Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2018	Apr. 19, 2018
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
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	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		52,110,701

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 155,293	$ 33,627
Marketable securities	93,541	109,786
Accounts receivable, net	23,314	17,601
Inventory	1,011	840
Prepaid expenses and other current assets	9,276	8,003
Total current assets	282,435	169,857
Property and equipment, net	5,105	5,306
Intangible assets, net	25,717	26,069
Non-current inventory and other	4,058	4,193
Total assets	317,315	205,425
Current liabilities:
Accounts payable and accrued liabilities	17,242	20,335
Product revenue allowances	27,713	23,028
Milestone obligations under license agreements	27,000	27,000
Total current liabilities	71,955	70,363
Other non-current liabilities	4,216	3,675
Total liabilities	76,171	74,038
Commitments and contingencies (Notes 8 and 14)
Stockholders' equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized, and no shares issued or outstanding
Common stock, $0.001 par value; 150,000,000 shares authorized; 52,109,701 and 44,938,133 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively	52	45
Additional paid-incapital	599,480	492,802
Accumulated other comprehensive loss	(28)	(34)
Accumulated deficit	(358,360)	(361,426)
Total stockholders' equity	241,144	131,387
Total liabilities and stockholders' equity	$ 317,315	$ 205,425

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
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	52,109,701	44,938,133
Common stock, shares outstanding	52,109,701	44,938,133

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenues:
Net product sales	$ 43,592	$ 37,415
Total revenues	43,592	37,415
Operating expenses:
Cost of goods sold, excluding amortization	4,560	4,003
Research and development	9,416	10,567
Selling, general and administrative	26,822	30,297
Intangible asset amortization	352	454
Total operating expenses	41,150	45,321
Income (loss) from operations	2,442	(7,906)
Other income	622	280
Income (loss) before income taxes	3,064	(7,626)
Provision (benefit) for income taxes	(2)	19
Net income (loss)	$ 3,066	$ (7,645)
Net income (loss) per share:
Basic	$ 0.07	$ (0.17)
Diluted	$ 0.06	$ (0.17)
Weighted average shares outstanding:
Basic	46,336,430	44,398,359
Diluted	48,225,041	44,398,359

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net income (loss)	$ 3,066	$ (7,645)
Other comprehensive income (loss):
Net foreign currency translation gain	12	4
Change in net unrealized gain (loss) on marketable securities	(6)	(12)
Tax provision on other comprehensive income (loss)	0	0
Other comprehensive income (loss), net of tax	6	(8)
Comprehensive income (loss)	$ 3,072	$ (7,653)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - 3 months ended Mar. 31, 2018 - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Other Comprehensive Income	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2017	44,938,133	44,938,133
Beginning balance at Dec. 31, 2017	$ 131,387	$ 45	$ 492,802	$ (34)	$ (361,426)
Net proceeds from public offering of common stock	100,868	$ 6	100,862
Net proceeds from public offering of common stock (in shares)		6,325,000
Issuance of common stock from the exercise of stock options and settlement of restricted stock units	2,666	$ 1	2,665
Issuance of common stock form the exercise of stock options and settlement of restricted stock awards (in shares)		846,568
Stock-based compensation expense	3,151		3,151
Net income	3,066				3,066
Other comprehensive income, net of tax	$ 6			6
Ending balance (in shares) at Mar. 31, 2018	52,109,701	52,109,701
Ending balance at Mar. 31, 2018	$ 241,144	$ 52	$ 599,480	$ (28)	$ (358,360)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities
Net income (loss)	$ 3,066	$ (7,645)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment	349	250
Stock-based compensation	3,151	2,256
Amortization of (discounts) premiums on marketable securities	(208)	(53)
Intangible asset amortization	352	454
Other non-cash adjustments, net	(113)	133
Changes in operating assets and liabilities:
Accounts receivable	(5,713)	2,516
Prepaid expenses and other assets	(1,263)	(446)
Inventory	63	(83)
Accounts payable and accrued liabilities	(2,731)	1,442
Product revenue allowances	4,685	(4,181)
Net cash provided by (used in) operating activities	1,638	(5,357)
Cash flows from investing activities
Purchases of property and equipment	(135)	(478)
Purchases of marketable securities	(30,433)	(53,467)
Maturities of marketable securities	46,880	36,777
Net cash provided by (used in) investing activities	16,312	(17,168)
Cash flows from financing activities
Net proceeds from offering of common stock	101,068
Proceeds from the exercise of stock options	2,666	2,209
Net cash provided by financing activities	103,734	2,209
Effect of exchange rate changes on cash, cash equivalents and restricted cash	18	1
Net change in cash, cash equivalents and restricted cash	121,702	(20,315)
Cash, cash equivalents and restricted cash
Beginning of period	34,335	41,256
End of period	$ 156,037	$ 20,941

Business Organization and Presentation

3 Months Ended

Mar. 31, 2018

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 (FDA) in January 2014 and launched commercially in the U.S. in April 2014. In July 2015, the European Commission (EC) granted centralized marketing authorization with unified labeling for HETLIOZ^® for the treatment of Non-24 in totally blind adults. 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 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 the treatment of gastroparesis.

•

VTR-297, a small molecule histone deacetylase (HDAC) inhibitor.

•

VQW-765, 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, 2017 included in the Company’s annual report on Form 10-K. The financial information as of March 31, 2018 and for the three months ended March 31, 2018 and 2017 is unaudited, but in the opinion of management, all adjustments 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, 2017 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, 2017.

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

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. Management continually re-evaluates its estimates, judgments and assumptions, and management’s evaluation could change. Actual results could differ from those estimates.

Revenue Recognition

In accordance with Accounting Standards Codification (ASC) Subtopic 606 Revenue from Contracts with Customers (ASC 606), the Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. The Company recognizes revenue when control of the product is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those product sales, which is typically once the product physically arrives at the customer. Sales taxes, value add taxes, and usage-based taxes are excluded from revenues.

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, 2018 and 2017 were as follows:


	Three Months Ended
	March 31,		March 31,
*(in thousands)*	2018		2017
HETLIOZ^® product sales, net	$	25,423	$	20,182
Fanapt^® product sales, net		18,169		17,233

	$	43,592	$	37,415

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 which is the point at which control is transferred to the customer. There were five major customers that each accounted for more than 10% of total revenues and, as a group, represented 87% of total revenues for the three months ended March 31, 2018. There were four major customers that each accounted for more than 10% of accounts receivable and, as a group, represented 79% of total accounts receivable at March 31, 2018. The Company evaluates outstanding receivables to assess collectability. In performing this evaluation, the Company analyzes economic conditions, the aging of receivables and customer specific risks. Using this information, the Company reserves an amount that it estimates may not be collected.

Reserves for Variable Consideration

The transaction price is determined based upon the consideration to which the Company will be entitled in exchange for transferring product to the customer. The Company estimates the amount of variable consideration that should be included in the transaction price utilizing the most likely amount method and updates its estimate at each reporting date. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. 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. Variable consideration for rebates, chargebacks and co-pay assistance is based upon the insurance benefits of the end customer, which 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. Reserves for variable consideration are classified as product revenue allowances on the condensed consolidated balance sheets, with the exception of prompt-pay discounts which are classified as reductions of accounts receivable. The reserve for product returns for which the product may not be returned for a period of greater than one year from the balance sheet date is classified other non-current liabilities on the condensed consolidated balance sheets. Uncertainties related to variable consideration are generally resolved in the quarter subsequent to period end, with the exception of product returns which are resolved during the product expiry period specified in the customer contract. 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.

Chargebacks: Chargebacks are discounts that occur when contracted indirect customers purchase directly from specialty pharmacies and wholesalers. Contracted indirect 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.

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. Vanda accounts for the Medicare Part D coverage gap using a point of sale model. 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.

Service Fees: The Company receives sales order management, data and distribution services from certain customers. 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 is a payment for a distinct good or service from the customer in which case the fair value of those distinct goods or services 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.

Product Returns: Consistent with industry practice, the Company generally offers direct customers a limited right to return as defined within the Company’s returns policy. The Company considers several factors in the estimation process, including historical return activity, expiration dates of product shipped to specialty pharmacies, inventory levels within the distribution channel, product shelf life, prescription trends and other relevant factors. The Company does not expect returned goods to be resalable. There was no right of return asset as of March 31, 2018 or December 31, 2017.

Non-Cash Investing and Financing Activities

For the three months ended March 31, 2018 and 2017, the Company recorded purchases of property, plant and equipment and the related current liability in the amount of zero and $0.4 million, respectively. For the three months ended March 31, 2018, the Company accrued $0.2 million in expense associated with the March 2018 public offering of common stock.

Recent Accounting Pronouncements

In November 2016, the Financial Accounting Standards Board (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 annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2017. The Company adopted this new standard in the first quarter of 2018 and applied the provisions retrospectively. As a result of the adoption of the new guidance, the Company increased the beginning of year total amount shown on the condensed consolidated statements of cash flows by $0.7 million for the three months ended March 31, 2018, equal to the balance of restricted cash included in the condensed consolidated balance sheets as of December 31, 2017. The Company increased the beginning of year and end of year total amounts shown on the consolidated statements of cash flows by $0.8 million for the three months ended March 31, 2017, equal to the balance of restricted cash included in the condensed consolidated balance sheets as of the period ended March 31, 2017 and December 31, 2016. Restricted cash relates primarily to amounts held as collateral for letters of credit for leases for office space at the Company’s Washington, D.C. headquarters. As of March 31, 2018 and December 31, 2017, restricted cash of $0.7 million is included in other non-current assets.

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. The Company’s adoption of this standard in the first quarter of 2018 had no impact to the Company’s condensed 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 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 the impact of this standard on the Company’s consolidated financial statements; however, based on the Company’s current operating leases, it is expected that most operating lease commitments will be recognized as operating lease liabilities and right-of-use assets upon adoption.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in ASC 605, Revenue Recognition, and creates ASC 606, Revenue from Contracts with Customers. ASC 606 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 (full retrospective), or (ii) retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial adoption (modified retrospective). 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 Company adopted this new standard in the first quarter of 2018 using the modified retrospective method to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting under ASC 605. There was no impact to opening retained earnings as of January 1, 2018 as a result of adoption of the new standard. The impact to the condensed consolidated statements of operations if the Company had applied ASC 605 for the three months ended March 31, 2018 is not material. As a result of adoption, the Company reclassified the provision for product revenue returns of $3.8 million from accounts receivable, net to product revenue allowances and other non-current liabilities in the condensed consolidated balance sheets as of March 31, 2018. The provision for product returns as of December 31, 2017 of $4.1 million is included in accounts receivable in the condensed consolidated balance sheet.

Marketable Securities

3 Months Ended

Mar. 31, 2018

Marketable Securities

3. Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of March 31, 2018, which all have contract maturities of less than one year:


			Gross		Gross			Fair
March 31, 2018	Amortized		Unrealized		Unrealized			Market
*(in thousands)*	Cost		Gains		Losses			Value
U.S. Treasury and government agencies	$	53,682	$	—	$	(82	)	$	53,600
Corporate debt		39,928		30		(17	)		39,941

	$	93,610	$	30	$	(99	)	$	93,541

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


			Gross		Gross			Fair
December 31, 2017	Amortized		Unrealized		Unrealized			Market
*(in thousands)*	Cost		Gains		Losses			Value
U.S. Treasury and government agencies	$	60,681	$	—	$	(63	)	$	60,618
Corporate debt		49,168		12		(12	)		49,168

	$	109,849	$	12	$	(75	)	$	109,786

Fair Value Measurements

3 Months Ended

Mar. 31, 2018

Fair Value Measurements

4. 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, 2018 and December 31, 2017 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, 2018 and 2017.

As of March 31, 2018, 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, 2018 Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
	March 31,		Identical Assets		Observable Inputs		Inputs
*(in thousands)*	2018		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and government agencies	$	53,600	$	53,600	$	—	$	—
Corporate debt		39,941		—		39,941		—

	$	93,541	$	53,600	$	39,941	$	—

As of December 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 December 31, 2017 Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
	December 31,		Identical Assets		Observable Inputs		Inputs
*(in thousands)*	2017		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and government agencies	$	60,618	$	60,618	$	—	$	—
Corporate debt		53,164		—		53,164		—

	$	113,782	$	60,618	$	53,164	$	—

Total assets measured at fair value as of December 31, 2017 include $4.0 million of cash equivalents.

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 values 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, 2018

Inventory

5. 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, 2018 and December 31, 2017:


	March 31,		December 31,
*(in thousands)*	2018		2017
Current assets
Work-in-process	$	—	$	80
Finished goods		1,011		760

	$	1,011	$	840

Non-Current assets
Raw materials	$	87	$	87
Work-in-process		2,750		2,821
Finished goods		277		408

	$	3,114	$	3,316

Intangible Assets

3 Months Ended

Mar. 31, 2018

Intangible Assets

6. Intangible Assets

HETLIOZ^®. In January 2014, the Company announced that the FDA had approved the New Drug Application (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 estimated economic useful life of the related product patents which is the remaining life of the U.S. method of use patent for HETLIOZ^® that expires in May 2034.

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, which is expected to occur in the first half of 2018. The future obligation of $25.0 million was recorded as a current liability as of March 31, 2018 and December 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 estimated economic useful life of the related product patents which is the remaining life of the U.S. method of use patent for HETLIOZ^® that expires in May 2034.

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 was 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 was fully amortized on a straight-line basis as of 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.

The following is a summary of the Company’s intangible assets as of March 31, 2018:


			March 31, 2018
	Estimated		Gross				Net
	Useful Life		Carrying		Accumulated		Carrying
*(in thousands)*	(Years)		Amount		Amortization		Amount
HETLIOZ^®		May 2034	$	33,000	$	7,283	$	25,717
Fanapt^®		November 2016		27,941		27,941		—

			$	60,941	$	35,224	$	25,717

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


			December 31, 2017
	Estimated		Gross				Net
	Useful Life		Carrying		Accumulated		Carrying
*(in thousands)*	(Years)		Amount		Amortization		Amount
HETLIOZ^®		May 2034	$	33,000	$	6,931	$	26,069
Fanapt^®		November 2016		27,941		27,941		—

			$	60,941	$	34,872	$	26,069

Intangible assets are amortized over their estimated useful economic life using the straight-line method. Amortization expense was $0.4 million and $0.5 million for the three months ended March 31, 2018 and 2017, respectively. The following is a summary of the future intangible asset amortization schedule as of March 31, 2018:


*(in thousands)*	Total		2018		2019		2020		2021		2022		Thereafter
HETLIOZ^®	$	25,717	$	1,193	$	1,591	$	1,591	$	1,591	$	1,591	$	18,160

Accounts Payable and Accrued Liabilities

3 Months Ended

Mar. 31, 2018

Accounts Payable and Accrued Liabilities

7. Accounts Payable and Accrued Liabilities

The following is a summary of the Company’s accounts payable and accrued liabilities as of March 31, 2018 and December 31, 2017:


	March 31,		December 31,
*(in thousands)*	2018		2017
Research and development expenses	$	4,587	$	4,663
Consulting and other professional fees		2,832		3,961
Compensation and employee benefits		3,447		5,323
Royalties payable		4,352		4,394
Other		2,024		1,994

	$	17,242	$	20,335

Commitments and Contingencies

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies

8. Commitments and Contingencies

Operating leases

Commitments relating to operating leases represent the minimum annual future payments under operating leases and subleases for its Company’s headquarters at 2200 Pennsylvania Avenue, N.W. in Washington, D.C., and operating leases for office space in London and Berlin. The following is a summary of the minimum annual future payments under operating leases and subleases for office space as of March 31, 2018:


	Cash Payments Due by Year
*(in thousands)*	Total		2018		2019		2020		2021		2022		Thereafter
Operating leases	$	24,471	$	1,729	$	2,423	$	2,521	$	2,340	$	2,354	$	13,104

In June 2011, the Company entered into an operating lease for its headquarters at 2200 Pennsylvania Avenue, N.W. in Washington, D.C. for 21,400 square feet of office space. The Company subsequently amended the lease in March 2014 and March 2018 to increase the office space under lease to 33,534 square feet and, in March 2018, extended the lease term to July 2028. 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.

The Company has an 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.

Rent expense under operating leases was $0.9 million and $0.8 million for the three months ended March 31, 2018 and 2017.

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^®. As a result of the FDA’s approval of the HETLIOZ^® NDA in January 2014, the Company made an $8.0 million milestone payment to BMS in the first quarter of 2014 under the license agreement that was capitalized as an intangible asset and is being amortized over the estimated economic useful life of the related product patents which is the remaining life of the U.S. method of use patent for HETLIOZ^® in the U.S. 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, which is expected to occur in the first half of 2018. The probable future $25.0 million milestone obligation was capitalized as an intangible asset in the first quarter of 2015 and is being amortized over the estimated economic useful life of the related product patents which is the remaining life of the U.S. method of use patent for HETLIOZ^® in the U.S. The Company has no remaining milestone obligations related to HETLIOZ^® after the $25.0 million payment. 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 (NCE) patent in that territory. During the period prior to the expiry of the NCE 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 NCE patent existed or for the remainder of the 10 years after the expiry of the NCE 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^®.

Fanapt ^®. Pursuant to the terms of a settlement agreement with Novartis, Novartis transferred all U.S. and Canadian rights in the Fanapt^® franchise to the Company on December 31, 2014. The Company has no remaining milestone obligations related to Fanapt^®. The Company was obligated to make royalty payments to Sanofi S.A. (Sanofi) and Titan Pharmaceuticals Inc. (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 NCE patent for Fanapt^® in the U.S. on November 15, 2016. Under the amended agreement, the Company pays 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. No further royalties on manufacturing know-how are payable by the Company after December 31, 2019. The Company is also obligated 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.

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 NCE expires in April 2023, except in the U.S., where it expires in June 2024 absent any applicable patent term adjustments. Lilly is eligible to receive future 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 $4.0 million of pre-NDA approval milestones includes $2.0 million due upon enrollment of the first subject into a Phase III study for tradipitant and $2.0 million due upon the filing of the first marketing authorization for tradipitant in either the U.S. or the European Union. The likelihood of achieving the enrollment of the first subject into a Phase III study for tradipitant was determined to be probable during 2017. As a result, the future obligation of $2.0 million tied to such milestone was recorded as research and development expense in the consolidated statement of operations for the year ended December 31, 2017 and a current liability in the condensed consolidated balance sheet as of March 31, 2018 and December 31, 2017. The Company is obligated to use its commercially reasonable efforts to develop and commercialize tradipitant.

VQW-765. In connection with a 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 VQW-765, 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 VQW-765 and is responsible for all development costs. 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 the Company 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 provides for an initial license fee of $1.0 million that was paid by the Company in the first quarter of 2017, annual maintenance fees 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 and marketing 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.

Accumulated Other Comprehensive Loss

3 Months Ended

Mar. 31, 2018

Accumulated Other Comprehensive Loss

10. Accumulated Other Comprehensive Loss

The accumulated balances related to each component of other comprehensive income (loss) were as follows as of March 31, 2018 and December 31, 2017:


	March 31,			December 31,
*(in thousands)*	2018			2017
Foreign currency translation	$	41		$	29
Available-for-sale securities		(69	)		(63	)

	$	(28	)	$	(34	)

There was no tax provision (benefit) included in accumulated other comprehensive loss as of March 31, 2018 and December 31, 2017. There were no reclassifications out of accumulated other comprehensive loss for the three months ended March 31, 2018 and 2017.

Stock-Based Compensation

3 Months Ended

Mar. 31, 2018

Stock-Based Compensation

11. Stock-Based Compensation

As of March 31, 2018, there were 6,264,228 shares that were subject to outstanding options and RSUs under the 2006 Equity Incentive Plan (2006 Plan) and the Amended and Restated 2016 Equity Incentive Plan (2016 Plan, and together with the 2006 Plan, Plans). The 2006 Plan expired by its terms on April 12, 2016, and the Company adopted the 2016 Plan. 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 under which 2,000,000 shares of common stock were reserved for issuance. In June 2017, the Company’s stockholders approved the amendment and restatement of the 2016 Plan pursuant to which an additional 2,700,000 shares were reserved for issuance, among other administrative changes. As a result, there are a total of 4,700,000 shares of common stock reserved for issuance under the 2016 Plan, 2,123,780 shares of which remained available for future grant as of March 31, 2018.

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. Service option awards granted to new 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. Service option awards granted to existing employees 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 either equal monthly installments over a period of one year or on the first anniversary of the grant date. 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, 2018, $10.7 million of unrecognized compensation costs related to unvested service option awards are expected to be recognized over a weighted average period of 1.5 years. No option awards are classified as a liability as of March 31, 2018.

A summary of option activity under the Plans for the three months ended March 31, 2018 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, 2017		4,719,784		$	10.03		5.63	$	24,421
Granted		437,500			18.85
Forfeited		(5,298	)		11.39
Exercised		(371,201	)		7.18				3,365

Outstanding at March 31, 2018		4,780,785			11.05		6.11		28,587

Exercisable at March 31, 2018		3,323,764			9.72		4.99		23,708

Vested and expected to vest at March 31, 2018		4,546,315			10.77		5.94		28,230

The weighted average grant-date fair value of options granted was $10.40 and $7.84 per share for the three months ended March 31, 2018 and 2017, respectively. Proceeds from the exercise of stock options amounted to $2.7 million and $2.2 million for the three months ended March 31, 2018 and 2017, 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 generally vest in four equal annual installments provided that the employee remains employed with the Company. As of March 31, 2018, $21.4 million of unrecognized compensation costs related to unvested service RSUs are expected to be recognized over a weighted average period of 2.1 years. No RSUs are classified as a liability as of March 31, 2018.

A summary of RSU activity under the Plans for the three months ended March 31, 2018 follows:


	Number of			Weighted
	Shares			Average
	Underlying			Grant Date
2006 and 2016 Plans	RSUs			Fair Value
Unvested at December 31, 2017		1,357,838		$	12.72
Granted		626,086			18.77
Forfeited		(25,114	)		13.33
Vested		(475,367	)		12.50

Unvested at March 31, 2018		1,483,443			15.33

The grant date fair value for the 475,367 shares underlying RSUs that vested during the three months ended March 31, 2018 was $5.9 million.

Stock-Based Compensation

Stock-based compensation expense recognized for the three months ended March 31, 2018 and 2017 was comprised of the following:


	Three Months Ended
	March 31,		March 31,
*(in thousands)*	2018		2017
Research and development	$	321	$	409
Selling, general and administrative		2,830		1,847

	$	3,151	$	2,256

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model that uses the assumptions noted in the following table. Expected volatility rates are based on the historical volatility of the Company’s publicly traded common stock and other factors. The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has not paid dividends to its stockholders since its inception (other than a dividend of preferred share purchase rights, which was declared in September 2008) and does not plan to pay dividends in the foreseeable future. Assumptions used in the Black-Scholes-Merton option pricing model for stock options granted during the three months ended March 31, 2018 and 2017 were as follows:


	Thee Months Ended
	March 31,			March 31,
	2018			2017
Expected dividend yield		0	%		0	%
Weighted average expected volatility		57	%		57	%
Weighted average expected term (years)		5.90			5.89
Weighted average risk-free rate		2.64	%		1.98	%

Income Taxes

3 Months Ended

Mar. 31, 2018

Income Taxes

12. 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, 2018 and December 31, 2017. As a result of the tax valuation allowance against deferred tax assets in the U.S., there was no benefit for income taxes associated with the income (loss) before income taxes for three months ended March 31, 2018 and 2017. Taxes have been recorded related to certain U.S. state jurisdictions and non-U.S. income for the three months ended March 31, 2018 and 2017. Differences between the statutory tax rate and effective tax rate for these jurisdictions relate to settlements of equity compensation awards that occurred during the period.

Certain tax attributes of the Company, including NOLs and credits, would be 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 utilize its NOLs and credit carryforward (tax attributes). Ownership changes occurred in the years ended December 31, 2014 and December 31, 2008. The Company believes that the ownership changes in 2014 and 2008 will not impact its ability to utilize NOL and credit carryforwards; however, future ownership changes may cause the Company’s existing tax attributes to have additional limitations. Because the Company maintains a valuation allowance on its U.S. tax attributes, any limitation as a result of application of IRC Section 382 limitation would not have a material impact on the Company’s provision for income taxes for the three months ended March 31, 2018.

The Tax Cuts and Jobs Act (TCJA) was enacted in December 2017. The TCJA reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred and creates new taxes on certain foreign sourced earnings. At March 31, 2018, the Company has not completed our accounting for the tax effects of the TCJA. Certain U.S. federal deferred tax assets and liabilities were remeasured as of December 31, 2017 based on the rates at which they are expected to reverse in the future, which is generally 21%. However, the Company is still analyzing certain aspects of the U.S. international and executive compensation provisions of the TCJA and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. Because the Company has recorded a valuation allowance against deferred tax assets in the U.S., future adjustments recorded as we complete our analysis will not have a material impact to our net deferred tax asset or liability.

Earnings per Share

3 Months Ended

Mar. 31, 2018

Earnings per Share

13. 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, 2018 and 2017:


	Three Months Ended
	March 31,		March 31,
*(in thousands, except for share and per share amounts)*	2018		2017
Numerator:
Net income (loss)	$	3,066	$	(7,645	)

Denominator:
Weighted average shares outstanding, basic		46,336,430		44,398,359
Effect of dilutive securities		1,888,611		—

Weighted average shares outstanding, diluted		48,225,041		44,398,359

Net income (loss) per share, basic and diluted:
Basic	$	0.07	$	(0.17	)

Diluted	$	0.06	$	(0.17	)

Antidilutive securities excluded from calculations of diluted net income (loss) per share		1,057,444		3,160,500

The Company incurred a net loss for the three months ended March 31, 2017 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.

Legal Matters

3 Months Ended

Mar. 31, 2018

Legal Matters

14. Legal Matters

Fanapt^®. In June 2014, the Company filed suit against Roxane Laboratories, Inc. (Roxane) in the U.S. District Court for the District of Delaware (Delaware District Court). The suit sought an adjudication that Roxane has infringed one or more claims of the Company’s U.S. Patent No. 8,586,610 (‘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 a 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 (‘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 (Federal Circuit). On July 27, 2017, Roxane, now a subsidiary of Hikma Pharmaceuticals PLC (Hikma), petitioned the Federal Circuit to substitute Roxane with new defendants West-Ward Pharmaceuticals International Limited and West-Ward Pharmaceuticals Corp. (each of which is a subsidiary of Hikma and both of which are referred to collectively herein as West-Ward). The Company did not oppose the substitution of West-Ward for Roxane. On April 13, 2018, the Federal Circuit affirmed the Delaware District Court’s decision that West-Ward infringed the ‘610 Patent.

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 (‘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 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 are scheduled to submit to the Delaware District Court a status report and request a schedule for trial no later than 14 days after the Federal Circuit issues its mandate in the West-Ward appeal. 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 (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^® (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^® (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 (Ohio District Court). The suit sought 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 the Company’s 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 (PTAB) of the U.S. 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.

HETLIOZ^®. On March 23, 2018, the Company received a Paragraph IV certification notice letter from Teva Pharmaceuticals USA, Inc. (Teva) notifying the Company that Teva had submitted an ANDA for HETLIOZ^® to the FDA requesting approval to market, sell and use a generic version of the 20mg HETLIOZ^® capsules for Non-24-Hour-Sleep-Wake Disorder. In its notice letter, Teva alleges that the Company’s Orange Book listed U.S. Patent No. RE46,604, U.S. Patent No. 9,060,995, U.S. Patent 9,539,234, U.S. Patent 9,549,913, U.S. Patent 9,730,910 and U.S. Patent 9,885,241, (collectively, the Vanda Patents), which cover methods of using HETLIOZ^®, are invalid, unenforceable and/or will not be infringed by Teva’s manufacture, use or sale of the product described in its ANDA.

Since receiving Teva’s notice letter, the Company has received similar notice letters from two additional generic drug manufacturers. The Company received notice letters from (a) MSN Pharmaceuticals Inc. and MSN Laboratories Private Limited (together, MSN) on April 2, 2018 and (b) Apotex on April 3, 2018. Each of MSN and Apotex notified the Company that it has submitted an ANDA to the FDA seeking to market, sell and use a generic version of the 20mg HETLIOZ^® capsules for Non-24-Hour Sleep-Wake Disorder. In their respective notice letters, each of MSA and Apotex allege that the Vanda Patents are invalid, unenforceable and/or will not be infringed by MSN’s or Apotex’s, respectively, manufacture, use or sale of the product described in their respective ANDA’s. The Company is currently reviewing the MSN and Apotex notice letters and intends to vigorously enforce its intellectual property rights relating to HETLIOZ^®. By statute, the Company has 45 days from receipt of each of the respective notice letters to initiate patent infringement lawsuits against MSN and Apotex. Such lawsuits would automatically preclude the FDA from approving either MSN’s or Apotex’s ANDA until the earlier of 30 months from the date the Company received the respective notice letters, or entry of a district court decision finding the patents invalid, unenforceable or not infringed. The composition and use of HETLIOZ^® are currently protected by seven patents that are listed in the FDA’s Orange Book.

On April 30, 2018, the Company filed a patent infringement lawsuit in the Delaware District Court against Teva. The lawsuit seeks an adjudication that Teva has infringed one or more claims of the Vanda Patents by submitting to the FDA an ANDA for a generic version of HETLIOZ^® prior to the expiration of the latest to expire of the Vanda Patents in 2034. The relief requested by the Company in the lawsuit includes a request for a permanent injunction preventing Teva from infringing the asserted claims of the Vanda Patents by engaging in the manufacture, use, offer to sell, sale, importation or distribution of generic versions of HETLIOZ^® before the last expiration date of the Vanda Patents. The lawsuit automatically precludes the FDA from approving Teva’s ANDA until the earlier of 30 months from the date the Company received the notice letter, or entry of a district court decision finding the Patents invalid, unenforceable or not infringed.

Business Organization and Presentation (Policies)

3 Months Ended

Mar. 31, 2018

Business organization

Business organization

•

VTR-297, a small molecule histone deacetylase (HDAC) inhibitor.

•

VQW-765, 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

Revenue Recognition

Revenue Recognition

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, 2018 and 2017 were as follows:


	Three Months Ended
	March 31,		March 31,
*(in thousands)*	2018		2017
HETLIOZ^® product sales, net	$	25,423	$	20,182
Fanapt^® product sales, net		18,169		17,233

	$	43,592	$	37,415

Major Customers

Major Customers

Reserves for Variable Consideration

Reserves for Variable Consideration

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, 2018

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, 2018 and 2017 were as follows:


	Three Months Ended
	March 31,		March 31,
*(in thousands)*	2018		2017
HETLIOZ^® product sales, net	$	25,423	$	20,182
Fanapt^® product sales, net		18,169		17,233

	$	43,592	$	37,415

Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2018

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, 2018, which all have contract maturities of less than one year:


			Gross		Gross			Fair
March 31, 2018	Amortized		Unrealized		Unrealized			Market
*(in thousands)*	Cost		Gains		Losses			Value
U.S. Treasury and government agencies	$	53,682	$	—	$	(82	)	$	53,600
Corporate debt		39,928		30		(17	)		39,941

	$	93,610	$	30	$	(99	)	$	93,541

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


			Gross		Gross			Fair
December 31, 2017	Amortized		Unrealized		Unrealized			Market
*(in thousands)*	Cost		Gains		Losses			Value
U.S. Treasury and government agencies	$	60,681	$	—	$	(63	)	$	60,618
Corporate debt		49,168		12		(12	)		49,168

	$	109,849	$	12	$	(75	)	$	109,786

- 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, 2018

Assets Measured at Fair Value on Recurring Basis

As of March 31, 2018, 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, 2018 Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
	March 31,		Identical Assets		Observable Inputs		Inputs
*(in thousands)*	2018		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and government agencies	$	53,600	$	53,600	$	—	$	—
Corporate debt		39,941		—		39,941		—

	$	93,541	$	53,600	$	39,941	$	—

As of December 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 December 31, 2017 Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
	December 31,		Identical Assets		Observable Inputs		Inputs
*(in thousands)*	2017		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and government agencies	$	60,618	$	60,618	$	—	$	—
Corporate debt		53,164		—		53,164		—

	$	113,782	$	60,618	$	53,164	$	—

Inventory (Tables)

3 Months Ended

Mar. 31, 2018

Inventory

Inventory consisted of the following as of March 31, 2018 and December 31, 2017:


	March 31,		December 31,
*(in thousands)*	2018		2017
Current assets
Work-in-process	$	—	$	80
Finished goods		1,011		760

	$	1,011	$	840

Non-Current assets
Raw materials	$	87	$	87
Work-in-process		2,750		2,821
Finished goods		277		408

	$	3,114	$	3,316

Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2018

Summary of Intangible Assets

The following is a summary of the Company’s intangible assets as of March 31, 2018:


			March 31, 2018
	Estimated		Gross				Net
	Useful Life		Carrying		Accumulated		Carrying
*(in thousands)*	(Years)		Amount		Amortization		Amount
HETLIOZ^®		May 2034	$	33,000	$	7,283	$	25,717
Fanapt^®		November 2016		27,941		27,941		—

			$	60,941	$	35,224	$	25,717

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


			December 31, 2017
	Estimated		Gross				Net
	Useful Life		Carrying		Accumulated		Carrying
*(in thousands)*	(Years)		Amount		Amortization		Amount
HETLIOZ^®		May 2034	$	33,000	$	6,931	$	26,069
Fanapt^®		November 2016		27,941		27,941		—

			$	60,941	$	34,872	$	26,069

Summary of Future Intangible Asset Amortization

The following is a summary of the future intangible asset amortization schedule as of March 31, 2018:


*(in thousands)*	Total		2018		2019		2020		2021		2022		Thereafter
HETLIOZ^®	$	25,717	$	1,193	$	1,591	$	1,591	$	1,591	$	1,591	$	18,160

Accounts Payable and Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2018

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, 2018 and December 31, 2017:


	March 31,		December 31,
*(in thousands)*	2018		2017
Research and development expenses	$	4,587	$	4,663
Consulting and other professional fees		2,832		3,961
Compensation and employee benefits		3,447		5,323
Royalties payable		4,352		4,394
Other		2,024		1,994

	$	17,242	$	20,335

Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2018

Summary of Minimum Annual Future Payments under Operating Leases and Subleases

office space in London and Berlin. The following is a summary of the minimum annual future payments under operating leases and subleases for office space as of March 31, 2018:


	Cash Payments Due by Year
*(in thousands)*	Total		2018		2019		2020		2021		2022		Thereafter
Operating leases	$	24,471	$	1,729	$	2,423	$	2,521	$	2,340	$	2,354	$	13,104

Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2018

Summary of Accumulated Balances Related to Each Component of Other Comprehensive Income (Loss)

The accumulated balances related to each component of other comprehensive income (loss) were as follows as of March 31, 2018 and December 31, 2017:


	March 31,			December 31,
*(in thousands)*	2018			2017
Foreign currency translation	$	41		$	29
Available-for-sale securities		(69	)		(63	)

	$	(28	)	$	(34	)

Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

Summary of Option Activity Plan

A summary of option activity under the Plans for the three months ended March 31, 2018 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, 2017		4,719,784		$	10.03		5.63	$	24,421
Granted		437,500			18.85
Forfeited		(5,298	)		11.39
Exercised		(371,201	)		7.18				3,365

Outstanding at March 31, 2018		4,780,785			11.05		6.11		28,587

Exercisable at March 31, 2018		3,323,764			9.72		4.99		23,708

Vested and expected to vest at March 31, 2018		4,546,315			10.77		5.94		28,230

Summary of RSU Activity for 2006 Plan and 2016 Plan

A summary of RSU activity under the Plans for the three months ended March 31, 2018 follows:


	Number of			Weighted
	Shares			Average
	Underlying			Grant Date
2006 and 2016 Plans	RSUs			Fair Value
Unvested at December 31, 2017		1,357,838		$	12.72
Granted		626,086			18.77
Forfeited		(25,114	)		13.33
Vested		(475,367	)		12.50

Unvested at March 31, 2018		1,483,443			15.33

Stock-Based Compensation Expense

Stock-based compensation expense recognized for the three months ended March 31, 2018 and 2017 was comprised of the following:


	Three Months Ended
	March 31,		March 31,
*(in thousands)*	2018		2017
Research and development	$	321	$	409
Selling, general and administrative		2,830		1,847

	$	3,151	$	2,256

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

Assumptions used in the Black-Scholes-Merton option pricing model for stock options granted during the three months ended March 31, 2018 and 2017 were as follows:


	Thee Months Ended
	March 31,			March 31,
	2018			2017
Expected dividend yield		0	%		0	%
Weighted average expected volatility		57	%		57	%
Weighted average expected term (years)		5.90			5.89
Weighted average risk-free rate		2.64	%		1.98	%

Earnings per Share (Tables)

3 Months Ended

Mar. 31, 2018

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, 2018 and 2017:


	Three Months Ended
	March 31,		March 31,
*(in thousands, except for share and per share amounts)*	2018		2017
Numerator:
Net income (loss)	$	3,066	$	(7,645	)

Denominator:
Weighted average shares outstanding, basic		46,336,430		44,398,359
Effect of dilutive securities		1,888,611		—

Weighted average shares outstanding, diluted		48,225,041		44,398,359

Net income (loss) per share, basic and diluted:
Basic	$	0.07	$	(0.17	)

Diluted	$	0.06	$	(0.17	)

Antidilutive securities excluded from calculations of diluted net income (loss) per share		1,057,444		3,160,500

Business Organization and Presentation - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2018 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, 2018	Mar. 31, 2017
Revenue from External Customer [Line Items]
Net product sales	$ 43,592	$ 37,415
HETLIOZ
Revenue from External Customer [Line Items]
Net product sales	25,423	20,182
Fanapt
Revenue from External Customer [Line Items]
Net product sales	$ 18,169	$ 17,233

Summary of Significant Accounting Policies - Additional Information (Detail) $ in Millions	3 Months Ended		12 Months Ended
	Mar. 31, 2018 USD ($) Customer	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
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	$ 0.0	$ 0.4
Accrued offering expenses	0.2
Accounting Standards Update 2016-18
Summary Of Significant Accounting Policies [Line Items]
Restricted cash	0.7	$ 0.8	$ 0.7	$ 0.8
Accounting Standards Update 2016-18 \| Other Noncurrent Assets
Summary Of Significant Accounting Policies [Line Items]
Restricted cash	0.7		0.7
Accounting Standards Update 2014-09
Summary Of Significant Accounting Policies [Line Items]
Provision for product revenue returns	$ 3.8		$ 4.1
Customer Concentration Risk \| Sales Revenue, Net
Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage	87.00%
Number of major customers that each accounted for more than 10% of total revenues \| Customer	5
Credit Concentration Risk \| Accounts Receivable
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 accounts receivable \| Customer	4

Summary of Available-For-Sale Marketable Securities (Detail) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	$ 93,541	$ 109,786
Current Investment
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	93,610	109,849
Gross Unrealized Gains	30	12
Gross Unrealized Losses	(99)	(75)
Fair Market Value	93,541	109,786
Current Investment \| U.S. Treasury and government agencies
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	53,682	60,681
Gross Unrealized Losses	(82)	(63)
Fair Market Value	53,600	60,618
Current Investment \| Corporate debt
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	39,928	49,168
Gross Unrealized Gains	30	12
Gross Unrealized Losses	(17)	(12)
Fair Market Value	$ 39,941	$ 49,168

Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	$ 93,541	$ 113,782
U.S. Treasury and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	53,600	60,618
Corporate debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	39,941	53,164
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	53,600	60,618
Quoted Prices in Active Markets for Identical Assets (Level 1) \| U.S. Treasury and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	53,600	60,618
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	39,941	53,164
Significant Other Observable Inputs (Level 2) \| Corporate debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	$ 39,941	$ 53,164

Fair Value Measurements - Additional Information (Detail) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	$ 93,541	$ 113,782
Cash Equivalents
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		$ 4,000

Inventory (Detail) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Current assets
Work-in-process		$ 80
Finished goods	$ 1,011	760
Total	1,011	840
Non-Current assets
Raw materials	87	87
Work-in-process	2,750	2,821
Finished goods	277	408
Total	$ 3,114	$ 3,316

Intangible Assets - (HETLIOZ) - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended			12 Months Ended
	Mar. 31, 2018	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2017
Finite-Lived Intangible Assets [Line Items]
Milestone obligation under license agreement	$ 27,000			$ 27,000
HETLIOZ
Finite-Lived Intangible Assets [Line Items]
Acquisition of intangible assets			$ 8,000
Intangible assets, estimated future useful life	2034-05			2034-05
Cumulative worldwide sales milestone	$ 250,000
Milestone obligation under license agreement	25,000			$ 25,000
Intangible assets capitalized	$ 25,000	$ 25,000

Intangible Assets - (Fanapt) - Additional Information (Detail) - Fanapt - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2009	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Acquisition of intangible assets			$ 12.0
Intangible assets, estimated useful life	2016-11	2016-11
Assets acquired and recorded at fair value, Intangible re-acquired right				$ 15.9

Summary of Intangible Assets (Detail) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 60,941	$ 60,941
Accumulated Amortization	35,224	34,872
Net Carrying Amount	$ 25,717	$ 26,069
HETLIOZ
Finite-Lived Intangible Assets [Line Items]
Intangible assets, estimated future useful life	2034-05	2034-05
Gross Carrying Amount	$ 33,000	$ 33,000
Accumulated Amortization	7,283	6,931
Net Carrying Amount	$ 25,717	$ 26,069
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 - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Finite-Lived Intangible Assets [Line Items]
Intangible asset amortization	$ 352	$ 454

Summary of Future Intangible Asset Amortization (Detail) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Finite-Lived Intangible Assets [Line Items]
Total	$ 25,717	$ 26,069
HETLIOZ
Finite-Lived Intangible Assets [Line Items]
Total	25,717	$ 26,069
2018	1,193
2019	1,591
2020	1,591
2021	1,591
2022	1,591
Thereafter	$ 18,160

Summary of Accounts Payable and Accrued Liabilities (Detail) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Accounts Payable and Accrued Liabilities [Line Items]
Research and development expenses	$ 4,587	$ 4,663
Consulting and other professional fees	2,832	3,961
Compensation and employee benefits	3,447	5,323
Royalties payable	4,352	4,394
Other	2,024	1,994
Accounts payable and accrued liabilities	$ 17,242	$ 20,335

Summary of Minimum Annual Future Payments Under Operating Leases and Subleases for Office Space (Detail) $ in Thousands	Mar. 31, 2018 USD ($)
Operating Leased Assets [Line Items]
Operating leases, Total	$ 24,471
Operating leases, 2018	1,729
Operating leases, 2019	2,423
Operating leases, 2020	2,521
Operating leases, 2021	2,340
Operating leases, 2022	2,354
Operating leases, Thereafter	$ 13,104

Commitments and Contingencies - (Operating Leases) - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2018 USD ($) ft²	Mar. 31, 2017 USD ($)	Jun. 30, 2011 ft²
Commitments and Contingencies Disclosure [Line Items]
Rent expense \| $	$ 0.9	$ 0.8
Washington DC Sublease [Member]
Commitments and Contingencies Disclosure [Line Items]
Leased square footage	9,928
Lease term expiration	2026-07
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
Washington DC Lease Amendment
Commitments and Contingencies Disclosure [Line Items]
Leased square footage	33,534		21,400
Renewal term of lease agreement	5 years
Lease term expiration	2028-07

Commitments and Contingencies - (HETLIOZ) - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2015	Mar. 31, 2014
HETLIOZ
Percentage of future sublicense fees payable to third-party	Mid-twenties
HETLIOZ
HETLIOZ
Acquisition of intangible assets			$ 8.0
Milestone obligation under license agreement	$ 25.0
Royalty payable percentage on net sales	10.00%
Cumulative worldwide sales milestone	$ 250.0
Intangible assets capitalized	$ 25.0	$ 25.0

Commitments and Contingencies - (Fanapt) - Additional Information (Detail) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2016
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 up to $200 million through November 2016 \| Maximum
Fanapt
Agreed upon sales threshold level for royalty rate		$ 200,000,000
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
Royalty Rate for Annual Sales in Excess of $200 million through November 2016 \| Maximum
Fanapt
Agreed upon sales threshold level for royalty rate		$ 200,000,000
November 16,2016 through December 31,2019
Fanapt
Royalty payable percentage on net sales	3.00%	3.00%
Prepaid royalty		$ 2,000,000
Fanapt
Fanapt
Royalty payable percentage on net sales	6.00%
Royalty payment period	10 years

Commitments and Contingencies - (Tradipitant) - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Commitments and Contingencies [Line Items]
Milestone obligation under license agreement	$ 27,000	$ 27,000
Tradipitant
Commitments and Contingencies [Line Items]
Future percentage of royalty payments based net sales	Low double digits
Possible future milestone payment	$ 4,000
Milestone obligation under license agreement	2,000	2,000
Tradipitant \| Research and development
Commitments and Contingencies [Line Items]
Milestone obligation under license agreement		$ 2,000
Tradipitant \| Development and Milestone Payments of Phase III Study Potentially Due to Third Party
Commitments and Contingencies [Line Items]
Possible future milestone payment	2,000
Tradipitant \| Development and Milestone Payment for First Marketing Authorization Potentially Due to Third Party
Commitments and Contingencies [Line Items]
Possible future milestone payment	2,000
Tradipitant \| Future Regulatory Approval and Sales Milestones
Commitments and Contingencies [Line Items]
Possible future milestone payment	$ 95,000

Commitments and Contingencies - (CFTR Activators and Inhibitors) - Additional Information (Detail) - CFTR Activators and Inhibitors - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	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

Public Offering of Common Stock - Additional Information (Detail) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($) $ / shares shares
Subsidiary, Sale of Stock [Line Items]
Net proceeds from public offering	$ 101,068
Accrued offering expenses	$ 200
Public Offering
Subsidiary, Sale of Stock [Line Items]
Public offering of common stock, shares \| shares	6,325,000
Public offerings of common stock, Price Per Share \| $ / shares	$ 17.00
Net proceeds from public offering	$ 100,900
Accrued offering expenses	$ 200
Over-Allotment Option
Subsidiary, Sale of Stock [Line Items]
Public offering of common stock, shares \| shares	825,000

Summary of Accumulated Balances Related to Each Component of Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Accumulated Other Comprehensive Income (Loss) [Line Items]
Foreign currency translation	$ 41	$ 29
Available-for-sale securities	(69)	(63)
Accumulated other comprehensive income (loss)	$ (28)	$ (34)

Accumulated Other Comprehensive Loss - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Accumulated Other Comprehensive Income (Loss) [Line Items]
Tax provision (benefit)	$ (2,000)	$ 19,000
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Tax provision (benefit)	0
Reclassification Out of Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Reclassifications out of accumulated other comprehensive loss	$ 0	$ 0

Stock-Based Compensation - (Stock-Based Compensation) - Additional Information (Detail) - shares	1 Months Ended	3 Months Ended
	Jun. 30, 2017	Mar. 31, 2018	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		6,264,228
2016 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares of common stock reserved for issuance		4,700,000	2,000,000
Additional shares reserved for issuance under equity incentive plans	2,700,000
Number of shares of common stock available for future grant		2,123,780

Stock-Based Compensation - (Stock Option) - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
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	$ 2,666	$ 2,209
Options granted, weighted average fair value per share	$ 10.40	$ 7.84
Service option awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expenses	$ 10,700
Unrecognized compensation expenses, weighted average period	1 year 6 months

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, 2018	Dec. 31, 2017
Number of Shares
Beginning balance	4,719,784
Granted	437,500
Forfeited	(5,298)
Exercised	(371,201)
Ending balance	4,780,785	4,719,784
Exercisable	3,323,764
Vested and expected to vest at March 31, 2018	4,546,315
Weighted Average Exercise Price at Grant Date
Beginning balance	$ 10.03
Granted	18.85
Forfeited	11.39
Exercised	7.18
Ending balance	11.05	$ 10.03
Exercisable	9.72
Vested and expected to vest at March 31, 2018	$ 10.77
Weighted Average Remaining Term (Years)
Weighted Average Remaining Term	6 years 1 month 9 days	5 years 7 months 17 days
Exercisable	4 years 11 months 26 days
Vested and expected to vest at March 31, 2018	5 years 11 months 8 days
Aggregate Intrinsic Value
Beginning balance	$ 24,421
Exercised	3,365
Ending balance	28,587	$ 24,421
Exercisable	23,708
Vested and expected to vest at March 31, 2018	$ 28,230

Stock-Based Compensation - (RSU) - Additional Information (Detail) - Restricted Stock Units (RSU) $ in Millions	3 Months Ended
	Mar. 31, 2018 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 1 month 6 days
Unrecognized compensation expenses related to unvested RSUs	$ 21.4
Grant date fair value of common stock vested, shares \| shares	475,367
Grant date fair value of common stock vested	$ 5.9

Summary of RSU Activity Plan (Detail) - Restricted Stock Units (RSU)	3 Months Ended
	Mar. 31, 2018 $ / shares shares
Number of Shares Unvested
Beginning balance \| shares	1,357,838
Granted \| shares	626,086
Forfeited \| shares	(25,114)
Vested \| shares	(475,367)
Ending balance \| shares	1,483,443
Weighted Average Price/Share Unvested
Beginning balance \| $ / shares	$ 12.72
Granted \| $ / shares	18.77
Forfeited \| $ / shares	13.33
Vested \| $ / shares	12.50
Ending balance \| $ / shares	$ 15.33

Total Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 3,151	$ 2,256
Research and development
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	321	409
Selling, general and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 2,830	$ 1,847

Black-Scholes-Merton Option Pricing Model for Stock Options Granted (Detail)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
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 25 days	5 years 10 months 21 days
Weighted average risk-free rate	2.64%	1.98%

Income Taxes - Additional Information (Detail)	3 Months Ended	12 Months Ended
Income Taxes - Additional Information (Detail)	Mar. 31, 2018	Dec. 31, 2017
Income Taxes [Line Items]
Federal tax at statutory rate	21.00%	35.00%
Percentage at which certain U.S. federal deferred tax assets and liabilities remeasured		21.00%

Basic and Diluted Net Loss Per Share of Common Stock (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Numerator:
Net income (loss)	$ 3,066	$ (7,645)
Denominator:
Weighted average shares outstanding, basic	46,336,430	44,398,359
Effect of dilutive securities	1,888,611
Weighted average shares outstanding, diluted	48,225,041	44,398,359
Net income (loss) per share, basic and diluted:
Basic	$ 0.07	$ (0.17)
Diluted	$ 0.06	$ (0.17)
Antidilutive securities excluded from calculations of diluted net income (loss) per share	1,057,444	3,160,500

Commitments and Contingencies - (VQW-765) - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2018
VQW-765
Commitments and Contingencies [Line Items]
Future percentage of royalty payments based net sales	Mid-teens