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Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2015	Jul. 24, 2015
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Trading Symbol	VNDA
Entity Registrant Name	Vanda Pharmaceuticals Inc.
Entity Central Index Key	0001347178
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		42,285,426

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 48,337	$ 60,901
Marketable securities	98,300	68,921
Accounts receivable, net	15,818	3,654
Inventory	4,962	5,170
Prepaid expenses and other current assets	6,956	3,084
Total current assets	174,373	141,730
Property and equipment, net	3,869	2,437
Intangible assets, net	44,638	26,724
Restricted cash and other	813	813
Total assets	223,693	171,704
Current liabilities:
Accounts payable	1,631	835
Accrued and other current liabilities	43,562	6,951
Total current liabilities	45,193	7,786
Milestone obligation under license agreement	25,000
Other non-current liabilities	3,753	3,101
Total liabilities	73,946	10,887
Commitments and contingencies (Notes 13 and 14)
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; 42,270,426 and 41,486,361 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively	42	41
Additional paid-in capital	453,269	448,744
Accumulated other comprehensive income	27	16
Accumulated deficit	(303,591)	(287,984)
Total stockholders' equity	149,747	160,817
Total liabilities and stockholders' equity	$ 223,693	$ 171,704

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	42,270,426	41,486,361
Common stock, shares outstanding	42,270,426	41,486,361

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenues:
Product sales, net	$ 27,582	$ 1,559	$ 49,732	$ 1,559
Royalty revenue		1,539		3,230
Licensing revenue		7,764		15,216
Total revenues	27,582	10,862	49,732	20,005
Operating expenses:
Cost of goods sold	5,766	198	10,781	198
Research and development	5,946	3,514	10,424	10,777
Selling, general and administrative	18,386	28,139	37,192	56,032
Intangible asset amortization	2,942	617	7,086	1,182
Total operating expenses	33,040	32,468	65,483	68,189
Loss from operations	(5,458)	(21,606)	(15,751)	(48,184)
Other income	72	31	144	76
Net loss	$ (5,386)	$ (21,575)	$ (15,607)	$ (48,108)
Basic and diluted net loss per share	$ (0.13)	$ (0.64)	$ (0.37)	$ (1.42)
Weighted average shares outstanding, basic and diluted	41,991,578	33,874,625	41,868,944	33,777,207

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Net loss	$ (5,386)	$ (21,575)	$ (15,607)	$ (48,108)
Other comprehensive income (loss):
Change in net unrealized income (loss) on marketable securities		2	11	(11)
Tax provision on other comprehensive income (loss)	0	0	0	0
Other comprehensive income (loss), net of tax		2	11	(11)
Comprehensive loss	$ (5,386)	$ (21,573)	$ (15,596)	$ (48,119)

- Definition

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

+ References + Details

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - 6 months ended Jun. 30, 2015 - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Other Comprehensive Income	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2014	41,486,361	41,486,361
Beginning balance at Dec. 31, 2014	$ 160,817	$ 41	$ 448,744	$ 16	$ (287,984)
Issuance of common stock from the exercise of stock options and settlement of restricted stock units (in shares)		809,012
Issuance of common stock from the exercise of stock options and settlement of restricted stock units	795	$ 1	794
Shares withheld upon settlement of equity awards(in shares)		(24,947)
Shares withheld upon settlement of equity awards	(282)		(282)
Stock-based compensation expense	4,013		4,013
Net income (loss)	(15,607)				(15,607)
Other comprehensive income, net of tax	$ 11			11
Ending balance (in shares) at Jun. 30, 2015	42,270,426	42,270,426
Ending balance at Jun. 30, 2015	$ 149,747	$ 42	$ 453,269	$ 27	$ (303,591)

- Definition

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

+ References + Details

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities
Net loss	$ (15,607)	$ (48,108)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment	263	264
Stock-based compensation expense	4,013	2,836
Amortization of discounts and premiums on marketable securities	426	96
Intangible asset amortization	7,086	1,182
Changes in assets and liabilities:
Accounts receivable	(12,164)	(345)
Prepaid expenses and other current assets	(3,872)	(1,463)
Inventory	208	(1,093)
Accounts payable	796	(413)
Accrued and other liabilities	36,193	1,691
Deferred revenue	314	(15,216)
Net cash provided by (used in) operating activities	17,656	(60,569)
Cash flows from investing activities
Purchases of property and equipment	(939)	(378)
Purchases of marketable securities	(81,348)	(20,544)
Proceeds from sale of marketable securities	999	8,198
Maturities of marketable securities	50,555	31,235
Change in restricted cash		245
Net cash provided by (used in) investing activities	(30,733)	10,756
Cash flows from financing activities
Obligations paid in connection with settlement of equity awards	(282)	(436)
Proceeds from exercise of stock options	795	2,479
Net cash provided by financing activities	513	2,043
Net decrease in cash and cash equivalents	(12,564)	(47,770)
Cash and cash equivalents
Beginning of period	60,901	64,764
End of period	48,337	16,994
Non-cash investing activities
Acquisition of intangible asset included in non-current liabilities	25,000
Purchases of property and equipment in current liabilities	759	20
Hetlioz
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Intangible asset amortization	$ 2,100
Cash flows from investing activities
Acquisition of intangible assets		$ (8,000)

Business Organization and Presentation

6 Months Ended

Jun. 30, 2015

Business Organization and Presentation

1. Business Organization and Presentation

Business Organization

Vanda Pharmaceuticals Inc. (Vanda or the Company) is a biopharmaceutical company focused on the development and commercialization of products for the treatment of central nervous system disorders. Vanda commenced its operations in 2003 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), which was approved by the U.S. Food and Drug Administration (FDA) in January 2014 and launched commercially in the U.S. in April 2014. In July 2015, the European Commission (EC) granted centralized marketing authorization with unified labeling for HETLIOZ^® for the treatment of Non-24 in totally blind adults. This authorization is valid in the 28 countries that are members of the European Union, as well as European Economic Area members Iceland, Liechtenstein and Norway. HETLIOZ^® has potential utility in a number of circadian rhythm disorders.

•

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.

•

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 unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements for the fiscal year ended December 31, 2014 included in the Company’s annual report on Form 10-K. The financial information as of June 30, 2015 and for the three and six months ended June 30, 2015 and 2014 is unaudited, but in the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair statement of the results for these interim periods have been included. The condensed consolidated balance sheet data as of December 31, 2014 was derived from audited financial statements but does not include all disclosures required by GAAP.

The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or for a full fiscal year. The financial information included herein should be read in conjunction with the consolidated financial statements and notes in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2014.

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Use of Estimates

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

Inventory

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

Net Product Sales

The Company’s net product sales consist of sales of HETLIOZ^® and, beginning in 2015, sales of Fanapt^®. Net sales by product for the three and six months ended June 30, 2015 and 2014 were as follows:


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
(in thousands)	2015		2014		2015		2014
HETLIOZ^® product sales, net	$	10,017	$	1,559	$	17,477	$	1,559
Fanapt^® product sales, net		17,565		—		32,255		—

	$	27,582	$	1,559	$	49,732	$	1,559

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.

HETLIOZ^® is only available in the U.S. for distribution through a limited number of specialty pharmacies, and is not available in retail pharmacies. Fanapt^® is available in the U.S. for distribution through a limited number of wholesalers and is available in retail pharmacies. The Company invoices and records revenue when its customers, specialty pharmacies and wholesalers, receive product from the third-party logistics warehouse. Revenues and accounts receivable are concentrated with these customers. The top six customers represented 95% of total revenues for the six months ended June 30, 2015, and the top three customers represented 72% of accounts receivable at June 30, 2015. The Company has not experienced any losses relating to receivables from customers.

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 June 30, 2015, the Company recorded $0.5 million of deferred revenue related to Fanapt^® sales.

Product Sales Discounts and Allowances

The Company’s product sales are 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 and supplemental discounts under the Medicaid Drug Rebate Program as well as contracted rebate programs with other payors. 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 or contracted discount rates and expected utilization. Estimates for the expected utilization of rebates are based on historical activity and, where available, 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. If actual future invoicing varies from estimates, the Company may need to adjust accruals, which would affect net revenue in the period of adjustment.

Chargebacks: Chargebacks are discounts that occur when contracted customers purchase directly from specialty pharmacies and wholesalers. 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 or wholesaler, in turn, charges back the difference between the price initially paid by the specialty pharmacy or wholesaler and the discounted price paid to the specialty pharmacy or wholesaler by the contracted customer. The allowance for chargebacks is based on historical activity and, where available, 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 activity and, where available, 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 and wholesaler 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 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 sales and an estimate for pending sales based on either historical activity or pending sales for which the Company has validated the insurance benefits.

Prompt-pay: Specialty pharmacies and wholesalers are offered discounts for prompt payment. The Company expects that the specialty pharmacies and wholesalers 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 historical return activity, expiration dates of product shipped to specialty pharmacies, inventory levels within the distribution channel, product shelf life, prescription trends and other relevant factors.

Stock-based Compensation

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. 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.

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 $0.9 million and $3.3 million for the three months ended June 30, 2015 and 2014, respectively, and $1.9 million and $4.3 million for the six months ended June 30, 2015 and 2014, respectively.

Segment Reporting

The Company operates in one reporting segment and, accordingly, no segment disclosures are presented herein.

Recent accounting pronouncements

In January 2015, the Financial Accounting Standards Board (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 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 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. At the time the new standard was issued, it was set to be effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. In July 2015, the FASB voted to defer the effective date by one year to December 15, 2017 for fiscal years, and interim periods within those fiscal years, beginning after that date. Early adoption of the standard is permitted, but not before the original effective date of December 15, 2016. The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements.

Settlement Agreement with Novartis

6 Months Ended

Jun. 30, 2015

Settlement Agreement with Novartis

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.

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 year ended 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 obligation 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 was included in gain on arbitration settlement in the consolidated statement of operations in the fourth quarter of 2014.

The Settlement Agreement provided for a 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 in the fourth quarter of 2014.

- Definition

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).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
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-Section 50
-Paragraph 5
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Reference 2: http://www.xbrl.org/2003/role/presentationRef
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-Topic 805
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-Section 50
-Paragraph 4
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-URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4926-128472

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1383-128463

Reference 15: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479

+ Details

Earnings per Share

6 Months Ended

Jun. 30, 2015

Earnings per Share

4. Earnings per Share

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

The following table presents the calculation of basic and diluted net loss per share of common stock for the three and six months ended June 30, 2015 and 2014:


	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
(in thousands, except for share and per share amounts)	2015			2014			2015			2014
Numerator:
Net loss	$	(5,386	)	$	(21,575	)	$	(15,607	)	$	(48,108	)

Denominator:
Weighted average shares outstanding, basic and diluted		41,991,578			33,874,625			41,868,944			33,777,207

Net loss per share, basic and diluted:
Net loss per share	$	(0.13	)	$	(0.64	)	$	(0.37	)	$	(1.42	)

Antidilutive securities excluded from calculations of diluted net loss per share		5,765,618			3,739,874			5,711,140			3,805,191

The Company incurred net losses for the three and six months ended June 30, 2015 and 2014 causing inclusion of any potentially dilutive securities to have an anti-dilutive effect, resulting in dilutive loss per share and basic loss per share attributable to common stockholders being equivalent.

Marketable Securities

6 Months Ended

Jun. 30, 2015

Marketable Securities

5. Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of June 30, 2015, which all have contract maturities of less than one year:


			Gross		Gross			Fair
June 30, 2015	Amortized		Unrealized		Unrealized			Market
(in thousands)	Cost		Gains		Losses			Value
U.S. Treasury and government agencies	$	54,628	$	7	$	(2	)	$	54,633
Corporate debt		43,645		26		(4	)		43,667

	$	98,273	$	33	$	(6	)	$	98,300

The following is a summary of the Company’s available-for-sale marketable securities as of December 31, 2014:


			Gross		Gross			Fair
December 31, 2014	Amortized		Unrealized		Unrealized			Market
(in thousands)	Cost		Gains		Losses			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

- Definition

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

+ References + Details

Fair Value Measurements

6 Months Ended

Jun. 30, 2015

Fair Value Measurements

6. Fair Value Measurements

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

•

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

•

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

•

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

Marketable securities classified in Level 1 and Level 2 as of June 30, 2015 and December 31, 2014 consist of available-for-sale marketable securities. The valuation of Level 1 instruments is determined using a market approach, and is based upon unadjusted quoted prices for identical assets in active markets. The valuation of investments classified in Level 2 also is determined using a market approach based upon quoted prices for similar assets in active markets, or other inputs that are observable for substantially the full term of the financial instrument. Level 2 securities include certificates of deposit, commercial paper and corporate notes that use as their basis readily observable market parameters. The Company did not transfer any assets between Level 2 and Level 1 during the six months ended June 30, 2015.

As of June 30, 2015, the Company held certain assets that are required to be measured at fair value on a recurring basis, as follows:

Fair Value Measurement as of June 30, 2015 Using

Quoted Prices in

Significant

Active Markets for

Significant Other

Unobservable

June 30,

Identical Assets

Observable Inputs

Inputs

(in thousands)

2015

(Level 1)

(Level 2)

(Level 3)

Available-for-sale securities

98,300

54,633

43,667

—

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

Quoted Prices in

Significant

Active Markets for

Significant Other

Unobservable

December 31,

Identical Assets

Observable Inputs

Inputs

(in thousands)

2014

(Level 1)

(Level 2)

(Level 3)

Available-for-sale securities

68,921

30,618

38,303

—

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

- Definition

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

+ References + Details

Inventory

6 Months Ended

Jun. 30, 2015

Inventory

7. Inventory

The Company evaluates expiry risk by evaluating current and future product demand relative to product shelf life. The Company builds demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance and patient usage. Inventory consisted of the following as of June 30, 2015 and December 31, 2014:


	June 30,		December 31,
(in thousands)	2015		2014
Raw materials	$	128	$	198
Work-in-process		1,778		1,326
Finished goods		2,646		3,394
Deferred cost of goods sold		410		252

	$	4,962	$	5,170

Deferred cost of goods sold represents the cost of product shipped to Probiomed, for which revenue recognition has been deferred. See Note 2, Summary of Significant Accounting Policies, for a discussion of Fanapt^® revenue recognition.

Prepaid Expenses and Other Current Assets

6 Months Ended

Jun. 30, 2015

Prepaid Expenses and Other Current Assets

8. Prepaid Expenses and Other Current Assets

The following is a summary of the Company’s prepaid expenses and other current assets as of June 30, 2015 and December 31, 2014:


	June 30,		December 31,
(in thousands)	2015		2014
Prepaid insurance	$	928	$	270
Prepaid manufacturing cost		346		358
Other prepaid expenses and vendor advances		5,363		2,302
Other current assets		319		154

	$	6,956	$	3,084

Intangible Assets

6 Months Ended

Jun. 30, 2015

Intangible Assets

9. Intangible Assets

The following is a summary of the Company’s intangible assets as of June 30, 2015:


		June 30, 2015
	Estimated	Gross				Net
	Useful Life	Carrying		Accumulated		Carrying
(in thousands)	(Years)	Amount		Amortization		Amount
HETLIOZ^®	January 2033	$	33,000	$	2,600	$	30,400
Fanapt^®	November 2016		27,941		13,703		14,238

		$	60,941	$	16,303	$	44,638

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


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

		$	35,941	$	9,217	$	26,724

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.

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. The likelihood of achieving the milestone and the related milestone obligation was determined to be probable during the six months ended June 30, 2015. As a result, the future obligation of $25.0 million was recorded as a non-current liability as of June 30, 2015 along with an addition of $25.0 million to capitalized intangible assets relating to HETLIOZ^®. The $25.0 million was determined to be additional consideration for the acquisition of the HETLIOZ^® intangible asset, which was created upon FDA approval on January 31, 2014. The actual payment of the $25.0 million will occur once the $250.0 million in cumulative worldwide sales of HETLIOZ^® is realized. The $25.0 million is being amortized on a straight-line basis over the remaining life of the U.S. patent for HETLIOZ^®, which is expected to be January 2033. Amortization of intangible assets relating to HETLIOZ^® amounted to $2.1 million for the six months ended June 30, 2015 and includes a catch-up adjustment of $1.2 million to retroactively record cumulative amortization from January 31, 2014 to December 31, 2014 for the milestone obligation of $25.0 million. In future periods the Company expects annual amortization of capitalized intangible asset costs relating to HETLIOZ^® will amount to $1.7 million until the expiration of the patent in 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. composition of matter patent for Fanapt^® 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 additional Fanapt^® patents solely owned by the Company with varying expiration dates, the latest of which is 2031. 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 $2.9 million and $0.6 million for the three months ended June 30, 2015 and 2014, respectively, and $7.1 million and $1.2 million for the six months ended June 30, 2015 and 2014, respectively. The following is a summary of the future intangible asset amortization schedule as of June 30, 2015:


			Remainder
(in thousands)	Total		of 2015		2016		2017		2018		2019		Thereafter
HETLIOZ^®	$	30,400	$	860	$	1,721	$	1,721	$	1,721	$	1,721	$	22,656
Fanapt^®		14,238		5,025		9,213		—		—		—		—

	$	44,638	$	5,885	$	10,934	$	1,721	$	1,721	$	1,721	$	22,656

Accrued Liabilities

6 Months Ended

Jun. 30, 2015

Accrued Liabilities

10. Accrued Liabilities

The following is a summary of the Company’s accrued liabilities as of June 30, 2015 and December 31, 2014:


	June 30,		December 31,
(in thousands)	2015		2014
Accrued sales allowances	$	28,738	$	495
Accrued research and development expenses		1,953		1,759
Accrued consulting and other professional fees		4,475		2,522
Compensation and employee benefits		1,888		388
Royalties payable		5,000		602
Other accrued liabilities		1,508		1,185

	$	43,562	$	6,951

Deferred Revenue

6 Months Ended

Jun. 30, 2015

Deferred Revenue

11. Deferred Revenue

The following is a summary of changes in total deferred revenue for the six months ended June 30, 2015 and 2014:


	Six Months Ended
	June 30,		June 30,
(in thousands)	2015		2014
Balance beginning of period	$	174	$	90,275
Deferred Fanapt^® product revenue		314		—
Licensing revenue recognized		—		15,216

Balance end of period	$	488	$	75,059

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. 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 year ended December 31, 2014, the Company recognized revenue of $30.7 million related to the license agreement. In connection with the Settlement Agreement, the Company recognized the remaining deferred revenue balance of $59.5 million during the three months ended December 31, 2014, as part of the gain on arbitration settlement. See Note 3, Settlement Agreement with Novartis, for further discussion.

Income Taxes

6 Months Ended

Jun. 30, 2015

Income Taxes

12. Income Taxes

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The fact that the Company has historically generated net operating losses (NOLs) serves as strong evidence that it is more likely than not that deferred tax assets will not be realized in the future. Therefore, the Company has a full valuation allowance against all deferred tax assets as of June 30, 2015 and December 31, 2014. Changes in ownership may limit the amount of NOL carryforwards that can be utilized in the future to offset taxable income. Ownership changes did occur as of December 31, 2008 and December 31, 2014. The Company determined that there was sufficient Built-In-Gain as of December 31, 2008 to offset the Internal Revenue Code of 1986, as amended (IRC), Section 382 limitation generated by the ownership change. The Company believes that there is sufficient Built-In-Gain as of December 31, 2014 to offset the IRC Section 382 limitation generated by the ownership change. Any future ownership changes may cause the Company’s existing tax attributes to have additional limitations.

Commitments and Contingencies

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies

13. Commitments and Contingencies

Operating leases

The following is a summary of the minimum annual future payments under operating leases as of June 30, 2015:


			Remainder
(in thousands)	Total		of 2015		2016		2017		2018		2019		Thereafter
Operating leases	$	14,051	$	736	$	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). 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 was abated for the first nine months of the amended lease ending on June 30, 2015. The Landlord provided the Company with a cash allowance of $0.8 million for tenant improvements. The allowance for tenant improvements is reflected in the consolidated financial statements as an increase to the deferred rent liability for the six months ended June 30, 2015. 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 $0.5 million and $0.4 million for the three months ended June 30, 2015 and 2014, respectively, and $0.9 million and $0.8 million for the six months ended June 30, 2015 and 2014, respectively.

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 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. During the first quarter of 2015, the likelihood of achieving the milestone and the related milestone obligation was determined to be probable. As such, the $25.0 million milestone obligation was capitalized as an intangible asset and is being amortized over the expected HETLIOZ^® patent life in the U.S. The actual payment of the $25.0 million will occur once the $250.0 million in cumulative worldwide sales of HETLIOZ^® is realized. Additionally, the Company is obligated to make royalty payments on HETLIOZ^® net sales to BMS in any territory where the Company commercializes HETLIOZ^® for a period equal to the greater of 10 years following 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 the license agreement for HETLIOZ^® to use its 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, 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 (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 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, 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 $200.0 million, and at a percentage in the mid-twenties on sales over $200.0 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.

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 generally 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.

Legal Matters

6 Months Ended

Jun. 30, 2015

Legal Matters

14. 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 (ANDA) 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, 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.

The two pending cases against Roxane were consolidated by agreement of the parties in April 2015 and are scheduled to be tried together in a four-day bench trial beginning on February 29, 2016.

In May 2015, the Company filed a lawsuit against Inventia Healthcare Pvt. Ltd. (Inventia) in the U.S. District Court for the District of Delaware. The suit seeks an adjudication that Inventia has infringed on one or more claims of one of the Company’s patents by submitting to the FDA an ANDA for a generic version of Fanapt^®. The relief requested by the Company includes a request for a permanent injunction preventing Inventia 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. The Company received Inventia’s paragraph IV notice regarding the Patent on April 3, 2015.

Stock-Based Compensation

6 Months Ended

Jun. 30, 2015

Stock-Based Compensation

15. Stock-Based Compensation

The fair value of stock options granted and RSUs awarded are amortized using the straight-line method. As stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model that uses the assumptions noted in the following table. Expected volatility rates are based on the historical volatility of the Company’s publicly traded common stock and other factors. 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 stock options granted during the six months ended June 30, 2015 and 2014 were as follows:


	Six Months Ended
	June 30,			June 30,
	2015			2014
Expected dividend yield		0	%		0	%
Weighted average expected volatility		61	%		64	%
Weighted average expected term (years)		5.99			5.83
Weighted average risk-free rate		1.61	%		1.77	%
Weighted average fair value per share	$	6.15		$	7.14

Total stock-based compensation expense related to stock-based awards for the three and six months ended June 30, 2015 and 2014 was comprised of the following:


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
(in thousands)	2015		2014		2015		2014
Research and development	$	603	$	454	$	1,227	$	935
Selling, general and administrative		1,465		989		2,786		1,901

	$	2,068	$	1,443	$	4,013	$	2,836

As of June 30, 2015, 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. There were 198,148 shares subject to outstanding options granted under the 2004 Plan as of June 30, 2015, and no additional options will be granted under the 2004 Plan. As of June 30, 2015, there were 11,829,472 shares of the Company’s common stock reserved for issuance under the 2006 Plan, of which 7,641,146 shares were subject to outstanding options and RSUs and 1,713,842 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 June 30, 2015, $14.8 million of unrecognized compensation costs related to unvested service option awards are expected to be recognized over a weighted average period of 1.6 years. No option awards are classified as a liability as of June 30, 2015.

A summary of option activity for the 2004 Plan for the six months ended June 30, 2015 follows:


2004 Option Plan				Weighted Average		Weighted Average		Aggregate
	Number of			Exercise Price at		Remaining Term		Intrinsic
(in thousands, except for share and per share amounts)	Shares			Grant Date		(Years)		Value
Outstanding at December 31, 2014		652,810			1.74		0.78		8,212
Exercised		(454,662	)		0.44				4,559

Outstanding at June 30, 2015		198,148			4.73		0.50		4,455

Exercisable at June 30, 2015		198,148			4.73		0.50		1,577

Vested and expected to vest at June 30, 2015		198,148			4.73		0.50		1,577

A summary of option activity for the 2006 Plan for the six months ended June 30, 2015 follows:


2006 Option Plan				Weighted Average		Weighted Average		Aggregate
	Number of			Exercise Price at		Remaining Term		Intrinsic
(in thousands, except for share and per share amounts)	Shares			Grant Date		(Years)		Value
Outstanding at December 31, 2014		6,227,112			11.58		6.71		28,523
Granted		721,500			11.35
Forfeited		(166,606	)		11.10
Expired		(2,409	)		11.70
Exercised		(123,257	)		5.32				794

Outstanding at June 30, 2015		6,656,340			11.68		6.52		19,773

Exercisable at June 30, 2015		4,151,650			12.20		5.02		14,830

Vested and expected to vest at June 30, 2015		6,456,458			11.69		6.43		19,516

Proceeds from the exercise of stock options amounted to $0.8 million for the six months ended June 30, 2015.

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 June 30, 2015, $9.2 million of unrecognized compensation costs related to unvested service RSUs are expected to be recognized over a weighted average period of 2.0 years. No service RSUs are classified as a liability as of June 30, 2015.

A summary of RSU activity for the 2006 Plan for the six months ended June 30, 2015 follows:


RSUs	Number of			Weighted
	Shares			Average
	Underlying			Grant Date
	RSUs			Fair Value
Unvested at December 31, 2014		1,025,961		$	9.94
Granted		253,000			11.23
Forfeited		(63,062	)		10.88
Vested		(231,093	)		7.96

Unvested at June 30, 2015		984,806			10.67

The grant date fair value for the 231,093 shares underlying RSUs that vested during the six months ended June 30, 2015 was $1.8 million.

Business Organization and Presentation (Policies)

6 Months Ended

Jun. 30, 2015

Business Organization

Business Organization

•

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.

•

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

Inventory

Inventory

Net Product Sales

Net Product Sales


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
(in thousands)	2015		2014		2015		2014
HETLIOZ^® product sales, net	$	10,017	$	1,559	$	17,477	$	1,559
Fanapt^® product sales, net		17,565		—		32,255		—

	$	27,582	$	1,559	$	49,732	$	1,559

Product Sales Discounts and Allowances

Stock-based Compensation

Stock-based Compensation

Advertising Expense

Advertising Expense

Segment Reporting

Segment Reporting

The Company operates in one reporting segment and, accordingly, no segment disclosures are presented herein.

Recent accounting pronouncements

Recent accounting pronouncements

- Definition

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

+ References + Details

- Definition

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

+ References + Details

Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2015

Net Sales by Product


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
(in thousands)	2015		2014		2015		2014
HETLIOZ^® product sales, net	$	10,017	$	1,559	$	17,477	$	1,559
Fanapt^® product sales, net		17,565		—		32,255		—

	$	27,582	$	1,559	$	49,732	$	1,559

Settlement Agreement with Novartis (Tables)

6 Months Ended

Jun. 30, 2015

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

Earnings per Share (Tables)

6 Months Ended

Jun. 30, 2015

Basic and Diluted Net Loss Per Share of Common Stock

The following table presents the calculation of basic and diluted net loss per share of common stock for the three and six months ended June 30, 2015 and 2014:


	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
(in thousands, except for share and per share amounts)	2015			2014			2015			2014
Numerator:
Net loss	$	(5,386	)	$	(21,575	)	$	(15,607	)	$	(48,108	)

Denominator:
Weighted average shares outstanding, basic and diluted		41,991,578			33,874,625			41,868,944			33,777,207

Net loss per share, basic and diluted:
Net loss per share	$	(0.13	)	$	(0.64	)	$	(0.37	)	$	(1.42	)

Antidilutive securities excluded from calculations of diluted net loss per share		5,765,618			3,739,874			5,711,140			3,805,191

Marketable Securities (Tables)

6 Months Ended

Jun. 30, 2015

Summary of Available-for-Sale Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of June 30, 2015, which all have contract maturities of less than one year:


			Gross		Gross			Fair
June 30, 2015	Amortized		Unrealized		Unrealized			Market
(in thousands)	Cost		Gains		Losses			Value
U.S. Treasury and government agencies	$	54,628	$	7	$	(2	)	$	54,633
Corporate debt		43,645		26		(4	)		43,667

	$	98,273	$	33	$	(6	)	$	98,300

The following is a summary of the Company’s available-for-sale marketable securities as of December 31, 2014:


			Gross		Gross			Fair
December 31, 2014	Amortized		Unrealized		Unrealized			Market
(in thousands)	Cost		Gains		Losses			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

- Definition

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

+ References + Details

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2015

Assets Measured at Fair Value on Recurring Basis

As of June 30, 2015, the Company held certain assets that are required to be measured at fair value on a recurring basis, as follows:

Fair Value Measurement as of June 30, 2015 Using

Quoted Prices in

Significant

Active Markets for

Significant Other

Unobservable

June 30,

Identical Assets

Observable Inputs

Inputs

(in thousands)

2015

(Level 1)

(Level 2)

(Level 3)

Available-for-sale securities

98,300

54,633

43,667

—

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

Quoted Prices in

Significant

Active Markets for

Significant Other

Unobservable

December 31,

Identical Assets

Observable Inputs

Inputs

(in thousands)

2014

(Level 1)

(Level 2)

(Level 3)

Available-for-sale securities

68,921

30,618

38,303

—

Inventory (Tables)

6 Months Ended

Jun. 30, 2015

Inventory

Inventory consisted of the following as of June 30, 2015 and December 31, 2014:


	June 30,		December 31,
(in thousands)	2015		2014
Raw materials	$	128	$	198
Work-in-process		1,778		1,326
Finished goods		2,646		3,394
Deferred cost of goods sold		410		252

	$	4,962	$	5,170

Prepaid Expenses and Other Current Assets (Tables)

6 Months Ended

Jun. 30, 2015

Summary of Prepaid Expenses, and Other Current Assets

The following is a summary of the Company’s prepaid expenses and other current assets as of June 30, 2015 and December 31, 2014:


	June 30,		December 31,
(in thousands)	2015		2014
Prepaid insurance	$	928	$	270
Prepaid manufacturing cost		346		358
Other prepaid expenses and vendor advances		5,363		2,302
Other current assets		319		154

	$	6,956	$	3,084

Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2015

Summary of Intangible Assets

The following is a summary of the Company’s intangible assets as of June 30, 2015:


		June 30, 2015
	Estimated	Gross				Net
	Useful Life	Carrying		Accumulated		Carrying
(in thousands)	(Years)	Amount		Amortization		Amount
HETLIOZ^®	January 2033	$	33,000	$	2,600	$	30,400
Fanapt^®	November 2016		27,941		13,703		14,238

		$	60,941	$	16,303	$	44,638

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


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

		$	35,941	$	9,217	$	26,724

Summary of Future Intangible Asset Amortization

The following is a summary of the future intangible asset amortization schedule as of June 30, 2015:


			Remainder
(in thousands)	Total		of 2015		2016		2017		2018		2019		Thereafter
HETLIOZ^®	$	30,400	$	860	$	1,721	$	1,721	$	1,721	$	1,721	$	22,656
Fanapt^®		14,238		5,025		9,213		—		—		—		—

	$	44,638	$	5,885	$	10,934	$	1,721	$	1,721	$	1,721	$	22,656

Accrued Liabilities (Tables)

6 Months Ended

Jun. 30, 2015

Summary of Accrued Liabilities

The following is a summary of the Company’s accrued liabilities as of June 30, 2015 and December 31, 2014:


	June 30,		December 31,
(in thousands)	2015		2014
Accrued sales allowances	$	28,738	$	495
Accrued research and development expenses		1,953		1,759
Accrued consulting and other professional fees		4,475		2,522
Compensation and employee benefits		1,888		388
Royalties payable		5,000		602
Other accrued liabilities		1,508		1,185

	$	43,562	$	6,951

Deferred Revenue (Tables)

6 Months Ended

Jun. 30, 2015

Summary of Changes in Total Deferred Revenue

The following is a summary of changes in total deferred revenue for the six months ended June 30, 2015 and 2014:


	Six Months Ended
	June 30,		June 30,
(in thousands)	2015		2014
Balance beginning of period	$	174	$	90,275
Deferred Fanapt^® product revenue		314		—
Licensing revenue recognized		—		15,216

Balance end of period	$	488	$	75,059

Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2015

Summary of Minimum Annual Future Payments under Operating Leases

The following is a summary of the minimum annual future payments under operating leases as of June 30, 2015:


			Remainder
(in thousands)	Total		of 2015		2016		2017		2018		2019		Thereafter
Operating leases	$	14,051	$	736	$	1,500	$	1,538	$	1,576	$	1,616	$	7,085

Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2015

Black-Scholes-Merton Option Pricing Model for Stock Options Granted

Assumptions used in the Black-Scholes-Merton option pricing model for stock options granted during the six months ended June 30, 2015 and 2014 were as follows:


	Six Months Ended
	June 30,			June 30,
	2015			2014
Expected dividend yield		0	%		0	%
Weighted average expected volatility		61	%		64	%
Weighted average expected term (years)		5.99			5.83
Weighted average risk-free rate		1.61	%		1.77	%
Weighted average fair value per share	$	6.15		$	7.14

Total Stock-Based Compensation Expense

Total stock-based compensation expense related to stock-based awards for the three and six months ended June 30, 2015 and 2014 was comprised of the following:


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
(in thousands)	2015		2014		2015		2014
Research and development	$	603	$	454	$	1,227	$	935
Selling, general and administrative		1,465		989		2,786		1,901

	$	2,068	$	1,443	$	4,013	$	2,836

Summary of RSU Activity for 2006 Plan

A summary of RSU activity for the 2006 Plan for the six months ended June 30, 2015 follows:


RSUs	Number of			Weighted
	Shares			Average
	Underlying			Grant Date
	RSUs			Fair Value
Unvested at December 31, 2014		1,025,961		$	9.94
Granted		253,000			11.23
Forfeited		(63,062	)		10.88
Vested		(231,093	)		7.96

Unvested at June 30, 2015		984,806			10.67

2004 Plan

Summary of Option Activity Plan

A summary of option activity for the 2004 Plan for the six months ended June 30, 2015 follows:


2004 Option Plan				Weighted Average		Weighted Average		Aggregate
	Number of			Exercise Price at		Remaining Term		Intrinsic
(in thousands, except for share and per share amounts)	Shares			Grant Date		(Years)		Value
Outstanding at December 31, 2014		652,810			1.74		0.78		8,212
Exercised		(454,662	)		0.44				4,559

Outstanding at June 30, 2015		198,148			4.73		0.50		4,455

Exercisable at June 30, 2015		198,148			4.73		0.50		1,577

Vested and expected to vest at June 30, 2015		198,148			4.73		0.50		1,577

2006 Plan

Summary of Option Activity Plan

A summary of option activity for the 2006 Plan for the six months ended June 30, 2015 follows:


2006 Option Plan				Weighted Average		Weighted Average		Aggregate
	Number of			Exercise Price at		Remaining Term		Intrinsic
(in thousands, except for share and per share amounts)	Shares			Grant Date		(Years)		Value
Outstanding at December 31, 2014		6,227,112			11.58		6.71		28,523
Granted		721,500			11.35
Forfeited		(166,606	)		11.10
Expired		(2,409	)		11.70
Exercised		(123,257	)		5.32				794

Outstanding at June 30, 2015		6,656,340			11.68		6.52		19,773

Exercisable at June 30, 2015		4,151,650			12.20		5.02		14,830

Vested and expected to vest at June 30, 2015		6,456,458			11.69		6.43		19,516

Net Sales by Product (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
Net Sales by Product (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenue from External Customer [Line Items]
Product sales, net	$ 27,582	$ 1,559	$ 49,732	$ 1,559
Hetlioz
Revenue from External Customer [Line Items]
Product sales, net	10,017	$ 1,559	17,477	$ 1,559
Fanapt
Revenue from External Customer [Line Items]
Product sales, net	$ 17,565		$ 32,255

Summary of Significant Accounting Policies - Additional Information (Detail) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) Segment Customer	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Deferred revenue	$ 488	$ 75,059	$ 488	$ 75,059	$ 174	$ 90,275
Percentage of insurance coverage gap allocated for prescription drugs			50.00%
Advertising expenses	900	$ 3,300	$ 1,900	$ 4,300
Number of reportable segments \| Segment			1
Customer Concentration Risk \| Sales Revenue, Net
Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage			95.00%
Number of major customers for sales revenues \| Customer			6
Credit Concentration Risk \| Accounts Receivable
Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage			72.00%
Number of major customers for accounts receivable \| Customer			3
Fanapt
Summary Of Significant Accounting Policies [Line Items]
Deferred revenue	$ 500		$ 500

Settlement Agreement with Novartis - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014	Dec. 31, 2009
Business Acquisition [Line Items]
Intangible assets, amortization method	Straight-line basis
Fanapt
Business Acquisition [Line Items]
Intangible assets, amortizing period end date	2016-11	2016-11
Upfront payment received			$ 200,000
Settlement Agreement
Business Acquisition [Line Items]
Net proceeds from offering of common stock		$ 25,000
Effective date of the Settlement Agreement		Dec. 31, 2014
Gain on termination of pre-existing non-contractual relationship		$ 18,087
Up-front Payment Arrangement
Business Acquisition [Line Items]
Gain on termination of pre-existing non-contractual relationship		59,500
Novartis Pharma AG \| Settlement Agreement
Business Acquisition [Line Items]
Net proceeds from offering of common stock		$ 25,000
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)

Fair Value of Consideration Exchanged as Part of Settlement Agreement (Detail) - Settlement Agreement $ in Thousands	12 Months Ended
	Dec. 31, 2014 USD ($)
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) $ in Thousands	Dec. 31, 2014 USD ($)
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

Basic and Diluted Net Income (Loss) Per Share of Common Stock (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Numerator:
Net loss	$ (5,386)	$ (21,575)	$ (15,607)	$ (48,108)
Denominator:
Weighted average shares outstanding, basic and diluted	41,991,578	33,874,625	41,868,944	33,777,207
Net loss per share, basic and diluted:
Net loss per share	$ (0.13)	$ (0.64)	$ (0.37)	$ (1.42)
Antidilutive securities excluded from calculations of diluted net loss per share	5,765,618	3,739,874	5,711,140	3,805,191

- Definition

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

+ References + Details

Summary of Available-For-Sale Marketable Securities (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	$ 98,300	$ 68,921
Current Investment
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	98,273	68,905
Gross Unrealized Gains	33	29
Gross Unrealized Losses	(6)	(13)
Fair Market Value	98,300	68,921
Current Investment \| U.S. Treasury and government agencies
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	54,628	30,618
Gross Unrealized Gains	7	4
Gross Unrealized Losses	(2)	(4)
Fair Market Value	54,633	30,618
Current Investment \| Corporate debt
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	43,645	38,287
Gross Unrealized Gains	26	25
Gross Unrealized Losses	(4)	(9)
Fair Market Value	$ 43,667	$ 38,303

Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 98,300	$ 68,921
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	54,633	30,618
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 43,667	$ 38,303

Inventory (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Inventory [Line Items]
Raw materials	$ 128	$ 198
Work-in-process	1,778	1,326
Finished goods	2,646	3,394
Deferred cost of goods sold	410	252
Total	$ 4,962	$ 5,170

Summary of Prepaid Expenses and Other Current Assets (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Prepaid Expenses And Other Current Assets [Line Items]
Prepaid insurance	$ 928	$ 270
Prepaid manufacturing cost	346	358
Other prepaid expenses and vendor advances	5,363	2,302
Other current assets	319	154
Prepaid expenses and other current assets	$ 6,956	$ 3,084

Summary of Intangible Assets (Detail) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Mar. 31, 2004	Jun. 30, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount		$ 60,941	$ 35,941
Accumulated Amortization		16,303	9,217
Net Carrying Amount		$ 44,638	$ 26,724
Hetlioz
Finite-Lived Intangible Assets [Line Items]
Estimated Patent life end date	2022-12	2033-01	2033-01
Gross Carrying Amount		$ 33,000	$ 8,000
Accumulated Amortization		2,600	539
Net Carrying Amount		$ 30,400	$ 7,461
Fanapt
Finite-Lived Intangible Assets [Line Items]
Estimated Patent life end date		2016-11	2016-11
Gross Carrying Amount		$ 27,941	$ 27,941
Accumulated Amortization		13,703	8,678
Net Carrying Amount		$ 14,238	$ 19,263

Intangible Assets (Textual 2 - HETLIOZ) - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended				6 Months Ended		12 Months Ended
	Jul. 31, 2013	Feb. 28, 2004	Jun. 30, 2015	Jun. 30, 2014	Mar. 31, 2014	Mar. 31, 2004	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Dec. 31, 2006
Finite-Lived Intangible Assets [Line Items]
Milestone obligation under license agreement			$ 25,000				$ 25,000
Intangible asset amortization			2,942	$ 617			$ 7,086	$ 1,182
Hetlioz
Finite-Lived Intangible Assets [Line Items]
Acquisition of intangible assets	$ 3,000	$ 500			$ 8,000			$ 8,000		$ 1,000
Estimated Patent life end date						2022-12	2033-01		2033-01
Cumulative worldwide sales milestone							$ 250,000
Milestone obligation under license agreement			$ 25,000				25,000
Intangible assets capitalized							25,000
Intangible asset amortization							2,100
Catch-up amortization of intangible asset							1,200
Future annual amortization of intangible asset							$ 1,700

Intangible Assets (Textual 3 - Fanapt) - Additional Information (Detail) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014	Dec. 31, 2009	Dec. 31, 2004
Finite-Lived Intangible Assets [Line Items]
Assets acquired and recorded at fair value, Intangible re-acquired right		$ 15,940
Fanapt
Finite-Lived Intangible Assets [Line Items]
Acquisition of intangible assets			$ 12,000	$ 500
Estimated Patent life end date	2016-11	2016-11
Assets acquired and recorded at fair value, Intangible re-acquired right		$ 15,900

Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Finite-Lived Intangible Assets [Line Items]
Intangible asset amortization	$ 2,942	$ 617	$ 7,086	$ 1,182

Summary of Future Intangible Asset Amortization (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	$ 44,638	$ 26,724
Remainder of 2015	5,885
2016	10,934
2017	1,721
2018	1,721
2019	1,721
Thereafter	22,656
Hetlioz
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	30,400	7,461
Remainder of 2015	860
2016	1,721
2017	1,721
2018	1,721
2019	1,721
Thereafter	22,656
Fanapt
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	14,238	$ 19,263
Remainder of 2015	5,025
2016	$ 9,213

Summary of Accrued Liabilities (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Accrued Liabilities [Line Items]
Accrued sales allowances	$ 28,738	$ 495
Accrued research and development expenses	1,953	1,759
Accrued consulting and other professional fees	4,475	2,522
Compensation and employee benefits	1,888	388
Royalties payable	5,000	602
Other accrued liabilities	1,508	1,185
Accrued liabilities	$ 43,562	$ 6,951

Summary of Changes in Total Deferred Revenue (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Deferred Revenue Arrangement [Line Items]
Balance beginning of period	$ 174	$ 90,275
Deferred Fanapt® product revenue	314
Licensing revenue recognized		15,216
Balance end of period	$ 488	$ 75,059

Deferred Revenue - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Dec. 31, 2014	Dec. 31, 2009
Deferred Revenue Arrangement [Line Items]
Licensing agreement	$ 7,764	$ 15,216	$ 30,700
Up-front Payment Arrangement
Deferred Revenue Arrangement [Line Items]
Recognized as part of gain on arbitration settlement			$ 59,500
Fanapt
Deferred Revenue Arrangement [Line Items]
Upfront payment received				$ 200,000

Summary of Minimum Annual Future Payments Under Operating Leases (Detail) $ in Thousands	Jun. 30, 2015 USD ($)
Operating Leased Assets [Line Items]
Operating leases, Total	$ 14,051
Operating leases,Remainder of 2015	736
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) $ in Millions	1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 31, 2014 USD ($) ft²	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Dec. 31, 2011 ft²
Commitments and Contingencies Disclosure [Line Items]
Rent expense		$ 0.5	$ 0.4	$ 0.9	$ 0.8
Washington DC Lease Amendment
Commitments and Contingencies Disclosure [Line Items]
Renewal term of Lease agreement	5 years
Additional square feet leased \| ft²	8,860
Lease term	12 years 1 month
Additional annual rental payment under lease amendment	$ 0.4
Allowance for tenant improvements	$ 0.8
Washington DC Lease
Commitments and Contingencies Disclosure [Line Items]
Renewal term of Lease agreement						5 years
Square feet leased \| ft²						21,400

Commitments and Contingencies (Textual 2 - HETLIOZ) - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended	6 Months Ended		12 Months Ended
	Jul. 31, 2013	Feb. 28, 2004	Mar. 31, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2006
HETLIOZ
Milestone obligation under license agreement				$ 25,000
Percentage of future sublicense fees payable to third-party				Mid-twenties
Hetlioz
HETLIOZ
Acquisition of intangible assets	$ 3,000	$ 500	$ 8,000		$ 8,000	$ 1,000
Milestone obligation under license agreement				$ 25,000
Royalty payable percentage				10.00%
Cumulative worldwide sales milestone				$ 250,000
Intangible assets capitalized				$ 25,000

Commitments and Contingencies (Textual 3 - Fanapt) - Additional Information (Detail) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014	Dec. 31, 2009	Dec. 31, 2004
Novartis Pharma AG \| Through November 2016
Fanapt
Royalty percentage payable on net sales below annual threshold		23.00%
Novartis Pharma AG \| Royalty Rate for Annual Sales in Excess of $200 million
Fanapt
Royalty percentage payable on net sales above annual threshold	mid-twenties
Novartis Pharma AG \| Beyond November 2016
Fanapt
Royalty percentage on net sales payable to Sanofi after expiration of patent		9.00%
Maximum \| Novartis Pharma AG
Fanapt
Agreed upon sales threshold level for royalty rate		$ 200,000,000
Fanapt
Fanapt
Acquisition of intangible assets			$ 12,000,000	$ 500,000
Royalty payments to Novartis based on sales, old rate from 2014	mid-twenties
Upfront payment received			$ 200,000,000

Commitments and Contingencies (Textual 4 - Tradipitant) - Additional Information (Detail) - Tradipitant - USD ($) $ in Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2012
Tradipitant
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
Tradipitant
Possible future milestone payments		$ 95.0

Legal Matters - Additional Information (Detail)	1 Months Ended
Legal Matters - Additional Information (Detail)	Apr. 30, 2015 Case
Roxane Laboratories Inc. \| Pending Cases
Legal Proceedings [Line Items]
Number of cases that were consolidated	2

Black-Scholes-Merton Option Pricing Model for Stock Options Granted (Detail) - $ / shares	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Share Based Payment Award Stock Options Valuation Assumptions [Line Items]
Expected dividend yield	0.00%	0.00%
Weighted average expected volatility	61.00%	64.00%
Weighted average expected term (years)	5 years 11 months 27 days	5 years 9 months 29 days
Weighted average risk-free rate	1.61%	1.77%
Weighted average fair value per share	$ 6.15	$ 7.14

Total Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total employee stock-based compensation expense	$ 2,068	$ 1,443	$ 4,013	$ 2,836
Research and development
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total employee stock-based compensation expense	603	454	1,227	935
Selling, general and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total employee stock-based compensation expense	$ 1,465	$ 989	$ 2,786	$ 1,901

Equity Incentive Plans (Textual 1 - Equity Incentive Plan) - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2015 EquityPlan shares	Dec. 31, 2014 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of equity incentive plans \| EquityPlan	2
2004 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding options granted	198,148	652,810
2006 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding options granted	6,656,340	6,227,112
Common stock reserved for issuance	11,829,472
2006 Plan \| Outstanding options and RSUs granted (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares subject to outstanding options and RSUs	7,641,146
Shares available for future grant	1,713,842
2006 Plan \| January 1, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for issuance	11,829,472
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 ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation option awards contractual term	10 years
Portion of initial stock options granted to employees that vests on employee's first anniversary	25.00%
Portion of initial stock options granted to employees that vests ratably over three years after completion of first year of service	75.00%
Option awards vesting period, after completion of one year of service	3 years
Vesting period	4 years
Vesting period for initial stock options granted to directors	4 years
Vesting period for subsequent stock options granted to directors	1 year
Unrecognized compensation expenses, weighted average period	2 years
Proceeds from exercise of employee stock options	$ 795	$ 2,479
Service option awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expenses	$ 14,800
Unrecognized compensation expenses, weighted average period	1 year 7 months 6 days

Summary of Option Activity for 2004 Plan (Detail) - 2004 Plan - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Number of Shares
Beginning balance	652,810
Exercised	(454,662)
Ending balance	198,148	652,810
Exercisable	198,148
Vested and expected to vest at June 30, 2015	198,148
Weighted Average Exercise Price at Grant Date
Beginning balance	$ 1.74
Exercised	0.44
Ending balance	4.73	$ 1.74
Exercisable	4.73
Vested and expected to vest at June 30, 2015	$ 4.73
Weighted Average Remaining Term (Years)
Weighted Average Remaining Term	6 months	9 months 11 days
Exercisable	6 months
Vested and expected to vest at June 30, 2015	6 months
Aggregate Intrinsic Value
Beginning balance	$ 8,212
Exercised	4,559
Ending balance	4,455	$ 8,212
Exercisable	1,577
Vested and expected to vest at June 30, 2015	$ 1,577

Summary of Option Activity for 2006 Plan (Detail) - 2006 Plan - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Number of Shares
Beginning balance	6,227,112
Granted	721,500
Forfeited	(166,606)
Expired	(2,409)
Exercised	(123,257)
Ending balance	6,656,340	6,227,112
Exercisable	4,151,650
Vested and expected to vest at June 30, 2015	6,456,458
Weighted Average Exercise Price at Grant Date
Beginning balance	$ 11.58
Granted	11.35
Forfeited	11.10
Expired	11.70
Exercised	5.32
Ending balance	11.68	$ 11.58
Exercisable	12.20
Vested and expected to vest at June 30, 2015	$ 11.69
Weighted Average Remaining Term (Years)
Weighted Average Remaining Term	6 years 6 months 7 days	6 years 8 months 16 days
Exercisable	5 years 7 days
Vested and expected to vest at June 30, 2015	6 years 5 months 5 days
Aggregate Intrinsic Value
Beginning balance	$ 28,523
Exercised	794
Ending balance	19,773	$ 28,523
Exercisable	14,830
Vested and expected to vest at June 30, 2015	$ 19,516

Equity Incentive Plans (Textual 3 RSU) - Additional Information (Detail) $ in Millions	6 Months Ended
	Jun. 30, 2015 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period of RSU awards in equal installments	4 years
Unrecognized compensation expenses, weighted average period	2 years
Fair value of common stock vested	$ 1.8
2006 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of common stock vested, shares \| shares	231,093
Restricted Stock Units (RSU)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expenses related to unvested RSUs	$ 9.2

Summary of RSU Activity for 2006 Plan (Detail) - 2006 Plan	6 Months Ended
	Jun. 30, 2015 $ / shares shares
Number of Shares Unvested
Beginning balance \| shares	1,025,961
Granted \| shares	253,000
Forfeited \| shares	(63,062)
Vested \| shares	(231,093)
Ending balance \| shares	984,806
Weighted Average Price/Share Unvested
Beginning balance \| $ / shares	$ 9.94
Granted \| $ / shares	11.23
Forfeited \| $ / shares	10.88
Vested \| $ / shares	7.96
Ending balance \| $ / shares	$ 10.67