View Filing Data

Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2018	Feb. 13, 2019	Jun. 30, 2018
Document and Entity Information
Entity Registrant Name	SUPERNUS PHARMACEUTICALS INC
Entity Central Index Key	0001356576
Document Type	10-K
Document Period End Date	Dec. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 3,020,270,520
Entity Common Stock, Shares Outstanding		52,320,473
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Current assets
Cash and cash equivalents	$ 192,248	$ 100,304
Marketable securities	163,770	39,736
Accounts receivable, net	102,922	65,586
Inventories, net	25,659	16,304
Prepaid expenses and other current assets	8,888	6,521
Total current assets	493,487	228,451
Long term marketable securities	418,798	133,638
Property and equipment, net	4,095	5,124
Intangible assets, net	31,368	36,019
Deferred income taxes	29,683	20,843
Other assets	380	389
Total assets	977,811	424,464
Current liabilities
Accounts payable	3,195	6,844
Accrued sales deductions	107,063	68,343
Accrued expenses	36,535	27,305
Income taxes payable	12,377	15,938
Non-recourse liability related to sale of future royalties, current portion	2,183	4,283
Deferred licensing revenue		287
Total current liabilities	161,353	123,000
Deferred licensing revenue, net of current portion		1,149
Convertible notes, net	329,462
Non-recourse liability related to sale of future royalties, long term	22,575	22,258
Other non-current liabilities	11,398	10,577
Total liabilities	524,788	156,984
Stockholders' equity
Common stock, $0.001 par value, 130,000,000 shares authorized at December 31, 2018 and December 31, 2017; 52,316,583 and 51,314,850 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively	52	51
Additional paid-in capital	369,637	294,999
Accumulated other comprehensive loss, net of tax	(3,158)	(747)
Retained earnings (accumulated deficit)	86,492	(26,823)
Total stockholders' equity	453,023	267,480
Total liabilities and stockholders' equity	$ 977,811	$ 424,464

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2018	Dec. 31, 2017
Consolidated Balance Sheets
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	130,000,000	130,000,000
Common stock, shares issued	52,316,583	51,314,850
Common stock, shares outstanding	52,316,583	51,314,850

Consolidated Statements of Earnings - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Revenue
Total revenue	$ 408,897	$ 302,238	$ 215,003
Costs and expenses
Cost of product sales	15,356	15,215	11,986
Research and development	89,209	49,577	42,791
Selling, general and administrative	159,888	137,905	106,010
Total costs and expenses	264,453	202,697	160,787
Operating earnings	144,444	99,541	54,216
Other income (expense)
Interest income	13,843	2,864	1,467
Interest expense	(13,840)	(134)	(543)
Interest expense on non-recourse liability related to sale of future royalties	(4,271)	(1,434)	(4,548)
Changes in fair value of derivative liabilities		76	448
Loss on extinguishment of debt		(295)	(671)
Total other income (expense)	(4,268)	1,077	(3,847)
Earnings before income taxes	140,176	100,618	50,369
Income tax expense (benefit)	29,183	43,334	(40,852)
Net earnings	$ 110,993	$ 57,284	$ 91,221
Earnings per share:
Basic (in dollars per share)	$ 2.13	$ 1.13	$ 1.84
Diluted (in dollars per share)	$ 2.05	$ 1.08	$ 1.76
Weighted-average shares outstanding:
Basic (in shares)	51,989,824	50,756,603	49,472,434
Diluted (in shares)	54,098,872	53,301,150	51,708,983
Product
Revenue
Total revenue	$ 399,871	$ 294,097	$ 210,078
Royalty
Revenue
Total revenue	8,276	6,367	4,686
Licensing
Revenue
Total revenue	$ 750	$ 1,774	$ 239

Consolidated Statements of Comprehensive Earnings - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Consolidated Statements of Comprehensive Earnings
Net earnings	$ 110,993	$ 57,284	$ 91,221
Other comprehensive earnings (loss):
Unrealized (loss) gain on marketable securities, net of tax	(2,411)	(613)	354
Other comprehensive earnings (loss)	(2,411)	(613)	354
Comprehensive earnings	$ 108,582	$ 56,671	$ 91,575

- Definition

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

+ References + Details

Consolidated Statements of Changes in Stockholder's Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Earnings (Loss)	Retained Earnings (Accumulated Deficit)	Total
Beginning balance at Dec. 31, 2015	$ 49	$ 263,955	$ (488)	$ (175,509)	$ 88,007
Beginning balance (in shares) at Dec. 31, 2015	49,004,674
Increase (Decrease) in Stockholders' Equity
Share-based compensation		5,926			5,926
Issuance of employee stock purchase plan shares		1,494			1,494
Issuance of employee stock purchase plan shares (in shares)	109,244
Exercise of stock options		557			557
Exercise of stock options (in shares)	85,694
Equity issued on conversion of convertible notes	$ 1	4,161			4,162
Equity issued on conversion of convertible notes (in shares)	771,655
Net earnings				91,221	91,221
Unrealized (loss) gain on marketable securities, net of tax			354		354
Other		34			34
Ending balance at Dec. 31, 2016	$ 50	276,127	(134)	(84,288)	191,755
Ending balance (in shares) at Dec. 31, 2016	49,971,267
Increase (Decrease) in Stockholders' Equity
Cumulative-effect of adoption of ASU \| ASU 2016-09		211		181	392
Adjusted Balance	$ 50	276,338	(134)	(84,107)	192,147
Share-based compensation		8,433			8,433
Issuance of employee stock purchase plan shares		1,888			1,888
Issuance of employee stock purchase plan shares (in shares)	71,256
Exercise of stock options		3,793			3,793
Exercise of stock options (in shares)	407,477
Equity issued on conversion of convertible notes	$ 1	4,547			4,548
Equity issued on conversion of convertible notes (in shares)	864,850
Net earnings				57,284	57,284
Unrealized (loss) gain on marketable securities, net of tax			(613)		(613)
Ending balance at Dec. 31, 2017	$ 51	294,999	(747)	(26,823)	267,480
Ending balance (in shares) at Dec. 31, 2017	51,314,850
Increase (Decrease) in Stockholders' Equity
Cumulative-effect of adoption of ASU \| ASU 2014-09				2,322	2,322
Adjusted Balance	$ 51	294,999	(747)	(24,501)	269,802
Share-based compensation		11,291			11,291
Issuance of employee stock purchase plan shares		2,209			2,209
Issuance of employee stock purchase plan shares (in shares)	71,250
Exercise of stock options	$ 1	9,372			9,373
Exercise of stock options (in shares)	930,483
Equity component of convertible notes issuance, net of tax		56,215			56,215
Purchases of convertible note hedges, net of tax		(70,137)			(70,137)
Issuance of warrants		65,688			65,688
Net earnings				110,993	110,993
Unrealized (loss) gain on marketable securities, net of tax			(2,411)		(2,411)
Ending balance at Dec. 31, 2018	$ 52	$ 369,637	$ (3,158)	$ 86,492	$ 453,023
Ending balance (in shares) at Dec. 31, 2018	52,316,583

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Adjustments to reconcile net earnings to net cash provided by operating activities:
Loss on extinguishment of debt		$ 295	$ 671
Change in fair value of derivative liability		(76)	(448)
Realized gains/losses on sales of securities	$ 8
Depreciation and amortization	7,063	8,132	2,399
Amortization of deferred financing costs and debt discount	11,848	50	278
Amortization of premium/discount on marketable securities	(1,673)	(563)	242
Non-cash interest expense on non-recourse liability related to sale of future royalties	4,271	1,434	4,548
Non-cash royalty revenue	(5,914)	(5,283)	(4,686)
Share-based compensation expense	11,291	8,433	5,926
Deferred income tax (benefit) provision	(4,167)	21,224	(41,787)
Changes in operating assets and liabilities:
Accounts receivable	(35,856)	(24,059)	(15,619)
Inventories	(9,355)	497	(4,214)
Prepaid expenses and other current assets	(2,367)	(3,566)	2,306
Accounts payable	(3,578)	(620)	3,470
Accrued sales deductions	38,720	26,400	15,149
Accrued expenses	10,432	2,888	7,539
Income taxes payable	(3,561)	15,931	7
Deferred licensing revenue		(274)	144
Other non-current liabilities	831	6,513	(334)
Net cash provided by operating activities	128,986	114,640	66,812
Cash flows from investing activities
Purchases of marketable securities	(491,654)	(101,889)	(47,364)
Sales and maturities of marketable securities	79,827	28,657	31,824
Purchases of property and equipment	(844)	(2,029)	(1,603)
Deferred legal fees	(809)	(11,154)	(18,821)
Net cash used in investing activities	(413,480)	(86,415)	(35,964)
Cash flows from financing activities
Proceeds from issuance of convertible notes	402,500
Convertible notes issuance financing costs	(10,435)
Proceeds from issuance of warrants	65,688
Purchases of convertible note hedges	(92,897)
Proceeds from issuance of common stock	11,582	5,681	2,052
Net cash provided by financing activities	376,438	5,681	2,052
Net change in cash and cash equivalents	91,944	33,906	32,900
Cash and cash equivalents at beginning of year	100,304	66,398	33,498
Cash and cash equivalents at end of period	192,248	100,304	66,398
Supplemental cash flow information:
Cash paid for interest on convertible notes	1,342	134	493
Income taxes paid	34,772	1,588
Non-cash investing and financing activity:
Conversion of convertible notes and interest make-whole		4,548	4,162
Deferred legal fees included in accounts payable and accrued expenses	250	521	$ 5,122
Unsettled purchase of marketable securities included in accrued expenses		$ 1,004
Acquisition of Biscayne Neurotherapeutics, Inc.
Supplemental cash flow information:
Cash paid for Biscayne acquisition	$ 15,000

Organization and Nature of Operations	12 Months Ended
Organization and Nature of Operations	Dec. 31, 2018
Organization and Nature of Operations
Organization and Nature of Operations	1. Organization and Nature of Operations Supernus Pharmaceuticals, Inc. (the Company) was incorporated in Delaware and commenced operations in 2005. The Company is a pharmaceutical company focused on developing and commercializing products for the treatment of central nervous system (CNS) diseases. The Company markets two products, Oxtellar XR for the treatment of epilepsy and Trokendi XR for the prophylaxis of migraine headache and treatment of epilepsy. The Company has several proprietary product candidates in clinical development that address the CNS market. The Company launched Oxtellar XR and Trokendi XR in 2013 for the treatment of epilepsy and launched Trokendi XR for the prophylaxis of migraine headache in adolescents and adults in April 2017. On October 4, 2018, the Company acquired Biscayne Neurotherapeutics, Inc. (Biscayne). Supernus obtained worldwide rights, excluding certain markets in Asia where rights have been out-licensed, to Biscayne’s product candidate, hurpezine A, that is in Phase I clinical development. This product candidate has received an Orphan Drug designation from the U.S. Food and Drug Administration (FDA) for the treatment of Dravet Syndrome, a severe form of childhood epilepsy. Supernus obtained rights to all the product candidate’s underlying and related intellectual property (IP). (See Note 18.)

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2018

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP).

The Company’s consolidated financial statements include the accounts of Supernus Pharmaceuticals, Inc., Supernus Europe Ltd., and Biscayne Neurotherapeutics, Inc. and its wholly-owned subsidiary, Biscayne Neurotherapeutics Australia Pty Ltd, collectively referred to herein as “Supernus” or “the Company.” All significant intercompany transactions and balances have been eliminated in consolidation. The financial results of Biscayne have been included in the consolidated financial statements from date of acquisition.

The Company has its principal business in the U.S. and operates in one operating segment.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosure of contingent assets and liabilities. Actual results could differ materially from the Company’s estimates. To the extent that there are material differences between these estimates and actual results, the Company’s financial condition or operating results will be affected. The Company bases its estimates on: historical experience; various forecasts; information received from its service providers; and other assumptions that the Company believes are reasonable under the circumstances. The Company evaluates the methodology employed and the judgment and assumptions used in its estimates on an ongoing basis.

Cash and Cash Equivalents

The Company considers all investments in highly liquid financial instruments with an original maturity of three months or less to be cash equivalents.

Marketable Securities

Marketable securities consist of investments in U.S. Treasury bills and notes, certificates of deposit, various U.S. governmental agency debt securities, corporate and municipal bonds and other fixed income securities. The Company places all investments with government, industrial or financial institutions whose debt is rated as investment grade. The Company classifies all available-for-sale marketable securities with maturities greater than one year from the balance sheet date as non-current assets.

The Company’s investments are classified as available-for-sale and are carried at fair value. Any unrealized holding gains or losses on debt securities are reported net of any tax effects as a component of other comprehensive earnings (loss) in the consolidated statement of comprehensive earnings.

Declines in value judged to be other-than-temporary, if any, are included in consolidated statement of earnings. A decline in the market value of any available-for-sale security below cost that is deemed to be other-than-temporary results in a reduction in fair value, with that reduction charged to earnings in that period. A new cost basis for the security is then established.

Dividend and interest income is recognized when earned. Premiums and discounts on marketable securities are amortized and accreted, respectively, to maturity and included in interest income in the consolidated statement of earnings. Realized gains and losses are also included in interest income and are determined using the specific identification method for determining the cost of securities sold.

Accounts Receivable, Net

Accounts receivable are reported on the consolidated balance sheets at outstanding amounts due from customers, less an allowance for doubtful accounts and sales discounts and allowances. The Company extends credit without requiring collateral. The Company writes off uncollectible receivables when the likelihood of collection is remote. The Company evaluates the collectability of accounts receivable on a regular basis. An allowance, when needed, is based upon various factors including the financial condition and payment history of customers, an overall review of collections experience on other accounts, and economic factors or events expected to affect future collections experience. Payment terms for receivables are based on customary commercial terms and are generally less than one year.

The Company recorded approximately $0.1 million, zero and $0.4 million for doubtful accounts for the years ended December 31, 2018, 2017 and 2016, respectively. There was no receivable write-off recorded for the years ended December 31, 2018, 2017 and 2016.

The Company recorded an allowance of approximately $11.5 million and $8.9 million for expected sales discounts and allowances related to prompt pay discounts and contractual fee for service arrangements to pharmaceutical wholesalers and distributors, as of December 31, 2018 and December 31, 2017, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, accounts receivable and marketable securities. The counterparties are various corporations and financial institutions of high credit standing, as described above.

Substantially all of the Company’s cash and cash equivalents and marketable securities are maintained in U.S. government agency debt and debt of well-known, investment grade corporations. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and, therefore, these bear minimal default risk.

The following table includes the Company’s customers, who are pharmaceutical wholesalers and distributors, that represent more than 10% of total net product sales for the years ended December 31, 2018, 2017 and 2016.


	Years Ended December 31,
	2018		2017		2016
Customer A	33	%	30	%	29	%
Customer B	33	%	30	%	30	%
Customer C	32	%	37	%	37	%
	98	%	97	%	96	%

The following table includes each major customer that represented more than 10% of accounts receivable, net as of December 31, 2018 and 2017:


	December 31,
	2018		2017
Customer A	46	%	46	%
Customer B	24	%	22	%
Customer C	27	%	28	%
	97	%	96	%

Inventories

Inventories, which are recorded at the lower of cost or net realizable value, include materials, labor and other direct and indirect costs and are valued using the first-in, first-out method. The Company typically capitalizes inventories produced in preparation for commercial launches when the related product candidates have received regulatory approval and it is probable that the related costs will be recoverable through the commercial sale of the product.

Intangible Assets

Intangible assets consist of patent defense costs, which are deferred legal fees that have been incurred in connection with legal proceedings related to the defense of patents for Oxtellar XR and Trokendi XR. Patent defense costs will be charged to expense in the event of an unsuccessful outcome of the litigation. Patents are carried at cost less accumulated amortization, which is calculated on a straight line basis over the estimated useful lives of the patents. Amortization commences in the quarter after the costs are incurred. The amortization period is based initially upon the remaining patent life and is adjusted, if necessary, for any subsequent settlements or other changes to the expected useful life of the patent. The carrying value of the patents is assessed for impairment annually during the fourth quarter of each year, or more frequently if impairment indicators exist.

Impairment of Long‑Lived Assets

Long-lived assets consist primarily of property and equipment and patent defense costs. The Company assesses the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indications of impairment exist, projected future undiscounted cash flows associated with the asset are compared to the carrying value to determine whether the asset’s value is recoverable. Evaluating for impairment requires judgment, including the estimation of future cash flows, future growth rates and profitability, and the expected life over which cash flows will occur. Changes in the Company’s business strategy or adverse changes in market conditions could affect impairment analyses and require recognition of an impairment charge equal to the excess of the carrying value of the long-lived asset over its estimated fair value at the time at which that determination is made.

Deferred Financing Costs

Deferred financing costs were incurred by the Company in connection with the Company’s sale of $402.5 million of 0.625% Convertible Senior Notes due 2023 (2023 Notes). (See Note 9). The Company amortizes deferred financing costs over the term of the debt, using the effective interest method.

Preclinical Study and Clinical Trial Accruals

The Company estimates preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions, clinical investigators, clinical research organizations (CROs) and other service providers that conduct activities on our behalf. In recording service fees, the Company estimates the time period over which the related services will be performed and compares the level of effort expended through the end of each period to the cumulative expenses recorded and payments made for such services. As appropriate, the Company accrues additional service fees or defers any non-refundable advance payments until the related services are performed. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust its accrued expenses or deferred advance payments accordingly. If the Company later determines that it no longer expects the services associated with a nonrefundable advance payment to be rendered, the remaining portion of that advance payment will be charged to expense in the period in which such determination is made.

Revenue Recognition

In accordance with ASC 606, “Revenue from Contracts with Customers,” the Company recognizes revenue when control of promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. (See Note 17 for disaggregation of revenue by nature.) The Company does not adjust revenue for effects of significant financing component for contracts where the Company expects the period between the transfer of the goods or service and collection to be less than one year.

Incremental costs for obtaining a contract include only those costs that the Company would not have incurred if the contract had not been obtained; e.g., sales commissions. As a practical expedient, the Company expenses incremental costs in obtaining a contract if the expected amortization period of the contract would have been a year or less, or if the amount is immaterial. These costs are recorded in Selling, general and administrative expenses in the consolidated statement of earnings. Costs to fulfill a contract are expensed as incurred and recorded in Cost of product sales in the consolidated statement of earnings. There were no contract assets or liabilities recorded as of January 1, 2018 or December 31, 2018.

Revenue from Product Sales

The Company’s products are distributed through a third party fulfillment center. The Company’s customers purchase product to fulfill orders from retail pharmacy chains and independent pharmacies of varying size and buying power. The Company’s customers take control of the products, including title and ownership, upon physical receipt of these products at their facilities.

The Company recognizes gross revenue when its products are shipped from its fulfillment center to its customers, who are primarily pharmaceutical wholesalers and distributors and the customers take control of the products. Product sales are recorded net of various forms of variable consideration, including estimated rebates, discounts, allowances, and an estimated liability for product returns (collectively, “sales deductions”).

Variability in the net transaction price for the Company’s products primarily arises from sales deductions, which require significant judgment. The Company considers: historical experience; current contract prices under applicable programs; unbilled claims; processing time lags; and inventory levels in the distribution channel in arriving at these estimates. The Company adjusts its estimates of revenue at the earlier of when the most likely amount of consideration it expects to receive changes or when the consideration becomes fixed.

If actual results in the future vary from estimates, the Company adjusts these estimates. These adjustments could materially affect net product sales and earnings in the period that such variances become known.

Sales Deductions

Sales deductions are primarily comprised of rebates, product returns and sales discounts and allowances. The Company records product sales net of the following sales deductions:

Rebates: Rebates are discounts which the Company pays under either private sector or public sector health care programs. Public sector rebate programs encompass: Medicaid Drug Rebate Programs; Medicare Coverage Gap Programs; and programs covering public health service institutions and government entities that purchase drugs under the Federal Supply Schedule, encompassing all federal employees and agencies. Private sector rebate programs include contractual agreements with managed care providers, under which the Company pays fees to gain access to that provider’s patient drug formulary and Company sponsored programs under which the Company defrays or eliminates patient co-payment charges that the patient would otherwise pay to their managed care provider. Rebates paid under public sector programs are generally mandated under law, whereas private sector rebates are generally contractually negotiated by the Company with managed care providers.

Rebates are owed upon dispensing product to a patient; i.e., filling a prescription. Our accrual balance consists of three components. First, because rebates are generally invoiced and paid quarterly in arrears, the accrual balance consists of an estimate of the amount expected to be incurred for prescriptions dispensed in the current quarter. Second, the accrual balance also includes accrual for known or estimated prior quarters’ unpaid rebates to cover prescriptions dispensed in past quarters. Third, the accrual balance includes an estimate for rebates that will be owed for prescriptions filled in future quarters; i.e., for product which has been sold to our customers, and which resides either as wholesaler/distributor inventory, or is held as inventory at pharmacies. This product will be used prospectively to fill prescriptions.

Because the period from the date on which the prescription is filled to the date the Company receives and pays the invoice varies, the Company’s estimates of expected rebate claims vary by program and by type of customer. For each of its products, the Company bases its estimates of expected rebate claims using multiple factors including historical levels of deductions; contractual terms with managed care providers; actual and anticipated changes in product price; prospective changes in managed care fee for service contractual agreements; prospective changes in co-pay assistance programs; and anticipated changes in program utilization rates (i.e., patient participation rates).

The sensitivity of the Company’s estimates can vary by program and by type of customer. If actual rebates vary from estimated amounts, the Company may need to adjust the balances of such rebates to reflect actual expenditures with respect to these programs. These changes could materially affect net product sales and earnings in the period of adjustment. The Company records an estimated liability for rebates at the time the customer takes title to the product (i.e., at the time of sale to wholesalers/distributors) as a reduction to gross product sales and an increase in Accrued Sales Deductions in current liabilities.

Returns: Sales of the Company’s products are not subject to a general right of return. Product that has been used to fill patient prescriptions is no longer subject to any right of return. However, the Company will accept the return of product that is damaged or defective when shipped from its warehouse. In addition, the Company will accept return of expired product six months prior to and up to 12 months subsequent to the product’s expiry date. Expired or defective returned product cannot be re-sold and are destroyed.

The Company estimates liability for returns based on the actual returns experience for its two commercial products, in conjunction with industry return experience for similar products; i.e., ambient temperature storage for oral formulations. Because the Company’s products have not reached maturity, the return rate of its products has and is expected to continue to vary. The Company records an estimated liability for product returns at the time the customer takes title to the product (i.e., at time of sale) as a reduction to gross product sales and an increase in Accrued Sales Deductions in current liabilities.

The Company’s estimated liability for product returns is also affected by price increases. The Company’s products have a shelf life of 36 to 48 months from date of manufacture. Because of the extended shelf life and its return policy, there typically is a significant time lag between the time at which the product is sold and when the Company issues credit on expired product. The Company’s policy permits product returns to be processed at current wholesaler price rather than historical price. Therefore, price increase(s) taken during the current period increases the provision for product returns and therefore affects its estimated liability for product returns for both sales made in the current period as well as sales made in prior periods. Accordingly, the Company may have to adjust its estimates, favorably or unfavorably, which would have an effect on product sales and earnings in the period of adjustment.

Sales discounts and allowances: Distributors and wholesalers of pharmaceutical products are generally offered various forms of consideration, including allowances, service fees and prompt payment discounts, as consideration for distributing products. Distributor and wholesaler allowances and service fees arise from contractual agreements and are estimated as a percentage of the price at which the Company sells product to them. In addition, they are offered a prompt pay discount for payment within a specified period.

The Company accounts for these discounts at the time of sale as a reduction to gross product sales and records these amounts as a reduction to Accounts Receivable.

Customer orders are generally fulfilled within a few days of receipt, resulting in minimal order backlog. Open purchase orders for products from customers are expected to be fulfilled within the next twelve months. There are no minimum product purchase requirements.

License Revenue

License and Collaboration Agreements

The Company has entered into collaboration agreements to commercialize both Oxtellar XR and Trokendi XR outside of the U.S., which involve the right to use the Company’s intellectual property as a functional license. These agreements generally include an up-front license fee and ongoing milestone payments upon the achievement of specific events. These agreements may also require minimum royalty payments based on in-country sales of products developed from the applicable intellectual property.

Up-front license fees are recognized once the license has been delivered to the customer.

Milestones are a form of variable consideration that are recognized when either the underlying events have been achieved (event-based milestone) or the sales-based targets have been met by the collaborative partner (sales-based milestone). Both types of milestone payments are non-refundable. The Company evaluates whether achieving the milestones is considered probable and estimates the amount to be included in the transaction price using the most likely amount method. This can involve management’s judgment that includes assessing factors that are outside of the Company’s influence, such as: likelihood of regulatory success; availability of third party information; and expected duration of time until achievement of event. These factors are evaluated based on the specific facts and circumstances. If it is probable that a significant revenue reversal would not occur, the value of the associated milestone is included in the transaction price.

Event-based milestones are recognized in the period that the related event, such as regulatory approval, occurs. Milestone payments that are not within the control of the Company, such as approval from regulatory authorities or where attainment of the specified event is dependent on the development activities of a third-party, are not considered probable of being achieved until the specified event occurs. Sales-based milestones are recognized as revenue when the target is achieved. Revenue is recognized from the satisfaction of performance obligations in the amount billable to the customer.

Revenue associated with future milestones will be recognized when the related event occurs or sales-based target is achieved.

There are no guaranteed minimum amounts owed to the Company related to license and collaboration agreements.

Royalty Revenue

The Company recognizes non-cash royalty revenue for royalty amounts earned pursuant to a royalty agreement with United Therapeutics Corporation that involves the right to use the Company’s intellectual property as a functional license. In 2014, the Company sold certain of these royalty rights to Healthcare Royalty Partners III, L.P. (HC Royalty) (see Note 16). Accordingly, the Company records non-cash royalty revenue based on estimated product sales of Orenitram by United Therapeutics that result in Royalty payments made from United Therapeutics to HC Royalty in connection with these agreements.

Royalty revenue also includes royalty amounts received from collaboration partners, including from Shire Plc (Shire), based on net product sales of Shire’s product, Mydayis, in the current period. Royalty revenue is only recognized when the underlying product sale by Shire occurs. The Shire arrangement also involves the right to use the Company’s intellectual property as a functional license.

There are no guaranteed minimum amounts owed to the Company related to royalty revenue agreements.

Cost of Product Sales

The cost of product sales consists primarily of materials, third-party manufacturing costs, freight and distribution costs, allocation of labor, quality control and assurance, and other manufacturing overhead costs.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development costs consist primarily of: employee-related expenses, including salaries and benefits; share-based compensation expense; expenses incurred under agreements with CROs; fees paid to clinical investigators who are participating in our clinical trials; fees paid to consultants and other vendors that assist in the conduct of the Company’s clinical trials; the cost of acquiring and manufacturing clinical trial materials; the cost of manufacturing materials used in process validation, but only to the extent that those materials are manufactured prior to receiving regulatory approval and are not expected to be sold commercially; facilities costs that do not have an alternative future use; related depreciation and other allocated expenses; license fees for, and milestone payments related to, in-licensed products and technologies; and costs associated with animal testing activities and regulatory approvals. Assets acquired that are used for research and development and have no future alternative use are expensed as in-process research and development.

Advertising Expense

Advertising expense includes costs of promotional materials and activities, such as marketing materials, marketing programs and speaker programs. The costs of the Company’s advertising efforts are expensed as incurred.

The Company incurred approximately $43.3 million, $33.8 million and $21.9 million in advertising costs for the years ended December 31, 2018, 2017 and 2016, respectively. These expenses are recorded in Selling, general and administrative expenses in the consolidated statement of earnings.

Share‑Based Compensation

The Company recognizes share-based compensation expense over the service period using the straight-line method. Employee share-based compensation is measured based on estimated fair value as of the grant date. The Company uses the Black-Scholes option-pricing model in calculating the grant date fair value of option awards. The Company uses the following assumptions for estimating fair value of option grants:

Fair Value of Common Stock—The fair value of the common stock underlying the option grants was determined based on observable market prices of the Company’s common stock.

Expected Volatility—Volatility is a measure of the amount by which a variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company has identified several public entities of similar size, complexity, and stage of development. Accordingly, historical volatility has been estimated using the volatility of the stock of these companies, as well as taking into consideration the Company’s actual volatility since our IPO in 2012. As the Company's historical experience is not sufficient to calculate volatility for the option grants, the Company will continue to use the guideline peer group volatility information until the historical volatility of its own common stock is sufficiently mature on its own to measure expected volatility for future option grants.

Dividend Yield—The Company has never declared or paid dividends, and has no plans to do so in the foreseeable future.

Expected Term—This is the period of time that the options granted are expected to remain unexercised. Options granted have a maximum term of ten years. The Company determines the average expected life of stock options according to the “simplified method” as described in Staff Accounting Bulletin 110, which is the mid‑point between the vesting date and the end of the contractual term. Over time, management will track actual experience with the option term, so that estimates will approximate actual experience.

Risk‑Free Interest Rate—This is the U.S. Treasury note rate during the week each option grant was issued during that year, with a term that most closely resembles the expected term of the option.

Expected Forfeiture Rate—Prior to 2017, the forfeiture rate was the estimated percentage of options granted that were anticipated to be forfeited or canceled before becoming fully vested. Following the Company's adoption of ASU 2016-09, " Compensation- Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," at January 1, 2017, forfeitures are accounted for as they occur.

Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities, and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. When appropriate, valuation allowances are established to reduce deferred tax assets to the amounts expected to be realized.

The Company accounts for uncertain tax positions in its consolidated financial statements when it is more-likely-than-not that the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be estimated as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authorities, assuming full knowledge of the position and relevant facts. The Company’s policy is to recognize any interest and penalties related to income taxes as income tax expense in the relevant period.

Recently Issued Accounting Pronouncements

Accounting Pronouncements Adopted in 2018

In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers,” and has subsequently issued a number of amendments to ASU 2014-09. ASU 2014-09 and all the related amendments are codified in ASC 606, “Revenue from Contracts with Customers” (the New Revenue Standard). The New Revenue Standard provides a comprehensive model to be used in the accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific guidance.

On January 1, 2018, the Company adopted the New Revenue Standard using the modified retrospective method and applied this method to those contracts which had not been completed as of January 1, 2018. While results for reporting periods beginning after January 1, 2018 are presented under the new guidance, prior period amounts were not adjusted and continue to be reported under the accounting standards in effect for the prior periods. The Company recognized the cumulative effect of initially applying the New Revenue Standard as an adjustment to the opening balance of retained earnings.

The impact of the adoption of the New Revenue standard was as follows:


	December 31, 2017
	As Reported		Adjustments		January 1, 2018

Accounts receivable, net	$	65,586	$	1,620	$	67,206
Deferred licensing revenue		287		(287)		—
Deferred licensing revenue, net of current portion		1,149		(1,149)		—
Deferred income taxes (asset)		20,843		(734)		20,109
Accumulated deficit		26,823		(2,322)		24,501

The Company recorded a decrease of $2.3 million to the accumulated deficit as of January 1, 2018 due to the cumulative impact of adopting the New Revenue Standard. The adoption of the New Revenue Standard resulted to the acceleration of both up-front licensing fees from license and collaboration agreements and the acceleration of royalties from sales of licensed product. Under the New Revenue Standard, up-front licensing fees are recognized when the license is delivered to the customer. Royalties from the sale of licensed product will be recognized as the underlying sales of product occur by the licensee. There were no changes in the timing of revenue recognition related to net product sales.

Adoption of the New Revenue Standard had no material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,” which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of a change in terms or conditions. ASU 2017-09 is effective after December 15, 2017 for all annual periods, and interim periods within those annual periods, with early adoption permitted. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” The standard eliminates diversity in the practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective after December 15, 2017 for annual reporting periods and interim periods therein. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combination (Topic 805): Clarifying the Definition of a Business,” which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard introduces a screen for determining when assets acquired are not a business. The guidance requires that if substantially all of the fair value of gross assets acquired or disposed of is concentrated in a single asset or group of similar identifiable assets, the assets would not represent a business. The guidance also clarifies that a business must include, at a minimum, an input and a substantive process that contribute to an output to be considered a business. The Company adopted the new standard on January 1, 2018 and will apply the new guidance prospectively to transactions occurring after adoption, including the Biscayne acquisition (see Note 18).

In August 2018, the U.S. Securities and Exchange Commission (SEC) adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification.” This final rule amends certain disclosure requirements that are redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expand the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The final rule is effective for all filings made on or after November 5, 2018. The SEC staff clarified that the first presentation of the changes in shareholders’ equity may be included in the first Form 10-Q for the quarter that begins after the effective date of the amendments. The adoption of the final rule did not have a material impact on the Company’s consolidated financial statements. The Company will change its presentation of statement of shareholders’ equity in the first quarter of 2019.

New Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” and its related amendments (the New Lease Standard). The New Lease Standard requires a lessee to recognize a right-of-use asset and a lease liability on the balance sheet. The New Lease Standard is effective after December 15, 2018 for fiscal years, and interim periods within those years. The Company will adopt this ASU on January 1, 2019 using the modified retrospective approach transition method. The adoption will result in an immaterial cumulative adjustment to retained earnings at the beginning of the adoption period. Results for reporting periods beginning after January 1, 2019 will be presented under the New Lease Standard while prior period amounts are not adjusted and continue to be reported in accordance with ASC 840, “Leases.” Hence, this will result in a balance sheet presentation that will not be comparable to the prior period in the first year of adoption. The Company expects to elect certain practical expedients permitted under the transition guidance.

The adoption of this ASU will result in the recognition of right-of-use assets and lease liabilities of approximately $4.0 million. The New Lease Standard is also expected to result in enhanced quantitative and qualitative lease-related disclosures. The Company does not expect the New Lease Standard to have a material impact on the consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), which requires credit losses on financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, not based on incurred losses. Further, credit losses on available-for-sale debt securities should be recorded through an allowance for credit losses, limited to the amount by which fair value is below amortized cost. The new standard also requires enhanced disclosure of credit risk associated with respective assets. The standard is effective after December 15, 2019, for interim and annual periods within those years, with early adoption permitted. The Company is currently assessing the impact of this new standard. The Company does not expect it to have a material impact.

The Company has evaluated all other ASUs issued through the date the consolidated financials were issued in this Annual Report on Form 10-K and believes that no other ASU will have a material impact on the Company’s consolidated financial statements.

Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2018

Fair Value of Financial Instruments

Fair Value of Financial Instruments

3. Fair Value of Financial Instruments

The fair value of an asset or liability represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Such transactions to sell an asset or transfer a liability are assumed to occur in the principal or most advantageous market for the asset or liability. Accordingly, fair value is determined based on a hypothetical transaction at the measurement date, considered from the perspective of a market participant rather than from a reporting entity’s perspective.

The Company reports assets and liabilities that are measured at fair value using a three level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1— Inputs are unadjusted quoted prices that the Company has the ability to access at the measurement date for identical assets traded in active markets.

Level 2— Inputs are quoted prices for similar assets and liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability (interest rates, yield curves, etc.). Inputs are derived principally from or corroborated by observable market data or by correlation or other means (market corroborated inputs).

Level 3—Unobservable inputs that reflect the Company’s own assumptions, based on the best information available, including the Company’s own data.

The Company’s financial assets that are required to be measured at fair value on a recurring basis were as follows, in thousands of dollars:


	Fair Value Measurements
	as of December 31, 2018 Using
					Significant
	Total Fair		Quoted Prices		Other		Significant
	Value at		in Active Markets		Observable		Unobservable
	December 31,		for Indentical Assets		Inputs		Inputs
	2018		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	192,248	$	192,248	$	—	$	—
Marketable securities
Corporate debt securities		163,770		245		163,525		—
Long term marketable securities:
Corporate debt securities		415,650		445		415,205		—
Government debt securities		3,148		—		3,148		—
Other non-current assets:
Marketable securities-restricted (SERP)		326		1		325		—
Total assets at fair value	$	775,142	$	192,939	$	582,203	$	—


	Fair Value Measurements
	as of December 31, 2017 Using
					Significant
	Total Fair		Quoted Prices		Other		Significant
	Value at		in Active Markets		Observable		Unobservable
	December 31,		for Indentical Assets		Inputs		Inputs
	2017		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	100,304	$	100,304	$	—	$	—
Marketable securities
Corporate debt securities		39,736		2,118		37,618		—
Long term marketable securities:
Corporate debt securities		132,477		448		132,029		—
Government debt securities		1,161		—		1,161		—
Other non-current assets:
Marketable securities-restricted (SERP)		335		—		335		—
Total assets at fair value	$	274,013	$	102,870	$	171,143	$	—

Level 1 assets include cash held at banks, certificates of deposit, money market funds, investment grade corporate and government debt securities.

Level 2 assets include the SERP (Supplemental Executive Retirement Plan) assets, commercial paper and investment grade corporate and government debt securities and other fixed income securities. Level 2 securities are valued using third-party pricing sources that apply applicable inputs and other relevant data in their models to estimate fair value. The fair value of the restricted marketable securities is included within other non-current assets in the consolidated balance sheets.

The carrying value, face value and estimated fair value of the 2023 Notes were approximately $329.5 million, $402.5 million and $375.8 million, respectively, as of December 31, 2018. The fair value was estimated based on actual trade information as well as quoted prices provided by bond traders and are characterized within Level 2 of the fair value hierarchy.

The carrying amounts of other financial instruments, including accounts receivable, accounts payable and accrued expenses approximate fair value due to their short‑term maturities.

Unrestricted marketable securities held by the Company were as follows, in thousands of dollars:

At December 31, 2018:

Gross

Amortized

Unrealized

Available for Sale

Cost

Gains

Losses

Fair Value

Corporate and government debt securities

586,726

(4,213)

582,568

At December 31, 2017:

Gross

Amortized

Unrealized

Available for Sale

Cost

Gains

Losses

Fair Value

Corporate and government debt securities

174,235

(909)

173,374

The contractual maturities of the unrestricted available for sale marketable securities held by the Company were as follows, in thousands of dollars:


	December 31,
	2018
Less Than 1 Year	$	163,770
1 year to 2 years		166,482
2 year to 3 years		163,687
3 years to 4 years		88,629
Greater Than 4 Years		—
Total	$	582,568

The Company has not experienced any other‑than‑temporary losses on its marketable securities.

- 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

Inventories

12 Months Ended

Dec. 31, 2018

Inventories

Inventories

4. Inventories

Inventories consist of the following, in thousands of dollars:


	December 31,		December 31,
	2018		2017
Raw materials	$	5,742	$	2,995
Work in process		7,275		8,873
Finished goods		12,642		4,436
	$	25,659	$	16,304

Property and Equipment

12 Months Ended

Dec. 31, 2018

Property and Equipment

Property and Equipment

5. Property and Equipment

Property and equipment consist of the following, in thousands of dollars:


	December 31,		December 31,
	2018		2017
Lab equipment and furniture	$	8,995	$	8,331
Leasehold improvements		2,731		2,731
Software		2,181		2,004
Computer equipment		1,313		1,226
Construction-in-progress		94		178
		15,314		14,470
Less accumulated depreciation and amortization		(11,219)		(9,346)
	$	4,095	$	5,124

Depreciation and amortization expense on property and equipment was approximately $1.9 million, $1.2 million, and $1.1 million for the years ended December 31, 2018, 2017 and 2016, respectively.

No indicators of impairment were identified.

Intangible Assets

12 Months Ended

Dec. 31, 2018

Intangible Assets

Intangible Assets

6. Intangible Assets

Intangible assets consist of patent defense costs, which are legal fees incurred in conjunction with defending patents for Oxtellar XR and Trokendi XR. We amortize those costs over the useful life of the respective patents.

The following sets forth the gross carrying amount and related accumulated amortization of the intangible assets, in thousands of dollars:


	Weighted-	December 31,		December 31,
	Average Life	2018		2017
Capitalized patent defense costs	4.00 - 8.25 years	$	44,724	$	44,185
Less accumulated amortization			(13,356)		(8,166)
		$	31,368	$	36,019

In March 2017, the Company entered into two settlements with several companies related to Trokendi XR patent litigation, which effectively reduced the remaining life of the Trokendi XR patents. The remaining unamortized aggregate capitalized patent defense costs for Trokendi XR have subsequently been amortized over the reduced remaining useful life of the patents at issue, or January 1, 2023. This is the date the Company is obligated under the settlements to grant a non-exclusive license to the patents at issue.

Amortization expense on intangible assets was approximately $5.2 million, $6.9 million and $1.3 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Anticipated annual amortization expense on intangible assets for each of the next four years from, 2019 to 2022, is approximately $5.2 million per year. Anticipated annual amortization expense on intangible assets for the fifth year, 2023, is approximately $2.5 million.

No indicators of impairment were identified.

Accrued Expenses

12 Months Ended

Dec. 31, 2018

Accrued Expenses

Accrued Expenses

7. Accrued Expenses

Accrued expenses are comprised of the following, in thousands of dollars:


	December 31,		December 31,
	2018		2017
Accrued clinical trial and clinical supply costs	$	14,034	$	6,996
Accrued compensation		13,546		10,279
Accrued professional fees		3,706		2,890
Accrued interest expense		650		—
Accrued product costs		38		726
Other accrued expenses		4,561		6,414
	$	36,535	$	27,305

Accrued Sales Deductions

12 Months Ended

Dec. 31, 2018

Accrued Sales Deductions

Accrued Sales Deductions

8. Accrued Sales Deductions

Accrued sales deductions are comprised of the following, in thousands of dollars:


	December 31,		December 31,
	2018		2017

Accrued rebates	$	85,003	$	49,460
Accrued product returns		22,060		18,883
	$	107,063	$	68,343

Convertible Senior Secured Notes

12 Months Ended

Dec. 31, 2018

Convertible Senior Secured Notes

Convertible Senior Secured Notes

9. Convertible Senior Secured Notes

On March 14, 2018, the Company entered into a Purchase Agreement (the Purchase Agreement) with Jefferies LLC, J.P. Morgan Securities LLC and Cowen and Company, LLC, as the initial purchasers (collectively, the Initial Purchasers), in connection with the offering and sale of $350 million aggregate principal amount of 2023 Notes. The Company also granted the Initial Purchasers an over-allotment option to purchase, within a 30-day period, up to an additional $52.5 million principal amount of additional 2023 Notes on the same terms and conditions, which the Initial Purchasers exercised in full on March 15, 2018.

On March 19, 2018, the sale of the 2023 Notes was settled and the 2023 Notes were issued pursuant to an Indenture, dated as of March 19, 2018 (the Indenture), between the Company and Wilmington Trust, National Association, as trustee. The Indenture includes customary terms and covenants, including certain events of default upon which the 2023 Notes may be due and payable immediately. The Indenture governing the 2023 Notes does not contain any financial or operating covenants or any restrictions on the payment of dividends, the issuance of other indebtedness or the issuance or repurchase of securities by the Company.

The Company will pay interest on the 2023 Notes at an annual rate of 0.625%, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2018. The 2023 Notes will mature on April 1, 2023, unless earlier converted or repurchased by the Company.

Noteholders may convert their 2023 Notes at their option only in the following circumstances: (1) during any calendar quarter, if the last reported sale price per share of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including the last trading day of the immediately preceding calendar quarter, exceeds 130% of the conversion price, or a price of approximately $77.13 per share on such trading day; (2) during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Company’s common stock, as specified in the Indenture; and (4) at any time from and including October 1, 2022, until the close of business on the second scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at its election, based on the applicable conversion rate. The initial conversion rate is 16.8545 shares per $1,000 principal amount of the 2023 Notes, which represents an initial conversion price of approximately $59.33 per share, and is subject to adjustment as specified in the Indenture.

If a “make-whole fundamental change”, as defined in the Indenture, occurs, then the Company will in certain circumstances increase the conversion rate for a specified period of time. If a “fundamental change”, as defined in the Indenture, occurs, then noteholders may require the Company to repurchase their 2023 Notes at a cash repurchase price equal to the principal amount of the 2023 Notes to be repurchased, plus accrued and unpaid interest, if any.

The Company may not redeem the 2023 Notes at its option before maturity.

In the event of conversion, if converted in cash, holders would forgo all future interest payments, any unpaid accrued interest and the possibility of further stock price appreciation. Upon the receipt of conversion requests, the settlement of the 2023 Notes will be paid pursuant to the terms of the Indenture. In the event that all of the 2023 Notes are converted, the Company would be required to repay the $402.5 million in principal value and any conversion premium in cash, shares or any combination of cash and shares of its common stock (at the Company’s option).

The 2023 Notes are the Company’s senior, unsecured obligations and will be equal in right of payment with the Company’s future senior, unsecured indebtedness. The 2023 Notes are senior in right of payment to the Company’s future indebtedness that is expressly subordinated to the 2023 Notes. The 2023 Notes are effectively subordinated to the Company’s future secured indebtedness, to the extent of the value of the collateral securing that indebtedness. The 2023 Notes will be structurally subordinated to all future indebtedness and other liabilities, including trade payables.

Convertible Notes Hedge and Warrant Transactions

Contemporaneously with the pricing of the 2023 Notes on March 14, 2018, and in connection with the exercise of the over-allotment option by the Initial Purchasers on March 15, 2018, the Company entered into separate privately negotiated convertible note hedge transactions (collectively, the Convertible Note Hedge Transactions) with each of the call spread counterparties. The Convertible Note Hedge Transactions cover, subject to customary anti-dilution adjustments substantially similar to those applicable to the 2023 Notes, the number of shares of the Company’s common stock underlying the 2023 Notes, as described above. The Company issued 402,500 convertible note hedge options, including options purchased on the exercise of the overallotment option. In the event that shares or cash are deliverable to holders of the 2023 Notes upon conversion at limits defined in the Indenture, counterparties to the convertible note hedges will be required to deliver up to approximately 6.8 million shares of the Company’s common stock or pay cash to the Company in an amount approximately equivalent to the value that the Company delivers to the holders of the 2023 Notes, based on a conversion price of $59.33 per share. The total cost of the convertible note hedge transactions was $92.9 million.

Concurrently with entering into the Convertible Note Hedge Transactions on each such date, the Company also entered into separate privately negotiated warrant transactions (collectively, the Warrant Transactions) with each of the call spread counterparties whereby the Company sold to the call spread counterparties warrants to purchase, subject to customary anti-dilution adjustments, up to the same number of shares of the Company’s common stock.

The Convertible Note Hedge Transactions and the Warrant Transactions are separate contracts entered into by the Company with the Call Spread Counterparties, and are not part of the terms of the 2023 Notes and will not affect the noteholders’ rights under the 2023 Notes. Holders of the 2023 Notes will not have any rights with respect to the Convertible Note Hedge Transactions or the Warrant Transactions. The Company issued a total of 6,783,939 warrants. The warrants entitle the holder to one share per warrant at an initial strike price of $80.9063 per share of the Company’s common stock (subject to adjustment). The Company received proceeds of approximately $65.7 million from the sale of these warrants.

The Convertible Note Hedge Transactions are expected to generally reduce the potential dilution with respect to the Company’s common stock upon conversion of the 2023 Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted 2023 Notes, as the case may be. The Warrant Transactions are intended to partially offset the cost to the Company of the purchased Convertible Note Hedge Transactions; however, the Warrant Transactions could have a dilutive effect with respect to the Company’s common stock to the extent that the market price per share of the Company’s common stock, as measured under the terms of the Warrant Transactions, exceeds the strike price of the warrants.

As these transactions meet certain accounting criteria under ASC 815-40-25, the convertible note hedges and warrants are recorded in stockholders’ equity and are not accounted for as derivatives. The net cost incurred in connection with the convertible note hedges and warrant transactions was recorded as a reduction to additional paid-in capital.

In accordance with accounting guidance on embedded conversion features, the Company valued and bifurcated the conversion option associated with the 2023 Notes from the respective host debt instrument, which is referred to as debt discount. The Company initially recorded the conversion option of $76.4 million in additional paid-in capital. The resulting debt discount $76.4 million on the 2023 Notes is being amortized to interest expense at an effective interest rate of 5.41% over the contractual term of the 2023 Notes.

The Company incurred approximately $10.4 million of debt financing costs. Approximately $2.0 million of this amount is allocated to the additional paid-in capital. The remaining $8.4 million is recorded as deferred costs and is being amortized to interest expense over the contractual term of the 2023 Notes.

The liability component of the 2023 Notes consisted of the following, in thousands of dollars:


	December 31,
	2018

Principal amount of the 2023 Notes	$	402,500
Debt discount		(76,434)
Deferred financing costs		(8,452)
Accretion of debt discount and deferred financing costs		11,848
December 31, 2018 carrying value	$	329,462

No 2023 Notes were converted as of December 31, 2018.

Stockholders' Equity	12 Months Ended
Stockholders' Equity	Dec. 31, 2018
Stockholders' Equity
Stockholders' Equity	10. Stockholders’ Equity Common Stock The holders of our common stock are entitled to one vote for each share of common stock held.

Share-Based Compensation

12 Months Ended

Dec. 31, 2018

Share-Based Compensation

Share-Based Compensation

11. Share‑Based Compensation

Stock Option Plan

The Company has adopted the Supernus Pharmaceuticals, Inc. 2012 Equity Incentive Plan, as amended (the 2012 Plan), which is stockholder approved. This plan provides for the grant of stock options and certain other equity awards, including stock appreciation rights (SARs), restricted and unrestricted stock, stock units, performance awards, cash awards and other awards that are convertible into or otherwise based on the Company’s common stock, to the Company’s key employees, directors, consultants and advisors. The 2012 Plan is administered by the Company’s Board of Directors and the Company’s Compensation Committee of the Board and provides for the issuance of up to 8 million shares of the Company’s common stock. Option awards are granted with an exercise price equal to the closing price of the Company’s common stock at the grant date. Option awards granted to employees, consultants and advisors generally vest in four equivalent annual installments, starting on the first anniversary of the date of the grant. Awards have ten-year contractual terms. Option awards granted to the directors generally vest over a one year term and have ten year contractual terms.

Employee Stock Purchase Plan

The Company has adopted the Supernus Pharmaceuticals, Inc. 2012 Employee Stock Purchase Plan, as amended (the ESPP). The ESPP allows eligible employees the opportunity to acquire shares of the Company’s common stock at periodic intervals through accumulated payroll deductions. These deductions will be applied at the semi-annual purchase dates of June 30 and December 31 to purchase shares of common stock at a discount. Eligible employees may purchase shares at the lower of 85% of the fair market value at either the first day of the purchase period or the fair market value at the end of the purchase period. The ESPP provides for issuance of up to 700,000 shares of the Company’s common stock. The Company records compensation expense related to its ESPP.

Share-based compensation expense was as follows, in thousands of dollars:


	Years Ended December 31,
	2018		2017		2016
Research and development	$	1,943	$	1,387	$	1,107
Selling, general and administrative		9,348		7,046		4,819
Total	$	11,291	$	8,433	$	5,926

The fair value of each option award is estimated on the date of grant using the Black‑Scholes option‑pricing model and the assumptions in the following table:


	Years Ended December 31,
	2018	2017	2016
Fair value of common stock	$37.20-$58.15	$25.30-$41.00	$12.98-$22.80
Expected volatility	57.95%-60.56%	53.61%-60.60%	60.89%-64.54%
Dividend yield	0%	0%	0%
Expected term	6.25 years	6.25 years	6.25 years
Risk-free interest rate	2.69%-2.85%	1.90%-2.18%	1.14%-2.15%
Expected forfeiture rate	0%	0%	5%

As of December 31, 2018 and 2017, total unrecognized compensation expense was approximately $22.4 million and $17.6 million, respectively, which the Company expects to recognize over a weighted‑average period of 2.65 years and 2.8 years, respectively.

The following table summarizes stock option and SAR activity:


				Weighted-Average
		Weighted-		Remaining	Aggregate
	Number of	Average		Contractual	Intrinsic Value
	Options	Exercise Price		Term (in years)	(in thousands)
Outstanding, December 31, 2016	3,644,088	$	10.25	7.59	$	54,673
Granted	1,130,155	$	26.57
Exercised	(407,477)	$	9.31		$	12,822
Forfeited	(86,096)	$	17.24
Outstanding, December 31, 2017	4,280,670	$	14.50	7.37	$	108,520
Granted	762,915	$	39.91
Exercised	(930,483)	$	10.07		$	36,317
Forfeited	(196,139)	$	25.01
Outstanding, December 31, 2018	3,916,963	$	19.98	7.10	$	57,220

As of December 31, 2018:
Vested and expected to vest	3,916,963	$	19.98	7.10	$	57,220
Exercisable	1,889,947	$	12.47	5.96	$	39,447

The weighted‑average grant‑date fair value of options which were granted for the years ended December 31, 2018, 2017 and 2016 was $23.43, $14.35 and $7.66 per share, respectively.

The total fair value of the underlying common stock related to shares that vested during the years ended December 31, 2018, 2017, and 2016 was approximately $8.3 million, $5.4 million and $3.9 million, respectively.

Earnings per Share

12 Months Ended

Dec. 31, 2018

Earnings per Share

Earnings per Share

12. Earnings per Share

Basic earnings per share is calculated using the weighted-average number of common shares outstanding. Diluted earnings per share is calculated using the weighted-average number of common shares, as per the treasury stock method under the dilutive effect of the Company’s stock option grants, SAR, warrants, ESPP awards and the 2023 Notes, as determined.

The following common stock equivalents were excluded in the calculation of diluted earnings per share because their inclusion would be anti-dilutive, as applied to the earnings from continuing operations, and as applicable to common stockholders, for the years ended December 31, 2018, 2017 and 2016:


	Years Ended December 31,
	2018	2017	2016
Warrants to purchase common stock	3,949,743	—	—
Convertible notes	87,215	—	—
Convertible notes hedges	87	—	—
Stock options, SAR and ESPP awards	199,982	40,009	22,944

The following table sets forth the computation of basic and diluted net earnings per share for the years ended December 31, 2018, 2017 and 2016, in thousands of dollars, except share and per share amounts:


	Years Ended December 31,
	2018		2017		2016

Numerator, in thousands:
Net earnings used for calculation of basic EPS	$	110,993	$	57,284	$	91,221
Interest expense on convertible debt		—		134		543
Changes in fair value of derivative liabilities		—		(76)		(448)
Loss on extinguishment of debt		—		295		671
Loss on extinguishment of outstanding debt, as if converted		—		(321)		(1,182)
Total adjustments		—		32		(416)
Net earnings used for calculation of diluted EPS	$	110,993	$	57,316	$	90,805

Denominator:
Weighted average shares outstanding, basic		51,989,824		50,756,603		49,472,434
Effect of dilutive potential common shares:
Shares underlying Convertible Senior Notes		—		285,257		1,222,363
Shares issuable to settle interest make-whole derivatives		—		7,012		71,537
Stock options and SAR		2,109,048		2,252,278		942,649
Total dilutive potential common shares		2,109,048		2,544,547		2,236,549
Weighted average shares outstanding, diluted		54,098,872		53,301,150		51,708,983

Net earings per share, basic	$	2.13	$	1.13		1.84
Net earnings per share, diluted	$	2.05	$	1.08		1.76

Income Taxes

12 Months Ended

Dec. 31, 2018

Income Taxes

Income Taxes

13. Income Taxes

The summary of the income tax expense (benefit) for the years ended December 31, 2018, 2017 and 2016 is as follows, in thousands of dollars:


	Years Ended December 31,
	2018		2017		2016
Current
Federal	$	26,772	$	18,288	$	544
State		5,621		3,822		78
Deferred
Federal		(2,450)		21,493		(39,898)
State		(760)		(269)		(1,576)
Total	$	29,183	$	43,334	$	(40,852)

A reconciliation of income tax expense at the U.S. Federal statutory income tax rate to provision for income taxes at the Company’s effective tax rate is as follows, in thousands of dollars:


	Years Ended December 31,
	2018		2017		2016
Income tax expense computed at U.S. Federal statutory income tax rate (1)	$	29,437	$	35,217	$	17,629
State income taxes		3,674		2,714		(1,523)
Permanent items (3)		(2,196)		(2,311)		715
Research and development credits		(3,199)		(2,196)		(1,902)
Uncertain income tax position		716		(1,137)		143
Effect of rate changes (2)		—		9,694		—
Change in valuation allowance (4)		—		—		(56,019)
Other		751		1,353		105
Income tax expense (benefit)	$	29,183	$	43,334	$	(40,852)

(1)Includes the effect of the Tax Cuts and Jobs Act, which lowered the U.S. corporate income tax rate from 35 percent to 21 percent effective January 1, 2018.

(2)Relates to the remeasurement of existing deferred taxes as a result of the change to the U.S. corporate income tax rate. The impact was a reduction in value of deferred taxes.

(3)Primarily relates to tax benefit from the exercise of employee stock options.

(4)Reduction in the 2016 valuation allowances was attributable to profitable results of operations.

The significant components of the Company’s deferred income tax assets (liabilities) were as follow, in thousands of dollars:


	As of December 31,
	2018		2017
Deferred tax assets:
Convertible bond hedge	$	21,412	$	—
Accrued sales deductions		13,205		8,449
Accrued compensation and stock based compensation		8,218		7,090
Non-recourse liability related to sale of future royalties		5,571		6,377
Research and development credit carryforwards		3,817		3,795
Amortization		3,289		2,073
Net operating loss carryforwards		2,900		5,072
Deferred rent		125		211
Inventory		499		480
Alternative Minimum Tax (AMT) credit		978		1,613
Other		1,143		645
Total deferred tax assets		61,157		35,805
Less: valuation allowance		(9)		—
Deferred tax asset, net of valuation allowance		61,148		35,805

Deferred tax liability:
Debt discount on 2023 Notes		(17,568)		—
Infringement legal costs		(10,697)		(10,557)
Depreciation		(236)		(264)
Section 481(a)		(2,964)		(4,141)
Net deferred tax assets	$	29,683	$	20,843

In assessing the realizability of deferred income tax assets, management considers whether it is more-likely-than-not that some or all of the deferred income tax assets will not be realized. The ultimate realization of the deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the net operating loss (NOL) and tax credit carryforwards are available. Management considers projected future taxable income, the scheduled reversal of deferred income tax liabilities, and available tax planning strategies that can be implemented by the Company in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the NOL and credit carryforwards are available to reduce income taxes payable, management had determined it is more-likely-than-not to realize such net deferred tax assets.

The Company has NOL and other tax credit carryforwards in several jurisdictions. The use of the Company’s U.S. Federal and State NOL carryforwards and research and development credits are restricted in annual use due to changes in the Company’s ownership. The Company’s state NOLs have a similar limitations on the use of NOLs. In addition, states may also impose other future limitations through state legislation or similar measures. Despite the NOL carryforwards, the Company may incur higher state income tax expense in the future.

As of December 31, 2018, the U.S. Federal and state NOL carryforwards amounted to approximately $20.6 million and $9.2 million, respectively, and will expire in various years beginning in 2033. For the year ended December 31, 2018, the Company utilized NOLs of approximately $18.4 million and expects the remaining $20.6 million of Federal NOL carryforwards to become available in the future years.

As of December 31, 2018, the Company has available research and development credit carryforwards of approximately $4.2 million, which will become available in 2020 and will expire, if unused, starting in 2026.

Due to NOL and research and development credit carryforwards, all U.S. Federal and state income tax returns filed by the Company are subject to examination by the taxing jurisdictions.

The Company accounts for uncertain income tax positions pursuant to the guidance in FASB ASC Topic 740, Income Taxes. The Company recognizes interest and penalties related to uncertain tax positions, if any, in income tax expense. Some uncertain income tax position liabilities have been recorded against the Company’s deferred income tax assets to offset such tax attribute carryforwards and other positions that can’t be offset by tax attributes until a liability has been booked.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows, in thousands of dollars:


	Years Ended December 31,
	2018		2017		2016
Balance as of January 1	$	8,859	$	9,299	$	9,341
Gross increases related to current year tax positions		1,108		1,178		662
Gross decreases related to current year tax positions		—		—		(169)
Gross increases related to prior year tax positions		—		947		—
Gross decreases related to prior year tax positions		(484)		—		(375)
Lapse of statute of limitations		(635)		—		—
Change in tax rates		—		(2,565)		(160)
Balance as of December 31	$	8,848	$	8,859	$	9,299

As of December 31, 2018, 2017 and 2016, the Company recorded $0.6 million of tax benefit, zero and $0.5 million of current tax expense on setting up an uncertain tax position related to the AMT. The $0.6 million current tax benefit was caused by the expiration of statute of limitation on 2014 AMT. The Company also recorded a $0.3 million expense on setting up an uncertain tax position related to 2018 research and development tax credit. The Company does not anticipate a significant increase or decrease in the uncertain income tax benefits within the next 12 months.

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (Tax Act), resulting in significant modifications to existing law. The Tax Act, among other things, lowered the U.S. corporate income tax rate from 35 percent to 21 percent effective January 1, 2018. The Tax Act also enhanced and extended through 2026 the option to claim accelerated depreciation on qualified property and expanded limitations on the deductibility of executive compensation. As of December 31, 2018, the Company has completed the accounting for all of the enactment date income tax effects of the Tax Act and determined that no adjustments are need to be recognized to the provisional amounts recorded at December 31, 2017.

Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies

Commitments and Contingencies

14. Commitments and Contingencies

Operating Leases

The Company has concurrent leases for office and lab space that extend through April 2020. The Company may elect to extend the term of the leases for an additional five-year term. The leases provide for a tenant improvement allowance of approximately $2.1 million in aggregate. As of December 31, 2018, $0.4 million is available for tenant improvements.

Rent expense for the leased facilities and leased vehicles for the years ended December 31, 2018, 2017 and 2016 was approximately, $3.6 million, $2.7 million and $2.7 million, respectively.

Future minimum lease payments under non-cancelable operating leases as of December 31, 2018 are as follows, in thousands of dollars:


Year ending December 31:
2019	$	3,400
2020		2,287
Thereafter		1,840
	$	7,527

On February 27, 2018, the Company and Rockside-700 LLC (Rockside) entered into a Lease Agreement (the Lease) for the Company’s new headquarters to be located at 700 Quince Orchard Road, Gaithersburg, Maryland. On December 13, 2018 (the Termination Date), the Company and Rockside terminated the Lease. As of the Termination Date, the term of the Lease had not commenced and the Company had not occupied the building. The Company has not incurred any material termination penalties in connection with termination of the Lease.

Product Licenses

The Company has obtained exclusive licenses from third parties for proprietary rights to support the product candidates in the Company’s psychiatry portfolio. Under license agreements with Afecta Pharmaceuticals, Inc. (Afecta), the Company has exclusive worldwide rights to selected product candidates, including an exclusive license to SPN-810 (molindone hydrochloride). We may pay up to $0.3 million upon the achievement of certain milestones, none of which is owed as of December 31, 2018. The Company is obligated to pay royalties to Afecta at a low single digit percentage of worldwide net product sales.

The Company has also entered into a purchase and sale agreement with Rune HealthCare Limited (Rune), where the Company obtained the exclusive worldwide rights to a product concept from Rune. There are no future milestone payments due to Rune under this agreement. If the Company receives approval to market and sell any products based on the Rune product concept, for SPN-809 (viloxazine hydrochloride), the Company is obligated to pay royalties to Rune at a low single digit percentage of worldwide net product sales.

Employee Benefit Plan	12 Months Ended
Employee Benefit Plan	Dec. 31, 2018
Employee Benefit Plan
Employee Benefit Plan	15. Employee Benefit Plan On January 2, 2006, the Company established the Supernus Pharmaceuticals, Inc. 401(k) Profit Sharing Plan (the 401(k) Plan) for its employees under Section 401(k) of the Internal Revenue Code (Code). Under the 401(k) Plan, all full‑time employees who are at least 18 years old are eligible to participate in the 401(k) Plan. Employees may participate starting on the first day of the month following employment. Employees may contribute up to the lesser of 90% of eligible compensation, or the applicable limit, as established by the Code. The Company matches 100% of a participant’s contribution for the first 3% of their salary deferral, and matches 50% of the next 2% of their salary deferral. As determined by the Board, the Company may elect to make a discretionary contribution not exceeding 60% of the annual compensation paid to all participating employees. The Company’s contributions to the 401(k) Plan were approximately $2.1 million, $1.8 million, and $1.6 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Royalty Agreements	12 Months Ended
Royalty Agreements	Dec. 31, 2018
Royalty Agreements
Royalty Agreements	16. Royalty Agreements In the third quarter of 2014, the Company received a $30.0 million payment pursuant to a Royalty Interest Acquisition Agreement related to the purchase by HC Royalty of certain of the Company’s rights under the Company’s agreement with United Therapeutics related to the commercialization of Orenitram (treprostinil) Extended-Release Tablets. The Company will retain full ownership of the royalty rights if and when a certain cumulative payment threshold is reached per the terms of the agreement. The Company recorded a non-recourse liability related to this transaction, and amortizes this amount as non-cash royalty revenue. Revenue recognition is based on estimated net product sales by United Therapeutics of Orenitram that result in payments made from United Therapeutics to HC Royalty. The Company also recognizes non-cash interest expense related to this liability and accrues at an effective interest rate. That rate is determined based on projections of HC Royalty’s rate of return. The Company recognized non-cash interest expense of $4.3 million, $1.4 million and $4.5 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Disaggregated Revenues

12 Months Ended

Dec. 31, 2018

Disaggregated Revenues

Disaggregated Revenues

17. Disaggregated Revenues

The following tables summarize the disaggregation of revenue by nature:


	Years Ended December 31,
	2018		2017		2016
	(in thousands)
Net Product Sales:
Trokendi XR	$	315,295	$	226,518	$	158,384
Oxtellar XR		84,576		67,579		51,694
Total Net Product Sales		399,871		294,097		210,078
Royalty Revenues		8,276		6,367		4,686
Licensing Revenue		750		1,774		239
Total Revenues	$	408,897	$	302,238	$	215,003

The Company recognized non-cash royalty revenue of $5.9 million, $5.3 million and $4.7 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Licensing revenue included $0.75 million and $1.5 million of milestone revenue for the years ended December 31, 2018 and 2017, respectively. No milestone revenue was recorded during the year ended December 31, 2016.

For the year ended December 31, 2018, revenue recognized from performance obligations related to prior periods (for example, due to changes in transaction price) was not material in the aggregate to Net Product Sales, License Revenue and Royalty Revenue.

Acquisitions	12 Months Ended
Acquisitions	Dec. 31, 2018
Acquisitions
Acquisitions	18. Acquisitions Biscayne Acquisition On October 4, 2018, the Company acquired Biscayne, a privately-held company developing a novel treatment for epilepsy. The Company obtained worldwide rights, excluding certain markets in Asia where rights have been out-licensed, to Biscayne’s product candidate, huperzine A (SPN-817). Huperzine A is in clinical development and has received an Orphan Drug designation from the U.S. Food and Drug Administration for the treatment of Dravet Syndrome, a severe form of childhood epilepsy. The Company made an upfront cash payment of $15 million as of the acquisition date. Upon the achievement of certain specified development and sales milestones, The Company may be required to make additional cash payments to the former Biscayne security holders. These additional payments include: (i) payments of up to approximately $73 million, contingent on the Company achieving certain development milestones by utilizing the acquired pharmaceutical intellectual property assets and (ii) payments of up to approximately $95 million, contingent on the Company achieving certain net product sales milestones with respect to the marketing of products developed from such assets. The Company will also pay a low single digit royalty on net sales to the former security holders of Biscayne, and any applicable royalties to third parties for the use of in-licensed intellectual property. The maximum combined royalty the Company will pay to all parties is approximately 12%, depending on the intellectual property covering the marketed product and applicable tiered net product sales levels. As a result of the acquisition, the Company added SPN-817 to its product development pipeline. The Company plans on studying SPN-817 initially in severe pediatric epilepsy disorders such as Dravet Syndrome. In accordance with ASU 2017-01, the acquisition of Biscayne was accounted for as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in a single asset, SPN-817. Net assets acquired included the in-process research and development asset, SPN-817, which is in early Phase I clinical development for the treatment of Dravet Syndrome, and deferred tax assets from net operating loss carryovers. Due to the stage of development of this asset, significant development risk remains. It is not yet probable that there is future economic benefit from this asset. Absent successful clinical results and regulatory approval for the asset, there is no alternative future use associated with SPN-817. Accordingly, approximately $14 million of the $15 million cash payment was recorded as research and development expense in the consolidated statement of earnings at the time of acquisition, as SPN-817 has not yet reached technological feasibility. The Company also recorded approximately $1 million related to the deferred tax assets acquired.

Quarterly Financial Information (unaudited)

12 Months Ended

Dec. 31, 2018

Quarterly Financial Information (unaudited)

Quarterly Financial Information (unaudited)

19. Quarterly Financial Information (unaudited), see accompanying accountants’ report

Quarterly financial information for fiscal 2018 and 2017 are presented in the following table, in thousands of dollars, except per share data:


	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
2018
Revenue	$	90,429	$	99,538	$	102,996	$	115,934
Total costs and expenses		59,035		63,818		65,521		76,079
Operating earnings		31,394		35,720		37,475		39,855
Net earnings		26,352		30,737		28,011		25,893
Net earnings per share, basic		0.51		0.59		0.54		0.50
Net earnings per share, diluted		0.49		0.57		0.52		0.48

2017
Revenue	$	57,576	$	75,829	$	80,398	$	88,435
Total costs and expenses		40,788		49,762		58,056		54,091
Operating earnings		16,788		26,067		22,342		34,344
Net earnings		10,297		17,368		15,961		13,658
Net earnings per share, basic		0.21		0.34		0.31		0.27
Net earnings per share, diluted		0.19		0.32		0.29		0.26

Subsequent Event	12 Months Ended
Subsequent Event	Dec. 31, 2018
Subsequent Event
Subsequent Event	20. Subsequent Event The Company has entered into a new lease agreement, effective January 31, 2019, with Advent Key West, LLC (Landlord), for its new headquarters in Rockville, MD (Premises). The term of the new lease commences upon Landlord tendering possession of the Premises. The term of this lease commenced on February 1, 2019 (the Commencement Date) and shall continue until April 30, 2034, unless earlier terminated in accordance with the terms of the Lease (the Lease Term). Fixed rent with respect to the Premises shall commence on the Commencement Date. The initial fixed rental rate is approximately $195,000 per month for the first 12 months, which rate will automatically increase by 2% on each anniversary of the Commencement Date. Under the terms of the Lease, the Company provided a security deposit of approximately $195,000 and will be required to pay all utility charges for the Premises and its pro rata share of any operating expenses and real estate taxes.

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Summary of Significant Accounting Policies

Basis of Presentation

The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP).

The Company has its principal business in the U.S. and operates in one operating segment.

Use of Estimates

Cash and Cash Equivalents

The Company considers all investments in highly liquid financial instruments with an original maturity of three months or less to be cash equivalents.

Marketable Securities

Accounts Receivable, net

Accounts Receivable, Net

Concentration of Credit Risk


	Years Ended December 31,
	2018		2017		2016
Customer A	33	%	30	%	29	%
Customer B	33	%	30	%	30	%
Customer C	32	%	37	%	37	%
	98	%	97	%	96	%

The following table includes each major customer that represented more than 10% of accounts receivable, net as of December 31, 2018 and 2017:


	December 31,
	2018		2017
Customer A	46	%	46	%
Customer B	24	%	22	%
Customer C	27	%	28	%
	97	%	96	%

Inventories

Intangible Assets

Impairment of Long-Lived Assets

Impairment of Long‑Lived Assets

Deferred Financing Costs

Preclinical Study and Clinical Trial Accruals

Revenue Recognition

Revenue from Product Sales

Sales Deductions

Sales deductions are primarily comprised of rebates, product returns and sales discounts and allowances. The Company records product sales net of the following sales deductions:

The Company accounts for these discounts at the time of sale as a reduction to gross product sales and records these amounts as a reduction to Accounts Receivable.

License Revenue

License and Collaboration Agreements

Up-front license fees are recognized once the license has been delivered to the customer.

Revenue associated with future milestones will be recognized when the related event occurs or sales-based target is achieved.

There are no guaranteed minimum amounts owed to the Company related to license and collaboration agreements.

Royalty Revenue

There are no guaranteed minimum amounts owed to the Company related to royalty revenue agreements.

Cost of Product Sales

Research and Development Costs

Advertising Expense

Share-Based Compensation

Share‑Based Compensation

Fair Value of Common Stock—The fair value of the common stock underlying the option grants was determined based on observable market prices of the Company’s common stock.

Dividend Yield—The Company has never declared or paid dividends, and has no plans to do so in the foreseeable future.

Risk‑Free Interest Rate—This is the U.S. Treasury note rate during the week each option grant was issued during that year, with a term that most closely resembles the expected term of the option.

Income Taxes

Recently Issued Accounting Pronouncements

Accounting Pronouncements Adopted in 2018

The impact of the adoption of the New Revenue standard was as follows:


	December 31, 2017
	As Reported		Adjustments		January 1, 2018

Accounts receivable, net	$	65,586	$	1,620	$	67,206
Deferred licensing revenue		287		(287)		—
Deferred licensing revenue, net of current portion		1,149		(1,149)		—
Deferred income taxes (asset)		20,843		(734)		20,109
Accumulated deficit		26,823		(2,322)		24,501

Adoption of the New Revenue Standard had no material impact on the Company’s consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of customers that represent more than 10% total revenue and more than 10% of accounts receivable, net


	Years Ended December 31,
	2018		2017		2016
Customer A	33	%	30	%	29	%
Customer B	33	%	30	%	30	%
Customer C	32	%	37	%	37	%
	98	%	97	%	96	%

The following table includes each major customer that represented more than 10% of accounts receivable, net as of December 31, 2018 and 2017:


	December 31,
	2018		2017
Customer A	46	%	46	%
Customer B	24	%	22	%
Customer C	27	%	28	%
	97	%	96	%

ASU 2014-09

Schedule of impact on financial statements due to adoption of the New Revenue Standard


	December 31, 2017
	As Reported		Adjustments		January 1, 2018

Accounts receivable, net	$	65,586	$	1,620	$	67,206
Deferred licensing revenue		287		(287)		—
Deferred licensing revenue, net of current portion		1,149		(1,149)		—
Deferred income taxes (asset)		20,843		(734)		20,109
Accumulated deficit		26,823		(2,322)		24,501

Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2018

Fair Value of Financial Instruments

Schedule of fair value of the financial assets and liabilities

The Company’s financial assets that are required to be measured at fair value on a recurring basis were as follows, in thousands of dollars:


	Fair Value Measurements
	as of December 31, 2018 Using
					Significant
	Total Fair		Quoted Prices		Other		Significant
	Value at		in Active Markets		Observable		Unobservable
	December 31,		for Indentical Assets		Inputs		Inputs
	2018		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	192,248	$	192,248	$	—	$	—
Marketable securities
Corporate debt securities		163,770		245		163,525		—
Long term marketable securities:
Corporate debt securities		415,650		445		415,205		—
Government debt securities		3,148		—		3,148		—
Other non-current assets:
Marketable securities-restricted (SERP)		326		1		325		—
Total assets at fair value	$	775,142	$	192,939	$	582,203	$	—


	Fair Value Measurements
	as of December 31, 2017 Using
					Significant
	Total Fair		Quoted Prices		Other		Significant
	Value at		in Active Markets		Observable		Unobservable
	December 31,		for Indentical Assets		Inputs		Inputs
	2017		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	100,304	$	100,304	$	—	$	—
Marketable securities
Corporate debt securities		39,736		2,118		37,618		—
Long term marketable securities:
Corporate debt securities		132,477		448		132,029		—
Government debt securities		1,161		—		1,161		—
Other non-current assets:
Marketable securities-restricted (SERP)		335		—		335		—
Total assets at fair value	$	274,013	$	102,870	$	171,143	$	—

Schedule of unrestricted marketable securities

Unrestricted marketable securities held by the Company were as follows, in thousands of dollars:

At December 31, 2018:

Gross

Amortized

Unrealized

Available for Sale

Cost

Gains

Losses

Fair Value

Corporate and government debt securities

586,726

(4,213)

582,568

At December 31, 2017:

Gross

Amortized

Unrealized

Available for Sale

Cost

Gains

Losses

Fair Value

Corporate and government debt securities

174,235

(909)

173,374

Schedule of contractual maturities of the unrestricted available for sale marketable securities held

The contractual maturities of the unrestricted available for sale marketable securities held by the Company were as follows, in thousands of dollars:


	December 31,
	2018
Less Than 1 Year	$	163,770
1 year to 2 years		166,482
2 year to 3 years		163,687
3 years to 4 years		88,629
Greater Than 4 Years		—
Total	$	582,568

Inventories (Tables)

12 Months Ended

Dec. 31, 2018

Inventories

Schedule of inventories

Inventories consist of the following, in thousands of dollars:


	December 31,		December 31,
	2018		2017
Raw materials	$	5,742	$	2,995
Work in process		7,275		8,873
Finished goods		12,642		4,436
	$	25,659	$	16,304

Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2018

Property and Equipment

Schedule of property and equipment

Property and equipment consist of the following, in thousands of dollars:


	December 31,		December 31,
	2018		2017
Lab equipment and furniture	$	8,995	$	8,331
Leasehold improvements		2,731		2,731
Software		2,181		2,004
Computer equipment		1,313		1,226
Construction-in-progress		94		178
		15,314		14,470
Less accumulated depreciation and amortization		(11,219)		(9,346)
	$	4,095	$	5,124

Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2018

Intangible Assets

Schedule of gross carrying amount and related accumulated amortization of the intangible assets

The following sets forth the gross carrying amount and related accumulated amortization of the intangible assets, in thousands of dollars:


	Weighted-	December 31,		December 31,
	Average Life	2018		2017
Capitalized patent defense costs	4.00 - 8.25 years	$	44,724	$	44,185
Less accumulated amortization			(13,356)		(8,166)
		$	31,368	$	36,019

Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2018

Accrued Expenses

Schedule of accrued expenses

Accrued expenses are comprised of the following, in thousands of dollars:


	December 31,		December 31,
	2018		2017
Accrued clinical trial and clinical supply costs	$	14,034	$	6,996
Accrued compensation		13,546		10,279
Accrued professional fees		3,706		2,890
Accrued interest expense		650		—
Accrued product costs		38		726
Other accrued expenses		4,561		6,414
	$	36,535	$	27,305

Accrued Sales Deductions (Tables)

12 Months Ended

Dec. 31, 2018

Accrued Sales Deductions

Schedule of accrued sales deductions

Accrued sales deductions are comprised of the following, in thousands of dollars:


	December 31,		December 31,
	2018		2017

Accrued rebates	$	85,003	$	49,460
Accrued product returns		22,060		18,883
	$	107,063	$	68,343

Convertible Senior Secured Notes (Tables)

12 Months Ended

Dec. 31, 2018

Convertible Senior Secured Notes

Summary of liability component of 2023 Notes

The liability component of the 2023 Notes consisted of the following, in thousands of dollars:


	December 31,
	2018

Principal amount of the 2023 Notes	$	402,500
Debt discount		(76,434)
Deferred financing costs		(8,452)
Accretion of debt discount and deferred financing costs		11,848
December 31, 2018 carrying value	$	329,462

Share-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2018

Share-Based Compensation

Schedule of share-based compensation expense

Share-based compensation expense was as follows, in thousands of dollars:


	Years Ended December 31,
	2018		2017		2016
Research and development	$	1,943	$	1,387	$	1,107
Selling, general and administrative		9,348		7,046		4,819
Total	$	11,291	$	8,433	$	5,926

Schedule of assumptions used in estimation of fair value of each award option on the date of grant using Black-Scholes option-pricing model


	Years Ended December 31,
	2018	2017	2016
Fair value of common stock	$37.20-$58.15	$25.30-$41.00	$12.98-$22.80
Expected volatility	57.95%-60.56%	53.61%-60.60%	60.89%-64.54%
Dividend yield	0%	0%	0%
Expected term	6.25 years	6.25 years	6.25 years
Risk-free interest rate	2.69%-2.85%	1.90%-2.18%	1.14%-2.15%
Expected forfeiture rate	0%	0%	5%

Summary of stock option and SAR activity


				Weighted-Average
		Weighted-		Remaining	Aggregate
	Number of	Average		Contractual	Intrinsic Value
	Options	Exercise Price		Term (in years)	(in thousands)
Outstanding, December 31, 2016	3,644,088	$	10.25	7.59	$	54,673
Granted	1,130,155	$	26.57
Exercised	(407,477)	$	9.31		$	12,822
Forfeited	(86,096)	$	17.24
Outstanding, December 31, 2017	4,280,670	$	14.50	7.37	$	108,520
Granted	762,915	$	39.91
Exercised	(930,483)	$	10.07		$	36,317
Forfeited	(196,139)	$	25.01
Outstanding, December 31, 2018	3,916,963	$	19.98	7.10	$	57,220

As of December 31, 2018:
Vested and expected to vest	3,916,963	$	19.98	7.10	$	57,220
Exercisable	1,889,947	$	12.47	5.96	$	39,447

Earnings per Share (Tables)

12 Months Ended

Dec. 31, 2018

Earnings per Share

Schedule of common stock equivalents excluded in the calculation of diluted earnings per share


	Years Ended December 31,
	2018	2017	2016
Warrants to purchase common stock	3,949,743	—	—
Convertible notes	87,215	—	—
Convertible notes hedges	87	—	—
Stock options, SAR and ESPP awards	199,982	40,009	22,944

Schedule of computation of basic and diluted net earnings per share


	Years Ended December 31,
	2018		2017		2016

Numerator, in thousands:
Net earnings used for calculation of basic EPS	$	110,993	$	57,284	$	91,221
Interest expense on convertible debt		—		134		543
Changes in fair value of derivative liabilities		—		(76)		(448)
Loss on extinguishment of debt		—		295		671
Loss on extinguishment of outstanding debt, as if converted		—		(321)		(1,182)
Total adjustments		—		32		(416)
Net earnings used for calculation of diluted EPS	$	110,993	$	57,316	$	90,805

Denominator:
Weighted average shares outstanding, basic		51,989,824		50,756,603		49,472,434
Effect of dilutive potential common shares:
Shares underlying Convertible Senior Notes		—		285,257		1,222,363
Shares issuable to settle interest make-whole derivatives		—		7,012		71,537
Stock options and SAR		2,109,048		2,252,278		942,649
Total dilutive potential common shares		2,109,048		2,544,547		2,236,549
Weighted average shares outstanding, diluted		54,098,872		53,301,150		51,708,983

Net earings per share, basic	$	2.13	$	1.13		1.84
Net earnings per share, diluted	$	2.05	$	1.08		1.76

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income Taxes

Schedule of summary of the income tax expense(benefit)

The summary of the income tax expense (benefit) for the years ended December 31, 2018, 2017 and 2016 is as follows, in thousands of dollars:


	Years Ended December 31,
	2018		2017		2016
Current
Federal	$	26,772	$	18,288	$	544
State		5,621		3,822		78
Deferred
Federal		(2,450)		21,493		(39,898)
State		(760)		(269)		(1,576)
Total	$	29,183	$	43,334	$	(40,852)

Schedule of reconciliation of income tax expense at the U.S Federal statutory income tax rate to the entity's effective income tax rate

A reconciliation of income tax expense at the U.S. Federal statutory income tax rate to provision for income taxes at the Company’s effective tax rate is as follows, in thousands of dollars:


	Years Ended December 31,
	2018		2017		2016
Income tax expense computed at U.S. Federal statutory income tax rate (1)	$	29,437	$	35,217	$	17,629
State income taxes		3,674		2,714		(1,523)
Permanent items (3)		(2,196)		(2,311)		715
Research and development credits		(3,199)		(2,196)		(1,902)
Uncertain income tax position		716		(1,137)		143
Effect of rate changes (2)		—		9,694		—
Change in valuation allowance (4)		—		—		(56,019)
Other		751		1,353		105
Income tax expense (benefit)	$	29,183	$	43,334	$	(40,852)

(1)Includes the effect of the Tax Cuts and Jobs Act, which lowered the U.S. corporate income tax rate from 35 percent to 21 percent effective January 1, 2018.

(2)Relates to the remeasurement of existing deferred taxes as a result of the change to the U.S. corporate income tax rate. The impact was a reduction in value of deferred taxes.

(3)Primarily relates to tax benefit from the exercise of employee stock options.

(4)Reduction in the 2016 valuation allowances was attributable to profitable results of operations.

Schedule of significant components of the entity's deferred tax assets (liabilities)

The significant components of the Company’s deferred income tax assets (liabilities) were as follow, in thousands of dollars:


	As of December 31,
	2018		2017
Deferred tax assets:
Convertible bond hedge	$	21,412	$	—
Accrued sales deductions		13,205		8,449
Accrued compensation and stock based compensation		8,218		7,090
Non-recourse liability related to sale of future royalties		5,571		6,377
Research and development credit carryforwards		3,817		3,795
Amortization		3,289		2,073
Net operating loss carryforwards		2,900		5,072
Deferred rent		125		211
Inventory		499		480
Alternative Minimum Tax (AMT) credit		978		1,613
Other		1,143		645
Total deferred tax assets		61,157		35,805
Less: valuation allowance		(9)		—
Deferred tax asset, net of valuation allowance		61,148		35,805

Deferred tax liability:
Debt discount on 2023 Notes		(17,568)		—
Infringement legal costs		(10,697)		(10,557)
Depreciation		(236)		(264)
Section 481(a)		(2,964)		(4,141)
Net deferred tax assets	$	29,683	$	20,843

Schedule of reconciliation of the beginning and ending amount of gross unrecognized tax benefits

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows, in thousands of dollars:


	Years Ended December 31,
	2018		2017		2016
Balance as of January 1	$	8,859	$	9,299	$	9,341
Gross increases related to current year tax positions		1,108		1,178		662
Gross decreases related to current year tax positions		—		—		(169)
Gross increases related to prior year tax positions		—		947		—
Gross decreases related to prior year tax positions		(484)		—		(375)
Lapse of statute of limitations		(635)		—		—
Change in tax rates		—		(2,565)		(160)
Balance as of December 31	$	8,848	$	8,859	$	9,299

Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies

Schedule of future minimum lease payments under non-cancelable operating leases

Future minimum lease payments under non-cancelable operating leases as of December 31, 2018 are as follows, in thousands of dollars:


Year ending December 31:
2019	$	3,400
2020		2,287
Thereafter		1,840
	$	7,527

Disaggregated Revenues (Tables)

12 Months Ended

Dec. 31, 2018

Disaggregated Revenues

Summary of disaggregation of revenue by nature


	Years Ended December 31,
	2018		2017		2016
	(in thousands)
Net Product Sales:
Trokendi XR	$	315,295	$	226,518	$	158,384
Oxtellar XR		84,576		67,579		51,694
Total Net Product Sales		399,871		294,097		210,078
Royalty Revenues		8,276		6,367		4,686
Licensing Revenue		750		1,774		239
Total Revenues	$	408,897	$	302,238	$	215,003

Quarterly Financial Information (unaudited) (Tables)

12 Months Ended

Dec. 31, 2018

Quarterly Financial Information (unaudited)

Schedule of quarterly financial information

Quarterly financial information for fiscal 2018 and 2017 are presented in the following table, in thousands of dollars, except per share data:


	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
2018
Revenue	$	90,429	$	99,538	$	102,996	$	115,934
Total costs and expenses		59,035		63,818		65,521		76,079
Operating earnings		31,394		35,720		37,475		39,855
Net earnings		26,352		30,737		28,011		25,893
Net earnings per share, basic		0.51		0.59		0.54		0.50
Net earnings per share, diluted		0.49		0.57		0.52		0.48

2017
Revenue	$	57,576	$	75,829	$	80,398	$	88,435
Total costs and expenses		40,788		49,762		58,056		54,091
Operating earnings		16,788		26,067		22,342		34,344
Net earnings		10,297		17,368		15,961		13,658
Net earnings per share, basic		0.21		0.34		0.31		0.27
Net earnings per share, diluted		0.19		0.32		0.29		0.26

Organization and Nature Business (Details)	12 Months Ended
Organization and Nature Business (Details)	Dec. 31, 2018 product
Organization and Nature of Operations
Number of commercial products	2

Summary of Significant Accounting Policies - Segments (Details)	12 Months Ended
	Dec. 31, 2018 segment
Basis of Presentation
Number of operating segments	1

Summary of Significant Accounting Policies - Accounts Receivable, Net (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Accounts Receivable, Net
Allowance for doubtful accounts	$ 0.1	$ 0.0	$ 0.4
Accounts receivable written off	0.0	0.0	$ 0.0
Allowance for expected sales discounts and allowances	$ 11.5	$ 8.9
Revenues \| Customer Concentration Risk
Concentration risk percentage
Concentration risk percentage	98.00%	97.00%	96.00%
Revenues \| Customer Concentration Risk \| Customer A
Concentration risk percentage
Concentration risk percentage	33.00%	30.00%	29.00%
Revenues \| Customer Concentration Risk \| Customer B
Concentration risk percentage
Concentration risk percentage	33.00%	30.00%	30.00%
Revenues \| Customer Concentration Risk \| Customer C
Concentration risk percentage
Concentration risk percentage	32.00%	37.00%	37.00%
Accounts Receivable, net \| Customer Concentration Risk
Concentration risk percentage
Concentration risk percentage	97.00%	96.00%
Accounts Receivable, net \| Customer Concentration Risk \| Customer A
Concentration risk percentage
Concentration risk percentage	46.00%	46.00%
Accounts Receivable, net \| Customer Concentration Risk \| Customer B
Concentration risk percentage
Concentration risk percentage	24.00%	22.00%
Accounts Receivable, net \| Customer Concentration Risk \| Customer C
Concentration risk percentage
Concentration risk percentage	27.00%	28.00%

Summary of Significant Accounting Policies - Deferred Financing Costs (Details) - 0.625% Convertible Senior Notes due 2023 $ in Millions	Dec. 31, 2018 USD ($)
Deferred Financing Costs
Aggregate principal amount	$ 402.5
Interest rate (as a percent)	0.625%

Summary of Significant Accounting Policies - Revenue Recognition (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($) product	Jan. 01, 2018 USD ($)	Dec. 31, 2017 USD ($)
Revenue Recognition
Sales return period prior to expiry date	6 months
Sales return period subsequent to expiry date	12 months
Number of commercial products \| product	2
Contract assets	$ 0	$ 0
Contract liabilities	$ 0	$ 0
Practical expedient
Revenue, Practical expedient, Incremental cost in obtaining contract [true/false]	true
Minimum
Revenue Recognition
Product shelf life	36 months
Maximum
Revenue Recognition
Product shelf life	48 months
License and collaboration agreements
Practical expedient
Guaranteed minimum amounts	$ 0		$ 0
Royalty revenue agreements
Practical expedient
Guaranteed minimum amounts	$ 0		$ 0

Summary of Significant Accounting Policies - Advertising Expense (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Selling, general and administrative
Advertising Expense
Advertising costs	$ 43.3	$ 33.8	$ 21.9

Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements (Details) - USD ($) $ in Thousands	Jan. 01, 2019	Dec. 31, 2018	Jan. 01, 2018	Dec. 31, 2017
Assets
Accounts receivable, net		$ 102,922	$ 67,206	$ 65,586
Deferred income taxes (asset)		29,683	20,109	20,843
Liabilities
Deferred licensing revenue				287
Deferred licensing revenue, net of current portion				1,149
Equity
Accumulated deficit/(Retained earnings)		$ (86,492)	24,501	$ 26,823
Effect of Change Higher (Lower)
Assets
Accounts receivable, net			1,620
Deferred income taxes (asset)			(734)
Liabilities
Deferred licensing revenue			(287)
Deferred licensing revenue, net of current portion			(1,149)
Equity
Accumulated deficit/(Retained earnings)			$ (2,322)
Restatement Adjustment \| Accounting Standards Update 2016-02
Equity
Lease assets	$ 4,000
Lease liabilities	$ 4,000

Fair Value of Financial Instruments - Carrying Value (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Other non-current assets:
Carrying value of the convertible notes	$ 329,462
Total Fair Value \| Recurring
Assets:
Cash and cash equivalents	192,248	$ 100,304
Marketable securities
Corporate debt securities	163,770	39,736
Long term marketable securities:
Corporate debt securities	415,650	132,477
Government debt securities	3,148	1,161
Other non-current assets:
Marketable securities - restricted (SERP)	326	335
Total assets at fair value	775,142	274,013
Quoted Prices in Active Markets for Identical Assets (Level 1) \| Recurring
Assets:
Cash and cash equivalents	192,248	100,304
Marketable securities
Corporate debt securities	245	2,118
Long term marketable securities:
Corporate debt securities	445	448
Other non-current assets:
Marketable securities - restricted (SERP)	1
Total assets at fair value	192,939	102,870
Significant Other Observable Inputs (Level 2) \| Recurring
Marketable securities
Corporate debt securities	163,525	37,618
Long term marketable securities:
Corporate debt securities	415,205	132,029
Government debt securities	3,148	1,161
Other non-current assets:
Marketable securities - restricted (SERP)	325	335
Total assets at fair value	582,203	$ 171,143
0.625% Convertible Senior Notes due 2023
Other non-current assets:
Amount issued	402,500
0.625% Convertible Senior Notes due 2023 \| Significant Other Observable Inputs (Level 2)
Other non-current assets:
Carrying value of the convertible notes	329,500
Amount issued	402,500
Estimated fair value	$ 375,800

Fair Value of Financial Instruments - Unrestricted Marketable Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Fair Value of Financial Instruments
Corporate and government debt securities, Amortized Cost	$ 586,726	$ 174,235
Corporate and government debt securities, Gross Unrealized Gains	55	48
Corporate and government debt securities, Gross Unrealized Losses	(4,213)	(909)
Corporate and government debt securities, Fair Value	582,568	173,374
Contractual maturities of the unrestricted available for sale marketable securities held
Less Than 1 Year	163,770
1 year to 2 years	166,482
2 year to 3 years	163,687
3 years to 4 years	88,629
Corporate debt securities, Fair Value	$ 582,568	$ 173,374

Inventories (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Inventories
Raw materials	$ 5,742	$ 2,995
Work in process	7,275	8,873
Finished goods	12,642	4,436
Total inventories	$ 25,659	$ 16,304

Property and Equipment (Details) - USD ($) $ in Thousands	12 Months Ended
Property and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Property and equipment
Property and equipment, gross	$ 15,314	$ 14,470
Less accumulated depreciation and amortization	(11,219)	(9,346)
Property and equipment, net	4,095	5,124
Depreciation and amortization expense	1,900	1,200	$ 1,100
Lab equipment and furniture
Property and equipment
Property and equipment, gross	8,995	8,331
Leasehold improvements
Property and equipment
Property and equipment, gross	2,731	2,731
Software
Property and equipment
Property and equipment, gross	2,181	2,004
Computer equipment
Property and equipment
Property and equipment, gross	1,313	1,226
Construction-in-progress
Property and equipment
Property and equipment, gross	$ 94	$ 178

Intangible Assets (Details) $ in Thousands	12 Months Ended
Intangible Assets (Details) $ in Thousands	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Mar. 31, 2017 item
Intangible Assets
Less accumulated amortization	$ (13,356)	$ (8,166)
Net book value of intangible assets	31,368	36,019
Additional disclosures
Amortization expense	5,200	6,900	$ 1,300
Anticipated annual amortization expense for the next five years
2019	5,200
2020	5,200
2021	5,200
2022	5,200
2023	2,500
Trokendi XR patent litigation
Additional disclosures
Number of settlements \| item				2
Capitalized patent defense costs
Intangible Assets
Gross carrying amount	$ 44,724	$ 44,185
Minimum \| Capitalized patent defense costs
Intangible Assets
Weighted-Average Life	4 years
Maximum \| Capitalized patent defense costs
Intangible Assets
Weighted-Average Life	8 years 3 months

Accrued Expenses (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Accrued Expenses
Accrued clinical trial and clinical supply costs	$ 14,034	$ 6,996
Accrued compensation	13,546	10,279
Accrued professional fees	3,706	2,890
Accrued interest expense	650
Accrued product costs	38	726
Other accrued expenses	4,561	6,414
Total	$ 36,535	$ 27,305

Accrued Sales Deductions (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Accrued Sales Deductions
Accrued rebates	$ 85,003	$ 49,460
Accrued product returns	22,060	18,883
Accrued sales deductions, net	$ 107,063	$ 68,343

Convertible Senior Secured Notes (Details)			12 Months Ended
Convertible Senior Secured Notes (Details)	Mar. 15, 2018 USD ($) shares	Mar. 14, 2018 USD ($) D $ / shares shares	Dec. 31, 2018 USD ($) $ / shares shares
Notes payable
Total cost of the convertible note hedge transactions			$ 92,897,000
Strike price of the Warrant Transactions (in dollars per share) \| $ / shares			$ 80.9063
Proceeds from sale of warrants			$ 65,688,000
Debt financing costs			10,435,000
Liability component of the 2023 Notes
December 31, 2018 carrying value			329,462,000
2023 Notes
Notes payable
Aggregate principal amount			402,500,000
Threshold trading days (whether or not consecutive) \| D		20
Consecutive trading day period (in days) \| D		30
Minimum percentage of the conversion price on trading day		130.00%
Conversion option stock price trigger \| $ / shares		$ 77.13
Threshold trading days period prior to a conversion date during which principal amount of notes for such trading day was less than 98% of the product of the last reported sale price of common stock \| D		5
Consecutive trading day period prior to a conversion date during which principal amount of notes for such trading day was less than 98% of the product of the last reported sale price of common stock \| D		10
Conversion rate for the Notes (in shares) \| shares		16.8545
Conversion ratio, principal amount		$ 1,000
Conversion price, per share of Common Stock \| $ / shares		$ 59.33
Amount of principal value to be repaid			$ 402,500,000
Warrants issued \| shares			6,783,939
Number of shares per warrant entitled to holder \| shares			1
Effective interest rate (as percent)			5.41%
Conversion option reported as debt discount and APIC			$ 2,000,000
Liability component of the 2023 Notes
Principal amount of the 2023 Notes			402,500,000
Debt discount			(76,434,000)
Deferred financing costs			(8,452,000)
Accretion of debt discount and deferred financing costs			11,848,000
December 31, 2018 carrying value			329,462,000
Shares of common stock issued upon conversion of Notes \| shares	6,800,000
Conversion of debt to equity - principal			$ 0
2023 Notes \| Overallotment option
Notes payable
Convertible note hedge options issued (in shares) \| shares	402,500
Convertible Senior Notes due 2023 granted to initial purchasers
Notes payable
Aggregate principal amount		$ 350,000,000
Interest rate (as a percent)		0.625%
Liability component of the 2023 Notes
Principal amount of the 2023 Notes		$ 350,000,000
Convertible Senior Notes due 2023 over-allotment option
Notes payable
Aggregate principal amount	$ 52,500,000
Over-allotment period for additional principal amount	30 days
Liability component of the 2023 Notes
Principal amount of the 2023 Notes	$ 52,500,000

Stockholders' Equity (Details)	Dec. 31, 2018 Vote
Common Stock
Stockholders' equity
Number of votes to which holders of common shares are entitled for each share held	1

Share-Based Compensation - 2012 Plan (Details) - 2012 Plan shares in Millions	12 Months Ended
	Dec. 31, 2018 installment shares
Share-Based Compensation
Maximum number of shares of common stock provided for issuance \| shares	8
Stock Option
Share-Based Compensation
Number of annual installments in which the awards would generally vest starting on the first anniversary of the date of grant \| installment	4
Stock Option \| Employees, Consultants and Advisors
Share-Based Compensation
Contractual term	10 years
Stock Option \| Directors
Share-Based Compensation
Contractual term	10 years
Vesting period	1 year

Share-Based Compensation - ESPP and Share-based Compensation Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Share-based Payments
Share-based compensation recognized	$ 11,291	$ 8,433	$ 5,926
Research and development
Share-based Payments
Share-based compensation recognized	1,943	1,387	1,107
Selling, general and administrative
Share-based Payments
Share-based compensation recognized	$ 9,348	$ 7,046	$ 4,819
ESPP
Share-based Payments
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent	85.00%
Maximum number of shares of common stock provided for issuance	700,000

Share-Based Compensation - Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Assumptions used in estimating the fair value of each option award using the Black-Scholes option-pricing model
Expected volatility, maximum (as a percent)	60.56%	60.60%	64.54%
Risk-free interest rate, maximum (as a percent)	2.85%	2.18%	2.15%
Aggregate Intrinsic Value (in thousands)
Outstanding	$ 57,220	$ 108,520	$ 54,673
Exercised	36,317	$ 12,822
Vested and expected to vest	57,220
Exercisable	$ 39,447
Stock option and Stock Appreciation Rights
Number of Options and SAR
Outstanding at the beginning of the period (in shares)	4,280,670	3,644,088
Granted (in shares)	762,915	1,130,155
Exercised (in shares)	(930,483)	(407,477)
Forfeited (in shares)	(196,139)	(86,096)
Outstanding at the end of the period (in shares)	3,916,963	4,280,670	3,644,088
Vested and expected to vest (in shares)	3,916,963
Exercisable (in shares)	1,889,947
Weighted-Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 14.50	$ 10.25
Granted (in dollars per share)	39.91	26.57
Exercised (in dollars per share)	10.07	9.31
Forfeited (in dollars per share)	25.01	17.24
Outstanding at the end of the period (in dollars per share)	19.98	$ 14.50	$ 10.25
Vested and expected to vest (in dollars per share)	19.98
Exercisable (in dollars per share)	$ 12.47
Stock Option
Assumptions used in estimating the fair value of each option award using the Black-Scholes option-pricing model
Expected volatility, minimum (as a percent)	57.95%	53.61%	60.89%
Dividend yield (as a percent)	0.00%	0.00%	0.00%
Expected term	6 years 3 months	6 years 3 months	6 years 3 months
Risk-free interest rate, minimum (as a percent)	2.69%	1.90%	1.14%
Expected forfeiture rate (as a percent)	0.00%	0.00%	5.00%
Weighted-Average Remaining Contractual Term (in years)
Outstanding at the end of the period	7 years 1 month 6 days	7 years 4 months 13 days	7 years 7 months 2 days
Vested and expected to vest	7 years 1 month 6 days
Exercisable	5 years 11 months 16 days
Share-based payments, additional disclosure
Weighted-average, grant-date fair value of options granted (in dollars per share)	$ 23.43	$ 14.35	$ 7.66
Total fair value of the common stock vested	$ 8,300	$ 5,400	$ 3,900
Total unrecognized compensation expense	$ 22,400	$ 17,600
Weighted-average period over which total unrecognized compensation expense is expected to be recognized	2 years 7 months 24 days	2 years 9 months 18 days
Stock Option \| Minimum
Assumptions used in estimating the fair value of each option award using the Black-Scholes option-pricing model
Fair value of common stock (in dollars per share)	$ 37.20	$ 25.30	$ 12.98
Stock Option \| Maximum
Assumptions used in estimating the fair value of each option award using the Black-Scholes option-pricing model
Fair value of common stock (in dollars per share)	$ 58.15	$ 41.00	$ 22.80

Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Numerator, in thousands:
Net earnings used for calculation of basic EPS									$ 110,993	$ 57,284	$ 91,221
Interest expense on convertible debt										134	543
Changes in fair value of derivative liabilities										(76)	(448)
Loss on extinguishment of debt										295	671
Loss on extinguishment of outstanding debt, as if converted										(321)	(1,182)
Total adjustments										32	(416)
Net earnings used for calculation of diluted EPS									$ 110,993	$ 57,316	$ 90,805
Denominator:
Weighted average shares outstanding, basic									51,989,824	50,756,603	49,472,434
Effect of dilutive potential common shares:
Shares underlying Convertible Senior Notes										285,257	1,222,363
Shares issuable to settle interest make-whole derivatives										7,012	71,537
Stock options and SAR									2,109,048	2,252,278	942,649
Total dilutive potential common shares									2,109,048	2,544,547	2,236,549
Weighted average shares outstanding, diluted									54,098,872	53,301,150	51,708,983
Net earnings per share, basic	$ 0.50	$ 0.54	$ 0.59	$ 0.51	$ 0.27	$ 0.31	$ 0.34	$ 0.21	$ 2.13	$ 1.13	$ 1.84
Net earnings per share, diluted	$ 0.48	$ 0.52	$ 0.57	$ 0.49	$ 0.26	$ 0.29	$ 0.32	$ 0.19	$ 2.05	$ 1.08	$ 1.76
Warrants to purchase common stock
Income per share
Common stock equivalents excluded in the calculation of diluted income per share									3,949,743
Convertible notes
Income per share
Common stock equivalents excluded in the calculation of diluted income per share									87,215
Convertible notes hedges
Income per share
Common stock equivalents excluded in the calculation of diluted income per share									87
Stock options, SAR, and ESPP awards
Income per share
Common stock equivalents excluded in the calculation of diluted income per share									199,982	40,009	22,944

Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Components of the income tax expense/(benefit)
U.S. corporate income tax rate (as a percent)	21.00%	35.00%
Current
Federal	$ 26,772	$ 18,288	$ 544
State	5,621	3,822	78
Deferred
Federal	(2,450)	21,493	(39,898)
State	(760)	(269)	(1,576)
Income tax expense/ (benefit)	29,183	43,334	(40,852)
Reconciliation of the expected income tax benefit computed using the federal statutory income tax rate to the Company's effective income tax rate
Income tax expense computed at U.S. Federal statutory income tax rate	29,437	35,217	17,629
State income taxes	3,674	2,714	(1,523)
Permanent items	(2,196)	(2,311)	715
Research and development credits	(3,199)	(2,196)	(1,902)
Uncertain income tax position	716	(1,137)	143
Effect of rate changes		9,694
Change in valuation allowance			(56,019)
Other	751	1,353	105
Income tax expense (benefit)	29,183	43,334	(40,852)
NOLs utilized	18,400
Research and development credit carryforwards	4,200
Deferred tax assets:
Convertible bond hedge	21,412
Accrued sales deductions	13,205	8,449
Accrued compensation and stock based compensation	8,218	7,090
Non-recourse liability related to sale of future royalties	5,571	6,377
Research and development credits carryforwards	3,817	3,795
Amortization	3,289	2,073
Net operating loss carryforwards	2,900	5,072
Deferred rent	125	211
Inventory	499	480
Alternative Minimum Tax (AMT) credit	978	1,613
Other	1,143	645
Total deferred tax assets	61,157	35,805
Less: valuation allowance	(9)
Deferred tax asset, net of valuation allowance	61,148	35,805
Deferred tax liability:
Debt discount on 2023 Notes	(17,568)
Infringement legal costs	(10,697)	(10,557)
Depreciation	(236)	(264)
Section 481(a)	(2,964)	(4,141)
Net deferred tax assets	29,683	20,843
Reconciliation of the beginning and ending amount of gross unrecognized tax benefits
Balance at the beginning of the period	8,859	9,299	9,341
Gross increases related to current-year tax positions	1,108	1,178	662
Gross decreases related to current-year tax positions			(169)
Gross increases related to prior-year tax positions		947
Gross decreases related to prior-year tax positions	(484)		(375)
Lapse of statute of limitations	(635)
Change in tax rates		(2,565)	(160)
Balance at the end of the period	8,848	8,859	9,299
Alternate minimum tax expense on uncertain tax position	600	$ 0	$ 500
Current tax benefit	600
Tax expense on uncertain tax position	300
U.S. Federal
Reconciliation of the expected income tax benefit computed using the federal statutory income tax rate to the Company's effective income tax rate
NOL carryforwards	20,600
State
Reconciliation of the expected income tax benefit computed using the federal statutory income tax rate to the Company's effective income tax rate
NOL carryforwards	$ 9,200

Commitments and Contingencies - Operating Lease (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Commitments and Contingencies
Additional period for which the entity may elect to extend the term of the lease	5 years
Additional tenant improvement allowance	$ 2,100
Amount available for tenant improvements	400
Rent expense	3,600	$ 2,700	$ 2,700
Future minimum lease payments under non-cancelable operating leases
2019	3,400
2020	2,287
Thereafter	1,840
Total	$ 7,527

Commitments and Contingencies - New Headquarters Lease (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Afecta Pharmaceuticals Inc \| Maximum
Potential maximum milestone payments payable	$ 300
Rune HealthCare Limited
Milestone payments due	$ 0

Employee Benefit Plan (Details) - USD ($) $ in Millions	12 Months Ended
Employee Benefit Plan (Details) - USD ($) $ in Millions	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Employee Benefit Plan
Minimum age requirement for employees to participate in the plan	18 years
Maximum contribution by employee (as a percent)	90.00%
Employer match of employee contributions on the first level of salary deferral (as a percent)	100.00%
Percentage of eligible compensation, first level, matched by employer	3.00%
Employer match of employee contributions on the second level of salary deferral (as a percent)	50.00%
Percentage of eligible compensation, second level, partially matched by employer	2.00%
Maximum percentage of participating employee annual compensation that the company may elect to make a discretionary contribute towards	60.00%
Company's contribution to the 401(k) Plan	$ 2.1	$ 1.8	$ 1.6

Royalty Agreements (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
Royalty Agreements (Details) - USD ($) $ in Thousands	Sep. 30, 2014	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Royalty agreement
Non-cash royalty revenue		$ 5,914	$ 5,283	$ 4,686
Non-cash interest expense		$ 4,271	$ 1,434	$ 4,548
License and collaboration agreements \| United Therapeutics
Royalty agreement
Non-cash royalty revenue	$ 30,000

Disaggregated Revenues (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
Disaggregated Revenues (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Revenue Recognition
Total revenue	$ 115,934	$ 102,996	$ 99,538	$ 90,429	$ 88,435	$ 80,398	$ 75,829	$ 57,576	$ 408,897	$ 302,238	$ 215,003
Non-cash royalty revenue									(5,914)	(5,283)	(4,686)
Product
Revenue Recognition
Total revenue									399,871	294,097	210,078
Trokendi XR
Revenue Recognition
Total revenue									315,295	226,518	158,384
Oxtellar XR
Revenue Recognition
Total revenue									84,576	67,579	51,694
Royalty
Revenue Recognition
Total revenue									8,276	6,367	4,686
Licensing
Revenue Recognition
Total revenue									750	1,774	$ 239
Milestone Revenue
Revenue Recognition
Total revenue									$ 750	$ 1,500

Acquisitions (Details) - Acquisition of Biscayne Neurotherapeutics, Inc. $ in Millions		12 Months Ended
	Oct. 04, 2018 USD ($)	Dec. 31, 2018 USD ($)
Acquisitions
Upfront cash payment	$ 15
Maximum combined royalty (as a percent)	12
Developmental milestones related to intellectual property \| Maximum
Acquisitions
Contingent consideration based on milestones	$ 73
Sales milestones related to marketing products developed from intellectual property assets \| Maximum
Acquisitions
Contingent consideration based on milestones	$ 95
Fair value measurement, nonrecurring
Acquisitions
Deferred tax asset		$ 1
Fair value measurement, nonrecurring \| In-process research and development
Acquisitions
Research and development expense		14
Cash paid for in-process research and development asset		$ 15

Quarterly Financial Information (unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Quarterly Financial Information (unaudited)
Reduction in net revenues	$ 115,934	$ 102,996	$ 99,538	$ 90,429	$ 88,435	$ 80,398	$ 75,829	$ 57,576	$ 408,897	$ 302,238	$ 215,003
Total costs and expenses	76,079	65,521	63,818	59,035	54,091	58,056	49,762	40,788	264,453	202,697	160,787
Operating earnings	39,855	37,475	35,720	31,394	34,344	22,342	26,067	16,788	144,444	99,541	54,216
Net earnings	$ 25,893	$ 28,011	$ 30,737	$ 26,352	$ 13,658	$ 15,961	$ 17,368	$ 10,297	$ 110,993	$ 57,284	$ 91,221
Net earnings per share, basic	$ 0.50	$ 0.54	$ 0.59	$ 0.51	$ 0.27	$ 0.31	$ 0.34	$ 0.21	$ 2.13	$ 1.13	$ 1.84
Net earnings per share, diluted	$ 0.48	$ 0.52	$ 0.57	$ 0.49	$ 0.26	$ 0.29	$ 0.32	$ 0.19	$ 2.05	$ 1.08	$ 1.76

- Definition

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

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 220
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-04(19))
-URI http://asc.fasb.org/extlink&oid=114873790&loc=SL114874131-224263

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 45
-Paragraph 7
-URI http://asc.fasb.org/extlink&oid=109260490&loc=d3e1337-109256

Reference 3: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 55
-Paragraph 52
-URI http://asc.fasb.org/extlink&oid=109256448&loc=d3e4984-109258

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SX 210.5-03(21))
-URI http://asc.fasb.org/extlink&oid=115205541&loc=SL114868664-224227

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 11
-URI http://asc.fasb.org/extlink&oid=109234566&loc=d3e22694-107794

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 50
-Paragraph 1
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=6371337&loc=d3e3550-109257

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=109260490&loc=d3e1252-109256

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 220
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-04(23))
-URI http://asc.fasb.org/extlink&oid=114873765&loc=SL114874048-224260

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 45
-Paragraph 60B
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=109260490&loc=SL5780133-109256

+ Details

- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

+ References

Reference 1: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 55
-Paragraph 52
-URI http://asc.fasb.org/extlink&oid=109256448&loc=d3e4984-109258

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=109260490&loc=d3e1252-109256

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 50
-Paragraph 1
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=6371337&loc=d3e3550-109257

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 220
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-04(23))
-URI http://asc.fasb.org/extlink&oid=114873765&loc=SL114874048-224260

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 11
-URI http://asc.fasb.org/extlink&oid=109234566&loc=d3e22694-107794

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 45
-Paragraph 7
-URI http://asc.fasb.org/extlink&oid=109260490&loc=d3e1337-109256

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SX 210.5-03(21))
-URI http://asc.fasb.org/extlink&oid=115205541&loc=SL114868664-224227

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 45
-Paragraph 60B
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=109260490&loc=SL5780133-109256

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 220
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-04(19))
-URI http://asc.fasb.org/extlink&oid=114873790&loc=SL114874131-224263

+ Details

- Definition

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

+ References + Details

Subsequent Event (Details) - Subsequent Event - Advent Key West, LLC (Landlord)	Feb. 01, 2019 USD ($)
Subsequent Event
Initial fixed monthly rental rate	$ 195,000
Increase in fixed monthly rental payments (as a percent)	2.00%
Required security deposit	$ 195,000