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Document and Entity Information - USD ($) $ in Millions	12 Months Ended
Document and Entity Information - USD ($) $ in Millions	Dec. 31, 2015	Jan. 31, 2016	Jun. 30, 2015
Document Information [Line Items]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	FY
Trading Symbol	VNDA
Entity Registrant Name	Vanda Pharmaceuticals Inc.
Entity Central Index Key	0001347178
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		43,102,957
Entity Public Float			$ 525.7

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 50,843	$ 60,901
Marketable securities	92,337	68,921
Accounts receivable, net	16,331	3,654
Inventory	1,294	5,170
Prepaid expenses and other current assets	5,742	3,084
Total current assets	166,547	141,730
Property and equipment, net	4,570	2,437
Intangible assets, net	38,752	26,724
Non-current inventory and other	3,181	813
Total assets	213,050	171,704
Current liabilities:
Accounts payable and accrued liabilities	15,767	7,291
Accrued government and other rebates	35,550	495
Total current liabilities	51,317	7,786
Milestone obligation under license agreement	25,000
Other non-current liabilities	3,706	3,101
Total liabilities	80,023	10,887
Commitments and contingencies (Notes 13 and 18)
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; 42,815,291 and 41,486,361 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively	43	41
Additional paid-in capital	460,794	448,744
Accumulated other comprehensive income	39	16
Accumulated deficit	(327,849)	(287,984)
Total stockholders' equity	133,027	160,817
Total liabilities and stockholders' equity	$ 213,050	$ 171,704

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 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	42,815,291	41,486,361
Common stock, shares outstanding	42,815,291	41,486,361

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Revenues:
Net product sales	$ 109,925	$ 12,909
Royalty revenue		6,502	$ 7,090
Licensing agreement		30,746	26,789
Total revenues	109,925	50,157	33,879
Operating expenses:
Cost of goods sold	23,462	1,583
Research and development	29,145	19,230	28,502
Selling, general and administrative	84,531	84,644	25,082
Intangible asset amortization	12,972	2,254	1,495
Gain on arbitration settlement		(77,616)
Total operating expenses	150,110	30,095	55,079
Income (loss) from operations	(40,185)	20,062	(21,200)
Other income	320	124	145
Net income (loss)	$ (39,865)	$ 20,186	$ (21,055)
Net income (loss) per share:
Basic	$ (0.94)	$ 0.58	$ (0.69)
Diluted	$ (0.94)	$ 0.55	$ (0.69)
Weighted average shares outstanding:
Basic	42,250,254	34,774,163	30,351,353
Diluted	42,250,254	36,686,723	30,351,353

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Net income (loss)	$ (39,865)	$ 20,186	$ (21,055)
Other comprehensive income (loss):
Change in net unrealized gain (loss) on marketable securities	23	(5)	11
Tax provision on other comprehensive income (loss)	0	0	0
Other comprehensive income (loss), net of tax	23	(5)	11
Comprehensive income (loss)	$ (39,842)	$ 20,181	$ (21,044)

- Definition

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

+ References + Details

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Other Comprehensive Income (Loss)	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2012		28,241,743
Beginning balance at Dec. 31, 2012	$ 9,905	$ 28	$ 296,982	$ 10	$ (287,115)
Net proceeds from public offering of common stock (in shares)		4,680,000
Net proceeds from public offering of common stock	48,505	$ 5	48,500
Issuance of common stock from the exercise of stock options and settlement of restricted stock units (in shares)		466,320
Issuance of common stock from the exercise of stock options and settlement of restricted stock units	1,550		1,550
Shares withheld upon settlement of equity awards(in shares)		(49,520)
Shares withheld upon settlement of equity awards	(196)		(196)
Stock-based compensation expense	5,404		5,404
Net income (loss)	(21,055)				(21,055)
Other comprehensive income, net of tax	11			11
Ending balance (in shares) at Dec. 31, 2013		33,338,543
Ending balance at Dec. 31, 2013	44,124	$ 33	352,240	21	(308,170)
Net proceeds from public offering of common stock (in shares)		5,750,000
Net proceeds from public offering of common stock	62,313	$ 5	62,308
Issuance of common stock to Novartis Pharma AG (in shares)		1,808,973
Issuance of common stock to Novartis Pharma AG	25,905	$ 2	25,903
Issuance of common stock from the exercise of stock options and settlement of restricted stock units (in shares)		621,231
Issuance of common stock from the exercise of stock options and settlement of restricted stock units	2,852	$ 1	2,851
Shares withheld upon settlement of equity awards(in shares)		(32,386)
Shares withheld upon settlement of equity awards	(436)		(436)
Stock-based compensation expense	5,878		5,878
Net income (loss)	20,186				20,186
Other comprehensive income, net of tax	$ (5)			(5)
Ending balance (in shares) at Dec. 31, 2014	41,486,361	41,486,361
Ending 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)		1,353,877
Issuance of common stock from the exercise of stock options and settlement of restricted stock units	4,374	$ 2	4,372
Shares withheld upon settlement of equity awards(in shares)		(24,947)
Shares withheld upon settlement of equity awards	(283)		(283)
Stock-based compensation expense	7,961		7,961
Net income (loss)	(39,865)				(39,865)
Other comprehensive income, net of tax	$ 23			23
Ending balance (in shares) at Dec. 31, 2015	42,815,291	42,815,291
Ending balance at Dec. 31, 2015	$ 133,027	$ 43	$ 460,794	$ 39	$ (327,849)

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Cash flows from operating activities
Net income (loss)	$ (39,865)	$ 20,186	$ (21,055)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment	582	530	432
Stock-based compensation	7,961	5,878	5,404
Amortization of discounts and premiums on marketable securities	677	174	155
Intangible asset amortization	12,972	2,254	1,495
Gain on arbitration settlement		(77,616)
Deferred revenues	(174)	(30,572)	(26,789)
Other non-cash adjustments	657	239	104
Changes in assets and liabilities:
Accounts receivable	(12,677)	(1,623)	(863)
Prepaid expenses and other current assets	(2,558)	(318)	1,264
Inventory	387	(2,210)
Accounts payable and accrued liabilities	9,432	1,029	261
Accrued government and other rebates	35,055	495
Net cash provided by (used in) operating activities	12,449	(81,554)	(39,592)
Cash flows from investing activities
Acquisition of intangible assets		(8,000)
Purchases of property and equipment	(2,527)	(769)	(176)
Purchases of marketable securities	(193,111)	(93,343)	(65,598)
Proceeds from sale of marketable securities	999	8,948
Maturities of marketable securities	168,041	80,882	31,499
Change in restricted cash		245
Net cash used in investing activities	(26,598)	(12,037)	(34,275)
Cash flows from financing activities
Net proceeds from offering of common stock		62,313	48,505
Tax obligations paid in connection with settlement of restricted stock units	(283)	(436)	(196)
Proceeds from exercise of employee stock options	4,374	2,851	1,550
Net cash provided by financing activities	4,091	89,728	49,859
Net decrease in cash and cash equivalents	(10,058)	(3,863)	(24,008)
Cash and cash equivalents
Beginning of year	60,901	64,764	88,772
End of year	50,843	60,901	64,764
Non-cash investing and financing activities
Acquisition of intangible asset accrued in non-current liabilities	25,000
Intangible asset related to re-acquired right to Fanapt		(15,940)
Inventories		2,960
Prepaid services		91
Purchases of property and equipment accrued in current liabilities	$ 187		$ 106
Novartis Pharma AG
Cash flows from financing activities
Net proceeds from offering of common stock		$ 25,000

Business Organization and Presentation

12 Months Ended

Dec. 31, 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 novel therapies addressing high unmet medical needs. 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 other circadian rhythm disorders and is presently in clinical development for the treatment of Jet Lag Disorder and Smith-Magenis Syndrome (SMS).

•

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

Reclassifications

Certain reclassifications have been made to prior year amounts to conform with current year classifications.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2015

Summary of Significant Accounting Policies

2.	Summary of Significant Accounting Policies

Use of Estimates

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

Cash and Cash Equivalents

For purposes of the consolidated balance sheets and consolidated statements of cash flows, cash equivalents represent highly-liquid investments with a maturity date of three months or less at the date of purchase. Restricted cash of $0.8 million included in current and non-current assets at December 31, 2015 and 2014, respectively, relates to the lease for office space for the Company’s headquarters located in Washington, D.C.

Marketable Securities

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

Inventory

Inventory, which is recorded at the lower of cost or market, includes the cost of third-party manufacturing and other direct and indirect costs and is valued using the first-in, first-out method. The Company capitalizes inventory costs associated with its products upon regulatory approval when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized; otherwise, such costs are expensed as research and development. Inventory is evaluated for impairment by consideration of factors such as lower of cost or market, net realizable value, obsolescence or expiry. Inventory not expected to be consumed within 12 months following the balance sheet date are classified as non-current.

Intangible Assets

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

Property and Equipment

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

Accounts Payable and Accrued Liabilities

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

Net Product Sales

The Company’s net product sales consist of sales of HETLIOZ^® and, beginning in 2015, sales of Fanapt^®. Net sales by product for the years ended December 31, 2015, 2014 and 2014 were as follows:


	Year Ended December 31,
*(in thousands)*	2015		2014		2013
HETLIOZ^® product sales, net	$	44,302	$	12,802	$	—
Fanapt^® product sales, net		65,623		107		—

	$	109,925	$	12,909	$	—

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.

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

The following table summarizes accounts receivable allowance activity as of and for the years ended December 31, 2015, 2014 and 2013.


*(in thousands)*	Accounts Receivable Allowances
Balance at December 31, 2012	$	—
Provision related to current period sales		—
Adjustments for prior period sales		—
Credits/payments made		—

Balance at December 31, 2013	$	—
Provision related to current period sales		85
Adjustments for prior period sales		—
Credits/payments made		—

Balance at December 31, 2014	$	85
Provision related to current period sales		1,071
Adjustments for prior period sales		(85	)
Credits/payments made		(12	)

Balance at December 31, 2015	$	1,059

License Revenue

The Company’s license revenues for the years ended December 31, 2014 and 2013 were derived from the amended and restated sublicense agreement with Novartis and include an upfront payment and future milestone and royalty payments. Pursuant to the amended and restated sublicense agreement, Novartis had the right to commercialize and develop Fanapt^® in the U.S. and Canada. Under the amended and restated sublicense agreement, the Company received an upfront payment of $200.0 million. Revenue related to the upfront payment was recognized ratably from the date the amended and restated sublicense agreement became effective (November 2009) through the expected duration of the Novartis commercialization of Fanapt^® in the U.S. which was estimated to be through the expiry of the Fanapt^® composition of patent, including a granted Hatch-Waxman extension (November 2016). In connection with the Settlement Agreement with Novartis, the Company recognized the remaining deferred revenue as of December 31, 2014 as part of the gain on arbitration settlement. See Note 3, Settlement Agreement with Novartis, for additional information.

Major Customers

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 Company has not experienced any losses relating to receivables from customers.

The following table presents each major customer that represented more than 10% of total revenues for the years ended December 31, 2015, 2014 and 2013:


	Year Ended December 31,
Percent of Total Revenues	2015		2014		2013
Novartis -royalty revenue		—		13%		21%
Novartis -license agreement		—		61%		79%
Distributor A		17%		—		—
Distributor B		18%		—		—
Distributor C		19%		—		—
Distributor D		14%		—		—
Distributor E		14%		—		—
Distributor F		12%		—		—

The following table presents each major customer that represented more than 10% of accounts receivable, net, as of December 31, 2015 and 2014:


	December 31,
Percent of Accounts Receivable, Net	2015		2014
Novartis -royalty		—		42%
Distributor A		22%		—
Distributor B		24%		—
Distributor C		17%		—
Distributor D		12%		21%
Distributor E		12%		17%
Distributor F		—		20%

Cost of Goods Sold

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

Research and Development Expenses

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

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of salaries, stock-based compensation, facilities and third party expenses. Selling, general and administrative expenses are associated with the activities of the executive, finance, accounting, information technology, business development, commercial support, trade and distribution, sales, marketing, legal, medical affairs and human resource functions. Additionally, selling, general and administrative expenses included an estimate for the annual Patient Protection and Affordable Care fee.

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 recognizes the expense over the award’s vesting period. The fair value of stock options granted and restricted stock units (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 employee and director stock options granted during the years ended December 31, 2015, 2014 and 2013 were as follows:


	Year Ended December 31,
	2015			2014			2013
Expected dividend yield		0	%		0	%		0	%
Weighted average expected volatility		60	%		62	%		65	%
Weighted average expected term (years)		6.00			5.90			6.03
Weighted average risk-free rate		1.67	%		1.73	%		1.59	%
Weighted average fair value per share	$	11.74		$	6.99		$	6.10

Stock-based compensation expense recognized for the years ended December 31, 2015, 2014 and 2013 was comprised of the following:


	Year Ended December 31,
*(in thousands)*	2015		2014		2013
Research and development	$	2,269	$	1,933	$	2,166
Selling, general and administrative		5,692		3,945		3,238

	$	7,961	$	5,878	$	5,404

Advertising Expense

The Company expenses the costs of advertising, including branded promotional expenses, as incurred. Branded advertising expenses, recorded in selling, general and administrative expenses, were $3.4 million and $5.0 million for the years ended December 31, 2015 and 2014, respectively. The Company did not incur any advertising expense during the year ended December 31, 2013.

Income taxes

The Company accounts for income taxes in accordance with the authoritative guidance on accounting for income taxes, which requires companies to account for deferred income taxes using the asset and liability method. Under the asset and liability method, current income tax expense or benefit is the amount of income taxes expected to be payable or refundable for the current year. A deferred income tax asset or liability is recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The fact that the Company has historically generated net operating losses (NOLs) serves as strong evidence that it is more likely than not that deferred tax assets will not be realized in the future. Therefore, the Company has a full valuation allowance against all deferred tax assets as of December 31, 2015 and 2014. Tax rate changes are reflected in income during the period such changes are enacted. Changes in ownership may limit the amount of NOL carryforwards that can be utilized in the future to offset taxable income.

Certain risks and uncertainties

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

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

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

Concentrations of credit risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company places its cash, cash equivalents and marketable securities with highly-rated financial institutions. At December 31, 2015, the Company maintained all of its cash, cash equivalents and marketable securities in two financial institutions. Deposits held with these institutions may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand, and the Company believes there is minimal risk of losses on such balances.

Segment information

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

Recent accounting pronouncements

In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes. Currently deferred taxes for each tax jurisdiction are presented as a net current asset or liability and net noncurrent asset or liability on the balance sheet. To simplify the presentation, the new guidance requires that all deferred tax assets and liabilities for each jurisdiction, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The new guidance becomes effective for public business entities in fiscal years beginning after December 15, 2016. The Company adopted this new standard in the fourth quarter of 2015, and adoption did not have a material impact on the Company’s consolidated financial statements.

In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement –Period Adjustments. Changes to the accounting for measurement-period adjustments relate to business combinations. Currently, an acquiring entity is required to retrospectively adjust the balance sheet amounts of the acquiree recognized at the acquisition date with a corresponding adjustment to goodwill as a result of changes made to the balance sheet amounts of the acquiree. The measurement period is the period after the acquisition date during which the acquirer may adjust the balance sheet amounts recognized for a business combination (generally up to one year from the date of acquisition). The changes eliminate the requirement to make such retrospective adjustments, and, instead require the acquiring entity to record these adjustments in the reporting period they are determined. 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 July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, dealing with changes to the subsequent measurement of inventory. Currently, an entity is required to measure its inventory at the lower of cost or market, whereby market can be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. The changes require that inventory be measured at the lower of cost and net realizable value, thereby eliminating the use of the other two market methodologies. Net realizable value is defined as the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. The new standard is effective for both public and private companies for 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 January 2015, the FASB issued 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 issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which defers 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

12 Months Ended

Dec. 31, 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
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1497-128463

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1490-128463

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1392-128463

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1486-128463

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4845-128472

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1500-128463

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 7
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1524-128463

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4922-128472

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4934-128472

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
-Section 50
-Paragraph 3
-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

12 Months Ended

Dec. 31, 2015

Earnings per Share

4. Earnings per Share

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

The following table presents the calculation of basic and diluted net income (loss) per share of common stock for the years ended December 31, 2015, 2014, and 2013:


	Year Ended December 31,
*(in thousands, except for share and per share amounts)*	2015			2014		2013
Numerator:
Net income (loss)	$	(39,865	)	$	20,186	$	(21,055	)

Denominator:
Weighted average shares outstanding: Basic		42,250,254			34,774,163		30,351,353
Effect of dilutive securities		—			1,912,560		—

Weighted average shares outstanding: Diluted		42,250,254			36,686,723		30,351,353

Net income (loss) per share, basic and diluted:
Basic	$	(0.94	)	$	0.58	$	(0.69	)

Diluted	$	(0.94	)	$	0.55	$	(0.69	)

Antidilutive securities excluded from calculations of diluted net income (loss) per share		5,660,199			3,524,656		4,409,811

The Company incurred a net loss for each of the years ended December 31, 2015 and 2013 causing inclusion of any potentially dilutive securities to have an anti-dilutive effect, resulting in dilutive loss per share and basic loss per share attributable to common stockholders being equivalent.

Marketable Securities

12 Months Ended

Dec. 31, 2015

Marketable Securities

5. Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of December 31, 2015, all of which have contract maturities of less than one year:


*December 31, 2015* *(in thousands)*	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
U.S. Treasury and government agencies	$	44,059	$	6	$	(8	)	$	44,057
Corporate debt		48,239		46		(5	)		48,280

	$	92,298	$	52	$	(13	)	$	92,337

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


*December 31, 2014* *(in thousands)*	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
U.S. Treasury and government agencies	$	30,618	$	4	$	(4	)	$	30,618
Corporate debt		38,287		25		(9	)		38,303

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

- Definition

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

+ References + Details

Fair Value Measurements

12 Months Ended

Dec. 31, 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 December 31, 2015 and 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 years ended December 31, 2015 and 2014.

As of December 31, 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 December 31, 2015 Using
*(in thousands)*	December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities:
U.S. Treasury and government agencies	$	44,057	$	44,057	$	—	$	—
Corporate debt		48,280		—		48,280

	$	92,337	$	44,057	$	48,280	$	—

As of December 31, 2014, the Company held certain assets that are required to be measured at fair value on a recurring basis, as follows:


			Fair Value Measurement as of December 31, 2014 Using
*(in thousands)*	December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities:
U.S. Treasury and government agencies	$	30,618	$	30,618	$	—	$	—
Corporate debt		38,303		—		38,303

	$	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

12 Months Ended

Dec. 31, 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 levels are evaluated for the amount of inventory that would be sold within one year. At certain times, the level of inventory can exceed the forecasted level of cost of goods sold for the next twelve months. The Company classifies the estimate of such inventory as non-current. Inventory consisted of the following as of December 31, 2015 and 2014:


	December 31,		December 31,
*(in thousands)*	2015		2014
Current assets
Raw materials	$	—	$	198
Work-in-process		—		1,326
Finished goods		1,294		3,394
Deferred cost of goods sold		—		252

	$	1,294	$	5,170

Non-Current assets
Raw materials	$	127	$	—
Work-in-process		2,369		—

	$	2,496	$	—

Prepaid Expenses and Other Current Assets

12 Months Ended

Dec. 31, 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 December 31, 2015 and 2014:


	December 31,		December 31,
*(in thousands)*	2015		2014
Prepaid insurance	$	423	$	270
Prepaid manufacturing cost		346		358
Other prepaid expenses and vendor advances		4,763		2,302
Other current assets		210		154

	$	5,742	$	3,084

Property and Equipment

12 Months Ended

Dec. 31, 2015

Property and Equipment

9. Property and Equipment

The following is a summary of the Company’s property and equipment-at cost, as of December 31, 2015 and 2014:


*(in thousands)*	Estimated Useful Life (Years)		December 31,
*(in thousands)*	Estimated Useful Life (Years)		2015			2014
Computer and other equipment		3	$	2,046		$	1,316
Furniture and fixtures		7		1,318			765
Leasehold improvements		11		3,519			2,089

				6,883			4,170
Accumulated depreciation and amortization				(2,313	)		(1,733	)

			$	4,570		$	2,437

Depreciation expense for the years ended December 31, 2015, 2014 and 2013 was $0.6 million, $0.5 million and $0.4 million, respectively.

Intangible Assets

12 Months Ended

Dec. 31, 2015

Intangible Assets

10. Intangible Assets

The following is a summary of the Company’s intangible assets as of December 31, 2015:


		December 31, 2015
(in thousands)	Estimated Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HETLIOZ^®	January 2033	$	33,000	$	3,460	$	29,540
Fanapt^®	November 2016		27,941		18,729		9,212

		$	60,941	$	22,189	$	38,752

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


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

		$	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 year ended December 31, 2015. As a result, the future obligation of $25.0 million was recorded as a non-current liability as of December 31, 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 $2.9 million for the year ended December 31, 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 rights 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 December 2031. Amortization of intangible assets relating to Fanapt^® amounted to $10.1 million for the year ended December 31, 2015. See Note 3, Settlement Agreement with Novartis, for additional information.

The intangible assets are being amortized over their estimated useful economic life using the straight line method. Total amortization expense was $13.0 million, $2.3 million and $1.5 million for the years ended December 31, 2015, 2014 and 2013, respectively.

The following is a summary of the future intangible asset amortization schedule as of December 31, 2015:


*(in thousands)*	Total		2016		2017		2018		2019		2020		Thereafter
HETLIOZ^®	$	29,540	$	1,721	$	1,721	$	1,721	$	1,721	$	1,721	$	20,935
Fanapt^®		9,212		9,212		—		—		—		—		—

	$	38,752	$	10,933	$	1,721	$	1,721	$	1,721	$	1,721	$	20,935

Accounts Payable and Accrued Liabilities

12 Months Ended

Dec. 31, 2015

Accounts Payable and Accrued Liabilities

11. Accounts Payable and Accrued Liabilities

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


*(in thousands)*	December 31, 2015		December 31, 2014
Research and development expenses	$	3,199	$	1,759
Consulting and other professional fees		5,088		2,522
Compensation and employee benefits		468		388
Royalties payable		5,328		602
Other		1,684		2,020

	$	15,767	$	7,291

Deferred Licensing Revenue

12 Months Ended

Dec. 31, 2015

Deferred Licensing Revenue

12. Deferred Licensing Revenue

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


	Year Ended December 31,
*(in thousands)*	2015		2014		2013
Balance beginning of year	$	—	$	90,275	$	117,064
Licensing revenue recognized		—		(30,746)		(26,789)
Recognized as part of gain on arbitration settlement		—		(59,529)		—

Balance end of year	$	—	$	—	$	90,275

The Company entered into an amended and restated sublicense agreement with Novartis in 2009, pursuant to which Novartis had the right to commercialize and develop Fanapt^® in the U.S. and Canada. Under the amended and restated sublicense agreement, the Company received an upfront payment of $200.0 million. 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 additional information.

Commitments and Contingencies

12 Months Ended

Dec. 31, 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 December 31, 2015:


	Cash payments due by year (1) (2) (3)
*(in thousands)*	Total		2016		2017		2018		2019		2020		Thereafter
Operating leases	$	13,315	$	1,500	$	1,538	$	1,576	$	1,616	$	1,656	$	5,429

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, which was subsequently amended in 2014, with Square 54 Office Owner LLC (Landlord) for its headquarters, consisting of a total of 30,260 square feet of office space at 2200 Pennsylvania Avenue, N.W. in Washington, D.C. (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 its expiration. 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. 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 year ended December 31, 2015.

Rent expense under operating leases, was $1.9 million, $1.7 million and $1.1 million for the years ended December 31, 2015, 2014 and 2013, 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 October 2009, subsequent to the FDA’s approval of the NDA for Fanapt^®, 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 had 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. The Company also received royalties equal to 10% of net sales of Fanapt^® in the U.S. and Canada. The Company retained exclusive rights to Fanapt^® outside the U.S. and Canada and was obligated to make royalty payments to Sanofi S.A. (Sanofi) on Fanapt^® sales outside the U.S. and Canada.

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 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 rate in the mid-twenties on sales over $200.0 million through November 2016. See Note 3, Settlement Agreement with Novartis, for additional information. In February 2016, the Company amended the agreement with Sanofi and Titan to remove Titan as the entity through which royalty payments from Vanda are directed to Sanofi following the expiration of the new chemical entity (NCE) patent for Fanapt^® in the U.S. on November 15, 2016. Under the amended agreement, the Company will pay directly to Sanofi a fixed royalty of 3% of net sales from November 16, 2016 through December 31, 2019 related to manufacturing know-how. The Company will make a $2.0 million payment applied to this 3% manufacturing know-how royalty and will make additional royalty payments only to the extent that Vanda’s cumulative royalty obligations during this period exceed the amount of the pre-payment. No further royalties on manufacturing know-how are payable by Vanda after December 31, 2019. This amended agreement does not alter Titan’s obligation under the License Agreement to make royalty payments to Sanofi prior to November 16, 2016 or Vanda’s obligations under the Sublicense Agreement to pay Sanofi a fixed royalty on Fanapt net sales equal up to 6% on Sanofi know-how not related to manufacturing under certain conditions for a period of up to 10 years in markets where the NCE patent has expired or was not issued.

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

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.

Income Taxes

12 Months Ended

Dec. 31, 2015

Income Taxes

14. Income Taxes

Deferred tax assets are reduced by a tax 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 tax valuation allowance against all deferred tax assets as of and December 31, 2015 and 2014. As a result of the tax valuation allowance against deferred tax assets, there was no provision for income taxes for the years ended December 31, 2015, 2014 and 2013.

The following is reconciliation between the Company’s statutory tax rate and effective tax rate for the years ended December 31, 2015, 2014 and 2013:


	Year Ended December 31,
	2015			2014			2013
Federal tax at statutory rate		35.0	%		34.0	%		-34.0	%
State taxes		-0.1	%		7.2	%		-4.0	%
Change in valuation allowance		-25.4	%		-59.7	%		43.9	%
Research and development credit		1.5	%		1.3	%		-1.1	%
Orphan drug credit		1.6	%		8.5	%		-22.7	%
Section 162(m) limitation		-5.7	%		1.1	%		1.2	%
Tax rate change		-0.3	%		4.8	%		-0.3	%
Change in State NOLs		-1.4	%		0.0	%		18.5	%
Non-deductible stock-based compensation		-5.1	%		0.0	%		0.0	%
Other non-deductible items		-0.1	%		2.8	%		-1.5	%

Effective tax rate		0.0	%		0.0	%		0.0	%

As of December 31, 2015, the Company has early adopted the balance sheet reclassification of all current deferred taxes to non-current deferred taxes. The Company has presented this information prospectively; therefore, prior periods were not retrospectively adjusted.

The following is a summary of the components of the Company’s deferred tax assets, net, and the related tax valuation allowance as of December 31, 2015 and 2014:


	December 31,
*(in thousands)*	2015			2014
Deferred tax assets:
Net operating loss carry forwards	$	86,640		$	73,626
Stock-based compensation		12,919			17,160
Accrued and deferred expenses		1,443			532
Research and development and orphan drug credit carryforwards		38,333			36,772
Other		802			806

Total deferred tax assets		140,137			128,896

Deferred tax liabilities:
Other		(1,100	)		(6	)

Total deferred tax liabilities		(1,100	)		(6	)

Deferred tax assets, net		139,037			128,890
Valuation allowance		(139,037	)		(128,890	)

Net deferred tax assets	$	—		$	—

The following is a summary of changes in the Company’s tax valuation allowance for the years ended December 31, 2015, 2014 and 2013:


*(in thousands)*	Balance at Beginning of Year		Additions Charged to Tax Expense		Reductions Credited to Tax Expense			Balance at End of Year
Year Ended:
December 31, 2015	$	128,890	$	17,002	$	(6,855	)		139,037
December 31, 2014		141,150		27,893		(40,153	)		128,890
December 31, 2013		133,271		22,998		(15,119	)		141,150

As of December 31, 2015, the Company had federal and state NOL carryforwards of $232.6 million, including $6.5 million of gross excess windfall benefits generated from stock-based compensation from which the tax benefit would be recorded to Additional Paid in Capital if realized. As of December 31, 2015, the Company also had research and development credits of $6.8 million and orphan drug carryforward credits of $31.6 million. These NOL carryforwards and credits will begin to expire in 2028 and 2024, respectively.

Because the Company has generated NOLs from inception through December, 31, 2015, all income tax returns filed by the Company are open to examination by tax jurisdictions. As of December 31, 2015, the Company’s income tax returns have not been under examination by any federal or state tax jurisdictions. As of December 31, 2015 and 2014, the Company had no uncertain tax positions.

Certain tax attributes of the Company, including NOLs and credits, are subject to any ownership change as defined under IRC Section 382, A change in ownership could affect the Company’s ability to use NOLs and credit carryforward (tax attributes). Ownership changes did occur as of December 31, 2014 and December 31, 2008. However, the Company believes that it had sufficient Built-In-Gain to offset the Internal Revenue Code of 1986, as amended (IRC), Section 382 limitation generated by the ownership changes. Any future ownership changes may cause the Company’s existing tax attributes to have additional limitations. Additionally, the Company maintains a valuation allowance on its tax attributes, therefore, any IRC Section 382 limitation would not have a material impact on the Company’s provision for income taxes as of December 31, 2015.

Public Offering of Common Stock

12 Months Ended

Dec. 31, 2015

Public Offering of Common Stock

15. Public Offering of Common Stock

In October 2014, the Company completed a public offering of 5,750,000 shares of common stock at a price to the public of $11.60 per share. Net cash proceeds from the public offering were $62.3 million, after deducting the underwriting discounts and commissions and offering expenses. In August 2013, the Company completed a public offering of 4,680,000 shares of common stock at a price to the public of $11.14 per share. Net cash proceeds from the 2013 public offering were $48.5 million, after deducting the underwriting discounts and commissions and offering expenses.

Equity Incentive Plans

12 Months Ended

Dec. 31, 2015

Equity Incentive Plans

16. Equity Incentive Plans

During the year ended December 31, 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 no shares subject to outstanding options granted under the 2004 Plan as of December 31, 2015, and no additional options will be granted under the 2004 Plan. As of December 31, 2015, there were 11,829,472 shares of the Company’s common stock reserved for issuance under the 2006 Plan, of which 7,275,129 shares were subject to outstanding options and RSUs and 1,733,142 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, 2016, 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 13,329,472 shares.

The Company has granted option awards with service conditions (service option awards) that are subject to terms and conditions established by the compensation committee of the board of directors. Service option awards have 10-year contractual terms and all service option awards granted prior to December 31, 2006, service option awards granted to new employees, and certain service option awards granted to existing employees vest and become exercisable on the first anniversary of the grant date with respect to the 25% of the shares subject to service option awards. The remaining 75% of the shares subject to the service option awards vest and become exercisable monthly in equal installments thereafter over three years. Certain service option awards granted to existing employees after December 31, 2006 vest and become exercisable monthly in equal installments over four years. The initial service option awards granted to directors upon their election vest and become exercisable in equal monthly installments over a period of four years, while the subsequent annual service option awards granted to directors vest and become exercisable in equal monthly installments over a period of one year. Certain service option awards to executives and directors provide for accelerated vesting if there is a change in control of the Company. Certain service option awards to employees and executives provide for accelerated vesting if the respective employee’s or executive’s service is terminated by the Company for any reason other than cause or permanent disability. As of December 31, 2015, $12.6 million of unrecognized compensation costs related to unvested service option awards are expected to be recognized over a weighted average period of 1.4 years. No option awards are classified as a liability as of December 31, 2015.

The following is a summary of option activity for the 2004 Plan for the years ended December 31, 2015, 2014, and 2013:


*2004 Option Plan*
*(in thousands, except for share and per share amounts)*	Number of Shares			Weighted Average Exercise Price at Grant Date		Weighted Average Remaining Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2012		672,145		$	1.79		2.78	$	1,512
Exercised		(115	)		4.73
Expired		(1,286	)		3.67

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

Outstanding at December 31, 2014		652,810			1.74		0.78		8,212
Exercised		(652,810	)		1.74				6,129

Outstanding at December 31, 2015		—

The following is a summary of option activity for the 2006 Plan for the years ended December 31, 2015, 2014, and 2013:


*2006 Option Plan*
*(in thousands, except for share and per share amounts)*	Number of Shares			Weighted Average Exercise Price at Grant Date		Weighted Average Remaining Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2012		4,865,487		$	10.83		7.15	$	634
Granted		1,245,500			10.18
Forfeited		(54,226	)		6.14
Expired		(259,295	)		10.65
Exercised		(263,848	)		5.86				1,545

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

Outstanding at December 31, 2014		6,227,112			11.58		6.71		28,523
Granted		1,056,500			11.74
Forfeited		(496,854	)		10.75
Expired		(64,336	)		25.69
Exercised		(469,974	)		7.02				2,594

Outstanding at December 31, 2015		6,252,448			11.87		6.16		7,498

Exercisable at December 31, 2015		4,163,690			12.11		4.86		6,616

Vested and expected to vest at December 31, 2015		6,120,365			11.87		6.10		7,491

Proceeds from the exercise of stock options amounted to $4.4 million, $2.9 million and $1.6 million for the years ended December 31, 2015, 2014 and 2013, respectively.

An RSU is a stock award that entitles the holder to receive shares of the Company’s common stock as the award vests. The fair value of each RSU is based on the closing price of the Company’s stock on the date of grant. The Company has granted RSUs with service conditions (service RSUs) that vest in four equal annual installments provided that the employee remains employed with the Company. As of December 31, 2015, $8.5 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 December 31, 2015.

The following is a summary of RSU activity for the 2006 Plan for the years ended December 31, 2015, 2014, and 2013:


RSUs	Number of Shares Underlying RSUs			Weighted Average Grant Date Fair Value
Unvested at December 31, 2012		705,376		$	5.91
Granted		400,500			10.29
Forfeited		(21,000	)		6.41
Vested		(201,186	)		6.71

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

Unvested at December 31, 2014		1,025,961			9.94
Granted		417,000			11.51
Forfeited		(189,187	)		10.60
Vested		(231,093	)		7.96

Unvested at December 31, 2015		1,022,681			10.90

The grant date fair value for the 231,093 shares underlying RSUs that vested during the year ended December 31, 2015 was $1.8 million.

Employee Benefit Plan

12 Months Ended

Dec. 31, 2015

Employee Benefit Plan

17. Employee Benefit Plan

The Company has a defined contribution plan under IRC Section 401(k). This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Currently, the Company matches 50 percent up to the first six percent of employee contributions. All matching contributions have been paid by the Company. The Company match vests over a four year period. The total Company match was $0.3 million, $0.2 million and $0.2 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Legal Matters

12 Months Ended

Dec. 31, 2015

Legal Matters

18. 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 ‘610 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 ‘610 Patent by engaging in the manufacture, use, offer to sell, sale, importation or distribution of generic versions of Fanapt^® before the expiration of the ‘610 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 the ‘610 Patent 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 ‘610 Patent by engaging in the manufacture, use, offer to sell, sale, importation or distribution of generic versions of Fanapt^® before the expiration of the ‘610 Patent in 2027. This lawsuit is scheduled to be tried in a four-day bench trial beginning on January 17, 2017.

In October 2015, the Company filed four separate patent infringement lawsuits in the United States District Court for the District of Delaware (the October 2015 Lawsuits). Two of the October 2015 Lawsuits join the existing litigations against the previous Fanapt^® ANDA filers, Roxane and Inventia, described above. The other two October 2015 Lawsuits were filed against new ANDA filers, Taro Pharmaceuticals, U.S.A., Inc. /Taro Pharmaceuticals Ltd. (Taro) and Apotex Inc. (Apotex).

The first of the October 2015 Lawsuits, which was filed against Roxane, seeks an adjudication that Roxane has infringed one or more claims of the Company’s U.S. Patent No. 9,138,432 (the ‘432 Patent) by submitting to the FDA its ANDA for a generic version of Fanapt^® prior to the expiration of the ‘432 Patent in September 2025. The relief requested by the Company includes a request for a permanent injunction preventing Roxane from infringing the asserted claims of the ‘432 Patent by engaging in the manufacture, use, offer to sell, sale, importation or distribution of generic versions of Fanapt^® before the expiration of the ‘432 Patent in 2025.

The second of the October 2015 Lawsuits, which was filed against Inventia, seeks an adjudication that Inventia has infringed one or more claims of the ‘432 Patent by submitting to the FDA its ANDA for a generic version of Fanapt^® prior to the expiration of the ‘432 Patent in September 2025. The relief requested by the Company includes a request for a permanent injunction preventing Inventia from infringing the asserted claims of the ‘432 Patent by engaging in the manufacture, use, offer to sell, sale, importation or distribution of generic versions of Fanapt^® before the expiration of the ‘432 Patent in 2025.

The third of the October 2015 Lawsuits, which was filed against Taro, seeks an adjudication that Taro has infringed one or more claims of the ‘432 Patent and the ‘610 Patent by submitting to the FDA an ANDA for a generic version of Fanapt^® prior to the expiration of the ‘432 patent in September 2025 and the ‘610 Patent in November 2027. The relief requested by the Company includes a request for a permanent injunction preventing Taro from infringing the asserted claims of the ‘432 Patent and the ‘610 Patent by engaging in the manufacture, use, offer to sell, sale, importation or distribution of generic versions of Fanapt^® before the expiration of the ‘432 Patent in 2025 and the ‘610 Patent in 2027.

The fourth of the October 2015 Lawsuits, which was filed against Apotex and Apotex Corp., seeks an adjudication that Apotex has infringed one or more claims of the ‘432 Patent and the ‘610 Patent by submitting to the FDA an ANDA for a generic version of Fanapt^® prior to the expiration of the ‘432 Patent in September 2025 and the ‘610 Patent in November 2027. The relief requested by the Company includes a request for a permanent injunction preventing Apotex from infringing the asserted claims of the ‘432 Patent and the ‘610 Patent by engaging in the manufacture, use, offer to sell, sale, importation or distribution of generic versions of Fanapt^® before the expiration of the ‘432 Patent in 2025 and the ‘610 Patent in 2027.

In November 2015, the Company filed a patent infringement lawsuit in the United States District Court for the District of Delaware against Lupin Limited and Lupin Pharmaceuticals, Inc. (collectively, Lupin). The suit seeks an adjudication that Lupin has infringed one or more claims of the ‘432 Patent and the ‘610 Patent by submitting to the FDA its ANDA for a generic version of Fanapt^® prior to the expiration of the ‘432 Patent in September 2025 and the ‘610 Patent in November 2027. The relief requested by the Company in the lawsuit includes a request for a permanent injunction preventing Lupin from infringing the asserted claims of the ‘432 Patent and the ‘610 Patent by engaging in the manufacture, use, offer to sell, sale, importation or distribution of generic versions of Fanapt^® before the expiration of the ‘432 Patent in 2025 and the ‘610 Patent in 2027.

Quarterly Financial Data (unaudited)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Data (unaudited)

19. Quarterly Financial Data (unaudited)


	First			Second			Third			Fourth
*(in thousands, except for per share amounts)*	Quarter			Quarter			Quarter			Quarter
2015
Revenue	$	22,150		$	27,582		$	28,344		$	31,849
Gross profit		17,135			21,816			21,834			25,678
Loss from operations		(10,293	)		(5,458	)		(9,541	)		(14,893	)
Net loss		(10,221	)		(5,386	)		(9,461	)		(14,798	)
Net loss per share, basic and diluted	$	(0.24	)	$	(0.13	)	$	(0.22	)	$	(0.35	)
2014
Revenue	$	9,143		$	10,862		$	14,782		$	15,370
Gross profit		9,143			10,664			14,079			14,688
Income (loss) from operations		(26,578	)		(21,606	)		(1,448	)		69,693
Net income (loss)		(26,533	)		(21,575	)		(1,426	)		69,719
Net income (loss) per share:
Basic	$	(0.79	)	$	(0.64	)	$	(0.04	)	$	1.85
Diluted	$	(0.79	)	$	(0.64	)	$	(0.04	)	$	1.77

The Company’s results for the fourth quarter of 2014 include a gain on arbitration settlement of $77.6 million, or $2.06 and $1.97 per basic and diluted share, respectively. See Note 3, Settlement Agreement with Novartis, for additional information. Gross profit has been calculated by subtracting Cost of Goods Sold from Total Revenues in the period.

Business Organization and Presentation (Policies)

12 Months Ended

Dec. 31, 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

Reclassifications

Reclassifications

Certain reclassifications have been made to prior year amounts to conform with current year classifications.

Use of Estimates

Use of Estimates

Cash and Cash Equivalents

Cash and Cash Equivalents

Marketable Securities

Marketable Securities

Inventory

Inventory

Intangible Assets

Intangible Assets

Property and Equipment

Property and Equipment

Accounts Payable and Accrued Liabilities

Accounts Payable and Accrued Liabilities

Net Product Sales

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 years ended December 31, 2015, 2014 and 2014 were as follows:


	Year Ended December 31,
*(in thousands)*	2015		2014		2013
HETLIOZ^® product sales, net	$	44,302	$	12,802	$	—
Fanapt^® product sales, net		65,623		107		—

	$	109,925	$	12,909	$	—

Product Sales Discounts and Allowances

The following table summarizes accounts receivable allowance activity as of and for the years ended December 31, 2015, 2014 and 2013.


*(in thousands)*	Accounts Receivable Allowances
Balance at December 31, 2012	$	—
Provision related to current period sales		—
Adjustments for prior period sales		—
Credits/payments made		—

Balance at December 31, 2013	$	—
Provision related to current period sales		85
Adjustments for prior period sales		—
Credits/payments made		—

Balance at December 31, 2014	$	85
Provision related to current period sales		1,071
Adjustments for prior period sales		(85	)
Credits/payments made		(12	)

Balance at December 31, 2015	$	1,059

License Revenue

Major Customers

Major Customers

The following table presents each major customer that represented more than 10% of total revenues for the years ended December 31, 2015, 2014 and 2013:


	Year Ended December 31,
Percent of Total Revenues	2015		2014		2013
Novartis -royalty revenue		—		13%		21%
Novartis -license agreement		—		61%		79%
Distributor A		17%		—		—
Distributor B		18%		—		—
Distributor C		19%		—		—
Distributor D		14%		—		—
Distributor E		14%		—		—
Distributor F		12%		—		—

The following table presents each major customer that represented more than 10% of accounts receivable, net, as of December 31, 2015 and 2014:


	December 31,
Percent of Accounts Receivable, Net	2015		2014
Novartis -royalty		—		42%
Distributor A		22%		—
Distributor B		24%		—
Distributor C		17%		—
Distributor D		12%		21%
Distributor E		12%		17%
Distributor F		—		20%

Cost of Goods Sold

Cost of Goods Sold

Research and Development Expenses

Research and Development Expenses

Selling, General and Administrative Expenses

Selling, General and Administrative Expenses

Stock-based Compensation

Stock-based Compensation

Assumptions used in the Black-Scholes-Merton option pricing model for employee and director stock options granted during the years ended December 31, 2015, 2014 and 2013 were as follows:


	Year Ended December 31,
	2015			2014			2013
Expected dividend yield		0	%		0	%		0	%
Weighted average expected volatility		60	%		62	%		65	%
Weighted average expected term (years)		6.00			5.90			6.03
Weighted average risk-free rate		1.67	%		1.73	%		1.59	%
Weighted average fair value per share	$	11.74		$	6.99		$	6.10

Stock-based compensation expense recognized for the years ended December 31, 2015, 2014 and 2013 was comprised of the following:


	Year Ended December 31,
*(in thousands)*	2015		2014		2013
Research and development	$	2,269	$	1,933	$	2,166
Selling, general and administrative		5,692		3,945		3,238

	$	7,961	$	5,878	$	5,404

Advertising Expense

Advertising Expense

Income taxes

Income taxes

Certain risks and uncertainties

Certain risks and uncertainties

Concentrations of credit risk

Concentrations of credit risk

Segment information

Segment information

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

Recent accounting pronouncements

Recent accounting pronouncements

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2015

Net Sales by Product

The Company’s net product sales consist of sales of HETLIOZ^® and, beginning in 2015, sales of Fanapt^®. Net sales by product for the years ended December 31, 2015, 2014 and 2014 were as follows:


	Year Ended December 31,
*(in thousands)*	2015		2014		2013
HETLIOZ^® product sales, net	$	44,302	$	12,802	$	—
Fanapt^® product sales, net		65,623		107		—

	$	109,925	$	12,909	$	—

Summary of Accounts Receivable Allowance Activity

The following table summarizes accounts receivable allowance activity as of and for the years ended December 31, 2015, 2014 and 2013.


*(in thousands)*	Accounts Receivable Allowances
Balance at December 31, 2012	$	—
Provision related to current period sales		—
Adjustments for prior period sales		—
Credits/payments made		—

Balance at December 31, 2013	$	—
Provision related to current period sales		85
Adjustments for prior period sales		—
Credits/payments made		—

Balance at December 31, 2014	$	85
Provision related to current period sales		1,071
Adjustments for prior period sales		(85	)
Credits/payments made		(12	)

Balance at December 31, 2015	$	1,059

Schedule of Major Customers that Represented More Than 10% of Total Revenues

The following table presents each major customer that represented more than 10% of total revenues for the years ended December 31, 2015, 2014 and 2013:


	Year Ended December 31,
Percent of Total Revenues	2015		2014		2013
Novartis -royalty revenue		—		13%		21%
Novartis -license agreement		—		61%		79%
Distributor A		17%		—		—
Distributor B		18%		—		—
Distributor C		19%		—		—
Distributor D		14%		—		—
Distributor E		14%		—		—
Distributor F		12%		—		—

Schedule of Major Customers that Represented More Than 10% of Accounts Receivable, Net

The following table presents each major customer that represented more than 10% of accounts receivable, net, as of December 31, 2015 and 2014:


	December 31,
Percent of Accounts Receivable, Net	2015		2014
Novartis -royalty		—		42%
Distributor A		22%		—
Distributor B		24%		—
Distributor C		17%		—
Distributor D		12%		21%
Distributor E		12%		17%
Distributor F		—		20%

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

Assumptions used in the Black-Scholes-Merton option pricing model for employee and director stock options granted during the years ended December 31, 2015, 2014 and 2013 were as follows:


	Year Ended December 31,
	2015			2014			2013
Expected dividend yield		0	%		0	%		0	%
Weighted average expected volatility		60	%		62	%		65	%
Weighted average expected term (years)		6.00			5.90			6.03
Weighted average risk-free rate		1.67	%		1.73	%		1.59	%
Weighted average fair value per share	$	11.74		$	6.99		$	6.10

Total Employee Stock-Based Compensation Expense

Stock-based compensation expense recognized for the years ended December 31, 2015, 2014 and 2013 was comprised of the following:


	Year Ended December 31,
*(in thousands)*	2015		2014		2013
Research and development	$	2,269	$	1,933	$	2,166
Selling, general and administrative		5,692		3,945		3,238

	$	7,961	$	5,878	$	5,404

Settlement Agreement with Novartis (Tables)

12 Months Ended

Dec. 31, 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)

12 Months Ended

Dec. 31, 2015

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

The following table presents the calculation of basic and diluted net income (loss) per share of common stock for the years ended December 31, 2015, 2014, and 2013:


	Year Ended December 31,
*(in thousands, except for share and per share amounts)*	2015			2014		2013
Numerator:
Net income (loss)	$	(39,865	)	$	20,186	$	(21,055	)

Denominator:
Weighted average shares outstanding: Basic		42,250,254			34,774,163		30,351,353
Effect of dilutive securities		—			1,912,560		—

Weighted average shares outstanding: Diluted		42,250,254			36,686,723		30,351,353

Net income (loss) per share, basic and diluted:
Basic	$	(0.94	)	$	0.58	$	(0.69	)

Diluted	$	(0.94	)	$	0.55	$	(0.69	)

Antidilutive securities excluded from calculations of diluted net income (loss) per share		5,660,199			3,524,656		4,409,811

Marketable Securities (Tables)

12 Months Ended

Dec. 31, 2015

Summary of Available-for-Sale Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of December 31, 2015, all of which have contract maturities of less than one year:


*December 31, 2015* *(in thousands)*	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
U.S. Treasury and government agencies	$	44,059	$	6	$	(8	)	$	44,057
Corporate debt		48,239		46		(5	)		48,280

	$	92,298	$	52	$	(13	)	$	92,337

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


*December 31, 2014* *(in thousands)*	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
U.S. Treasury and government agencies	$	30,618	$	4	$	(4	)	$	30,618
Corporate debt		38,287		25		(9	)		38,303

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

- 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)

12 Months Ended

Dec. 31, 2015

Assets Measured at Fair Value on Recurring Basis

As of December 31, 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 December 31, 2015 Using
*(in thousands)*	December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities:
U.S. Treasury and government agencies	$	44,057	$	44,057	$	—	$	—
Corporate debt		48,280		—		48,280

	$	92,337	$	44,057	$	48,280	$	—

As of December 31, 2014, the Company held certain assets that are required to be measured at fair value on a recurring basis, as follows:


			Fair Value Measurement as of December 31, 2014 Using
*(in thousands)*	December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities:
U.S. Treasury and government agencies	$	30,618	$	30,618	$	—	$	—
Corporate debt		38,303		—		38,303

	$	68,921	$	30,618	$	38,303	$	—

Inventory (Tables)

12 Months Ended

Dec. 31, 2015

Inventory

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


	December 31,		December 31,
*(in thousands)*	2015		2014
Current assets
Raw materials	$	—	$	198
Work-in-process		—		1,326
Finished goods		1,294		3,394
Deferred cost of goods sold		—		252

	$	1,294	$	5,170

Non-Current assets
Raw materials	$	127	$	—
Work-in-process		2,369		—

	$	2,496	$	—

Prepaid Expenses and Other Current Assets (Tables)

12 Months Ended

Dec. 31, 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 December 31, 2015 and 2014:


	December 31,		December 31,
*(in thousands)*	2015		2014
Prepaid insurance	$	423	$	270
Prepaid manufacturing cost		346		358
Other prepaid expenses and vendor advances		4,763		2,302
Other current assets		210		154

	$	5,742	$	3,084

Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2015

Summary of Property and Equipment-at Cost

The following is a summary of the Company’s property and equipment-at cost, as of December 31, 2015 and 2014:


*(in thousands)*	Estimated Useful Life (Years)		December 31,
*(in thousands)*	Estimated Useful Life (Years)		2015			2014
Computer and other equipment		3	$	2,046		$	1,316
Furniture and fixtures		7		1,318			765
Leasehold improvements		11		3,519			2,089

				6,883			4,170
Accumulated depreciation and amortization				(2,313	)		(1,733	)

			$	4,570		$	2,437

Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2015

Summary of Intangible Assets

The following is a summary of the Company’s intangible assets as of December 31, 2015:


		December 31, 2015
(in thousands)	Estimated Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HETLIOZ^®	January 2033	$	33,000	$	3,460	$	29,540
Fanapt^®	November 2016		27,941		18,729		9,212

		$	60,941	$	22,189	$	38,752

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


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

		$	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 December 31, 2015:


*(in thousands)*	Total		2016		2017		2018		2019		2020		Thereafter
HETLIOZ^®	$	29,540	$	1,721	$	1,721	$	1,721	$	1,721	$	1,721	$	20,935
Fanapt^®		9,212		9,212		—		—		—		—		—

	$	38,752	$	10,933	$	1,721	$	1,721	$	1,721	$	1,721	$	20,935

Accounts Payable and Accrued Liabilities (Tables)

12 Months Ended

Dec. 31, 2015

Summary of Accounts Payable and Accrued Liabilities

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


*(in thousands)*	December 31, 2015		December 31, 2014
Research and development expenses	$	3,199	$	1,759
Consulting and other professional fees		5,088		2,522
Compensation and employee benefits		468		388
Royalties payable		5,328		602
Other		1,684		2,020

	$	15,767	$	7,291

Deferred Licensing Revenue (Tables)

12 Months Ended

Dec. 31, 2015

Summary of Changes in Deferred Licensing Revenue

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


	Year Ended December 31,
*(in thousands)*	2015		2014		2013
Balance beginning of year	$	—	$	90,275	$	117,064
Licensing revenue recognized		—		(30,746)		(26,789)
Recognized as part of gain on arbitration settlement		—		(59,529)		—

Balance end of year	$	—	$	—	$	90,275

Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 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 December 31, 2015:


	Cash payments due by year (1) (2) (3)
*(in thousands)*	Total		2016		2017		2018		2019		2020		Thereafter
Operating leases	$	13,315	$	1,500	$	1,538	$	1,576	$	1,616	$	1,656	$	5,429

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Reconciliation Between Statutory Tax Rate and Effective Tax Rate

The following is reconciliation between the Company’s statutory tax rate and effective tax rate for the years ended December 31, 2015, 2014 and 2013:


	Year Ended December 31,
	2015			2014			2013
Federal tax at statutory rate		35.0	%		34.0	%		-34.0	%
State taxes		-0.1	%		7.2	%		-4.0	%
Change in valuation allowance		-25.4	%		-59.7	%		43.9	%
Research and development credit		1.5	%		1.3	%		-1.1	%
Orphan drug credit		1.6	%		8.5	%		-22.7	%
Section 162(m) limitation		-5.7	%		1.1	%		1.2	%
Tax rate change		-0.3	%		4.8	%		-0.3	%
Change in State NOLs		-1.4	%		0.0	%		18.5	%
Non-deductible stock-based compensation		-5.1	%		0.0	%		0.0	%
Other non-deductible items		-0.1	%		2.8	%		-1.5	%

Effective tax rate		0.0	%		0.0	%		0.0	%

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

The following is a summary of the components of the Company’s deferred tax assets, net, and the related tax valuation allowance as of December 31, 2015 and 2014:


	December 31,
*(in thousands)*	2015			2014
Deferred tax assets:
Net operating loss carry forwards	$	86,640		$	73,626
Stock-based compensation		12,919			17,160
Accrued and deferred expenses		1,443			532
Research and development and orphan drug credit carryforwards		38,333			36,772
Other		802			806

Total deferred tax assets		140,137			128,896

Deferred tax liabilities:
Other		(1,100	)		(6	)

Total deferred tax liabilities		(1,100	)		(6	)

Deferred tax assets, net		139,037			128,890
Valuation allowance		(139,037	)		(128,890	)

Net deferred tax assets	$	—		$	—

Summary of Changes in Tax Valuation Allowance

The following is a summary of changes in the Company’s tax valuation allowance for the years ended December 31, 2015, 2014 and 2013:


*(in thousands)*	Balance at Beginning of Year		Additions Charged to Tax Expense		Reductions Credited to Tax Expense			Balance at End of Year
Year Ended:
December 31, 2015	$	128,890	$	17,002	$	(6,855	)		139,037
December 31, 2014		141,150		27,893		(40,153	)		128,890
December 31, 2013		133,271		22,998		(15,119	)		141,150

Equity Incentive Plans (Tables)

12 Months Ended

Dec. 31, 2015

Summary of RSU Activity for 2006 Plan

The following is a summary of RSU activity for the 2006 Plan for the years ended December 31, 2015, 2014, and 2013:


RSUs	Number of Shares Underlying RSUs			Weighted Average Grant Date Fair Value
Unvested at December 31, 2012		705,376		$	5.91
Granted		400,500			10.29
Forfeited		(21,000	)		6.41
Vested		(201,186	)		6.71

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

Unvested at December 31, 2014		1,025,961			9.94
Granted		417,000			11.51
Forfeited		(189,187	)		10.60
Vested		(231,093	)		7.96

Unvested at December 31, 2015		1,022,681			10.90

2004 Plan

Summary of Option Activity Plan

The following is a summary of option activity for the 2004 Plan for the years ended December 31, 2015, 2014, and 2013:


*2004 Option Plan*
*(in thousands, except for share and per share amounts)*	Number of Shares			Weighted Average Exercise Price at Grant Date		Weighted Average Remaining Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2012		672,145		$	1.79		2.78	$	1,512
Exercised		(115	)		4.73
Expired		(1,286	)		3.67

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

Outstanding at December 31, 2014		652,810			1.74		0.78		8,212
Exercised		(652,810	)		1.74				6,129

Outstanding at December 31, 2015		—

2006 Plan

Summary of Option Activity Plan

The following is a summary of option activity for the 2006 Plan for the years ended December 31, 2015, 2014, and 2013:


*2006 Option Plan*
*(in thousands, except for share and per share amounts)*	Number of Shares			Weighted Average Exercise Price at Grant Date		Weighted Average Remaining Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2012		4,865,487		$	10.83		7.15	$	634
Granted		1,245,500			10.18
Forfeited		(54,226	)		6.14
Expired		(259,295	)		10.65
Exercised		(263,848	)		5.86				1,545

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

Outstanding at December 31, 2014		6,227,112			11.58		6.71		28,523
Granted		1,056,500			11.74
Forfeited		(496,854	)		10.75
Expired		(64,336	)		25.69
Exercised		(469,974	)		7.02				2,594

Outstanding at December 31, 2015		6,252,448			11.87		6.16		7,498

Exercisable at December 31, 2015		4,163,690			12.11		4.86		6,616

Vested and expected to vest at December 31, 2015		6,120,365			11.87		6.10		7,491

Quarterly Financial Data (unaudited) (Tables)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Data


	First			Second			Third			Fourth
*(in thousands, except for per share amounts)*	Quarter			Quarter			Quarter			Quarter
2015
Revenue	$	22,150		$	27,582		$	28,344		$	31,849
Gross profit		17,135			21,816			21,834			25,678
Loss from operations		(10,293	)		(5,458	)		(9,541	)		(14,893	)
Net loss		(10,221	)		(5,386	)		(9,461	)		(14,798	)
Net loss per share, basic and diluted	$	(0.24	)	$	(0.13	)	$	(0.22	)	$	(0.35	)
2014
Revenue	$	9,143		$	10,862		$	14,782		$	15,370
Gross profit		9,143			10,664			14,079			14,688
Income (loss) from operations		(26,578	)		(21,606	)		(1,448	)		69,693
Net income (loss)		(26,533	)		(21,575	)		(1,426	)		69,719
Net income (loss) per share:
Basic	$	(0.79	)	$	(0.64	)	$	(0.04	)	$	1.85
Diluted	$	(0.79	)	$	(0.64	)	$	(0.04	)	$	1.77

Summary of Significant Accounting Policies - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2015 USD ($) Segment	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	Dec. 31, 2009 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Restricted cash, current and non-current	$ 800,000	$ 800,000
Percentage of insurance coverage gap allocated for prescription drugs under Medicare Part D	50.00%
Advertising expenses	$ 3,400,000	$ 5,000,000	$ 0
Number of reportable segments \| Segment	1
Fanapt
Summary Of Significant Accounting Policies [Line Items]
Upfront payment received under Fanapt sublicense agreement from Novartis				$ 200,000,000

Net Sales by Product (Detail) - USD ($) $ in Thousands	12 Months Ended
Net Sales by Product (Detail) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Revenue from External Customer [Line Items]
Product sales, net	$ 109,925	$ 12,909
HETLIOZ
Revenue from External Customer [Line Items]
Product sales, net	44,302	12,802
Fanapt
Revenue from External Customer [Line Items]
Product sales, net	$ 65,623	$ 107

Summary of Accounts Receivable Allowance Activity (Detail) - Accounts Receivable Allowance - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Valuation and Qualifying Accounts Disclosure [Line Items]
Beginning balance	$ 85
Provision related to current period sales	1,071	$ 85
Adjustments for prior period sales	(85)
Credits/payments made	(12)
Ending balance	$ 1,059	$ 85

Schedule of Major Customers that Represented More Than 10% of Total Revenues (Detail) - Customer Concentration Risk - Sales Revenue, Net	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Novartis \| Royalty Revenue
Revenue, Major Customer [Line Items]
Concentration Risk, Percentage		13.00%	21.00%
Novartis \| Licensing agreement
Revenue, Major Customer [Line Items]
Concentration Risk, Percentage		61.00%	79.00%
Distributor A
Revenue, Major Customer [Line Items]
Concentration Risk, Percentage	17.00%
Distributor B
Revenue, Major Customer [Line Items]
Concentration Risk, Percentage	18.00%
Distributor C
Revenue, Major Customer [Line Items]
Concentration Risk, Percentage	19.00%
Distributor D
Revenue, Major Customer [Line Items]
Concentration Risk, Percentage	14.00%
Distributor E
Revenue, Major Customer [Line Items]
Concentration Risk, Percentage	14.00%
Distributor F
Revenue, Major Customer [Line Items]
Concentration Risk, Percentage	12.00%

Schedule of Major Customers that Represented More Than 10% of Accounts Receivable, Net (Detail) - Credit Concentration Risk - Accounts Receivable	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Novartis \| Royalty Revenue
Concentration Risk [Line Items]
Concentration Risk, Percentage		42.00%
Distributor A
Concentration Risk [Line Items]
Concentration Risk, Percentage	22.00%
Distributor B
Concentration Risk [Line Items]
Concentration Risk, Percentage	24.00%
Distributor C
Concentration Risk [Line Items]
Concentration Risk, Percentage	17.00%
Distributor D
Concentration Risk [Line Items]
Concentration Risk, Percentage	12.00%	21.00%
Distributor E
Concentration Risk [Line Items]
Concentration Risk, Percentage	12.00%	17.00%
Distributor F \| Royalty Revenue
Concentration Risk [Line Items]
Concentration Risk, Percentage		20.00%

Black-Scholes-Merton Option Pricing Model for Stock Options Granted (Detail) - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Share Based Payment Award Stock Options Valuation Assumptions [Line Items]
Expected dividend yield	0.00%	0.00%	0.00%
Weighted average expected volatility	60.00%	62.00%	65.00%
Weighted average expected term (years)	6 years	5 years 10 months 24 days	6 years 11 days
Weighted average risk-free rate	1.67%	1.73%	1.59%
Weighted average fair value per share	$ 11.74	$ 6.99	$ 6.10

Total Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total employee stock-based compensation expense	$ 7,961	$ 5,878	$ 5,404
Research and development
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total employee stock-based compensation expense	2,269	1,933	2,166
Selling, general and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total employee stock-based compensation expense	$ 5,692	$ 3,945	$ 3,238

Settlement Agreement with Novartis - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended		3 Months Ended	12 Months Ended
	Oct. 31, 2014	Aug. 31, 2013	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2009
Business Acquisition [Line Items]
Net proceeds from offering of common stock	$ 62,300	$ 48,500			$ 62,313	$ 48,505
Intangible assets, amortization method				Straight-line basis
Gain on termination of pre-existing non-contractual relationship			$ 77,616		$ 77,616
Fanapt
Business Acquisition [Line Items]
Intangible assets, estimated useful life				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			$ 59,529		59,529
Novartis Pharma AG
Business Acquisition [Line Items]
Net proceeds from offering of common stock					25,000
Novartis Pharma AG \| Settlement Agreement
Business Acquisition [Line Items]
Net proceeds from offering of common stock					$ 25,000
Price per share			$ 13.82		$ 13.82
Stock issued during period, shares					1,808,973
Percentage of premium to average closing prices			10.00%		10.00%
Trading days					10 days
Gain (Loss) on issuance of stock					$ (900)

Fair Value of Consideration Exchanged as Part of Settlement Agreement (Detail) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended	12 Months Ended
	Oct. 31, 2014	Aug. 31, 2013	Dec. 31, 2014	Dec. 31, 2014	Dec. 31, 2013
Business Acquisition [Line Items]
Equity issued				$ 25,905
Cash received	$ (62,300)	$ (48,500)		(62,313)	$ (48,505)
Settlement of pre-existing non-contractual relationship			$ 77,616	77,616
Settlement Agreement
Business Acquisition [Line Items]
Equity issued				25,904
Cash received				(25,000)
Settlement of pre-existing non-contractual relationship				18,087
Business Combination, Consideration Transferred, Total				$ 18,991

Assets Acquired and Recorded at Fair Value (Detail) $ 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								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Numerator:
Net income (loss)	$ (14,798)	$ (9,461)	$ (5,386)	$ (10,221)	$ 69,719	$ (1,426)	$ (21,575)	$ (26,533)	$ (39,865)	$ 20,186	$ (21,055)
Denominator:
Weighted average shares outstanding: Basic									42,250,254	34,774,163	30,351,353
Effect of dilutive securities										1,912,560
Weighted average shares outstanding: Diluted									42,250,254	36,686,723	30,351,353
Net income (loss) per share, basic and diluted:
Basic					$ 1.85	$ (0.04)	$ (0.64)	$ (0.79)	$ (0.94)	$ 0.58	$ (0.69)
Diluted					$ 1.77	$ (0.04)	$ (0.64)	$ (0.79)	$ (0.94)	$ 0.55	$ (0.69)
Antidilutive securities excluded from calculations of diluted net income (loss) per share									5,660,199	3,524,656	4,409,811

Summary of Available-For-Sale Marketable Securities (Detail) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	$ 92,337	$ 68,921
U.S. Treasury and government agencies
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	44,057	30,618
Corporate debt
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	48,280	38,303
Current Investment
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	92,298	68,905
Gross Unrealized Gains	52	29
Gross Unrealized Losses	(13)	(13)
Fair Market Value	92,337	68,921
Current Investment \| U.S. Treasury and government agencies
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	44,059	30,618
Gross Unrealized Gains	6	4
Gross Unrealized Losses	(8)	(4)
Fair Market Value	44,057	30,618
Current Investment \| Corporate debt
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	48,239	38,287
Gross Unrealized Gains	46	25
Gross Unrealized Losses	(5)	(9)
Fair Market Value	$ 48,280	$ 38,303

Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 92,337	$ 68,921
U.S. Treasury and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	44,057	30,618
Corporate debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	48,280	38,303
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	44,057	30,618
Quoted Prices in Active Markets for Identical Assets (Level 1) \| U.S. Treasury and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	44,057	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	48,280	38,303
Significant Other Observable Inputs (Level 2) \| Corporate debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 48,280	$ 38,303

Inventory (Detail) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Inventory [Line Items]
Raw materials		$ 198
Work-in-process		1,326
Finished goods	$ 1,294	3,394
Deferred cost of goods sold		252
Total	1,294	$ 5,170
Raw materials	127
Work-in-process	2,369
Total	$ 2,496

Summary of Prepaid Expenses and Other Current Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Prepaid Expenses And Other Current Assets [Line Items]
Prepaid insurance	$ 423	$ 270
Prepaid manufacturing cost	346	358
Other prepaid expenses and vendor advances	4,763	2,302
Other current assets	210	154
Prepaid expenses and other current assets	$ 5,742	$ 3,084

Summary of Property and Equipment-at Cost (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 6,883	$ 4,170
Accumulated depreciation and amortization	(2,313)	(1,733)
Property and equipment, net	$ 4,570	2,437
Computer and Other Equipment
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	3 years
Property and equipment, gross	$ 2,046	1,316
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	7 years
Property and equipment, gross	$ 1,318	765
Leasehold improvements
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	11 years
Property and equipment, gross	$ 3,519	$ 2,089

Property and Equipment - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Depreciation expense	$ 582	$ 530	$ 432

Summary of Intangible Assets (Detail) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount		$ 60,941	$ 35,941
Accumulated Amortization		22,189	9,217
Net Carrying Amount		$ 38,752	$ 26,724
HETLIOZ
Finite-Lived Intangible Assets [Line Items]
Intangible assets, estimated useful life	2022-12	2033-01	2033-01
Gross Carrying Amount		$ 33,000	$ 8,000
Accumulated Amortization		3,460	539
Net Carrying Amount		$ 29,540	$ 7,461
Fanapt
Finite-Lived Intangible Assets [Line Items]
Intangible assets, estimated useful life		2016-11	2016-11
Gross Carrying Amount		$ 27,941	$ 27,941
Accumulated Amortization		18,729	8,678
Net Carrying Amount		$ 9,212	$ 19,263

Intangible Assets (Textual 2 - HETLIOZ) - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended	12 Months Ended
	Jul. 31, 2013	Feb. 29, 2004	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2006
Finite-Lived Intangible Assets [Line Items]
Acquisition of intangible assets					$ 8,000
Milestone obligation under license agreement				$ 25,000
Intangible asset amortization				$ 12,972	$ 2,254	$ 1,495
HETLIOZ
Finite-Lived Intangible Assets [Line Items]
Acquisition of intangible assets	$ 3,000	$ 500	$ 8,000				$ 1,000
Intangible assets, estimated useful life			2022-12	2033-01	2033-01
Cumulative worldwide sales milestone				$ 250,000
Milestone obligation under license agreement				25,000
Intangible assets capitalized				25,000
Intangible asset amortization				2,900
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	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2009
Finite-Lived Intangible Assets [Line Items]
Acquisition of intangible assets		$ 8,000
Assets acquired and recorded at fair value, Intangible re-acquired right		15,940
Intangible asset amortization	$ 12,972	$ 2,254	$ 1,495
Fanapt
Finite-Lived Intangible Assets [Line Items]
Acquisition of intangible assets				$ 12,000
Estimated Patent life end date	2016-11	2016-11
Assets acquired and recorded at fair value, Intangible re-acquired right		$ 15,940
Intangible asset amortization	$ 10,100

Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Intangible asset amortization	$ 12,972	$ 2,254	$ 1,495

Summary of Future Intangible Asset Amortization (Detail) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	$ 38,752	$ 26,724
2016	10,933
2017	1,721
2018	1,721
2019	1,721
2020	1,721
Thereafter	20,935
HETLIOZ
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	29,540	7,461
2016	1,721
2017	1,721
2018	1,721
2019	1,721
2020	1,721
Thereafter	20,935
Fanapt
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	9,212	$ 19,263
2016	$ 9,212

Summary of Accounts Payable and Accrued Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Accrued Liabilities [Line Items]
Research and development expenses	$ 3,199	$ 1,759
Consulting and other professional fees	5,088	2,522
Compensation and employee benefits	468	388
Royalties payable	5,328	602
Other	1,684	2,020
Accounts payable and accrued liabilities	$ 15,767	$ 7,291

Summary of Changes in Deferred Licensing Revenue (Detail) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2014	Dec. 31, 2013
Deferred Revenue Arrangement [Line Items]
Balance beginning of year		$ 90,275	$ 117,064
Licensing revenue recognized		(30,746)	(26,789)
Recognized as part of gain on arbitration settlement	$ (77,616)	(77,616)
Balance end of year			$ 90,275
Up-front Payment Arrangement
Deferred Revenue Arrangement [Line Items]
Recognized as part of gain on arbitration settlement	$ (59,529)	$ (59,529)

Deferred Licensing Revenue - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2009
Deferred Revenue Arrangement [Line Items]
Licensing agreement		$ 30,746	$ 26,789
Recognized as part of gain on arbitration settlement	$ 77,616	77,616
Up-front Payment Arrangement
Deferred Revenue Arrangement [Line Items]
Recognized as part of gain on arbitration settlement	$ 59,529	$ 59,529
Fanapt
Deferred Revenue Arrangement [Line Items]
Upfront payment received				$ 200,000

Summary of Minimum Annual Future Payments Under Operating Leases (Detail) $ in Thousands	Dec. 31, 2015 USD ($)
Operating Leased Assets [Line Items]
Operating leases, Total	$ 13,315
Operating leases, 2016	1,500
Operating leases, 2017	1,538
Operating leases, 2018	1,576
Operating leases, 2019	1,616
Operating leases, 2020	1,656
Operating leases, Thereafter	$ 5,429

Commitments and Contingencies - Additional Information (Detail) $ in Millions	12 Months Ended
	Dec. 31, 2015 USD ($) ft²	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)
Commitments and Contingencies Disclosure [Line Items]
Rent expense	$ 1.9	$ 1.7	$ 1.1
Washington DC Lease
Commitments and Contingencies Disclosure [Line Items]
Renewal term of Lease agreement	5 years
Square feet leased \| ft²	30,260
Allowance for tenant improvements	$ 0.8

Commitments and Contingencies (Textual 2 - HETLIOZ) - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended	12 Months Ended
	Jul. 31, 2013	Feb. 29, 2004	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2006
HETLIOZ
Acquisition of intangible assets					$ 8,000
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			$ 1,000
Milestone obligation under license agreement				$ 25,000
Royalty payable percentage on net sales				10.00%
Cumulative worldwide sales milestone				$ 250,000
Intangible assets capitalized				$ 25,000

Commitments and Contingencies (Textual 3 - Fanapt) - Additional Information (Detail) - USD ($)	1 Months Ended	12 Months Ended
	Feb. 29, 2016	Dec. 31, 2015	Dec. 31, 2014
Subsequent Event
Fanapt
Royalty Payment	$ 2,000,000
November 16,2016 through December 31,2019 \| Subsequent Event
Fanapt
Royalty payable percentage on net sales	3.00%
Fanapt
Fanapt
Royalty received percentage on net sales		10.00%
Fanapt \| Subsequent Event
Fanapt
Royalty payable percentage on net sales	6.00%
Royalty payment period	10 years
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 \| Maximum
Fanapt
Agreed upon sales threshold level for royalty rate			$ 200,000,000

Commitments and Contingencies (Textual 4 - Tradipitant) - Additional Information (Detail) - Tradipitant - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 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
Future Regulatory Approval and Sales Milestones
Tradipitant
Possible future milestone payments		$ 95.0

Income Taxes - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Taxes [Line Items]
Provision for income taxes	$ 0	$ 0	$ 0
Operating loss carryforwards, net	232,600,000
Operating loss carryforwards, excess windfall benefits generated from stock options	$ 6,500,000
Net operating loss carryforwards beginning expiration year	2028
Carryforward credits beginning expiration year	2024
Research and Development
Income Taxes [Line Items]
Tax credits carryforwards	$ 6,800,000
Orphan Drug
Income Taxes [Line Items]
Tax credits carryforwards	$ 31,600,000

Reconciliation Between Statutory Tax Rate and Effective Tax Rate (Detail)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Tax Rate Reconciliation [Line Items]
Federal tax at statutory rate	35.00%	34.00%	(34.00%)
State taxes	(0.10%)	7.20%	(4.00%)
Change in valuation allowance	(25.40%)	(59.70%)	43.90%
Research and development credit	1.50%	1.30%	(1.10%)
Orphan drug credit	1.60%	8.50%	(22.70%)
Section 162(m) limitation	(5.70%)	1.10%	1.20%
Tax rate change	(0.30%)	4.80%	(0.30%)
Change in State NOLs	(1.40%)	0.00%	18.50%
Non-deductible stock-based compensation	(5.10%)	0.00%	0.00%
Other non-deductible items	(0.10%)	2.80%	(1.50%)
Effective tax rate	0.00%	0.00%	0.00%

Components of Deferred Tax Assets, Net and Related Valuation Allowance (Detail) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Deferred tax assets:
Net operating loss carry forwards	$ 86,640	$ 73,626
Stock-based compensation	12,919	17,160
Accrued and deferred expenses	1,443	532
Research and development and orphan drug credit carryforwards	38,333	36,772
Other	802	806
Total deferred tax assets	140,137	128,896
Deferred tax liabilities:
Other	(1,100)	(6)
Total deferred tax liabilities	(1,100)	(6)
Deferred tax assets, net	139,037	128,890
Valuation allowance	(139,037)	(128,890)	$ (141,150)	$ (133,271)
Net deferred tax assets	$ 0	$ 0

Valuation Allowance Activity on Deferred Tax Assets (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Valuation Allowance [Line Items]
Balance At Beginning Of Period	$ 128,890	$ 141,150	$ 133,271
Additions Charged To Income Tax Expense	17,002	27,893	22,998
Reductions Credited To Income Tax Expense	(6,855)	(40,153)	(15,119)
Balance At End Of Period	$ 139,037	$ 128,890	$ 141,150

Public Offering of Common Stock - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended		12 Months Ended
	Oct. 31, 2014	Aug. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Stockholders Equity Note [Line Items]
Public common stock offering, shares	5,750,000	4,680,000
Common stock offering price, per share	$ 11.60	$ 11.14
Net cash proceeds from public common stock offering	$ 62,300	$ 48,500	$ 62,313	$ 48,505

Equity Incentive Plans (Textual 1 - Equity Incentive Plan) - Additional Information (Detail)		12 Months Ended
	Jan. 01, 2016 shares	Dec. 31, 2015 EquityPlan shares	Dec. 31, 2014 shares	Dec. 31, 2013 shares	Dec. 31, 2012 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		0	652,810	670,744	672,145
2006 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding options granted		6,252,448	6,227,112	5,533,618	4,865,487
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		7,275,129
Shares available for future grant		1,733,142
2006 Plan \| January 1, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Increase each January 1 in the number of shares reserved under 2006 Plan as a percentage of common stock outstanding		4.00%
Maximum increase each January 1 in the number of shares reserved		1,500,000
2006 Plan \| Subsequent Event \| January 1, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for issuance	13,329,472
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	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation option awards contractual term	10 years
Portion of initial stock options granted to employees that vests on employee's first anniversary	25.00%
Portion of initial stock options granted to employees that vests ratably over three years after completion of first year of service	75.00%
Option awards vesting period, after completion of one year of service	3 years
Vesting period	4 years
Vesting period for initial stock options granted to directors	4 years
Vesting period for subsequent stock options granted to directors	1 year
Unrecognized compensation expenses, weighted average period	2 years
Proceeds from exercise of employee stock options	$ 4,374	$ 2,851	$ 1,550
Service option awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expenses	$ 12,600
Unrecognized compensation expenses, weighted average period	1 year 4 months 24 days

Summary of Option Activity for 2004 Plan (Detail) - 2004 Plan - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Number of Shares
Beginning balance	652,810	670,744	672,145
Exercised	(652,810)	(17,934)	(115)
Expired			(1,286)
Ending balance	0	652,810	670,744	672,145
Weighted Average Exercise Price at Grant Date
Beginning balance	$ 1.74	$ 1.79	$ 1.79
Exercised	$ 1.74	3.57	4.73
Expired			3.67
Ending balance		$ 1.74	$ 1.79	$ 1.79
Weighted Average Remaining Term (Years)
Weighted Average Remaining Term		9 months 11 days	1 year 9 months 11 days	2 years 9 months 11 days
Aggregate Intrinsic Value
Beginning balance	$ 8,212	$ 7,124	$ 1,512
Exercised	$ 6,129
Ending balance		$ 8,212	$ 7,124	$ 1,512

Summary of Option Activity for 2006 Plan (Detail) - 2006 Plan - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Number of Shares
Beginning balance	6,227,112	5,533,618	4,865,487
Granted	1,056,500	1,324,337	1,245,500
Forfeited	(496,854)	(237,108)	(54,226)
Expired	(64,336)		(259,295)
Exercised	(469,974)	(393,735)	(263,848)
Ending balance	6,252,448	6,227,112	5,533,618	4,865,487
Exercisable	4,163,690
Vested and expected to vest at December 31, 2015	6,120,365
Weighted Average Exercise Price at Grant Date
Beginning balance	$ 11.58	$ 10.98	$ 10.83
Granted	11.74	12.17	10.18
Forfeited	10.75	8.35	6.14
Expired	25.69		10.65
Exercised	7.02	7.08	5.86
Ending balance	11.87	$ 11.58	$ 10.98	$ 10.83
Exercisable	12.11
Vested and expected to vest at December 31, 2015	$ 11.87
Weighted Average Remaining Term (Years)
Weighted Average Remaining Term	6 years 1 month 28 days	6 years 8 months 16 days	6 years 11 months 5 days	7 years 1 month 24 days
Exercisable	4 years 10 months 10 days
Vested and expected to vest at December 31, 2015	6 years 1 month 6 days
Aggregate Intrinsic Value
Beginning balance	$ 28,523	$ 21,264	$ 634
Exercised	2,594	2,923	1,545
Ending balance	7,498	$ 28,523	$ 21,264	$ 634
Exercisable	6,616
Vested and expected to vest at December 31, 2015	$ 7,491

Equity Incentive Plans (Textual 3 RSU) - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period of RSU awards in equal installments	4 years
Unrecognized compensation expenses, weighted average period	2 years
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	231,093	209,562	201,186
Restricted Stock Units (RSU)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expenses related to unvested RSUs	$ 8.5

Summary of RSU Activity for 2006 Plan (Detail) - 2006 Plan - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Number of Shares Unvested
Beginning balance	1,025,961	883,690	705,376
Granted	417,000	436,115	400,500
Forfeited	(189,187)	(84,282)	(21,000)
Vested	(231,093)	(209,562)	(201,186)
Ending balance	1,022,681	1,025,961	883,690
Weighted Average Price/Share Unvested
Beginning balance	$ 9.94	$ 7.70	$ 5.91
Granted	11.51	12.28	10.29
Forfeited	10.60	6.75	6.41
Vested	7.96	6.67	6.71
Ending balance	$ 10.90	$ 9.94	$ 7.70

Employee Benefit Plan - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Employee Benefit Plans [Line Items]
Defined contribution plan employer matching percent	50.00%
Defined contribution plan maximum employee contribution percent	6.00%
Defined contribution plan vesting period	4 years
Defined contribution plan matching amount	$ 0.3	$ 0.2	$ 0.2

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

Quarterly Financial Data (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Quarterly Financial Data [Line Items]
Revenue	$ 31,849	$ 28,344	$ 27,582	$ 22,150	$ 15,370	$ 14,782	$ 10,862	$ 9,143	$ 109,925	$ 50,157	$ 33,879
Gross profit	25,678	21,834	21,816	17,135	14,688	14,079	10,664	9,143
Income (loss) from operations	(14,893)	(9,541)	(5,458)	(10,293)	69,693	(1,448)	(21,606)	(26,578)	(40,185)	20,062	(21,200)
Net income (loss)	$ (14,798)	$ (9,461)	$ (5,386)	$ (10,221)	$ 69,719	$ (1,426)	$ (21,575)	$ (26,533)	$ (39,865)	$ 20,186	$ (21,055)
Net income (loss) per share:
Basic					$ 1.85	$ (0.04)	$ (0.64)	$ (0.79)	$ (0.94)	$ 0.58	$ (0.69)
Diluted					$ 1.77	$ (0.04)	$ (0.64)	$ (0.79)	$ (0.94)	$ 0.55	$ (0.69)
Net loss per share, basic and diluted	$ (0.35)	$ (0.22)	$ (0.13)	$ (0.24)

- Definition

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

+ References + Details

- Definition

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

+ References + Details

Quarterly Financial Data (Unaudited) - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Schedule Of Quarterly Financial Data [Line Items]
Gain on arbitration settlement	$ 77,616					$ 77,616
Basic	$ 1.85	$ (0.04)	$ (0.64)	$ (0.79)	$ (0.94)	$ 0.58	$ (0.69)
Diluted	1.77	$ (0.04)	$ (0.64)	$ (0.79)	$ (0.94)	$ 0.55	$ (0.69)
Arbitration
Schedule Of Quarterly Financial Data [Line Items]
Basic	2.06
Diluted	$ 1.97

- Definition

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

+ References + Details