Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2017	Apr. 24, 2017
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
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		44,552,263

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 20,111	$ 40,426
Marketable securities	117,645	100,914
Accounts receivable, net	17,751	20,268
Inventory	816	779
Prepaid expenses and other current assets	12,239	11,788
Total current assets	168,562	174,175
Property and equipment, net	5,461	5,015
Intangible assets, net	27,365	27,819
Non-current inventory and other	3,332	3,365
Total assets	204,720	210,374
Current liabilities:
Accounts payable and accrued liabilities	18,025	16,196
Accrued government and other rebates	29,943	34,124
Milestone obligation under license agreement	25,000
Total current liabilities	72,968	50,320
Milestone obligation under license agreement		25,000
Other non-current liabilities	3,610	3,724
Total liabilities	76,578	79,044
Commitments and contingencies (Notes 11 and 13)
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; 44,546,274 and 44,000,614 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively	45	44
Additional paid-in capital	481,551	477,087
Accumulated other comprehensive income	50	58
Accumulated deficit	(353,504)	(345,859)
Total stockholders' equity	128,142	131,330
Total liabilities and stockholders' equity	$ 204,720	$ 210,374

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2017	Dec. 31, 2016
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	44,546,274	44,000,614
Common stock, shares outstanding	44,546,274	44,000,614

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Revenues:
Net product sales	$ 37,415	$ 33,262
Total revenues	37,415	33,262
Operating expenses:
Cost of goods sold, excluding amortization	4,003	5,956
Research and development	10,567	7,548
Selling, general and administrative	30,297	29,290
Intangible asset amortization	454	2,943
Total operating expenses	45,321	45,737
Loss from operations	(7,906)	(12,475)
Other income	280	117
Loss before income taxes	(7,626)	(12,358)
Provision for income taxes	19
Net loss	$ (7,645)	$ (12,358)
Basic and diluted net loss per share	$ (0.17)	$ (0.29)
Weighted average shares outstanding, basic and diluted	44,398,359	43,104,462

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Net loss	$ (7,645)	$ (12,358)
Other comprehensive income (loss):
Net foreign currency translation gain	4
Change in net unrealized gain (loss) on marketable securities	(12)	53
Tax provision on other comprehensive income (loss)	0	0
Other comprehensive income (loss), net of tax	(8)	53
Comprehensive loss	$ (7,653)	$ (12,305)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - 3 months ended Mar. 31, 2017 - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Other Comprehensive Income (Loss)	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2016	44,000,614	44,000,614
Beginning balance at Dec. 31, 2016	$ 131,330	$ 44	$ 477,087	$ 58	$ (345,859)
Issuance of common stock from the exercise of stock options and settlement of restricted stock units	2,209	$ 1	2,208
Issuance of common stock form the exercise of stock options and settlement of restricted stock awards (in shares)		545,660
Stock-based compensation expense	2,256		2,256
Net loss	(7,645)				(7,645)
Other comprehensive loss, net of tax	$ (8)			(8)
Ending balance (in shares) at Mar. 31, 2017	44,546,274	44,546,274
Ending balance at Mar. 31, 2017	$ 128,142	$ 45	$ 481,551	$ 50	$ (353,504)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities
Net loss	$ (7,645)	$ (12,358)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation of property and equipment	250	219
Stock-based compensation	2,256	2,266
Amortization of discounts and premiums on marketable securities	(53)	28
Intangible asset amortization	454	2,943
Other non-cash adjustments, net	133	12
Changes in operating assets and liabilities:
Accounts receivable	2,516	(348)
Prepaid expenses and other assets	(446)	(1,484)
Inventory	(83)	42
Accounts payable and accrued liabilities	1,442	6,955
Accrued government and other rebates	(4,181)	(3,174)
Net cash used in operating activities	(5,357)	(4,899)
Cash flows from investing activities
Purchases of property and equipment	(478)
Purchases of marketable securities	(53,467)	(47,311)
Maturities of marketable securities	36,777	40,083
Net cash used in investing activities	(17,168)	(7,228)
Cash flows from financing activities
Proceeds from the exercise of employee stock options	2,209	24
Net cash provided by financing activities	2,209	24
Effect of foreign currencies on cash and cash equivalents	1
Net decrease in cash and cash equivalents	(20,315)	(12,103)
Cash and cash equivalents
Beginning of period	40,426	50,843
End of period	$ 20,111	$ 38,740

Business Organization and Presentation

3 Months Ended

Mar. 31, 2017

Business Organization and Presentation

1. Business Organization and Presentation

Business organization

Vanda Pharmaceuticals Inc. (the Company) is a global biopharmaceutical company focused on the development and commercialization of innovative 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), was approved by the U.S. Food and Drug Administration (the FDA) in January 2014 and launched commercially in the U.S. in April 2014. In July 2015, the European Commission (the EC) granted centralized marketing authorization with unified labeling for HETLIOZ^® for the treatment of Non-24 in totally blind adults. HETLIOZ^® was commercially launched in Germany in August 2016. HETLIOZ^® has potential utility in a number of other circadian rhythm disorders and is presently in clinical development for the treatment of Pediatric Non-24, Jet Lag Disorder and Smith-Magenis Syndrome (SMS).

•

Fanapt^® (iloperidone), a product for the treatment of schizophrenia, the oral formulation of which was approved by the FDA in May 2009 and launched commercially in the U.S. by Novartis Pharma AG (Novartis) in January of 2010. 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. Fanapt^® has potential utility in a number of other disorders. An assessment of new Fanapt^® clinical opportunities is ongoing.

•

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 and gastroparesis.

•

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

•

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

•

Portfolio of Cystic Fibrosis Transmembrane Conductance Regulator (CFTR) activators and inhibitors.

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, 2016 included in the Company’s annual report on Form 10-K. The financial information as of March 31, 2017 and for the three months ended March 31, 2017 and 2016 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, 2016 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, 2016.

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2017

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. The Company has estimated its annual fees for Fanapt^® under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, however, the amount of the estimated liability could increase, but the range of this increase is not reasonably estimable at this time. Management continually re-evaluates its estimates, judgments and assumptions, and management’s evaluation could change. Actual results could differ from those estimates.

Inventory

Inventory, which is recorded at the lower of cost or net realizable value, 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 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, 2017 and 2016 were as follows:


	Three Months Ended
	March 31,		March 31,
*(in thousands)*	2017		2016
HETLIOZ^®product sales, net	$	20,182	$	16,201
Fanapt^® product sales, net		17,233		17,061

	$	37,415	$	33,262

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. There were four major customers that each accounted for more than 10% of total revenues and, as a group, represented 79% of total revenues for the three months ended March 31, 2017. There were five major customers that each accounted for more than 10% of accounts receivable and, as a group, represented 86% of total accounts receivable at March 31, 2017.

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

Non-Cash Investing and Financing Activities

For the three months ended March 31, 2017 and 2016, the Company recorded purchases of property, plant and equipment and the related current liability in the amount of $0.4 million and zero, respectively.

Recent accounting pronouncements

In November 2016, the FASB issued Accounting Standards Update (ASU) 2016-18, Restricted Cash. The new standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for annually reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2017. 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 August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments, to clarify guidance on the classification of certain cash receipts and cash payments in the statement of cash flow. The standard is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2017. Early adoption is permitted. Adoption of this new standard is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, related to the measurement of credit losses on financial instruments. The standard will require the use of an “expected loss” model for instruments measured at amortized cost. The standard is effective for years beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2019. The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued 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 beginning after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. The Company adopted this new standard in the first quarter of 2017. As a result of adoption of the new guidance, the Company recognized deferred tax assets related to the previously unrecognized tax benefits, fully reduced by a valuation allowance as it is more likely than not that such benefits will not be realized. The Company will recognize excess tax benefits arising from share-based payments in the Company’s provision for income taxes as opposed to additional paid-in capital on a prospective basis. Additionally, the Company elected to continue to estimate the impact of forfeitures when determining the amount of compensation cost to be recognized each period rather than to account for them as they occur. The remaining updates required by this standard did not have a material impact to 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 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), in April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers, identifying Performance Obligations and Licensing, and in May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients, which provide additional clarification on certain topics addressed in ASU 2014-09. ASU 2016-08, ASU 2016-10, and ASU 2016-12 follow the same implementation guidelines as ASU 2014-09 and ASU 2015-14. The initial analysis identifying areas that will be impacted by the new guidance is substantially complete, and the Company is currently analyzing the potential impacts to the consolidated financial statements and related disclosures. Revenue from the Company’s product sales is expected to remain substantially unchanged. Management expects to adopt the new standard on January 1, 2018.

Earnings per Share

3 Months Ended

Mar. 31, 2017

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, 2017 and 2016:


	Three Months Ended
	March 31,			March 31,
*(in thousands, except for share and per share amounts)*	2017			2016
Numerator:
Net loss	$	(7,645	)	$	(12,358	)

Denominator:
Weighted average shares outstanding, basic and diluted		44,398,359			43,104,462

Net loss per share, basic and diluted:	$	(0.17	)	$	(0.29	)

Antidilutive securities excluded from calculations of diluted net loss per share		3,160,500			6,245,280

The Company incurred net losses for the three months ended March 31, 2017 and 2016 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, 2017

Marketable Securities

4. Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of March 31, 2017, which all have contract maturities of less than one year:


March 31, 2017 *(in thousands)*	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
U.S. Treasury and government agencies	$	60,106	$	—	$	(47	)	$	60,059
Corporate debt		57,492		102		(8	)		57,586

	$	117,598	$	102	$	(55	)	$	117,645

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


December 31, 2016 *(in thousands)*	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
U.S. Treasury and government agencies	$	50,661	$	3	$	(17	)	$	50,647
Corporate debt		50,194		89		(16	)		50,267

	$	100,855	$	92	$	(33	)	$	100,914

- Definition

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

+ References + Details

Fair Value Measurements

3 Months Ended

Mar. 31, 2017

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, 2017 and December 31, 2016 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, 2017 and 2016.

As of March 31, 2017, 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, 2017 Using
*(in thousands)*	March 31, 2017		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	$	60,059	$	60,059	$	—	$	—
Corporate debt		57,586		—		57,586

	$	117,645	$	60,059	$	57,586	$	—

As of December 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 December 31, 2016 Using
*(in thousands)*	December 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	$	50,647	$	50,647	$	—	$	—
Corporate debt		50,267		—		50,267

	$	100,914	$	50,647	$	50,267	$	—

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, 2017

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, 2017 and December 31, 2016:


	March 31,		December 31,
*(in thousands)*	2017		2016
Current assets
Work-in-process	$	50	$	17
Finished goods		766		762

	$	816	$	779

Non-Current assets
Raw materials	$	127	$	127
Work-in-process		2,191		2,225
Finished goods		125		83

	$	2,443	$	2,435

Prepaid Expenses and Other Current Assets

3 Months Ended

Mar. 31, 2017

Prepaid Expenses and Other Current Assets

7. Prepaid Expenses and Other Current Assets

The following is a summary of the Company’s prepaid expenses and other current assets as of March 31, 2017 and December 31, 2016:


	March 31,		December 31,
*(in thousands)*	2017		2016
Research and development expenses	$	2,879	$	2,397
Consulting and other professional fees		6,888		6,051
Prepaid royalties		1,207		1,761
Other		1,265		1,579

	$	12,239	$	11,788

Accounts Payable and Accrued Liabilities

3 Months Ended

Mar. 31, 2017

Accounts Payable and Accrued Liabilities

8. Accounts Payable and Accrued Liabilities

The following is a summary of the Company’s accounts payable and accrued liabilities as of March 31, 2017 and December 31, 2016:


	March 31,		December 31,
*(in thousands)*	2017		2016
Research and development expenses	$	4,313	$	3,024
Consulting and other professional fees		5,892		3,192
Compensation and employee benefits		2,848		4,291
Royalties payable		3,114		4,555
Other		1,858		1,134

	$	18,025	$	16,196

Intangible Assets

3 Months Ended

Mar. 31, 2017

Intangible Assets

9. Intangible Assets

The following is a summary of the Company’s intangible assets as of March 31, 2017:


			March 31, 2017
*(in thousands)*	Estimated Useful Life (Years)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HETLIOZ^®		January 2033	$	33,000	$	5,635	$	27,365
Fanapt^®		November 2016		27,941		27,941		—

			$	60,941	$	33,576	$	27,365

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


			December 31, 2016
*(in thousands)*	Estimated Useful Life (Years)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HETLIOZ^®		January 2033	$	33,000	$	5,181	$	27,819
Fanapt^®		November 2016		27,941		27,941		—

			$	60,941	$	33,122	$	27,819

HETLIOZ^®. 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. method of use patent for HETLIOZ^® that expires in January 2033.

The Company is obligated to make a future milestone payment to BMS of $25.0 million when cumulative worldwide sales of HETLIOZ^® reach $250.0 million. The obligation of $25.0 million was recorded as a current liability as of March 31, 2017. The $25.0 million was determined to be additional consideration for the acquisition of the HETLIOZ^® intangible asset. The intangible asset of $25.0 million is being amortized on a straight-line basis over the remaining life of the U.S. method of use patent for HETLIOZ^® that expires in January 2033.

Fanapt^®. 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 has been fully 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 a settlement agreement in December 2014, 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 has been fully amortized on a straight-line basis to November 2016. The useful life estimation for the Fanapt^® intangible asset was 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^® was completed in November 2016.

Intangible assets are amortized over their estimated useful economic life using the straight-line method. Amortization expense was $0.4 million and $2.9 million for the three months ended March 31, 2017 and 2016, respectively. The following is a summary of the future intangible asset amortization schedule as of March 31, 2017:


*(in thousands)*	Total		2017		2018		2019		2020		2021		Thereafter
HETLIOZ^®	$	27,365	$	1,296	$	1,728	$	1,728	$	1,728	$	1,728	$	19,157

Income Taxes

3 Months Ended

Mar. 31, 2017

Income Taxes

10. 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 pretax losses in the U.S. serves as strong evidence that it is more likely than not that deferred tax assets in the U.S. will not be realized in the future. Therefore, the Company had a full tax valuation allowance against all deferred tax assets in the U.S. as of March 31, 2017 and December 31, 2016. As a result of the tax valuation allowance against deferred tax assets in the U.S., the provision or benefit for income taxes for the three months ended March 31, 2017 and 2016 was not material.

Certain tax attributes of the Company, including net operating losses (NOLs) and credits, are potentially subject to a limitation should an ownership change as defined under the Internal Revenue Code of 1986, as amended (IRC), Section 382, occur. The limitations resulting from 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 will be able to utilize all existing NOL carryforwards before their expiration despite these limitations. 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 U.S. tax attributes, therefore, any IRC Section 382 limitation would not have a material impact on the Company’s provision for income taxes as of March 31, 2017.

Commitments and Contingencies

3 Months Ended

Mar. 31, 2017

Commitments and Contingencies

11. Commitments and Contingencies

Operating leases

Commitments relating to operating leases represent the minimum annual future payments under operating leases and subleases for a total of 40,188 square feet of office space for the Company’s headquarters at 2200 Pennsylvania Avenue, N.W. in Washington, D.C. that expire in 2026, the operating lease for 2,880 square feet of office space for the Company’s European headquarters in London that has a noncancellable lease term ending in 2021, and 1,249 square feet of office space in Berlin under a short-term operating lease. The following is a summary of the minimum annual future payments under operating leases and subleases for office space as of March 31, 2017:


	Cash payments due by year
*(in thousands)*	Total		2017		2018		2019		2020		2021		Thereafter
Operating leases	$	21,164	$	1,509	$	2,220	$	2,275	$	2,331	$	2,171	$	10,658

In 2011, the Company entered into an operating lease for its headquarters at 2200 Pennsylvania Avenue, N.W. in Washington, D.C. A lease amendment in 2014 increased the office space under lease to 30,260 square feet, and a lease amendment in June 2016 extended the lease term from April 2023 to September 2026. Subject to the prior rights of other tenants, 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 under certain circumstances.

In June 2016, the Company entered into a sublease under which the Company leases 9,928 square feet of office space for its headquarters at 2200 Pennsylvania Avenue, N.W. in Washington, D.C. The sublease term began in January 2017 and ends in July 2026, but may be terminated earlier by either party under certain circumstances. The Company has the right to sublease or assign all or a portion of the premises, subject to standard conditions.

Rent expense under operating leases was $0.8 million and $0.5 million for the three months ended March 31, 2017 and 2016.

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, which is expected to be in 2018. 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 ^®. 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 up to December 31, 2014. 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 with Novartis, Novartis transferred all U.S. and Canadian rights in the Fanapt^® franchise to the Company on December 31, 2014. The Company was 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 year ended December 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 did 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.

Portfolio of CFTR activators and inhibitors. In March 2017, the Company entered into a license agreement with the University of California San Francisco (UCSF), under which Vanda acquired an exclusive worldwide license to develop and commercialize a portfolio of CFTR activators and inhibitors. Pursuant to the license agreement, the Company will develop and commercialize the CFTR activators and inhibitors and is responsible for all development costs under the license agreement, including current pre-investigational new drug development work. The license agreement includes an initial license fee of $1.0 million, annual maintenance fees and development, and up to $46.0 million in potential regulatory and sales milestone obligations. UCSF is eligible to receive single-digit tiered royalties on net sales.

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.

Stock-Based Compensation

3 Months Ended

Mar. 31, 2017

Stock-Based Compensation

12. Stock-Based Compensation

As of March 31, 2017, there were 6,583,429 shares that were subject to outstanding options and RSUs under the 2006 Equity Incentive Plan (the 2006 Plan) and the 2016 Equity Incentive Plan (the 2016 Plan, and together with the 2006 Plan, the Plans). The 2006 Plan expired by its terms on April 12, 2016. Outstanding options and RSUs under the 2006 Plan remain in effect and the terms of the 2006 Plan continue to apply, but no additional awards can be granted under the 2006 Plan. In June 2016, the Company’s stockholders approved the 2016 Plan. There are 2,000,000 shares of common stock reserved for issuance under the 2016 Plan, of which 526,661 shares remained available for future grant as of as of March 31, 2017.

Stock Options

The Company has granted option awards under the Plans 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, 2017, $11.1 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 March 31, 2017.

A summary of option activity under the Plans for the three months ended March 31, 2017 follows:


2006 and 2016 Plans *(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, 2016		5,548,336		$	11.62		5.58	$	32,453
Granted		592,750			14.50
Forfeited		(212,718	)		10.71
Expired		(570,600	)		30.57
Exercised		(198,156	)		11.14				669

Outstanding at March 31, 2017		5,159,612			9.92		6.37		21,602

Exercisable at March 31, 2017		3,410,101			8.94		5.12		17,474

Vested and expected to vest at March 31, 2017		4,857,256			9.75		6.18		21,090

The weighted average grant-date fair value of options granted was $7.84 and $4.27 per share for the three months ended March 31, 2017 and 2016, respectively. Proceeds from the exercise of stock options amounted to $2.2 million and less than $0.1 million for the three months ended March 31, 2017 and 2016, respectively.

Restricted Stock Units

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 under the Plans 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, 2017, $16.9 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 RSUs are classified as a liability as of March 31, 2017.

A summary of RSU activity under the Plans for the three months ended March 31, 2017 follows:


2006 and 2016 Plans	Number of Shares Underlying RSUs			Weighted Average Grant Date Fair Value
Unvested at December 31, 2016		1,138,428		$	10.07
Granted		760,086			14.50
Forfeited		(127,193	)		10.49
Vested		(347,504	)		9.60

Unvested at March 31, 2017		1,423,817			12.52

The grant date fair value for the 347,504 shares underlying RSUs that vested during the three months ended March 31, 2017 was $3.3 million.

Stock-Based Compensation

Stock-based compensation expense recognized for the three months ended March 31, 2017 and 2016 was comprised of the following:


	Three Months Ended
	March 31,		March 31,
*(in thousands)*	2017		2016
Research and development	$	409	$	524
Selling, general and administrative		1,847		1,742

	$	2,256	$	2,266

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, 2017 and 2016 were as follows:


	Three Months Ended
	March 31,			March 31,
	2017			2016
Expected dividend yield		0	%		0	%
Weighted average expected volatility		57	%		57	%
Weighted average expected term (years)		5.89			6.08
Weighted average risk-free rate		1.98	%		1.38	%

- Definition

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

+ References + Details

Legal Matters

3 Months Ended

Mar. 31, 2017

Legal Matters

13. 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. On August 25, 2016, the Delaware District Court ruled in favor of the Company, finding that Roxane’s ANDA product infringed the asserted claims of the ‘610 Patent and the ‘198 Patent. The Delaware District Court ruled that the Company is entitled to a permanent injunction against Roxane enjoining Roxane from infringing the ‘610 Patent, including the manufacture, use, sale, offer to sell, sale, distribution or importation of any generic iloperidone product described in the ‘610 Patent ANDA until the expiration of the ‘610 Patent in November 2027. If the Company obtains pediatric exclusivity, the injunction against Roxane would be extended until May 2028 under the Delaware District Court’s order. On September 23, 2016, Roxane filed a notice of appeal with the Federal Circuit Court of Appeals. Roxane filed its opening appellate brief on February 7, 2017. The Company filed its responsive brief on April 19, 2017.

In 2015, the Company filed six separate patent infringement lawsuits in the Delaware District Court against Roxane, Inventia Healthcare Pvt. Ltd. (Inventia), Lupin Ltd. and Lupin Pharmaceuticals, Inc. (Lupin), Taro Pharmaceuticals USA, Inc. and Taro Pharmaceutical Industries, Ltd. (Taro), 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 an 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. Certain Defendants have since entered into agreements resolving these lawsuits, as discussed below. The remaining parties have agreed, and the Delaware District Court has ordered, that within 14 days after any decision on the merits in the Roxane appeal, the parties will submit to the Delaware District Court a status report and request a schedule for trial. The Company entered into a confidential stipulation with Inventia regarding any potential launch of Inventia’s generic ANDA product. The Company also entered into a confidential stipulation with Lupin regarding any potential launch of Lupin’s generic ANDA product.

Lupin filed counter claims for declaratory judgment of invalidity and noninfringement of seven of the Company’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 October 13, 2016, the Company and Lupin filed a Stipulation of Dismissal in the Delaware District Court pursuant to which Lupin’s counterclaims relating to the Method of Treatment Patents were dismissed without prejudice in recognition of an agreement reached between the parties by which the Company would not assert those patents against Lupin absent certain changes in Lupin’s proposed prescribing information for its iloperidone tablets.

On October 24, 2016, the Company entered into a License Agreement with Taro to resolve the Company’s patent litigation against Taro regarding Taro’s ANDA seeking approval of its generic version of Fanapt^® (the Taro License Agreement). Under the Taro License Agreement, the Company granted Taro a non-exclusive license to manufacture and commercialize Taro’s version of Fanapt^® in the U.S. effective November 2, 2027, unless prior to that date the Company obtains pediatric exclusivity for Fanapt^®, in which case, the license will be effective May 2, 2028. Taro may enter the market earlier under certain limited circumstances. The Taro License Agreement, which is subject to review by the U.S. Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ), provides for a full settlement and release by the Company and Taro of all claims that are the subject of the litigation.

On December 7, 2016, the Company entered into a License Agreement with Apotex to resolve the Company’s patent litigation against Apotex regarding Apotex’s ANDA seeking approval of its generic version of Fanapt^® (the Apotex License Agreement). Under the Apotex License Agreement, the Company granted Apotex a non-exclusive license to manufacture and commercialize Apotex’s version of Fanapt^® in the U.S. effective November 2, 2027, unless prior to that date the Company obtains pediatric exclusivity for Fanapt^®, in which case, the license will be effective May 2, 2028. Apotex may enter the market earlier under certain limited circumstances. The Apotex License Agreement, which is subject to review by the FTC and the DOJ, provides for a full settlement and release by the Company and Apotex of all claims that are the subject of the litigation.

On February 26, 2016, Roxane filed suit against the Company in the U.S. District Court for the Southern District of Ohio (the Ohio District Court). 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 to transfer the lawsuit to the Delaware District Court. On December 20, 2016, the Ohio District Court ruled in our favor, dismissing Roxane’s suit without prejudice for lack of personal jurisdiction.

On February 26, 2016, Roxane filed a Petition for Inter Partes Review (IPR) of the ‘432 Patent with the Patent Trials and Appeals Board (the PTAB) of the United States Patent and Trademark Office. The Company filed a Preliminary Response on June 7, 2016, and on August 30, 2016 the PTAB denied the request by Roxane to institute an IPR of the ‘432 Patent. On September 29, 2016, Roxane filed a Petition for Rehearing with the PTAB, and on October 13, 2016 the Company filed a Response to Roxane’s Petition. On November 4, 2016, the PTAB denied Roxane’s Petition for Rehearing.

Business Organization and Presentation (Policies)

3 Months Ended

Mar. 31, 2017

Business organization

Business organization

•

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

•

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

•

Portfolio of Cystic Fibrosis Transmembrane Conductance Regulator (CFTR) activators and inhibitors.

Basis of Presentation

Basis of Presentation

Use of Estimates

Use of Estimates

Inventory

Inventory

Revenue from 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, 2017 and 2016 were as follows:


	Three Months Ended
	March 31,		March 31,
*(in thousands)*	2017		2016
HETLIOZ^®product sales, net	$	20,182	$	16,201
Fanapt^® product sales, net		17,233		17,061

	$	37,415	$	33,262

Product Sales Discounts and Allowances

Major Customers

Major Customers

Stock-Based Compensation

Stock-Based Compensation

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, 2017

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, 2017 and 2016 were as follows:


	Three Months Ended
	March 31,		March 31,
*(in thousands)*	2017		2016
HETLIOZ^®product sales, net	$	20,182	$	16,201
Fanapt^® product sales, net		17,233		17,061

	$	37,415	$	33,262

Earnings per Share (Tables)

3 Months Ended

Mar. 31, 2017

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, 2017 and 2016:


	Three Months Ended
	March 31,			March 31,
*(in thousands, except for share and per share amounts)*	2017			2016
Numerator:
Net loss	$	(7,645	)	$	(12,358	)

Denominator:
Weighted average shares outstanding, basic and diluted		44,398,359			43,104,462

Net loss per share, basic and diluted:	$	(0.17	)	$	(0.29	)

Antidilutive securities excluded from calculations of diluted net loss per share		3,160,500			6,245,280

Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2017

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, 2017, which all have contract maturities of less than one year:


March 31, 2017 *(in thousands)*	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
U.S. Treasury and government agencies	$	60,106	$	—	$	(47	)	$	60,059
Corporate debt		57,492		102		(8	)		57,586

	$	117,598	$	102	$	(55	)	$	117,645

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


December 31, 2016 *(in thousands)*	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
U.S. Treasury and government agencies	$	50,661	$	3	$	(17	)	$	50,647
Corporate debt		50,194		89		(16	)		50,267

	$	100,855	$	92	$	(33	)	$	100,914

- 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, 2017

Assets Measured at Fair Value on Recurring Basis

As of March 31, 2017, 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, 2017 Using
*(in thousands)*	March 31, 2017		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	$	60,059	$	60,059	$	—	$	—
Corporate debt		57,586		—		57,586

	$	117,645	$	60,059	$	57,586	$	—

As of December 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 December 31, 2016 Using
*(in thousands)*	December 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	$	50,647	$	50,647	$	—	$	—
Corporate debt		50,267		—		50,267

	$	100,914	$	50,647	$	50,267	$	—

Inventory (Tables)

3 Months Ended

Mar. 31, 2017

Inventory

Inventory consisted of the following as of March 31, 2017 and December 31, 2016:


	March 31,		December 31,
*(in thousands)*	2017		2016
Current assets
Work-in-process	$	50	$	17
Finished goods		766		762

	$	816	$	779

Non-Current assets
Raw materials	$	127	$	127
Work-in-process		2,191		2,225
Finished goods		125		83

	$	2,443	$	2,435

Prepaid Expenses and Other Current Assets (Tables)

3 Months Ended

Mar. 31, 2017

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 March 31, 2017 and December 31, 2016:


	March 31,		December 31,
*(in thousands)*	2017		2016
Research and development expenses	$	2,879	$	2,397
Consulting and other professional fees		6,888		6,051
Prepaid royalties		1,207		1,761
Other		1,265		1,579

	$	12,239	$	11,788

Accounts Payable and Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2017

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, 2017 and December 31, 2016:


	March 31,		December 31,
*(in thousands)*	2017		2016
Research and development expenses	$	4,313	$	3,024
Consulting and other professional fees		5,892		3,192
Compensation and employee benefits		2,848		4,291
Royalties payable		3,114		4,555
Other		1,858		1,134

	$	18,025	$	16,196

Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2017

Summary of Intangible Assets

The following is a summary of the Company’s intangible assets as of March 31, 2017:


			March 31, 2017
*(in thousands)*	Estimated Useful Life (Years)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HETLIOZ^®		January 2033	$	33,000	$	5,635	$	27,365
Fanapt^®		November 2016		27,941		27,941		—

			$	60,941	$	33,576	$	27,365

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


			December 31, 2016
*(in thousands)*	Estimated Useful Life (Years)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HETLIOZ^®		January 2033	$	33,000	$	5,181	$	27,819
Fanapt^®		November 2016		27,941		27,941		—

			$	60,941	$	33,122	$	27,819

Summary of Future Intangible Asset Amortization

The following is a summary of the future intangible asset amortization schedule as of March 31, 2017:


*(in thousands)*	Total		2017		2018		2019		2020		2021		Thereafter
HETLIOZ^®	$	27,365	$	1,296	$	1,728	$	1,728	$	1,728	$	1,728	$	19,157

Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2017

Summary of Minimum Annual Future Payments under Operating Leases and Subleases

The following is a summary of the minimum annual future payments under operating leases and subleases for office space as of March 31, 2017:


	Cash payments due by year
*(in thousands)*	Total		2017		2018		2019		2020		2021		Thereafter
Operating leases	$	21,164	$	1,509	$	2,220	$	2,275	$	2,331	$	2,171	$	10,658

Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2017

Summary of Option Activity Plan

A summary of option activity under the Plans for the three months ended March 31, 2017 follows:


2006 and 2016 Plans *(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, 2016		5,548,336		$	11.62		5.58	$	32,453
Granted		592,750			14.50
Forfeited		(212,718	)		10.71
Expired		(570,600	)		30.57
Exercised		(198,156	)		11.14				669

Outstanding at March 31, 2017		5,159,612			9.92		6.37		21,602

Exercisable at March 31, 2017		3,410,101			8.94		5.12		17,474

Vested and expected to vest at March 31, 2017		4,857,256			9.75		6.18		21,090

Summary of RSU Activity Plan

A summary of RSU activity under the Plans for the three months ended March 31, 2017 follows:


2006 and 2016 Plans	Number of Shares Underlying RSUs			Weighted Average Grant Date Fair Value
Unvested at December 31, 2016		1,138,428		$	10.07
Granted		760,086			14.50
Forfeited		(127,193	)		10.49
Vested		(347,504	)		9.60

Unvested at March 31, 2017		1,423,817			12.52

Stock-Based Compensation Expense

Stock-based compensation expense recognized for the three months ended March 31, 2017 and 2016 was comprised of the following:


	Three Months Ended
	March 31,		March 31,
*(in thousands)*	2017		2016
Research and development	$	409	$	524
Selling, general and administrative		1,847		1,742

	$	2,256	$	2,266

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, 2017 and 2016 were as follows:


	Three Months Ended
	March 31,			March 31,
	2017			2016
Expected dividend yield		0	%		0	%
Weighted average expected volatility		57	%		57	%
Weighted average expected term (years)		5.89			6.08
Weighted average risk-free rate		1.98	%		1.38	%

Business Organization and Presentation - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2017 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, 2017	Mar. 31, 2016
Revenue from External Customer [Line Items]
Net product sales	$ 37,415	$ 33,262
HETLIOZ
Revenue from External Customer [Line Items]
Net product sales	20,182	16,201
Fanapt
Revenue from External Customer [Line Items]
Net product sales	$ 17,233	$ 17,061

Summary of Significant Accounting Policies - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2017 USD ($) Customer	Mar. 31, 2016 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Percentage of insurance coverage gap allocated for prescription drugs under Medicare Part D	50.00%
Purchases of property, plant and equipment and the related current liability \| $	$ 0.4	$ 0.0
Customer Concentration Risk \| Sales Revenue, Net
Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage	79.00%
Number of major customers that each accounted for more than 10% of total revenues	4
Credit Concentration Risk \| Accounts Receivable
Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage	86.00%
Number of major customers that each accounted for more than 10% of total accounts receivable	5

Basic and Diluted Net Loss Per Share of Common Stock (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Numerator:
Net loss	$ (7,645)	$ (12,358)
Denominator:
Weighted average shares outstanding, basic and diluted	44,398,359	43,104,462
Net loss per share, basic and diluted:	$ (0.17)	$ (0.29)
Antidilutive securities excluded from calculations of diluted net loss per share	3,160,500	6,245,280

Summary of Available-For-Sale Marketable Securities (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	$ 117,645	$ 100,914
U.S. Treasury and government agencies
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	60,059	50,647
Corporate debt
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	57,586	50,267
Current Investment
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	117,598	100,855
Gross Unrealized Gains	102	92
Gross Unrealized Losses	(55)	(33)
Fair Market Value	117,645	100,914
Current Investment \| U.S. Treasury and government agencies
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	60,106	50,661
Gross Unrealized Gains		3
Gross Unrealized Losses	(47)	(17)
Fair Market Value	60,059	50,647
Current Investment \| Corporate debt
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	57,492	50,194
Gross Unrealized Gains	102	89
Gross Unrealized Losses	(8)	(16)
Fair Market Value	$ 57,586	$ 50,267

Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 117,645	$ 100,914
U.S. Treasury and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	60,059	50,647
Corporate debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	57,586	50,267
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	60,059	50,647
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	60,059	50,647
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	57,586	50,267
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	$ 57,586	$ 50,267

Inventory (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Current assets
Work-in-process	$ 50	$ 17
Finished goods	766	762
Total	816	779
Non-Current assets
Raw materials	127	127
Work-in-process	2,191	2,225
Finished goods	125	83
Total	$ 2,443	$ 2,435

Summary of Prepaid Expenses and Other Current Assets (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Prepaid Expenses And Other Current Assets [Line Items]
Research and development expenses	$ 2,879	$ 2,397
Consulting and other professional fees	6,888	6,051
Prepaid royalties	1,207	1,761
Other	1,265	1,579
Prepaid expenses and other current assets	$ 12,239	$ 11,788

Summary of Accounts Payable and Accrued Liabilities (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Accounts Payable and Accrued Liabilities [Line Items]
Research and development expenses	$ 4,313	$ 3,024
Consulting and other professional fees	5,892	3,192
Compensation and employee benefits	2,848	4,291
Royalties payable	3,114	4,555
Other	1,858	1,134
Accounts payable and accrued liabilities	$ 18,025	$ 16,196

Summary of Intangible Assets (Detail) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 60,941	$ 60,941
Accumulated Amortization	33,576	33,122
Net Carrying Amount	$ 27,365	$ 27,819
HETLIOZ
Finite-Lived Intangible Assets [Line Items]
Intangible assets, estimated useful life	2033-01	2033-01
Gross Carrying Amount	$ 33,000	$ 33,000
Accumulated Amortization	5,635	5,181
Net Carrying Amount	$ 27,365	$ 27,819
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	$ 27,941	$ 27,941

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, 2017	Mar. 31, 2014	Dec. 31, 2016	Dec. 31, 2006
Finite-Lived Intangible Assets [Line Items]
Milestone obligation under license agreement					$ 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
Cumulative worldwide sales milestone			$ 250,000
Milestone obligation under license agreement			25,000
Intangible assets capitalized			$ 25,000

Intangible Assets (Textual 3 - Fanapt) - Additional Information (Detail) - Fanapt - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016	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, 2017	Mar. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Intangible asset amortization	$ 454	$ 2,943

Summary of Future Intangible Asset Amortization (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	$ 27,365	$ 27,819
HETLIOZ
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	27,365	$ 27,819
2017	1,296
2018	1,728
2019	1,728
2020	1,728
2021	1,728
Thereafter	$ 19,157

Commitments and Contingencies - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2017 USD ($) ft²	Mar. 31, 2016 USD ($)
Commitments and Contingencies Disclosure [Line Items]
Rent expense \| $	$ 0.8	$ 0.5
Washington DC Lease
Commitments and Contingencies Disclosure [Line Items]
Leased square footage	40,188
Expiration date of leases for office space	2026
Washington DC Lease \| Sublease
Commitments and Contingencies Disclosure [Line Items]
Leased square footage	9,928
Washington DC Lease Amendment
Commitments and Contingencies Disclosure [Line Items]
Leased square footage	30,260
Renewal term of lease agreement	5 years
London Lease
Commitments and Contingencies Disclosure [Line Items]
Leased square footage	2,880
Noncancellable lease term ending date	2021
Berlin Lease
Commitments and Contingencies Disclosure [Line Items]
Leased square footage	1,249

Summary of Minimum Annual Future Payments Under Operating Leases and Subleases for Office Space (Detail) $ in Thousands	Mar. 31, 2017 USD ($)
Operating Leased Assets [Line Items]
Operating leases, Total	$ 21,164
Operating leases, 2017	1,509
Operating leases, 2018	2,220
Operating leases, 2019	2,275
Operating leases, 2020	2,331
Operating leases, 2021	2,171
Operating leases, Thereafter	$ 10,658

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, 2017	Mar. 31, 2014	Dec. 31, 2006	Dec. 31, 2016
HETLIOZ
Milestone obligation under license agreement						$ 25,000
Percentage of future sublicense fees payable to third-party			Mid-twenties
HETLIOZ
HETLIOZ
Acquisition of intangible assets	$ 3,000	$ 500		$ 8,000	$ 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 ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2014	Dec. 31, 2016
Fanapt
Royalty received percentage on net sales		10.00%
Prepaid royalty	$ 1,207,000		$ 1,761,000
Royalty Rate for Annual Sales 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%
Prepaid royalty	$ 2,000,000
Maximum
Fanapt
Agreed upon sales threshold level for royalty rate	$ 200,000,000
Fanapt
Fanapt
Royalty payable percentage on net sales	6.00%
Royalty payment period	10 years

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

Commitments and Contingencies (Textual 5 - CFTR Activators and Inhibitors - Additional Information (Detail) - CFTR Activators and Inhibitors - USD ($) $ in Millions	1 Months Ended	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2017
CFTR activators and inhibitors
Milestone payment under license agreement	$ 1.0
Possible future milestone payments	$ 46.0
Tiered royalties payable on future net sales		Single-digit

Stock-Based Compensation (Textual 1 - Stock-Based Compensation) - Additional Information (Detail) - shares	3 Months Ended
	Mar. 31, 2017	Jun. 30, 2016
2006 Plan and 2016 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	6,583,429
2016 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares of common stock reserved for issuance		2,000,000
Number of shares of common stock available for future grant	526,661

Stock-Based Compensation (Textual 2 Stock Option) - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
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	$ 2,209	$ 24
Options granted, weighted average fair value per share	$ 7.84	$ 4.27
Service option awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expenses	$ 11,100
Unrecognized compensation expenses, weighted average period	1 year 4 months 24 days

Summary of Option Activity for 2006 Plan and the 2016 Plan (Detail) - 2006 Plan and 2016 Plan - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Number of Shares
Beginning balance	5,548,336
Granted	592,750
Forfeited	(212,718)
Expired	(570,600)
Exercised	(198,156)
Ending balance	5,159,612	5,548,336
Exercisable	3,410,101
Vested and expected to vest at March 31, 2017	4,857,256
Weighted Average Exercise Price at Grant Date
Beginning balance	$ 11.62
Granted	14.50
Forfeited	10.71
Expired	30.57
Exercised	11.14
Ending balance	9.92	$ 11.62
Exercisable	8.94
Vested and expected to vest at March 31, 2017	$ 9.75
Weighted Average Remaining Term (Years)
Weighted Average Remaining Term	6 years 4 months 13 days	5 years 6 months 29 days
Exercisable	5 years 1 month 13 days
Vested and expected to vest at March 31, 2017	6 years 2 months 5 days
Aggregate Intrinsic Value
Beginning balance	$ 32,453
Exercised	669
Ending balance	21,602	$ 32,453
Exercisable	17,474
Vested and expected to vest at March 31, 2017	$ 21,090

Stock-Based Compensation (Textual 3 RSU) - Additional Information (Detail) - Restricted Stock Units (RSU) $ in Millions	3 Months Ended
	Mar. 31, 2017 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	$ 16.9
Grant date fair value of common stock vested, shares \| shares	347,504
Grant date fair value of common stock vested	$ 3.3

Summary of RSU Activity Plan (Detail) - Restricted Stock Units (RSU)	3 Months Ended
	Mar. 31, 2017 $ / shares shares
Number of Shares Unvested
Beginning balance \| shares	1,138,428
Granted \| shares	760,086
Forfeited \| shares	(127,193)
Vested \| shares	(347,504)
Ending balance \| shares	1,423,817
Weighted Average Price/Share Unvested
Beginning balance \| $ / shares	$ 10.07
Granted \| $ / shares	14.50
Forfeited \| $ / shares	10.49
Vested \| $ / shares	9.60
Ending balance \| $ / shares	$ 12.52

Total Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 2,256	$ 2,266
Research and development
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	409	524
Selling, general and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 1,847	$ 1,742

Black-Scholes-Merton Option Pricing Model for Stock Options Granted (Detail)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share Based Payment Award Stock Options Valuation Assumptions [Line Items]
Expected dividend yield	0.00%	0.00%
Weighted average expected volatility	57.00%	57.00%
Weighted average expected term (years)	5 years 10 months 21 days	6 years 29 days
Weighted average risk-free rate	1.98%	1.38%