useful Life (Years)		2014			2013
Computer equipment		3	$	1,316		$	983
Furniture and fixtures		7		765			580
Leasehold improvements		11		2,089			1,884

			$	4,170		$	3,447
Accumulated depreciation and amortization			$	(1,733	)	$	(1,249	)

			$	2,437		$	2,198

Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2014

Summary of Intangible Asset

The following is a summary of the Company’s intangible assets as of December 31, 2014 and 2013:


	Estimated Useful Life	December 31, 2014
(in thousands)	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HETLIOZ^®	January 2033	$	8,000	$	539	$	7,461
Fanapt^®	November 2016	$	27,941	$	8,678	$	19,263

	Estimated Useful Life	December 31, 2013
(in thousands)	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Fanapt^®	November 2016	$	12,000	$	6,963	$	5,037

Summary of Future Intangible Asset Amortization

The following is a summary of the future intangible asset amortization schedule as of December 31, 2014:


*(in thousands)*	Total		2015		2016		2017		2018		2019		Thereafter
HETLIOZ^®	$	7,461	$	411	$	411	$	411	$	411	$	411	$	5,406
Fanapt^®		19,263		10,050		9,213		—		—		—		—

	$	26,724	$	10,461	$	9,624	$	411	$	411	$	411	$	5,406

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Summary of Current and Deferred Income Tax Provision (Benefit)

The following is a summary of the Company’s current and deferred income tax provision (benefit) for years ended December 31, 2014, 2013 and 2012:

Year Ended December 31,

(in thousands)

2014

2013

2012

Current income tax expense (benefit):

Federal

—

State

—

Deferred income tax expense (benefit):

Federal

—

State

—

Total income tax expense (benefit)

—

Reconciliation Between Statutory Tax Rate and Effective Tax Rate

The following is a reconciliation between the Company’s statutory tax rate and effective tax rate for the years ended December 31, 2014, 2013 and 2012:


	Year Ended December 31,
	2014			2013			2012
Federal tax at statutory rate		34.0	%		-34.0	%		-34.0	%
State taxes		7.2	%		-4.0	%		-3.3	%
Change in valuation allowance		-59.7	%		43.9	%		70.3	%
Research and development credit		1.3	%		-1.1	%		0.8	%
Orphan drug credit		8.5	%		-22.7	%		-30.3	%
Stock options		0.0	%		0.0	%		1.4	%
Section 162(m) limitation		1.1	%		1.2	%		0.0	%
Stock issuance cost		1.6	%		0.0	%		0.0	%
Tax rate change		4.8	%		-0.3	%		-7.0	%
Change in Maryland NOL		0.0	%		18.5	%		0.0	%
Other non-deductible items		1.2	%		-1.5	%		2.1	%

Effective tax rate		0.0	%		0.0	%		0.0	%

Components of Deferred Tax Assets, Net, and Related Valuation Allowance

The following is a summary of the components of the Company’s deferred tax assets, net, and the related valuation allowance as of December 31, 2014 and 2013:


	December 31,
*(in thousands)*	2014			2013
Deferred tax assets:
Net operating loss carry forwards	$	73,626		$	48,206
Stock-based compensation		17,160			17,626
Deferred revenue		—			36,670
Accrued and deferred expenses		532			566
Research and development and orphan drug credit carryforwards		36,772			38,597
Depreciation and amortization, net		118			110
Contributions carryforward		420			—
Reacquired rights		182			—
Licensing agreements		86			—

Total deferred tax assets		128,896			141,775

Deferred tax liabilities:
Licensing agreements		—			(616	)
Unrealized gain on available for sale securities		(6	)		(9	)

Total deferred tax liabilities		(6	)		(625	)

Deferred tax assets		128,890			141,150
Valuation allowance		(128,890	)		(141,150	)

Net deferred tax assets	$	—		$	—

Valuation Allowance Activity on Deferred Tax Assets

The valuation allowance activity on deferred tax assets was as follows:


*(in thousands)*	Balance At Beginning Of Period		Additions Charged To Income Tax Expense		Reductions Credited To Income Tax Expense		Balance At End Of Period
Calendar year ended:
December 31, 2012	$	113,823	$	28,102	$	8,654	$	133,271
December 31, 2013	$	133,271	$	22,998	$	15,119	$	141,150
December 31, 2014	$	141,150	$	27,893	$	40,153	$	128,890

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2014

Assets Measured at Fair Value on Recurring Basis

As of December 31, 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 December 31, 2014 Using
*(in thousands)*	December 31, 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	$	68,921	$	30,618	$	38,303	$	—

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	$	—

Restricted Cash (Tables)

12 Months Ended

Dec. 31, 2014

Summary of Restricted Cash Used to Collateralize Various Letters of Credit

The following is a summary of the Company’s restricted cash used to collateralize various letters of credit as of December 31, 2014 and 2013:


	December 31,
*(in thousands)*	2014		2013
Current:
Rockville, Maryland office lease	$	—	$	430
Maryland Board of Pharmacy license		—		100

Total current	$	—	$	530

Non-current:
Washington, D.C. office lease	$	785	$	500
Maryland Board of Pharmacy license		—		—

Total non-current	$	785	$	500

Equity Incentive Plans (Tables)

12 Months Ended

Dec. 31, 2014

Summary of RSU Activity for 2006 Plan

The following is a summary of RSU activity for the 2006 Plan for the years ended December 31, 2014, 2013, and 2012:


	Number of Shares Underlying RSUs			Weighted Average Grant Date Fair Value
Unvested at December 31, 2011		522,346		$	7.43
Granted		245,000			3.28
Forfeited		(61,970	)		7.64

Unvested at December 31, 2012		705,376			5.91
Granted		400,500			10.29
Forfeited		(21,000	)		6.41
Vested		(201,186	)		6.71

Unvested at December 31, 2013		883,690			7.70
Granted		436,115			12.28
Forfeited		(84,282	)		6.75
Vested		(209,562	)		6.67

Unvested at December 31, 2014		1,025,961			9.94

2004 Plan

Summary of Option Activity Plan

The following is a summary of option activity for the 2004 Plan for the years ended December 31, 2014, 2013, and 2012:


*(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, 2011		677,145		$	1.78		3.78	$	2,016
Exercised		(5,000	)		0.33				14

Outstanding at December 31, 2012		672,145			1.79		2.78		1,512
Exercised		(115	)		4.73
Expired		(1,286	)		3.67

Outstanding at December 31, 2013		670,744			1.79		1.78		7,124
Exercised		(17,934	)		3.57

Outstanding at December 31, 2014		652,810			1.74		0.78		8,212

Exercisable at December 31, 2014		652,810			1.74		0.78		8,212

2006 Plan

Summary of Option Activity Plan

The following is a summary of option activity for the 2006 Plan for the years ended December 31, 2014, 2013, and 2012:


*(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, 2011		4,254,681		$	12.16		7.65	$	396
Granted		846,000			3.42
Forfeited		(149,091	)		7.50
Expired		(76,103	)		10.68
Exercised		(10,000	)		1.02				22

Outstanding at December 31, 2012		4,865,487			10.83		7.15		634
Granted		1,245,500			10.18
Forfeited		(54,226	)		6.14
Expired		(259,295	)		10.65
Exercised		(263,848	)		5.86				1,545

Outstanding at December 31, 2013		5,533,618			10.98		6.93		21,264
Granted		1,324,337			12.17
Forfeited		(237,108	)		8.35
Exercised		(393,735	)		7.08				2,923

Outstanding at December 31, 2014		6,227,112			11.58		6.71		28,523

Exercisable at December 31, 2014		3,822,302			12.31		5.18		19,110

Expected to vest at December 31, 2014		2,263,369			10.34		9.12		9,034

Quarterly Financial Data (unaudited) (Tables)

12 Months Ended

Dec. 31, 2014

Quarterly Financial Data


*(in thousands, except for per share amounts)*	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
2014
Revenue	$	9,143		$	10,862		$	14,782		$	15,370
Income (loss) from operations		(26,578	)		(21,606	)		(1,448	)		69,693
Net income (loss)		(26,533	)		(21,575	)		(1,426	)		69,719
Net income (loss) per share:
Basic	$	(0.79	)	$	(0.64	)	$	(0.04	)	$	1.85
Diluted	$	(0.79	)	$	(0.64	)	$	(0.04	)	$	1.77
2013 ⁽¹⁾

Revenue	$	8,068		$	8,319		$	8,709		$	8,783
Loss from operations		(4,565	)		(3,413	)		(5,431	)		(7,791	)
Net loss		(4,519	)		(3,383	)		(5,406	)		(7,747	)
Net loss per share, basic and diluted	$	(0.16	)	$	(0.12	)	$	(0.17	)	$	(0.23	)

(1)

In the first quarter of 2014, the Company elected to change its method of accounting for stock-based compensation from the accelerated attribution method to the straight-line method. The consolidated financial data above for the year ended 2013 has been adjusted to reflect this change. See Note 4, Change in Method of Accounting for Stock-based Compensation, for further discussion.

Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2014 Segment	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2014 Fanapt	Dec. 31, 2009 Fanapt
Summary Of Significant Accounting Policies [Line Items]
Deferred revenue	$ 174,000	$ 90,275,000	$ 117,064,000	$ 200,000
Percentage of insurance coverage gap allocated for prescription drugs	50.00%
Upfront payment received under Fanapt sublicense agreement from Novartis					200,000,000
Advertising expenses	$ 5,000,000	$ 0	$ 0
Number of business segment	1

Total Employee Stock-Based Compensation Expense (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total employee stock-based compensation expense	$ 5,755	$ 5,336	$ 5,026
Research and development
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total employee stock-based compensation expense	1,810	2,098	1,673
Selling, general and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total employee stock-based compensation expense	$ 3,945	$ 3,238	$ 3,353

Black-Scholes-Merton Option Pricing Model for Employee and Director Stock Options Granted (Detail) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Share Based Payment Award Stock Options Valuation Assumptions [Line Items]
Expected dividend yield	0.00%	0.00%	0.00%
Weighted average expected volatility	62.00%	65.00%	68.00%
Weighted average expected term (years)	5 years 10 months 24 days	6 years 11 days	6 years 11 days
Weighted average risk-free rate	1.73%	1.59%	0.94%
Weighted average fair value per share	$ 6.99	$ 6.10	$ 2.08

Settlement Agreement with Novartis - Additional Information (Detail) (USD $)	1 Months Ended		3 Months Ended	12 Months Ended		1 Months Ended	12 Months Ended			12 Months Ended			1 Months Ended
	Oct. 31, 2014	Aug. 31, 2013	Dec. 31, 2014	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014 Fanapt	Dec. 31, 2014 Fanapt	Dec. 31, 2013 Fanapt	Dec. 31, 2009 Fanapt	Dec. 31, 2014 Up-front Payment Arrangement	Dec. 31, 2014 Settlement Agreement	Dec. 31, 2014 Novartis Pharma AG	Dec. 31, 2014 Novartis Pharma AG Settlement Agreement
Business Acquisition [Line Items]
Net proceeds from offering of common stock	$ 62,313,000	$ 48,505,000		$ 62,313,000	$ 48,505,000						$ 25,000,000	$ 25,000,000	$ 25,000,000
Price per share													$ 13.82
Stock issued during period, shares													1,808,973
Percentage of premium to average closing prices													10.00%
Trading days													10 days
Gain (Loss) on issuance of stock													900,000
Intangible assets, amortization method				Straight-line basis
Intangible assets, amortizing period end date				2016-11		2027-11	2016-11	2016-11				2016-11
Effective date of the Settlement Agreement											Dec. 31, 2014
Non-recurring transaction costs elated to the acquisition			600,000	600,000
Date of acquisition				Jan. 01, 2013
Gain on termination of pre-existing non-contractual relationship			77,600,000	77,616,000			18,100,000			59,500,000	18,087,000
Upfront payment received									$ 200,000,000

Fair Value of Consideration Exchanged as Part of Settlement Agreement (Detail) (USD $) In Thousands, unless otherwise specified	1 Months Ended		3 Months Ended	12 Months Ended
	Oct. 31, 2014	Aug. 31, 2013	Dec. 31, 2014	Dec. 31, 2014	Dec. 31, 2013
Business Acquisition [Line Items]
Equity issued				$ 25,905
Cash received	(62,313)	(48,505)		(62,313)	(48,505)
Settlement of pre-existing non-contractual relationship			77,600	77,616
Settlement Agreement
Business Acquisition [Line Items]
Equity issued				25,904
Cash received				(25,000)
Settlement of pre-existing non-contractual relationship				18,087
Business Combination, Consideration Transferred, Total				$ 18,991

Assets Acquired and Recorded at Fair Value (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Business Acquisition [Line Items]
Assets acquired and recorded at fair value, Inventory	$ 2,960
Assets acquired and recorded at fair value, Intangible - Re-acquired right	15,940
Assets acquired and recorded at fair value, Prepaid services	91
Assets acquired and recorded at fair value	18,991
Revenue	79,335	75,270
Net income (loss)	$ (100,742)	$ 41,048
Basic income (loss) per share	$ (2.90)	$ 1.35
Diluted income (loss) per share	$ (2.90)	$ 1.29

Change in Method of Accounting for Stock-based Compensation - Additional Information (Detail) (USD $)			12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014 Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method	Dec. 31, 2011 Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method	Dec. 31, 2011 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]
New Accounting Pronouncement or Change in Accounting Principle, Effect of Change on share based compensation			$ 2,200,000
New Accounting Pronouncement or Change in Accounting Principle, Effect of Change on Net Income			2,200,000
New Accounting Pronouncement or Change in Accounting Principle, Effect of Change on Earnings Per Share			$ 0.06
Accumulated deficit	$ (287,984,000)	$ (308,170,000)		$ (258,498,000)	$ 4,945,000

Adjustments in Balance Sheet (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
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; 28,117,026 shares issued and outstanding at December 31, 2011	41	33
Additional paid-in capital	448,744	352,240
Accumulated other comprehensive income	16	21
Accumulated deficit	(287,984)	(308,170)
Total stockholders' equity	160,817	44,124	9,905	33,474
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
Common stock, $0.001 par value; 150,000,000 shares authorized; 28,117,026 shares issued and outstanding at December 31, 2011				28
Additional paid-in capital				291,923
Accumulated other comprehensive income				21
Accumulated deficit				(258,498)
Total stockholders' equity				33,474
As Previously Reported
Stockholders' equity:
Total stockholders' equity				33,474
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
Common stock, $0.001 par value; 150,000,000 shares authorized; 28,117,026 shares issued and outstanding at December 31, 2011				28
Additional paid-in capital				296,868
Accumulated other comprehensive income				21
Accumulated deficit				(263,443)
Total stockholders' equity				33,474
Retrospective Adjustment \| 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
Additional paid-in capital				(4,945)
Accumulated deficit				$ 4,945

Accumulated change in equity from transactions and other events and circumstances from non-owner sources, net of tax effect, at period end. Excludes Net Income (Loss), and accumulated changes in equity from transactions resulting from investments by owners and distributions to owners. Includes foreign currency translation items, certain pension adjustments, unrealized gains and losses on certain investments in debt and equity securities, other than temporary impairment (OTTI) losses related to factors other than credit losses on available-for-sale and held-to-maturity debt securities that an entity does not intend to sell and it is not more likely than not that the entity will be required to sell before recovery of the amortized cost basis, as well as changes in the fair value of derivatives related to the effective portion of a designated cash flow hedge.

+ References+ Details

Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

+ References+ Details

Adjustments in Balance Sheet (Parenthetical) (Detail) (USD $)	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2011 Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method	Dec. 31, 2011 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	$ 0.001	$ 0.001	$ 0.001
Preferred stock, shares authorized	20,000,000	20,000,000	20,000,000	20,000,000
Preferred stock, shares issued	0	0	0	0
Preferred stock, shares outstanding	0	0	0	0
Common stock, par value	$ 0.001	$ 0.001	$ 0.001	$ 0.001
Common stock, shares authorized	150,000,000	150,000,000	150,000,000	150,000,000
Common stock, shares issued	41,486,361	33,338,543	28,117,026	28,117,026
Common stock, shares outstanding	41,486,361	33,338,543	28,117,026	28,117,026

Adjustments in Statement of Operations (Detail) (USD $)
In Thousands, except Share data, unless otherwise specified

3 Months Ended

12 Months Ended

Dec. 31, 2014

Sep. 30, 2014

Jun. 30, 2014

Mar. 31, 2014

Dec. 31, 2013

Sep. 30, 2013

Jun. 30, 2013

Mar. 31, 2013

Dec. 31, 2014

Dec. 31, 2013

Dec. 31, 2012

Revenues:

Licensing agreement

$ 30,746

$ 26,789

Royalty revenue

6,502

7,090

5,938

Total revenues

15,370

14,782

10,862

9,143

8,783

^[1]

8,709

^[1]

8,319

^[1]

8,068

^[1]

50,157

33,879

32,727

1,583

129

19,230

28,502

45,764

Intangible asset amortization

84,644

25,082

14,517

2,254

1,495

30,095

55,079

61,905

69,693

(1,448)

(21,606)

(26,578)

(7,791)

^[1]

(5,431)

^[1]

(3,413)

^[1]

(4,565)

^[1]

20,062

(21,200)

(29,178)

Other income

124

145

561

69,719

(1,426)

(21,575)

(26,533)

(7,747)

^[1]

(5,406)

^[1]

(3,383)

^[1]

(4,519)

^[1]

20,186

(21,055)

(28,617)

$ (0.23)

^[1]

$ (0.17)

^[1]

$ (0.12)

^[1]

$ (0.16)

^[1]

Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method

Revenues:

Licensing agreement

26,789

Royalty revenue

7,090

5,938

Total revenues

33,879

32,727

129

28,502

45,764

Intangible asset amortization

25,082

14,517

1,495

55,079

61,905

(21,200)

(29,178)

Other income

145

561

Loss before tax benefit

(21,055)

(28,617)

(21,055)

(28,617)

Weighted average shares outstanding, basic and diluted

$ (0.69)

$ (1.01)

30,351,353

28,228,409

As Previously Reported | Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method

Revenues:

Licensing agreement

26,789

Royalty revenue

7,090

5,938

Total revenues

33,879

32,727

129

28,190

45,446

Intangible asset amortization

24,594

13,882

1,495

54,279

60,952

(20,400)

(28,225)

Other income

145

561

Loss before tax benefit

(20,255)

(27,664)

(20,255)

(27,664)

Weighted average shares outstanding, basic and diluted

$ (0.67)

$ (0.98)

30,351,353

28,228,409

Retrospective Adjustment | Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method

312

318

488

635

800

953

(800)

(953)

Loss before tax benefit

(800)

(953)

$ (800)

$ (953)

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

$ (0.02)

$ (0.03)

[1]

Adjustments in Statement of Comprehensive Loss (Detail) (USD $)
In Thousands, unless otherwise specified

3 Months Ended

12 Months Ended

Dec. 31, 2014

Sep. 30, 2014

Jun. 30, 2014

Mar. 31, 2014

Dec. 31, 2013

Sep. 30, 2013

Jun. 30, 2013

Mar. 31, 2013

Dec. 31, 2014

Dec. 31, 2013

Dec. 31, 2012

$ 69,719

$ (1,426)

$ (21,575)

$ (26,533)

$ (7,747)

^[1]

$ (5,406)

^[1]

$ (3,383)

^[1]

$ (4,519)

^[1]

$ 20,186

$ (21,055)

$ (28,617)

Change in net unrealized loss on marketable securities

(5)

(11)

(5)

(11)

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

20,181

(21,044)

(28,628)

Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method

(21,055)

(28,617)

Change in net unrealized loss on marketable securities

(11)

(11)

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

(21,044)

(28,628)

As Previously Reported | Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method

(20,255)

(27,664)

Change in net unrealized loss on marketable securities

(11)

(11)

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

(20,244)

(27,675)

Retrospective Adjustment | Change in Accounting for Amortization of Stock-Based Compensation Cost from Accelerated Attribution Method to Straight-Line Method

(800)

(953)

$ (800)

$ (953)

[1]

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

+ References+ Details

Adjustments in Statement of Cash Flows (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Cash flows from operating activities
Net loss	$ 20,186	$ (21,055)	$ (28,617)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment	530	432	633
Employee and non-employee stock-based compensation	5,878	5,404	5,047
Amortization of discounts and premiums on marketable securities	(174)	(155)	(560)
Intangible asset amortization	2,254	1,495	1,495
Landlord contributions for tenant improvements			1,826
Net cash used in operating activities	(81,554)	(39,592)	(44,917)
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		(21,055)	(28,617)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment		432	633
Employee and non-employee stock-based compensation		5,404	5,047
Amortization of discounts and premiums on marketable securities		155	560
Intangible asset amortization		1,495	1,495
Landlord contributions for tenant improvements			1,826
Changes in assets and liabilities, net		(26,023)	(25,861)
Net cash used in operating activities		(39,592)	(44,917)
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		(20,255)	(27,664)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment		432	633
Employee and non-employee stock-based compensation		4,604	4,094
Amortization of discounts and premiums on marketable securities		155	560
Intangible asset amortization		1,495	1,495
Landlord contributions for tenant improvements			1,826
Changes in assets and liabilities, net		(26,023)	(25,861)
Net cash used in operating activities		(39,592)	(44,917)
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		(800)	(953)
Adjustments to reconcile net loss to net cash used in operating activities:
Employee and non-employee stock-based compensation		$ 800	$ 953

Basic and Diluted Net Income (Loss) Per Share of Common Stock (Detail) (USD $)
In Thousands, except Share data, unless otherwise specified

3 Months Ended

12 Months Ended

Dec. 31, 2014

Sep. 30, 2014

Jun. 30, 2014

Mar. 31, 2014

Dec. 31, 2013

Sep. 30, 2013

Jun. 30, 2013

Mar. 31, 2013

Dec. 31, 2014

Dec. 31, 2013

Dec. 31, 2012

Numerator:

Weighted average shares outstanding: Basic

$ 69,719

$ (1,426)

$ (21,575)

$ (26,533)

$ (7,747)

^[1]

$ (5,406)

^[1]

$ (3,383)

^[1]

$ (4,519)

^[1]

$ 20,186

$ (21,055)

$ (28,617)

Denominator:

34,774,163

30,351,353

28,228,409

Effect of dilutive securities

1,912,560

Weighted average shares outstanding: Diluted

36,686,723

30,351,353

28,228,409

Net income (loss) per share, basic and diluted:

Basic

$ 1.85

$ (0.04)

$ (0.64)

$ (0.79)

$ 0.58

$ (0.69)

$ (1.01)

Diluted

$ 1.77

$ (0.04)

$ (0.64)

$ (0.79)

$ 0.55

$ (0.69)

$ (1.01)

Antidilutive securities excluded from calculations of diluted net income (loss) per share

3,524,656

4,409,811

5,462,476

[1]

Summary of Available-For-Sale Marketable Securities (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	$ 68,921	$ 65,586
Current Investment
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	68,905	65,565
Gross Unrealized Gains	29	27
Gross Unrealized Losses	(13)	(6)
Fair Market Value	68,921	65,586
Current Investment \| U.S. Treasury and government agencies
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	30,618	31,557
Gross Unrealized Gains	4	9
Gross Unrealized Losses	(4)
Fair Market Value	30,618	31,566
Current Investment \| Corporate debt
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	38,287	34,008
Gross Unrealized Gains	25	18
Gross Unrealized Losses	(9)	(6)
Fair Market Value	$ 38,303	$ 34,020

Accounts Receivable - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Royalty receivable	$ 1,600,000	$ 2,000,000
Bad debt expense	0	0	0
Allowance for doubtful accounts	$ 0	$ 0

Inventory (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014
Inventory [Line Items]
Raw materials	$ 198
Work-in-process	1,326
Finished goods	3,394
Deferred cost of goods sold	252
Total	$ 5,170

Carrying amount, net of reserves and adjustments, as of the balance sheet date of merchandise or goods which are partially completed. This inventory is generally comprised of raw materials, labor and factory overhead costs, which require further materials, labor and overhead to be converted into finished goods, and which generally require the use of estimates to determine percentage complete and pricing.

+ References+ Details

Summary of Prepaid Expenses and Other Current Assets (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Prepaid Expenses And Other Current Assets [Line Items]
Prepaid insurance	$ 270	$ 167
Prepaid manufacturing cost	358
Other prepaid expenses and vendor advances	2,302	2,408
Other current assets	154	128
Total prepaid expenses and other current assets	$ 3,084	$ 2,703

Amount of asset related to consideration paid in advance for insurance that provides economic benefits within a future period of one year or the normal operating cycle, if longer.

+ References+ Details

Summary of Property and Equipment-at Cost (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 4,170	$ 3,447
Accumulated depreciation and amortization	(1,733)	(1,249)
Property and equipment, net	2,437	2,198
Computer equipment
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	3 years
Property and equipment, gross	1,316	983
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	7 years
Property and equipment, gross	765	580
Leasehold improvements
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	11 years
Property and equipment, gross	$ 2,089	$ 1,884

Summary of Intangible Assets (Detail) (USD $) In Thousands, unless otherwise specified	1 Months Ended	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2014	Dec. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Estimated Patent life end date		2016-11
Net Carrying Amount	$ 26,724	$ 26,724	$ 5,037
Hetlioz
Finite-Lived Intangible Assets [Line Items]
Estimated Patent life end date		2033-01
Gross Carrying Amount	8,000	8,000
Accumulated Amortization	539	539
Net Carrying Amount	7,461	7,461
Fanapt
Finite-Lived Intangible Assets [Line Items]
Estimated Patent life end date	2027-11	2016-11	2016-11
Gross Carrying Amount	27,941	27,941	12,000
Accumulated Amortization	8,678	8,678	6,963
Net Carrying Amount	$ 19,263	$ 19,263	$ 5,037

Intangible Assets - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	1 Months Ended	12 Months Ended				1 Months Ended		12 Months Ended	1 Months Ended				12 Months Ended
	Feb. 28, 2004	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2014 Intangible - Re-acquired right	Jan. 31, 2014 Hetlioz	Jul. 31, 2013 Hetlioz	Dec. 31, 2014 Hetlioz	Jan. 31, 2014 Hetlioz Minimum	Jan. 31, 2014 Hetlioz Maximum	Dec. 31, 2014 Fanapt	May 31, 2009 Fanapt	Dec. 31, 2014 Fanapt	Dec. 31, 2013 Fanapt	Dec. 31, 2009 Fanapt	Dec. 31, 2004 Fanapt	Dec. 31, 2009 Fanapt Minimum	Dec. 31, 2009 Fanapt Maximum
Finite-Lived Intangible Assets [Line Items]
Payment for original sublicense agreement	$ 500	$ 8,000				$ 8,000	$ 3,000					$ 12,000			$ 12,000	$ 500
Estimated Patent life end date		2016-11						2033-01	2022-12	2033-01	2027-11		2016-11	2016-11			2016-11	2017-05
Recognized intangible assets		15,940			15,900
Intangible asset amortization		$ 2,254	$ 1,495	$ 1,495

Summary of Future Intangible Asset Amortization (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	$ 26,724	$ 5,037
2015	10,461
2016	9,624
2017	411
2018	411
2019	411
Thereafter	5,406
Hetlioz
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	7,461
2015	411
2016	411
2017	411
2018	411
2019	411
Thereafter	5,406
Fanapt
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	19,263	5,037
2015	10,050
2016	$ 9,213

Summary of Accrued Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Accrued Liabilities [Line Items]
Accrued research and development expenses	$ 1,759	$ 2,324
Accrued consulting and other professional fees	2,522	2,015
Compensation and employee benefits	388	176
Other accrued liabilities	1,833	665
Accrued liabilities	$ 6,502	$ 5,180

Carrying value as of the balance sheet date of obligations incurred through that date and payable for professional fees, such as for legal and accounting services received. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).

+ References+ Details

Carrying value as of the balance sheet date of obligations incurred through that date and payable arising from transactions not otherwise specified in the taxonomy. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).

+ References+ Details

Summary of Changes in Total Deferred Revenue (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Deferred Revenue Arrangement [Line Items]
Balance beginning of period	$ 90,275	$ 117,064
Deferred Fanapt®product sales	174
Licensing revenue recognized	30,746	26,789
Recognized as part of gain on arbitration settlement	59,529
Balance end of period	$ 174	$ 90,275

Deferred Revenue - Additional Information (Detail) (USD $)	3 Months Ended	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2014 Up-front Payment Arrangement	Dec. 31, 2014 Fanapt	Dec. 31, 2009 Fanapt
Deferred Revenue Arrangement [Line Items]
Upfront payment received							$ 200,000,000
Licensing agreement		30,746,000	26,789,000	26,789,000
Recognized as part of gain on arbitration settlement	$ 77,600,000	$ 77,616,000			$ 59,500,000	$ 18,100,000

Summary of Minimum Annual Future Payments Under Operating Leases (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014
Operating Leased Assets [Line Items]
Operating leases, Total	$ 14,710
Operating leases, 2015	1,395
Operating leases, 2016	1,500
Operating leases, 2017	1,538
Operating leases, 2018	1,576
Operating leases, 2019	1,616
Operating leases, Thereafter	$ 7,085

Commitments and Contingencies - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended					1 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2012 Washington DC Lease	Dec. 31, 2011 Washington DC Lease sqft	Mar. 31, 2014 Washington DC Lease Amendment sqft
Commitments and Contingencies Disclosure [Line Items]
Renewal term of Lease agreement					5 years	5 years
Square feet leased					21,400	8,860
Allowance for tenant improvements				$ 1.9		$ 0.8
Lease term						12 years 1 month
Additional annual rental payment under lease amendment						0.4
Rent expense	$ 1.7	$ 1.1	$ 2.0

Commitments and Contingencies (Textual 1 - Consulting Agreement) - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Consulting Fees
Research and development	$ 19,230	$ 28,502	$ 45,764
Consulting Agreement
Consulting Fees
Research and development	$ 2,000	$ 500

The aggregate costs incurred (1) in a planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service, a new process or technique, or in bringing about a significant improvement to an existing product or process; or (2) to translate research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process whether intended for sale or the entity's use, during the reporting period charged to research and development projects, including the costs of developing computer software up to the point in time of achieving technological feasibility, and costs allocated in accounting for a business combination to in-process projects deemed to have no alternative future use.

+ References+ Details

Commitments and Contingencies (Textual 2 - HETLIOZ) - Additional Information (Detail) (USD $)	1 Months Ended	12 Months Ended	1 Months Ended	12 Months Ended	1 Months Ended		12 Months Ended	3 Months Ended
	Feb. 28, 2004	Dec. 31, 2014	Feb. 28, 2004 Maximum In the event that cumulative sales of HETLIOZ reach $250.0 million	Dec. 31, 2014 License Agreement	Jan. 31, 2014 Hetlioz	Jul. 31, 2013 Hetlioz	Dec. 31, 2014 Hetlioz	Mar. 31, 2014 Hetlioz License Agreement
HETLIOZ
Milestone payment under license agreement	$ 500,000	$ 8,000,000		$ 1,000,000	$ 8,000,000	$ 3,000,000		$ 8,000,000
Possible future milestone payment in the event product reaches a certain agreed upon sales threshold			$ 25,000,000
Royalty percentage							10.00%
Percentage of future sublicense fees payable to third-party		Mid-twenties

Commitments and Contingencies (Textual 3 - Fanapt) - Additional Information (Detail) (USD $)	1 Months Ended	12 Months Ended						1 Months Ended		12 Months Ended
	Feb. 28, 2004	Dec. 31, 2014	Dec. 31, 2014 Novartis Pharma AG	Dec. 31, 2014 Novartis Pharma AG Through November 2016	Dec. 31, 2014 Novartis Pharma AG Royalty Rate for Annual Sales in Excess of $200 million	Dec. 31, 2014 Novartis Pharma AG Beyond November 2016	Dec. 31, 2014 Maximum Novartis Pharma AG	Dec. 31, 2014 Fanapt	May 31, 2009 Fanapt	Dec. 31, 2014 Fanapt	Dec. 31, 2013 Fanapt	Dec. 31, 2009 Fanapt	Dec. 31, 2004 Fanapt	Dec. 31, 2009 Fanapt Maximum	Dec. 31, 2004 Fanapt Maximum
Fanapt
Milestone payment under license agreement	$ 500,000	$ 8,000,000							$ 12,000,000			$ 12,000,000	$ 500,000
Possible future Fanapt maximum milestone payments to Novartis															100,000,000
Future royalty payments to Novartis based on sales					mid-twenties					mid-twenties
Upfront payment received												200,000,000
Potential future maximum milestone payments from Novartis												265,000,000
Royalty percentage				23.00%		9.00%
Possible future milestone payment agreed upon sales threshold							$ 200,000,000
Intangible assets, amortizing period end date		2016-11	2016-11					2027-11		2016-11	2016-11			2017-05

Commitments and Contingencies (Textual 4 - VLY 686) - Additional Information (Detail) (Tradipitant, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2012
VLY-686
Future percentage of royalty payments based net sales	Low double digits
Possible future milestone payments		$ 4.0
Milestone payment under license agreement		1.0
License Agreement
VLY-686
Possible future milestone payments		$ 95.0

Summary of Current and Deferred Income Tax Provision (Benefit) (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014
Current income tax expense (benefit):
Federal	$ 0
State	0
Deferred income tax expense (benefit):
Federal	0
State	0
Total income tax expense (benefit)	$ 0

Amount of current federal tax expense (benefit) pertaining to income (loss) from continuing operations.

+ References+ Details

Amount of current state and local tax expense (benefit) pertaining to income (loss) from continuing operations.

+ References+ Details

Amount of deferred federal income tax expense (benefit) pertaining to income (loss) from continuing operations.

+ References+ Details

Amount of deferred state and local tax expense (benefit) pertaining to income (loss) from continuing operations.

+ References+ Details

Reconciliation Between Statutory Tax Rate and Effective Tax Rate (Detail)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Income Tax Rate Reconciliation [Line Items]
Federal tax at statutory rate	34.00%	(34.00%)	(34.00%)
State taxes	7.20%	(4.00%)	(3.30%)
Change in valuation allowance	(59.70%)	43.90%	70.30%
Research and development credit	1.30%	(1.10%)	0.80%
Orphan drug credit	8.50%	(22.70%)	(30.30%)
Stock options	0.00%	0.00%	1.40%
Section 162(m) limitation	1.10%	1.20%	0.00%
Stock issuance cost	1.60%	0.00%	0.00%
Tax rate change	4.80%	(0.30%)	(7.00%)
Other non-deductible items	1.20%	(1.50%)	2.10%
Effective tax rate	0.00%	0.00%	0.00%
Maryland
Income Tax Rate Reconciliation [Line Items]
Change in valuation allowance	0.00%	18.50%	0.00%

Components of Deferred Tax Assets, Net and Related Valuation Allowance (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Deferred tax assets:
Net operating loss carry forwards	$ 73,626	$ 48,206
Stock-based compensation	17,160	17,626
Deferred revenue		36,670
Accrued and deferred expenses	532	566
Research and development and orphan drug credit carryforwards	36,772	38,597
Depreciation and amortization, net	118	110
Contributions carryforward	420
Reacquired rights	182
Licensing agreements	86
Total deferred tax assets	128,896	141,775
Deferred tax liabilities:
Licensing agreements		(616)
Unrealized gain on available for sale securities	(6)	(9)
Total deferred tax liabilities	(6)	(625)
Deferred tax assets	128,890	141,150
Valuation allowance	(128,890)	(141,150)
Net deferred tax assets	$ 0	$ 0

Income Taxes - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Income Taxes [Line Items]
Increase (decrease) in tax valuation allowance, net	$ (12.3)	$ 7.9	$ 19.4
Net operating loss carryforwards beginning expiration year	2028
Carryforward credits beginning expiration year	2024
Federal
Income Taxes [Line Items]
Operating loss carryforwards, net	197.4
State
Income Taxes [Line Items]
Operating loss carryforwards, net	201.3
Operating loss carryforwards, excess windfall benefits generated from stock options	4.2
Orphan Drug
Income Taxes [Line Items]
Tax credits carryforwards	30.6
Research and development
Income Taxes [Line Items]
Tax credits carryforwards	$ 6.2

Valuation Allowance Activity on Deferred Tax Assets (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Valuation Allowance [Line Items]
Balance At End Of Period	$ 128,890	$ 141,150
Valuation Allowance of Deferred Tax Assets
Valuation Allowance [Line Items]
Balance At Beginning Of Period	141,150	133,271	113,823
Additions Charged To Income Tax Expense	27,893	22,998	28,102
Reductions Credited To Income Tax Expense	40,153	15,119	8,654
Balance At End Of Period	$ 128,890	$ 141,150	$ 133,271

Assets Measured at Fair Value on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 68,921	$ 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	30,618	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	$ 38,303	$ 34,020

Summary of Restricted Cash Used to Collateralize Various Letters of Credit (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, current		$ 530
Restricted cash, non-current	785	500
Office Lease \| Rockville, Maryland
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, current		430
Office Lease \| Washington, D.C.
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, non-current	785	500
Board of Pharmacy license \| Maryland
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, current		$ 100

Quarterly Financial Data [Line Items]

The carrying amounts of cash and cash equivalent items which are restricted as to withdrawal or usage. Restrictions may include legally restricted deposits held as compensating balances against short-term borrowing arrangements, contracts entered into with others, or entity statements of intention with regard to particular deposits; however, time deposits and short-term certificates of deposit are not generally included in legally restricted deposits. Excludes compensating balance arrangements that are not agreements which legally restrict the use of cash amounts shown on the balance sheet. For a classified balance sheet represents the current portion only (the noncurrent portion has a separate concept); there is a separate and distinct element for unclassified presentations.

+ References+ Details

Public Offering of Common Stock - Additional Information (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended		12 Months Ended
	Oct. 31, 2014	Aug. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Stockholders Equity Note [Line Items]
Public common stock offering, shares	5,750,000	4,680,000
Common stock offering price, per share	$ 11.60	$ 11.14
Net cash proceeds from public common stock offering	$ 62,313	$ 48,505	$ 62,313	$ 48,505

Equity Incentive Plans (Textual 1 - Equity Incentive Plan) - Additional Information (Detail)										12 Months Ended
	Dec. 31, 2014 EquityPlan	Dec. 31, 2014 2004 Plan	Dec. 31, 2013 2004 Plan	Dec. 31, 2012 2004 Plan	Dec. 31, 2011 2004 Plan	Dec. 31, 2014 2006 Plan	Dec. 31, 2013 2006 Plan	Dec. 31, 2012 2006 Plan	Dec. 31, 2011 2006 Plan	Dec. 31, 2014 2006 Plan Outstanding options and RSUs granted (RSUs)	Dec. 31, 2014 2006 Plan January 1, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of equity incentive plans	2
Outstanding options granted		652,810	670,744	672,145	677,145	6,227,112	5,533,618	4,865,487	4,254,681
Common stock reserved for issuance						10,329,472					11,829,472
Shares subject to outstanding options and RSUs										7,253,073
Shares available for future grant										956,265
Increase each January 1 in the number of shares reserved under 2006 Plan as a percentage of common stock outstanding											4.00%
Minimum increase each January 1 in the number of shares reserved											1,500,000
Increase in number of shares reserved and available for future grant											1,500,000

Equity Incentive Plans (Textual 2 Stock Option) - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
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 2 months 12 days
Proceeds from exercise of employee stock options	$ 2,851,000	$ 1,550,000	$ 12,000
Service option awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expenses	$ 14,000,000
Unrecognized compensation expenses, weighted average period	1 year 8 months 12 days
2004 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected to vest at September 30, 2014	0

Summary of Option Activity for 2004 Plan (Detail) (2004 Plan, USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
2004 Plan
Number of Shares
Beginning balance	670,744	672,145	677,145
Exercised	(17,934)	(115)	(5,000)
Expired		(1,286)
Ending balance	652,810	670,744	672,145	677,145
Exercisable	652,810
Weighted Average Exercise Price at Grant Date
Beginning balance	$ 1.79	$ 1.79	$ 1.78
Exercised	$ 3.57	$ 4.73	$ 0.33
Expired		$ 3.67
Ending balance	$ 1.74	$ 1.79	$ 1.79	$ 1.78
Exercisable	$ 1.74
Weighted Average Remaining Term (Years)
Weighted Average Remaining Term	9 months 11 days	1 year 9 months 11 days	2 years 9 months 11 days	3 years 9 months 11 days
Exercisable	9 months 11 days
Aggregate Intrinsic Value
Beginning balance	$ 7,124	$ 1,512	$ 2,016
Exercised			14
Ending balance	8,212	7,124	1,512	2,016
Exercisable	$ 8,212

Summary of Option Activity for 2006 Plan (Detail) (2006 Plan, USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
2006 Plan
Number of Shares
Beginning balance	5,533,618	4,865,487	4,254,681
Granted	1,324,337	1,245,500	846,000
Forfeited	(237,108)	(54,226)	(149,091)
Expired		(259,295)	(76,103)
Exercised	(393,735)	(263,848)	(10,000)
Ending balance	6,227,112	5,533,618	4,865,487	4,254,681
Exercisable	3,822,302
Expected to vest at December 31, 2014	2,263,369
Weighted Average Exercise Price at Grant Date
Beginning balance	$ 10.98	$ 10.83	$ 12.16
Granted	$ 12.17	$ 10.18	$ 3.42
Forfeited	$ 8.35	$ 6.14	$ 7.50
Expired		$ 10.65	$ 10.68
Exercised	$ 7.08	$ 5.86	$ 1.02
Ending balance	$ 11.58	$ 10.98	$ 10.83	$ 12.16
Exercisable	$ 12.31
Expected to vest at December 31, 2014	$ 10.34
Weighted Average Remaining Term (Years)
Weighted Average Remaining Term	6 years 8 months 16 days	6 years 11 months 5 days	7 years 1 month 24 days	7 years 7 months 24 days
Exercisable	5 years 2 months 5 days
Expected to vest at December 31, 2014	9 years 1 month 13 days
Aggregate Intrinsic Value
Beginning balance	$ 21,264	$ 634	$ 396
Exercised	2,923	1,545	22
Ending balance	28,523	21,264	634	396
Exercisable	19,110
Expected to vest at December 31, 2014	$ 9,034

Equity Incentive Plans (Textual 3 RSU) - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 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 2 months 12 days
Fair value of common stock vested	$ 1,400,000
Common shares received in payment of payroll taxes (shares)	32,386
Tax obligations paid in connection with settlement of restricted stock units	436,000	196,000
2006 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of common stock vested, shares	209,562	201,186
Restricted Stock Units (RSU)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expenses related to unvested RSUs	$ 8,300,000

Summary of RSU Activity for 2006 Plan (Detail) (2006 Plan, USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
2006 Plan
Number of Shares Unvested
Beginning balance	883,690	705,376	522,346
Granted	436,115	400,500	245,000
Forfeited	(84,282)	(21,000)	(61,970)
Vested	(209,562)	(201,186)
Ending balance	1,025,961	883,690	705,376
Weighted Average Price/Share Unvested
Beginning balance	$ 7.70	$ 5.91	$ 7.43
Granted	$ 12.28	$ 10.29	$ 3.28
Forfeited	$ 6.75	$ 6.41	$ 7.64
Vested	$ 6.67	$ 6.71
Ending balance	$ 9.94	$ 7.70	$ 5.91

Employee Benefit Plan - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Employee Benefit Plan [Line Items]
Defined contribution plan employer matching percent	50.00%
Defined contribution plan maximum employee contribution percent	6.00%
Defined contribution plan vesting period	4 years
Defined contribution plan matching amount	$ 0.2	$ 0.2	$ 0.1

Quarterly Financial Data (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified

3 Months Ended

12 Months Ended

Dec. 31, 2014

Sep. 30, 2014

Jun. 30, 2014

Mar. 31, 2014

Dec. 31, 2013

Sep. 30, 2013

Jun. 30, 2013

Mar. 31, 2013

Dec. 31, 2014

Dec. 31, 2013

Dec. 31, 2012

Revenue

$ 15,370

$ 14,782

$ 10,862

$ 9,143

$ 8,783

^[1]

$ 8,709

^[1]

$ 8,319

^[1]

$ 8,068

^[1]

$ 50,157

$ 33,879

$ 32,727

Income (loss) from operations

69,693

(1,448)

(21,606)

(26,578)

(7,791)

^[1]

(5,431)

^[1]

(3,413)

^[1]

(4,565)

^[1]

20,062

(21,200)

(29,178)

Net loss per share, basic and diluted

$ 69,719

$ (1,426)

$ (21,575)

$ (26,533)

$ (7,747)

^[1]

$ (5,406)

^[1]

$ (3,383)

^[1]

$ (4,519)

^[1]

$ 20,186

$ (21,055)

$ (28,617)

Net income (loss) per share:

Basic

$ 1.85

$ (0.04)

$ (0.64)

$ (0.79)

$ 0.58

$ (0.69)

$ (1.01)

Diluted

$ 1.77

$ (0.04)

$ (0.64)

$ (0.79)

$ 0.55

$ (0.69)

$ (1.01)

$ (0.23)

^[1]

$ (0.17)

^[1]

$ (0.12)

^[1]

$ (0.16)

^[1]

[1]

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

+ References+ Details

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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

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Quarterly Financial Data (Unaudited) - Additional Information (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Schedule Of Quarterly Financial Data [Line Items]
Gain on arbitration settlement	$ 77,600				$ 77,616
Basic	$ 1.85	$ (0.04)	$ (0.64)	$ (0.79)	$ 0.58	$ (0.69)	$ (1.01)
Diluted	$ 1.77	$ (0.04)	$ (0.64)	$ (0.79)	$ 0.55	$ (0.69)	$ (1.01)
Arbitration
Schedule Of Quarterly Financial Data [Line Items]
Basic	$ 2.06
Diluted	$ 1.97

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

+ References+ Details