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Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2016	Apr. 30, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Trading Symbol	VNDA
Entity Registrant Name	Vanda Pharmaceuticals Inc.
Entity Central Index Key	0001347178
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		43,153,007

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 38,740	$ 50,843
Marketable securities	99,590	92,337
Accounts receivable, net	16,679	16,331
Inventory	938	1,294
Prepaid expenses and other current assets	6,502	5,742
Total current assets	162,449	166,547
Property and equipment, net	4,351	4,570
Intangible assets, net	35,809	38,752
Non-current inventory and other	4,131	3,181
Total assets	206,740	213,050
Current liabilities:
Accounts payable and accrued liabilities	22,664	15,767
Accrued government and other rebates	32,376	35,550
Total current liabilities	55,040	51,317
Milestone obligation under license agreement	25,000	25,000
Other non-current liabilities	3,688	3,706
Total liabilities	83,728	80,023
Commitments and contingencies (Notes 10 and 11)
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; 43,109,206 and 42,815,291 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively	43	43
Additional paid-in capital	463,084	460,794
Accumulated other comprehensive income	92	39
Accumulated deficit	(340,207)	(327,849)
Total stockholders' equity	123,012	133,027
Total liabilities and stockholders' equity	$ 206,740	$ 213,050

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
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	43,109,206	42,815,291
Common stock, shares outstanding	43,109,206	42,815,291

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenues:
Net product sales	$ 33,262	$ 22,150
Total revenues	33,262	22,150
Operating expenses:
Cost of goods sold	5,956	5,015
Research and development	7,548	4,478
Selling, general and administrative	29,290	18,806
Intangible asset amortization	2,943	4,144
Total operating expenses	45,737	32,443
Loss from operations	(12,475)	(10,293)
Other income	117	72
Net loss	$ (12,358)	$ (10,221)
Basic and diluted net loss per share	$ (0.29)	$ (0.24)
Weighted average shares outstanding, basic and diluted	43,104,462	41,744,948

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Net loss	$ (12,358)	$ (10,221)
Other comprehensive income:
Change in net unrealized gain on marketable securities	53	11
Tax provision on other comprehensive income	0	0
Other comprehensive income , net of tax	53	11
Comprehensive loss	$ (12,305)	$ (10,210)

- Definition

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

+ References + Details

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - 3 months ended Mar. 31, 2016 - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Other Comprehensive Income	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2015	42,815,291	42,815,291
Beginning balance at Dec. 31, 2015	$ 133,027	$ 43	$ 460,794	$ 39	$ (327,849)
Issuance of common stock from the exercise of stock options and settlement of restricted stock units	24		24
Issuance of common stock form the exercise of stock options and settlement of restricted stock awards		293,915
Stock-based compensation expense	2,266		2,266
Net loss	(12,358)				(12,358)
Other comprehensive income, net of tax	$ 53			53
Ending balance (in shares) at Mar. 31, 2016	43,109,206	43,109,206
Ending balance at Mar. 31, 2016	$ 123,012	$ 43	$ 463,084	$ 92	$ (340,207)

- Definition

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

+ References + Details

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities
Net loss	$ (12,358)	$ (10,221)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation of property and equipment	219	140
Stock-based compensation	2,266	1,945
Amortization of discounts and premiums on marketable securities	28	197
Intangible asset amortization	2,943	4,144
Other non-cash adjustments		239
Changes in operating assets and liabilities:
Accounts receivable	(348)	(16,466)
Prepaid expenses and other assets	(1,484)	581
Inventory	130	(45)
Accounts payable and accrued liabilities	6,879	10,853
Accrued government and other rebates	(3,174)	14,188
Net cash provided by (used in) operating activities	(4,899)	5,555
Cash flows from investing activities
Purchases of property and equipment		(783)
Purchases of marketable securities	(47,311)	(59,890)
Maturities of marketable securities	40,083	27,105
Net cash used in investing activities	(7,228)	(33,568)
Cash flows from financing activities
Obligations paid in connection with settlement of equity awards		(282)
Proceeds from exercise of employee stock options	24	203
Net cash provided by (used in) financing activities	24	(79)
Net decrease in cash and cash equivalents	(12,103)	(28,092)
Cash and cash equivalents
Beginning of period	50,843	60,901
End of period	$ 38,740	$ 32,809

Business Organization and Presentation

3 Months Ended

Mar. 31, 2016

Business Organization and Presentation

1. Business Organization and Presentation

Business Organization

Vanda Pharmaceuticals Inc. (the Company) is a specialty pharmaceutical company focused on the development and commercialization of novel therapies to address high unmet medical needs and improve the lives of patients. The Company commenced its operations in 2003 and operates in one reporting segment 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. Novartis transferred all the U.S. and Canadian commercial rights to the Fanapt^® franchise to the Company on December 31, 2014. Additionally, the Company’s distribution partners launched Fanapt^® in Israel and Mexico in 2014.

•

Tradipitant (VLY-686), a small molecule neurokinin-1 receptor (NK-1R) antagonist, which is presently in clinical development for the treatment of chronic pruritus in atopic dermatitis.

•

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

•

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

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements for the fiscal year ended December 31, 2015 included in the Company’s annual report on Form 10-K. The financial information as of March 31, 2016 and for the three months ended March 31, 2016 and 2015 is unaudited, but in the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair statement of the results for these interim periods have been included. The condensed consolidated balance sheet data as of December 31, 2015 was derived from audited financial statements but does not include all disclosures required by GAAP.

The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or for a full fiscal year. The financial information included herein should be read in conjunction with the consolidated financial statements and notes in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2015.

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Use of Estimates

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

Inventory

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

Revenue from Net Product Sales

The Company’s revenues consist of net product sales of HETLIOZ^® and net product sales of Fanapt^®. Net sales by product for the three months ended March 31, 2016 and 2015 were as follows:


	Three Months Ended
(in thousands)	March 31, 2016		March 31, 2015
Revenues:
HETLIOZ^® product sales, net	$	16,201	$	7,460
Fanapt^® product sales, net		17,061		14,690

Total revenues	$	33,262	$	22,150

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.

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 top six customers represented 96% of total revenues for the three months ended March 31, 2016, and the top five customers represented 86% of accounts receivable at March 31, 2016.

Product Sales Discounts and Allowances

The Company’s product sales are recorded net of applicable discounts, rebates, chargebacks, service fees, co-pay assistance 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 rebates, chargebacks 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:

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.

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.

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

Stock-Based Compensation

Compensation costs for all stock-based awards to employees and directors are measured based on the grant date fair value of those awards and recognized over the period during which the employee or director is required to perform service in exchange for the award. The Company 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 three months ended March 31, 2016 and 2015 were as follows:


	Three Months Ended
	March 31, 2016			March 31, 2015
Expected dividend yield		0	%		0	%
Weighted average expected volatility		57	%		61	%
Weighted average expected term (years)		6.08			5.97
Weighted average risk-free rate		1.38	%		1.59	%
Weighted average fair value per share	$	4.27		$	6.14

Stock-based compensation expense recognized for the three months ended March 31, 2016 and 2015 was comprised of the following:


	Three Months Ended
(in thousands)	March 31, 2016		March 31, 2015
Research and development	$	524	$	624
Selling, general and administrative		1,742		1,321

	$	2,266	$	1,945

Advertising Expense

The Company expenses the costs of advertising, including branded promotional expenses, as incurred. Branded advertising expenses, recorded in selling, general and administrative expenses, were $0.6 million and $1.0 million for the three months ended March 31, 2016 and 2015, respectively.

Non-Cash Investing and Financing Activities

For the three months ended March 31, 2015, the Company recorded an intangible asset of $25.0 million relating to HETLIOZ^® and recorded the related non-current liability relating to its obligation to make a milestone payment to Bristol-Myers Squibb (BMS) of $25.0 million in the event that cumulative worldwide sales of HETLIOZ^® reach $250.0 million.

Recent accounting pronouncements

In March 2016, the FASB issued Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. The ASU provides that all of the tax effects related to share-based payments are recorded as part of the provision for income taxes, allows entities to withhold an amount up to the employees’ maximum individual tax rate in the relevant jurisdiction, allows entities to estimate the effect of forfeitures or recognized forfeitures when they occur, and other improvements to the accounting for share-based awards. The new standard is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases. The new standard requires that lessees will need to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability subject to certain adjustments. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). The new standard is effective for annual periods ending after December 15, 2018, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating this standard to determine if adoption will 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 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 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. This new standard 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. In July 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers, 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. In March 2016, the FASB issued ASU 2016-08 Revenue from Contracts with Customers, Principal versus Agent Considerations (Reporting Revenue versus Net) and in April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers, identifying Performance Obligations and Licensing, which provide additional clarification on certain topics addressed in ASU 2014-09. ASU 2016-08 and ASU 2016-10 follow the same implementation guidelines as ASU 2014-09 and ASU 2015-14. The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements.

Earnings per Share

3 Months Ended

Mar. 31, 2016

Earnings per Share

3. Earnings per Share

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

The following table presents the calculation of basic and diluted net loss per share of common stock for the three months ended March 31, 2016 and 2015:


	Three Months Ended
(in thousands, except for share and per share amounts)	March 31, 2016			March 31, 2015
Numerator:
Net loss	$	(12,358	)	$	(10,221	)

Denominator:
Weighted average shares outstanding, basic and diluted		43,104,462			41,744,948

Net loss per share, basic and diluted:	$	(0.29	)	$	(0.24	)

Antidilutive securities excluded from calculations of diluted net loss per share		6,245,280			5,656,662

The Company incurred net losses for the three months ended March 31, 2016 and 2015 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

3 Months Ended

Mar. 31, 2016

Marketable Securities

4. Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of March 31, 2016, which all have contract maturities of less than one year:


March 31, 2016 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
U.S. Treasury and government agencies	$	54,166	$	26	$	(1	)	$	54,191
Corporate debt		45,332		68		(1	)		45,399

	$	99,498	$	94	$	(2	)	$	99,590

The following is a summary of the Company’s available-for-sale marketable securities as of December 31, 2015:


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

- Definition

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

+ References + Details

Fair Value Measurements

3 Months Ended

Mar. 31, 2016

Fair Value Measurements

5. 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 March 31, 2016 and December 31, 2015 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 three months ended March 31, 2016 and 2015.

As of March 31, 2016, 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 March 31, 2016 Using
(in thousands)	March 31, 2016		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	$	54,191	$	54,191	$	—	$	—
Corporate debt		45,399		—		45,399

	$	99,590	$	54,191	$	45,399	$	—

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	$	—

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, and milestone obligations under license agreements, 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

3 Months Ended

Mar. 31, 2016

Inventory

6. 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 March 31, 2016 and December 31, 2015:


(in thousands)	March 31, 2016		December 31, 2015
Current assets
Finished goods	$	938	$	1,294

	$	938	$	1,294

Non-Current assets
Raw materials	$	127	$	127
Work-in-process		2,249		2,369
Finished goods		346		—

	$	2,722	$	2,496

Accounts Payable and Accrued Liabilities

3 Months Ended

Mar. 31, 2016

Accounts Payable and Accrued Liabilities

7. Accounts Payable and Accrued Liabilities

The following is a summary of the Company’s accounts payable and accrued liabilities as of March 31, 2016 and December 31, 2015:


(in thousands)	March 31, 2016		December 31, 2015
Research and development expenses	$	3,890	$	3,199
Consulting and other professional fees		10,540		5,088
Compensation and employee benefits		1,465		468
Royalties payable		5,533		5,328
Other		1,236		1,684

	$	22,664	$	15,767

Intangible Assets

3 Months Ended

Mar. 31, 2016

Intangible Assets

8. Intangible Assets

The following is a summary of the Company’s intangible assets as of March 31, 2016:


		March 31, 2016
(in thousands)	Estimated Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HETLIOZ^®	January 2033	$	33,000	$	3,891	$	29,109
Fanapt^®	November 2016		27,941		21,241		6,700

		$	60,941	$	25,132	$	35,809

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

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 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 2015. As a result, the future obligation of $25.0 million was recorded as a non-current liability along with a capitalized intangible assets relating to HETLIOZ^®. The actual payment of the obligation will occur once the $250.0 million in cumulative worldwide sales of HETLIOZ^® is realized. Intangible assets relating HETLIOZ^® are 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.

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. Pursuant to the terms of a settlement agreement with Novartis, Novartis transferred all U.S. and Canadian rights in the Fanapt^® franchise to the Company on December 31, 2014. As a result, the Company recognized an intangible asset of $15.9 million related to the reacquired rights to Fanapt^®. Intangible assets relating to Fanapt^® are being amortized on a straight-line basis over the remaining life of the U.S. composition of matter patent for Fanapt^® through November 2016. The useful life estimation is based on the market participant methodology prescribed by ASC Subtopic 805, Business Combinations, 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.

The intangible assets are being amortized over their estimated useful economic life using the straight-line method. Amortization expense was $2.9 million and $4.1 million for the three months ended March 31, 2016 and 2015, respectively. The following is a summary of the future intangible asset amortization schedule as of March 31, 2016:


(in thousands)	Total		Remainder of 2016		2017		2018		2019		2020		Thereafter
HETLIOZ^®	$	29,109	$	1,290	$	1,721	$	1,721	$	1,721	$	1,721	$	20,935
Fanapt^®		6,700		6,700		—		—		—		—		—

	$	35,809	$	7,990	$	1,721	$	1,721	$	1,721	$	1,721	$	20,935

Income Taxes

3 Months Ended

Mar. 31, 2016

Income Taxes

9. Income Taxes

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The fact that the Company has historically generated net operating losses (NOLs) serves as strong evidence that it is more likely than not that deferred tax assets will not be realized in the future. Therefore, the Company has a full valuation allowance against all deferred tax assets as of March 31, 2016 and December 31, 2015. As a result of the tax valuation allowance against deferred tax assets, there was no provision for income taxes for the three months ended March 31, 2016 and 2015.

Certain tax attributes of the Company, including NOLs and credits, are subject to limitation as a result of any ownership change as defined under Internal Revenue Code of 1986, as amended (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 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 and therefore, any IRC Section 382 limitation would not have a material impact on the Company’s provision for income taxes as of March 31, 2016.

Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies

10. Commitments and Contingencies

Operating leases

The following is a summary of the minimum annual future payments under operating leases as of March 31, 2016:


	Cash payments due by year
(in thousands)	Total		Remainder of 2016		2017		2018		2019		2020		Thereafter
Operating leases	$	12,944	$	1,129	$	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. Rent expense under operating leases was $0.5 million and $0.4 million for the three months ended March 31, 2016 and 2015, 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 a settlement agreement with Novartis, Novartis transferred all U.S. and Canadian rights in the Fanapt^® franchise to the Company on December 31, 2014.

A predecessor company of Sanofi, Hoechst Marion Roussel, Inc. (HMRI) discovered Fanapt^® and completed early clinical work on the product. In 1996, following a review of its product portfolio, HMRI licensed its rights to the Fanapt^® patents and patent applications to Titan Pharmaceuticals, Inc. (Titan) on an exclusive basis. In 1997, soon after it had acquired its rights, Titan sublicensed its rights to Fanapt^® on an exclusive basis to Novartis. In June 2004, the Company acquired exclusive worldwide rights to these patents and patent applications, as well as certain Novartis patents and patent applications to develop and commercialize Fanapt^®, through a sublicense agreement with Novartis. In 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 a settlement agreement with Novartis, Novartis transferred all U.S. and Canadian rights in the Fanapt^® franchise to the Company on December 31, 2014. The Company is obligated to make royalty payments to Sanofi 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. In February 2016, the Company amended the agreement with Sanofi and Titan to remove Titan as the entity through which royalty payments from the Company 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 made a $2.0 million payment during the three months ended March 31, 2016 that applied to this 3% manufacturing know-how royalty and will make additional royalty payments only to the extent that the Company’s cumulative royalty obligations during this period exceed the amount of the pre-payment. No further royalties on manufacturing know-how are payable by the Company 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 the Company’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 distribution agreements with Probiomed S.A. de C.V. for the commercialization of Fanapt^® in Mexico and Megapharm Ltd. for the commercialization of Fanapt^® in Israel.

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. The Company 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 the Company terminates the license agreement, or if Lilly terminates due to the Company’s breach or for certain other reasons set forth in the license agreement, all rights licensed and developed by the Company under the license agreement will revert or otherwise be licensed back to Lilly on an exclusive basis, subject to payment by Lilly to the Company of a royalty on net sales of products that contain tradipitant.

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

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

Research and Development and Marketing Agreements

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

Legal Matters

3 Months Ended

Mar. 31, 2016

Legal Matters

11. 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 Delaware District Court). 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 a generic version of Fanapt^® prior to the expiration of the ‘610 Patent in November 2027. In addition, pursuant to the settlement agreement with Novartis, the Company assumed Novartis’ patent infringement action against Roxane in the Delaware District Court. That suit alleges that Roxane has infringed one or more claims of U.S Patent RE39198 (the ‘198 Patent), which is licensed exclusively to the Company, by filing an ANDA for a generic version of Fanapt^® prior to the expiration of the ‘198 Patent in November 2016. These two cases against Roxane were consolidated by agreement of the parties and were tried together in a five-day bench trial that concluded on March 4, 2016. The parties are engaged in post-trial briefing and are awaiting the Delaware District Court’s decision.

In 2015, the Company filed six separate patent infringement lawsuits in the Delaware District Court against Roxane, Inventia Healthcare Pvt. Ltd., Lupin Ltd. and Lupin Pharmaceuticals, Inc. (Lupin), Taro Pharmaceuticals USA, Inc. and Taro Pharmaceutical Industries, Ltd., and Apotex Inc. and Apotex Corp., (collectively, the Defendants). The lawsuits each seek an adjudication that the respective Defendants infringed one or more claims of the ‘610 Patent and/or the Company’s U.S. Patent No. 9,138,432 (the ‘432 Patent) by submitting to the FDA and ANDA for a generic version of Fanapt^® prior to the expiration of the ‘610 Patent in November 2027 or the ‘432 Patent in September 2025. The Defendants have denied infringement and counterclaimed for declaratory judgment of invalidity and noninfringement of the ‘610 patent and the ‘432 Patent. Lupin filed counter claims for declaratory judgment of invalidity and noninfringement of seven of the Company’s U.S. method of treatment patents that are listed in the Approved Drug Products with Therapeutic Equivalence Evaluations (the Orange Book) related to Fanapt^® (such seven patents, the Method of Treatment Patents). The Company has not sued Lupin for infringing the Method of Treatment Patents. On March 30, 2016, the Delaware District Court scheduled a five-day bench trial beginning on May 15, 2017 in which all of these lawsuits regarding infringement of the ‘610 Patent and the ‘432 Patent would be tried together.

On February 26, 2016, Roxane filed suit against the Company in the U.S. District Court for the Southern District of Ohio. The suit seeks a declaratory judgment of invalidity and noninfringement of the Method of Treatment Patents. The Company has not sued Roxane for infringing the Method of Treatment Patents. The Company filed a motion to dismiss this lawsuit for lack of personal jurisdiction or, in the alternative, to transfer the lawsuit to the Delaware District Court. The Company intends to vigorously defend the Method of Treatment Patents.

On February 26, 2016, Roxane filed a Petition for Inter Partes Review (IPR) of the ‘432 Patent with the Patent Trials and Appeals Board (PTAB) of the United States Patent and Trademark Office. The Company has three months to file an optional Preliminary Response. Upon receipt of the Preliminary Response, the PTAB has another three months in which to institute or deny the IPR proceeding. If the PTAB decides to institute the IPR proceeding, Roxane will have the opportunity to challenge the validity of the ‘432 Patent under certain sections of the Patent Act before the PTAB. A U.S. patent is presumed valid unless and until the PTAB or court makes an invalidity determination. The Company intends to vigorously defend the validity of the ‘432 Patent.

Stock-Based Compensation

3 Months Ended

Mar. 31, 2016

Stock-Based Compensation

12. Stock-Based Compensation

As of March 31, 2016, the Company had one equity incentive plan, the 2006 Equity Incentive Plan (the 2006 Plan) that was adopted in April 2006. 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. As of March 31, 2016, there were 8,056,668 shares that were subject to outstanding options and RSUs and 2,157,668 shares remained available for future grant. The 2006 Plan expired by its terms on April 12, 2016. Outstanding options and RSUs under the 2006 Plan will remain in effect and the terms of the 2006 Plan will continue to apply, but no additional awards will be made under the 2006 Plan.

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 March 31, 2016, $13.4 million of unrecognized compensation costs related to unvested service option awards are expected to be recognized over a weighted average period of 1.5 years. No option awards are classified as a liability as of March 31, 2016.

A summary of option activity for the three months ended March 31, 2016 follows:


Stock Options (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, 2015		6,252,448		$	11.87		6.16	$	7,498
Granted		749,511			7.94
Forfeited		(172,735	)		11.16
Expired		—			—
Exercised		(6,249	)		3.82				24

Outstanding at March 31, 2016		6,822,975			11.46		6.28		5,872

Exercisable at March 31, 2016		4,439,627			12.02		4.85		5,074

Vested and expected to vest at March 31, 2016		6,586,275			11.52		6.17		5,818

Proceeds from the exercise of stock options amounted to less than $0.1 million for the three months ended March 31, 2016 and $0.2 million for the three months ended March 31, 2015.

An RSU is a stock award that entitles the holder to receive shares of the Company’s common stock as the award vests. The fair value of each RSU is based on the closing price of the Company’s stock on the date of grant. The Company has granted RSUs with service conditions (service RSUs) that vest in four equal annual installments provided that the employee remains employed with the Company. As of March 31, 2016, $11.4 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 March 31, 2016.

A summary of RSU activity for the 2006 Plan for the three months ended March 31, 2016 follows:


RSUs	Number of Shares Underlying RSUs			Weighted Average Grant Date Fair Value
Unvested at December 31, 2015		1,022,681		$	10.90
Granted		569,242			7.96
Forfeited		(70,564	)		11.03
Vested		(287,666	)		9.65

Unvested at March 31, 2016		1,233,693			9.83

The grant date fair value for the 287,666 shares underlying RSUs that vested during the three months ended March 31, 2016 was $2.8 million.

Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Business organization

Business Organization

•

Tradipitant (VLY-686), a small molecule neurokinin-1 receptor (NK-1R) antagonist, which is presently in clinical development for the treatment of chronic pruritus in atopic dermatitis.

•

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

•

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

Basis of presentation

Basis of Presentation

Use of Estimates

Use of Estimates

Inventory

Inventory

Net Product Sales

Revenue from Net Product Sales

The Company’s revenues consist of net product sales of HETLIOZ^® and net product sales of Fanapt^®. Net sales by product for the three months ended March 31, 2016 and 2015 were as follows:


	Three Months Ended
(in thousands)	March 31, 2016		March 31, 2015
Revenues:
HETLIOZ^® product sales, net	$	16,201	$	7,460
Fanapt^® product sales, net		17,061		14,690

Total revenues	$	33,262	$	22,150

Product Sales Discounts and Allowances

Major Customers

Major Customers

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 three months ended March 31, 2016 and 2015 were as follows:


	Three Months Ended
	March 31, 2016			March 31, 2015
Expected dividend yield		0	%		0	%
Weighted average expected volatility		57	%		61	%
Weighted average expected term (years)		6.08			5.97
Weighted average risk-free rate		1.38	%		1.59	%
Weighted average fair value per share	$	4.27		$	6.14

Stock-based compensation expense recognized for the three months ended March 31, 2016 and 2015 was comprised of the following:


	Three Months Ended
(in thousands)	March 31, 2016		March 31, 2015
Research and development	$	524	$	624
Selling, general and administrative		1,742		1,321

	$	2,266	$	1,945

Advertising Expense

Advertising Expense

Non-Cash Investing and Financing Activities

Non-Cash Investing and Financing Activities

Recent accounting pronouncements

Recent accounting pronouncements

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2016

Revenue From Net Sales by Product

The Company’s revenues consist of net product sales of HETLIOZ^® and net product sales of Fanapt^®. Net sales by product for the three months ended March 31, 2016 and 2015 were as follows:


	Three Months Ended
(in thousands)	March 31, 2016		March 31, 2015
Revenues:
HETLIOZ^® product sales, net	$	16,201	$	7,460
Fanapt^® product sales, net		17,061		14,690

Total revenues	$	33,262	$	22,150

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 three months ended March 31, 2016 and 2015 were as follows:


	Three Months Ended
	March 31, 2016			March 31, 2015
Expected dividend yield		0	%		0	%
Weighted average expected volatility		57	%		61	%
Weighted average expected term (years)		6.08			5.97
Weighted average risk-free rate		1.38	%		1.59	%
Weighted average fair value per share	$	4.27		$	6.14

Stock-Based Compensation Expense

Stock-based compensation expense recognized for the three months ended March 31, 2016 and 2015 was comprised of the following:


	Three Months Ended
(in thousands)	March 31, 2016		March 31, 2015
Research and development	$	524	$	624
Selling, general and administrative		1,742		1,321

	$	2,266	$	1,945

Earnings per Share (Tables)

3 Months Ended

Mar. 31, 2016

Basic and Diluted Net Loss Per Share of Common Stock

The following table presents the calculation of basic and diluted net loss per share of common stock for the three months ended March 31, 2016 and 2015:


	Three Months Ended
(in thousands, except for share and per share amounts)	March 31, 2016			March 31, 2015
Numerator:
Net loss	$	(12,358	)	$	(10,221	)

Denominator:
Weighted average shares outstanding, basic and diluted		43,104,462			41,744,948

Net loss per share, basic and diluted:	$	(0.29	)	$	(0.24	)

Antidilutive securities excluded from calculations of diluted net loss per share		6,245,280			5,656,662

Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2016

Summary of Available-for-Sale Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of March 31, 2016, which all have contract maturities of less than one year:


March 31, 2016 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
U.S. Treasury and government agencies	$	54,166	$	26	$	(1	)	$	54,191
Corporate debt		45,332		68		(1	)		45,399

	$	99,498	$	94	$	(2	)	$	99,590

The following is a summary of the Company’s available-for-sale marketable securities as of December 31, 2015:


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

- 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)

3 Months Ended

Mar. 31, 2016

Assets Measured at Fair Value on Recurring Basis

As of March 31, 2016, 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 March 31, 2016 Using
(in thousands)	March 31, 2016		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	$	54,191	$	54,191	$	—	$	—
Corporate debt		45,399		—		45,399

	$	99,590	$	54,191	$	45,399	$	—

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	$	—

Inventory (Tables)

3 Months Ended

Mar. 31, 2016

Inventory

Inventory consisted of the following as of March 31, 2016 and December 31, 2015:


(in thousands)	March 31, 2016		December 31, 2015
Current assets
Finished goods	$	938	$	1,294

	$	938	$	1,294

Non-Current assets
Raw materials	$	127	$	127
Work-in-process		2,249		2,369
Finished goods		346		—

	$	2,722	$	2,496

Accounts Payable and Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2016

Summary of Accounts Payable and Accrued Liabilities

The following is a summary of the Company’s accounts payable and accrued liabilities as of March 31, 2016 and December 31, 2015:


(in thousands)	March 31, 2016		December 31, 2015
Research and development expenses	$	3,890	$	3,199
Consulting and other professional fees		10,540		5,088
Compensation and employee benefits		1,465		468
Royalties payable		5,533		5,328
Other		1,236		1,684

	$	22,664	$	15,767

Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2016

Summary of Intangible Assets

The following is a summary of the Company’s intangible assets as of March 31, 2016:


		March 31, 2016
(in thousands)	Estimated Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HETLIOZ^®	January 2033	$	33,000	$	3,891	$	29,109
Fanapt^®	November 2016		27,941		21,241		6,700

		$	60,941	$	25,132	$	35,809

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

Summary of Future Intangible Asset Amortization

The following is a summary of the future intangible asset amortization schedule as of March 31, 2016:


(in thousands)	Total		Remainder of 2016		2017		2018		2019		2020		Thereafter
HETLIOZ^®	$	29,109	$	1,290	$	1,721	$	1,721	$	1,721	$	1,721	$	20,935
Fanapt^®		6,700		6,700		—		—		—		—		—

	$	35,809	$	7,990	$	1,721	$	1,721	$	1,721	$	1,721	$	20,935

Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2016

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 March 31, 2016:


	Cash payments due by year
(in thousands)	Total		Remainder of 2016		2017		2018		2019		2020		Thereafter
Operating leases	$	12,944	$	1,129	$	1,538	$	1,576	$	1,616	$	1,656	$	5,429

Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2016

Summary of Option Activity Plan

A summary of option activity for the three months ended March 31, 2016 follows:


Stock Options (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, 2015		6,252,448		$	11.87		6.16	$	7,498
Granted		749,511			7.94
Forfeited		(172,735	)		11.16
Expired		—			—
Exercised		(6,249	)		3.82				24

Outstanding at March 31, 2016		6,822,975			11.46		6.28		5,872

Exercisable at March 31, 2016		4,439,627			12.02		4.85		5,074

Vested and expected to vest at March 31, 2016		6,586,275			11.52		6.17		5,818

Summary of RSU Activity for 2006 Plan

A summary of RSU activity for the 2006 Plan for the three months ended March 31, 2016 follows:


RSUs	Number of Shares Underlying RSUs			Weighted Average Grant Date Fair Value
Unvested at December 31, 2015		1,022,681		$	10.90
Granted		569,242			7.96
Forfeited		(70,564	)		11.03
Vested		(287,666	)		9.65

Unvested at March 31, 2016		1,233,693			9.83

The grant date fair value for the 287,666 shares underlying RSUs that vested during the three months ended March 31, 2016 was $2.8 million.

Business Organization and Presentation - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2016 Segment
Organization and Summary of Significant Accounting Policies Disclosure [Line Items]
Number of operating segments	1

Net Sales by Product (Detail) - USD ($) $ in Thousands	3 Months Ended
Net Sales by Product (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Mar. 31, 2015
Revenues:
Net product sales	$ 33,262	$ 22,150
HETLIOZ
Revenues:
Net product sales	16,201	7,460
Fanapt
Revenues:
Net product sales	$ 17,061	$ 14,690

Summary of Significant Accounting Policies - Additional Information (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) Customer	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Percentage of insurance coverage gap allocated for prescription drugs under Medicare Part D	50.00%
Advertising expenses	$ 600	$ 1,000
Milestone obligation under license agreement	$ 25,000		$ 25,000
HETLIOZ
Summary Of Significant Accounting Policies [Line Items]
Intangible asset acquired		25,000
Milestone obligation under license agreement		25,000
Cumulative worldwide sales milestone		$ 250,000
Customer Concentration Risk \| Sales Revenue, Net
Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage	96.00%
Number of major customers for sales revenues \| Customer	6
Credit Concentration Risk \| Accounts Receivable
Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage	86.00%
Number of major customers for accounts receivable \| Customer	5

Black-Scholes-Merton Option Pricing Model for Stock Options Granted (Detail) - $ / shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Share Based Payment Award Stock Options Valuation Assumptions [Line Items]
Expected dividend yield	0.00%	0.00%
Weighted average expected volatility	57.00%	61.00%
Weighted average expected term (years)	6 years 29 days	5 years 11 months 19 days
Weighted average risk-free rate	1.38%	1.59%
Weighted average fair value per share	$ 4.27	$ 6.14

Total Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 2,266	$ 1,945
Research and development
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	524	624
Selling, general and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 1,742	$ 1,321

Basic and Diluted Net Loss Per Share of Common Stock (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Numerator:
Net loss	$ (12,358)	$ (10,221)
Denominator:
Weighted average shares outstanding, basic and diluted	43,104,462	41,744,948
Net loss per share, basic and diluted:	$ (0.29)	$ (0.24)
Antidilutive securities excluded from calculations of diluted net loss per share	6,245,280	5,656,662

- Definition

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

+ References + Details

Summary of Available-For-Sale Marketable Securities (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	$ 99,590	$ 92,337
U.S. Treasury and government agencies
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	54,191	44,057
Corporate debt
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	45,399	48,280
Current Investment
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	99,498	92,298
Gross Unrealized Gains	94	52
Gross Unrealized Losses	(2)	(13)
Fair Market Value	99,590	92,337
Current Investment \| U.S. Treasury and government agencies
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	54,166	44,059
Gross Unrealized Gains	26	6
Gross Unrealized Losses	(1)	(8)
Fair Market Value	54,191	44,057
Current Investment \| Corporate debt
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	45,332	48,239
Gross Unrealized Gains	68	46
Gross Unrealized Losses	(1)	(5)
Fair Market Value	$ 45,399	$ 48,280

Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 99,590	$ 92,337
U.S. Treasury and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	54,191	44,057
Corporate debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	45,399	48,280
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	54,191	44,057
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	54,191	44,057
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	45,399	48,280
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	$ 45,399	$ 48,280

Inventory (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Inventory [Line Items]
Finished goods	$ 938	$ 1,294
Total	938	1,294
Raw materials	127	127
Work-in-process	2,249	2,369
Finished goods	346
Total	$ 2,722	$ 2,496

Summary of Accounts Payable and Accrued Liabilities (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Accounts Payable and Accrued Liabilities [Line Items]
Research and development expenses	$ 3,890	$ 3,199
Consulting and other professional fees	10,540	5,088
Compensation and employee benefits	1,465	468
Royalties payable	5,533	5,328
Other	1,236	1,684
Accounts payable and accrued liabilities	$ 22,664	$ 15,767

Summary of Intangible Assets (Detail) - USD ($) $ in Thousands	3 Months Ended			12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 60,941			$ 60,941
Accumulated Amortization	25,132			22,189
Net Carrying Amount	$ 35,809			$ 38,752
HETLIOZ
Finite-Lived Intangible Assets [Line Items]
Intangible assets, estimated useful life	2033-01	2033-01	2022-12	2033-01
Gross Carrying Amount	$ 33,000			$ 33,000
Accumulated Amortization	3,891			3,460
Net Carrying Amount	$ 29,109			$ 29,540
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	21,241			18,729
Net Carrying Amount	$ 6,700			$ 9,212

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, 2016	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2006
Finite-Lived Intangible Assets [Line Items]
Milestone obligation under license agreement			$ 25,000			$ 25,000
HETLIOZ
Finite-Lived Intangible Assets [Line Items]
Acquisition of intangible assets	$ 3,000	$ 500			$ 8,000		$ 1,000
Intangible assets, estimated useful life			2033-01	2033-01	2022-12	2033-01
Cumulative worldwide sales milestone				$ 250,000
Intangible assets capitalized				25,000
Milestone obligation under license agreement				$ 25,000

Intangible Assets (Textual 3 - Fanapt) - Additional Information (Detail) - Fanapt - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015	Dec. 31, 2009	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Acquisition of intangible assets			$ 12.0
Estimated Patent life end date	2016-11	2016-11
Assets acquired and recorded at fair value, Intangible re-acquired right				$ 15.9

Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Intangible asset amortization	$ 2,943	$ 4,144

Summary of Future Intangible Asset Amortization (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	$ 35,809	$ 38,752
Remainder of 2016	7,990
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	29,109	29,540
Remainder of 2016	1,290
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	6,700	$ 9,212
Remainder of 2016	$ 6,700

Income Taxes - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Taxes [Line Items]
Provision for income taxes	$ 0	$ 0

Summary of Minimum Annual Future Payments Under Operating Leases (Detail) $ in Thousands	Mar. 31, 2016 USD ($)
Operating Leased Assets [Line Items]
Operating leases, Total	$ 12,944
Operating leases,Remainder of 2016	1,129
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	3 Months Ended
	Mar. 31, 2016 USD ($) ft²	Mar. 31, 2015 USD ($)
Commitments and Contingencies Disclosure [Line Items]
Rent expense \| $	$ 0.5	$ 0.4
Washington DC Lease
Commitments and Contingencies Disclosure [Line Items]
Renewal term of Lease agreement	5 years
Square feet leased \| ft²	30,260

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, 2015	Mar. 31, 2014	Dec. 31, 2006	Mar. 31, 2016	Dec. 31, 2015
HETLIOZ
Milestone obligation under license agreement						$ 25,000	$ 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)	3 Months Ended
	Mar. 31, 2016 USD ($)
Fanapt
Royalty received percentage on net sales	10.00%
Prepaid royalty Payment	$ 2,000,000
Royalty payment period	10 years
Royalty Rate for Annual Sales in up to $200 million through November 2016
Fanapt
Royalty percentage payable on net sales below annual threshold	23.00%
Royalty Rate for Annual Sales in Excess of $200 million through November 2016
Fanapt
Royalty percentage payable on net sales above annual threshold	Mid-twenties
November 16,2016 through December 31,2019
Fanapt
Royalty payable percentage on net sales	3.00%
Maximum
Fanapt
Agreed upon sales threshold level for royalty rate	$ 200,000,000
Fanapt
Fanapt
Royalty payable percentage on net sales	6.00%

Commitments and Contingencies (Textual 4 - Tradipitant) - Additional Information (Detail) - Tradipitant $ in Millions	12 Months Ended
	Dec. 31, 2012 USD ($)
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

Legal Matters - Additional Information (Detail)	Mar. 04, 2016 Case
Roxane Laboratories Inc.
Legal Proceedings [Line Items]
Number of cases that were consolidated	2

Stock-Based Compensation (Textual 1 - Stock-Based Compensation) - Additional Information (Detail)		3 Months Ended
	Jan. 01, 2016 shares	Mar. 31, 2016 EquityPlan shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of equity incentive plan \| EquityPlan		1
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		8,056,668
Shares available for future grant		2,157,668
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
Increase in number of shares reserved and available for future grant	1,500,000
Number of common stock available for issuance	13,329,472
Equity incentive plan, expiration date		Apr. 12, 2016
Number of additional shares awarded		0

Stock-Based Compensation (Textual 2 Stock Option) - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
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
Proceeds from exercise of employee stock options	$ 24	$ 203
Service option awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expenses	$ 13,400
Unrecognized compensation expenses, weighted average period	1 year 6 months

Summary of Option Activity (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2014
Number of Shares
Beginning balance	6,252,448
Granted	749,511
Forfeited	(172,735)
Expired	0
Exercised	(6,249)
Ending balance	6,822,975
Exercisable	4,439,627
Vested and expected to vest at March 31, 2016	6,586,275
Weighted Average Exercise Price at Grant Date
Beginning balance	$ 11.87
Granted	7.94
Forfeited	11.16
Expired	0
Exercised	3.82
Ending balance	11.46
Exercisable	12.02
Vested and expected to vest at March 31, 2016	$ 11.52
Weighted Average Remaining Term (Years)
Weighted Average Remaining Term	6 years 3 months 11 days	6 years 1 month 28 days
Exercisable	4 years 10 months 6 days
Vested and expected to vest at March 31, 2016	6 years 2 months 1 day
Aggregate Intrinsic Value
Beginning balance	$ 7,498
Exercised	24
Ending balance	5,872
Exercisable	5,074
Vested and expected to vest at March 31, 2016	$ 5,818

Stock-Based Compensation (Textual 3 RSU) - Additional Information (Detail) - Restricted Stock Units (RSU) $ in Millions	3 Months Ended
	Mar. 31, 2016 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period of RSU awards in equal installments	4 years
Unrecognized compensation expenses, weighted average period	2 years
Unrecognized compensation expenses related to unvested RSUs	$ 11.4
2006 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of common stock vested, shares \| shares	287,666
Fair value of common stock vested	$ 2.8

Summary of RSU Activity for 2006 Plan (Detail) - 2006 Plan - Restricted Stock Units (RSU)	3 Months Ended
	Mar. 31, 2016 $ / shares shares
Number of Shares Unvested
Beginning balance \| shares	1,022,681
Granted \| shares	569,242
Forfeited \| shares	(70,564)
Vested \| shares	(287,666)
Ending balance \| shares	1,233,693
Weighted Average Price/Share Unvested
Beginning balance \| $ / shares	$ 10.90
Granted \| $ / shares	7.96
Forfeited \| $ / shares	11.03
Vested \| $ / shares	9.65
Ending balance \| $ / shares	$ 9.83