View Filing Data

Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2020

Property, Plant and Equipment [Abstract]

Property and equipment consists of the following (dollars in thousands):


	March 31, 2020		December 31, 2019
	(unaudited)
Lab equipment and furniture	$	11,538	$	11,053
Leasehold improvements	14,974		14,217
Software	2,225		2,225
Computer equipment	2,013		1,839
Construction-in-progress	431		433
	31,181		29,767
Less accumulated depreciation and amortization	(13,170)		(12,699)
Total	$	18,011	$	17,068

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets
Cash and cash equivalents	$ 225,767	$ 181,381
Marketable securities	175,104	165,692
Accounts receivable, net	119,195	87,332
Inventories, net	24,418	26,628
Prepaid expenses and other current assets	12,564	11,611
Total current assets	557,048	472,644
Long term marketable securities	534,712	591,773
Property and equipment, net	18,011	17,068
Intangible assets, net	23,579	24,840
Lease assets	21,911	21,279
Deferred income taxes	34,067	32,063
Other assets	538	615
Total assets	1,189,866	1,160,282
Current liabilities
Accounts payable	3,124	10,141
Accrued product returns and rebates	119,453	107,629
Accrued expenses and other current liabilities	33,003	37,130
Income taxes payable	9,097	2,443
Nonrecourse liability related to sale of future royalties, current portion	3,658	3,244
Total current liabilities	168,335	160,587
Convertible notes, net	349,232	345,170
Nonrecourse liability related to sale of future royalties, long term	18,369	19,248
Lease liabilities, long term	30,804	30,440
Other liabilities	9,743	9,409
Total liabilities	576,483	564,854
Stockholders’ equity
Common stock, $0.001 par value; 130,000,000 shares authorized; 52,537,159 and 52,533,348 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	53	53
Additional paid-in capital	392,430	388,410
Accumulated other comprehensive earnings (loss), net of tax	(166)	7,417
Retained earnings	221,066	199,548
Total stockholders’ equity	613,383	595,428
Total liabilities and stockholders’ equity	$ 1,189,866	$ 1,160,282

Condensed Consolidated Statements of Comprehensive Earnings - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement of Comprehensive Income [Abstract]
Net earnings	$ 21,518	$ 18,340
Other comprehensive (loss) earnings
Unrealized (loss) gain on marketable securities, net of tax	(7,583)	4,585
Other comprehensive (loss) earnings	(7,583)	4,585
Comprehensive earnings	$ 13,935	$ 22,925

- Definition

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

+ References + Details

Fair Value of Financial Instruments - Financial Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Fair value of financial instruments
Carrying Value	$ 349,232	$ 345,170
0.625% Convertible Senior Notes due 2023 \| Significant Other Observable Inputs (Level 2)
Fair value of financial instruments
Carrying Value	349,232	345,170
Fair Value	$ 328,038	$ 366,023

Subsequent Events (Details) - Subsequent Event $ in Millions	Apr. 28, 2020 USD ($) numberOfMarketProducts numberOfProductsCandidates	Apr. 21, 2020 USD ($)
USWM Enterprises, LLC
Subsequent Event [Line Items]
Consideration transferred	$ 530
Upfront cash payment	300
Additional cash payments upon milestone achievements	$ 230
Number of established marketed products \| numberOfMarketProducts	3
Number of product candidates \| numberOfProductsCandidates	1
Navitor \| Development Agreement
Subsequent Event [Line Items]
Payments to acquire Series D Preferred Shares		$ 15
Payment for option issue fee		10
Upfront cash payment		25
Threshold for development costs payments		50
Navitor \| Development Agreement \| Minimum
Subsequent Event [Line Items]
Total potential payments		410
Navitor \| Development Agreement \| Maximum
Subsequent Event [Line Items]
Total potential payments		$ 475
Navitor \| Development Agreement
Subsequent Event [Line Items]
Ownership percentage		13.00%

Organization and Business	3 Months Ended
Organization and Business	Mar. 31, 2020
Organization and Nature of Operations
Organization and Business	Organization and Business 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 the treatment of epilepsy. The Company is also developing multiple proprietary CNS product candidates to address significant unmet medical needs and market opportunities. The Company launched Oxtellar XR and Trokendi XR for the treatment of epilepsy in 2013, followed by the launch of Trokendi XR for the prophylaxis of migraine headache in adolescents and adults in 2017. The Company launched Oxtellar XR with an expanded indication to include monotherapy for partial seizures in January 2019. COVID-19 Impact The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business operations, and has assessed the impact of the COVID-19 pandemic on its condensed consolidated financial statements as of March 31, 2020. Since the situation surrounding the COVID-19 pandemic remains fluid, the long term duration, nature, and extent of the effects cannot be reasonably estimated at this time.

Property and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended
Property and Equipment (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Property and equipment
Property and equipment, gross	$ 31,181		$ 29,767
Less accumulated depreciation and amortization	(13,170)		(12,699)
Property and equipment, net	18,011		17,068
Depreciation and amortization expense	500	$ 400
Lab equipment and furniture
Property and equipment
Property and equipment, gross	11,538		11,053
Leasehold improvements
Property and equipment
Property and equipment, gross	14,974		14,217
Software
Property and equipment
Property and equipment, gross	2,225		2,225
Computer equipment
Property and equipment
Property and equipment, gross	2,013		1,839
Construction-in-progress
Property and equipment
Property and equipment, gross	$ 431		$ 433

Fair Value of Financial Instruments - Carrying Value (Details) - Recurring - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Quoted Prices in Active Markets for Identical Assets (Level 1)
Other noncurrent assets
Marketable securities - restricted (SERP)	$ 8	$ 3
Total assets at fair value	226,030	181,638
Significant Other Observable Inputs (Level 2)
Other noncurrent assets
Marketable securities - restricted (SERP)	334	415
Total assets at fair value	709,895	757,626
Total Fair Value
Other noncurrent assets
Marketable securities - restricted (SERP)	342	418
Total assets at fair value	935,925	939,264
Corporate debt securities \| Quoted Prices in Active Markets for Identical Assets (Level 1)
Marketable securities
Marketable securities	0	0
Long term marketable securities
Long term marketable securities	255	254
Corporate debt securities \| Significant Other Observable Inputs (Level 2)
Marketable securities
Marketable securities	174,939	165,527
Long term marketable securities
Long term marketable securities	524,428	571,574
Corporate debt securities \| Total Fair Value
Marketable securities
Marketable securities	174,939	165,527
Long term marketable securities
Long term marketable securities	524,683	571,828
Municipal debt securities \| Quoted Prices in Active Markets for Identical Assets (Level 1)
Marketable securities
Marketable securities	0	0
Municipal debt securities \| Significant Other Observable Inputs (Level 2)
Marketable securities
Marketable securities	165	165
Municipal debt securities \| Total Fair Value
Marketable securities
Marketable securities	165	165
U.S. government agency and municipal debt securities \| Quoted Prices in Active Markets for Identical Assets (Level 1)
Long term marketable securities
Long term marketable securities	0	0
U.S. government agency and municipal debt securities \| Significant Other Observable Inputs (Level 2)
Long term marketable securities
Long term marketable securities	10,029	19,945
U.S. government agency and municipal debt securities \| Total Fair Value
Long term marketable securities
Long term marketable securities	10,029	19,945
Cash \| Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Cash and cash equivalents	19,911	78,912
Cash \| Significant Other Observable Inputs (Level 2)
Assets:
Cash and cash equivalents	0	0
Cash \| Total Fair Value
Assets:
Cash and cash equivalents	19,911	78,912
Money market funds \| Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Cash and cash equivalents	205,856	102,469
Money market funds \| Significant Other Observable Inputs (Level 2)
Assets:
Cash and cash equivalents		0
Money market funds \| Total Fair Value
Assets:
Cash and cash equivalents	$ 205,856	$ 102,469

Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Tax Expense

The following table provides information regarding the Company’s income tax expense for the three months ended March 31, 2020 and 2019, (dollars in thousands):


	Three Months ended March 31,
	2020			2019
	(unaudited)
Income tax expense	$	7,516		$	5,899
Effective tax rate	25.9		%	24.3		%

The increases in income tax expense and the effective tax rate for the three months ended March 31, 2020, as compared to the same period in the prior year, are primarily attributable to higher income before taxes, increase in the number of states in which we owe taxes and an increase in non-deductible expenses.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the U.S. economy and fund a nationwide effort to curtail the effect of the COVID-19 pandemic. While the CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more significant provisions which are expected to impact the

Company’s financial statements include removal of certain limitations on utilization of net operating losses and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act.

As of March 31, 2020, the Company expects that these provisions will not have a material impact as the Company does not have net operating losses that would fall under these provisions and does not expect interest expense to be limited. The ultimate impact of the CARES Act may differ from this estimate due to changes in interpretations and assumptions, guidance that may be issued and actions the Company may take in response to the CARES Act. The CARES Act is highly detailed and the Company will continue to assess the impact that various provisions will have on its business.

Accounts Receivable (Details) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Receivables [Abstract]
Allowance for expected sales discounts and allowances	$ 10.3	$ 11.0

Convertible Senior Notes Due 2023 - Narrative (Details)	1 Months Ended	3 Months Ended	12 Months Ended
Convertible Senior Notes Due 2023 - Narrative (Details)	Mar. 31, 2018 USD ($) $ / shares shares	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Sep. 30, 2018 $ / shares
Notes payable
Strike price of the warrant transactions (in dollars per share) \| $ / shares	$ 80.9063			$ 80.9063
2023 Notes
Notes payable
Interest rate	0.625%
Effective interest rate	5.41%
2023 Notes \| $	$ 402,500,000	$ 402,500,000	$ 402,500,000
Conversion rate for the notes (in shares per $1,000 principal amount)	0.0168545
Conversion price, per share of common stock (in dollars per share) \| $ / shares	$ 59.33			$ 59.33
Convertible note hedge options issued (in shares)	402,500
Common stock issued upon conversion of notes (in shares)	6,800,000
Warrants issued (in shares)	6,783,939
Number of shares per warrant entitled to holder (in shares)	1
Conversion of debt to equity \| $		$ 0	$ 0

Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Payables and Accruals [Abstract]
Accrued clinical trial costs	$ 11,224	$ 13,285
Accrued compensation	9,549	11,223
Accrued professional fees	4,706	3,936
Lease liabilities, current	3,456	2,825
Other accrued expenses	4,068	5,861
Total	$ 33,003	$ 37,130

Commitments and Contingencies	3 Months Ended
Commitments and Contingencies	Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies Product Licenses The Company has obtained exclusive licenses from third parties for proprietary rights to support the product candidates in the Company’s neurology and psychiatry portfolio. Under these license agreements, the Company may be required to pay certain amounts upon the achievement of defined milestones. If these products are ultimately commercialized, the Company is also obligated to pay royalties to third parties, as percentage of net product sales, for each respective product under a license agreement. Royalty Agreement In the third quarter of 2014, the Company received $30.0 million 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. Full ownership of the royalty rights will revert to the Company if and when a certain cumulative payment threshold is reached, per the terms of the agreement (see Note 2, Note 3 and Note 16).

Summary of Significant Accounting Policies - Advertising Expense (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Selling, general and administrative
Advertising Expense
Advertising costs	$ 11.6	$ 9.9

Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Raw materials	$ 4,331	$ 4,582
Work in process	8,221	11,428
Finished goods	11,866	10,618
Total inventories	$ 24,418	$ 26,628

Other Income (Expense)

3 Months Ended

Mar. 31, 2020

Other Income and Expenses [Abstract]

Other Income (Expense)

Other income (expense) consist of the following (dollars in thousands):


	Three Months ended March 31,
	2020		2019
	(unaudited)
Interest income	$	5,777	$	4,681
Interest expense	(4,693)		(4,710)
Interest expense on nonrecourse liability related to sale of future royalties	(1,062)		(1,160)

Total	$	22	$	(1,189)

Interest expense includes noncash interest expense related to amortization of deferred financing costs and amortization of the debt discount on the 2023 Notes of $4.1 million and $3.8 million for the three months ended March 31, 2020 and 2019, respectively.

Fair Value of Financial Instruments - Unrestricted Marketable Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Fair Value Disclosures [Abstract]
Amortized cost	$ 710,072	$ 747,598
Gross unrealized gains	5,362	10,031
Gross unrealized losses	(5,618)	(164)
Total fair value	$ 709,816	$ 757,465

Share-Based Payments - Share-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based payments
Share-based compensation expense	$ 3,988	$ 3,287
Research and development
Share-based payments
Share-based compensation expense	681	574
Selling, general and administrative
Share-based payments
Share-based compensation expense	$ 3,307	$ 2,713

Share-Based Payments - Activity (Details) - Stock option and Stock Appreciation Rights - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Number of Options and SAR
Outstanding at the beginning of the period (in shares)	4,606,559
Granted (in shares)	1,105,925
Exercised (in shares)	(3,811)
Forfeited (in shares)	(25,275)
Outstanding at the end of the period (in shares)	5,683,398	4,606,559
Vested and expected to vest (in shares)	5,683,398	4,606,559
Exercisable (in shares)	3,394,315	2,598,112
Weighted- Average Exercise Price (per share)
Outstanding at the beginning of the period (in dollars per share)	$ 23.05
Granted (in dollars per share)	23.99
Exercised (in dollars per share)	8.33
Forfeited (in dollars per share)	28.12
Outstanding at the end of the period (in dollars per share)	23.22	$ 23.05
Vested and expected to vest (in dollars per share)	23.22	23.05
Exercisable (in dollars per share)	$ 18.71	$ 15.68
Weighted- Average Remaining Contractual Term (in years)
Outstanding at the end of the period	7 years 29 days	6 years 7 months 28 days
Vested and expected to vest	7 years 29 days	6 years 7 months 28 days
Exercisable	5 years 9 months	5 years 5 months 23 days

Disaggregated Revenues (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenue Recognition
Non-cash royalty revenue	$ 1,567	$ 1,576
Net product sales	(94,976)	(85,474)
Net earnings	(21,518)	(18,340)
Trokendi XR
Revenue Recognition
Net product sales	(68,551)	$ (63,693)
Trokendi XR \| Sales Returns
Revenue Recognition
Provision for product returns	8,000
Net product sales	8,000
Net earnings	$ 5,900
Earnings per basic and diluted share (in dollars per share)	$ 0.11
Revenues \| Customer Concentration Risk \| Trokendi XR
Revenue Recognition
Concentration risk percentage (more than)	74.00%	77.00%

Leases - Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended
Leases - Lease Costs (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019
Operating leases cost
Fixed lease cost	$ 1,497	$ 1,032
Variable lease cost	627	465
Total operating lease cost	$ 2,124	$ 1,497

Commitments and Contingencies (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2014
Commitments and Contingencies Disclosure [Abstract]
Nonrecourse liability related to sale of future royalties, long term	$ 18,369	$ 19,248	$ 30,000

Inventories

3 Months Ended

Mar. 31, 2020

Inventory Disclosure [Abstract]

Inventories

Inventories consist of the following (dollars in thousands):


	March 31, 2020		December 31, 2019
	(unaudited)
Raw materials	$	4,331	$	4,582
Work in process	8,221		11,428
Finished goods	11,866		10,618
Total	$	24,418	$	26,628

As of March 31, 2020 and December 31, 2019, the Company did not capitalize any pre-launch inventory costs.

Fair Value of Financial Instruments - Narrative (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Fair value of financial instruments
Impairment due to credit losses	$ 0
Recurring \| Fair Value (Level 3)
Fair value of financial instruments
Total assets at fair value	$ 0	$ 0

Share-Based Payments

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Share-Based Payments

Share-based compensation expense is as follows (dollars in thousands):


	Three Months ended March 31,
	2020		2019
	(unaudited)
Research and development	$	681	$	574
Selling, general and administrative	3,307		2,713
Total	$	3,988	$	3,287

Stock Option and Stock Appreciation Rights

The following table summarizes stock option and stock appreciation rights (SAR) activities:


	Number of Options	Weighted- Average Exercise Price (per share)		Weighted- Average Remaining Contractual Term (in years)
Outstanding, December 31, 2019	4,606,559	$	23.05	6.66
Granted	1,105,925	$	23.99
Exercised	(3,811)	$	8.33
Forfeited	(25,275)	$	28.12
Outstanding, March 31, 2020 (unaudited)	5,683,398	$	23.22	7.08

As of December 31, 2019:
Vested and expected to vest	4,606,559	$	23.05	6.66
Exercisable	2,598,112	$	15.68	5.48

As of March 31, 2020:
Vested and expected to vest	5,683,398	$	23.22	7.08
Exercisable	3,394,315	$	18.71	5.75

Restricted Stock Units

During the three months ended March 31, 2020, the Company granted 26,055 RSUs with a weighted average grant date fair value per share of $23.99, which generally vest one year from the date of grant.

Performance Stock Units

Performance-Based Awards

During the three months ended March 31, 2020, the Company granted 15,625 performance-based awards, with a weighted average grant date fair value per share of $23.99, which require certain performance targets to be achieved in order for these awards to vest. Vesting is subject to continued service requirements through the date that the achievement of the performance target is certified.

Market-Based Awards

During the three months ended March 31, 2020, the Company granted 15,625 market-based awards, with a weighted average grant date fair value per share of $23.41, which are subject to market-based performance targets in order for these awards to vest.

Accrued Expenses and Other Current Liabilities

3 Months Ended

Mar. 31, 2020

Payables and Accruals [Abstract]

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (dollars in thousands):


	March 31, 2020		December 31, 2019
	(unaudited)
Accrued clinical trial costs⁽¹⁾	$	11,224	$	13,285
Accrued compensation	9,549		11,223
Accrued professional fees	4,706		3,936
Lease liabilities, current	3,456		2,825
Other accrued expenses	4,068		5,861
Total	$	33,003	$	37,130

_____________________________________________________________________

⁽¹⁾ Includes preclinical and all clinical trial-related costs.

Earnings per Share

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Earnings per Share

Basic earnings per share (EPS) is calculated using the weighted-average number of common shares outstanding. Diluted EPS is calculated using the weighted-average number of common shares outstanding, including the dilutive effect of the Company’s stock option grants, SARs, RSUs, PSUs, warrants, employee stock purchase plan (ESPP) awards and the 2023 Notes, as determined per the treasury stock method.

Effect of Convertible Notes and Related Convertible Note Hedges and Warrants

In connection with the issuance of the 2023 Notes, the Company entered into Convertible Note Hedge and Warrant Transactions as described further in Note 5, Convertible Senior Notes Due 2023. The expected collective impact of the Convertible Note Hedge and Warrant Transactions is to reduce the potential dilution that may occur between the conversion price of $59.33 per share and the strike price of the warrants of $80.9063 per share.

The 2023 Notes and related Convertible Note Hedge and Warrant Transactions are excluded in the calculation of diluted EPS because inclusion would be anti-dilutive. Specifically, the denominator of the diluted EPS calculation excludes the additional shares related to the 2023 Notes and warrants, because the average price of the Company's common stock was less than the conversion price of the 2023 Notes of $59.33 per share, as well as less than the strike price of the warrants of $80.9063 per share. Prior to actual conversion, the Convertible Note Hedge Transactions are not considered in calculating diluted earnings per share, as their impact would be anti-dilutive.

In addition to the above described effect of the 2023 Notes and the related Convertible Note Hedge and Warrant Transactions, the Company also excluded the common stock equivalents of the following outstanding stock-based awards in the calculation of diluted EPS, because their inclusion would be anti-dilutive:


	Three Months ended March 31,
	2020	2019
	(unaudited)



Stock options, RSUs, PSUs	3,034,099	608,948

The following table sets forth the computation of basic and diluted net earnings per share for the three months ended March 31, 2020 and 2019 (dollars in thousands, except share and per share amounts):


	Three Months ended March 31,
	2020		2019
	(unaudited)
Numerator, dollars in thousands:
Net earnings	$	21,518	$	18,340

Denominator:
Weighted average shares outstanding, basic	52,534,787		52,336,443

Effect of dilutive securities:
Stock options, PSU, RSU and SAR	1,046,264		1,648,942
Weighted average shares outstanding, diluted	53,581,051		53,985,385

Earnings per share, basic	$	0.41	$	0.35
Earnings per share, diluted	$	0.40	$	0.34

Convertible Senior Notes Due 2023 - Summary of liability component of 2023 Notes (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2018
Debt Instrument [Line Items]
Total carrying value	$ 349,232,000	$ 345,170,000
2023 Notes
Debt Instrument [Line Items]
2023 Notes	402,500,000	402,500,000	$ 402,500,000
Unamortized debt discount and deferred financing costs	(53,268,000)	(57,330,000)
Total carrying value	$ 349,232,000	$ 345,170,000

Other Income (Expense) (Tables)

3 Months Ended

Mar. 31, 2020

Other Income and Expenses [Abstract]

Schedule of other income (expense)

Other income (expense) consist of the following (dollars in thousands):


	Three Months ended March 31,
	2020		2019
	(unaudited)
Interest income	$	5,777	$	4,681
Interest expense	(4,693)		(4,710)
Interest expense on nonrecourse liability related to sale of future royalties	(1,062)		(1,160)

Total	$	22	$	(1,189)

Inventories (Tables)

3 Months Ended

Mar. 31, 2020

Inventory Disclosure [Abstract]

Schedule of inventories

Inventories consist of the following (dollars in thousands):


	March 31, 2020		December 31, 2019
	(unaudited)
Raw materials	$	4,331	$	4,582
Work in process	8,221		11,428
Finished goods	11,866		10,618
Total	$	24,418	$	26,628

Summary of Significant Accounting Policies - Basis of Presentation (Details)	3 Months Ended
	Mar. 31, 2020 segment
Accounting Policies [Abstract]
Number of operating segments	1

Cover Page - shares	3 Months Ended
Cover Page - shares	Mar. 31, 2020	Apr. 29, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2020
Document Transition Report	false
Entity File Number	001-35518
Entity Registrant Name	SUPERNUS PHARMACEUTICALS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-2590184
Entity Address, Address Line One	9715 Key West Avenue
Entity Address, City or Town	Rockville
Entity Address, State or Province	MD
Entity Address, Postal Zip Code	20850
City Area Code	301
Local Phone Number	838-2500
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Title of 12(b) Security	Common Stock, $0.001 par value per share
Entity Common Stock, Shares Outstanding		52,538,659
Trading Symbol	SUPN
Security Exchange Name	NASDAQ
Entity Central Index Key	0001356576
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1

Earnings per Share (Tables)

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

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


	Three Months ended March 31,
	2020	2019
	(unaudited)



Stock options, RSUs, PSUs	3,034,099	608,948

Schedule of computation of basic and diluted earnings per share


	Three Months ended March 31,
	2020		2019
	(unaudited)
Numerator, dollars in thousands:
Net earnings	$	21,518	$	18,340

Denominator:
Weighted average shares outstanding, basic	52,534,787		52,336,443

Effect of dilutive securities:
Stock options, PSU, RSU and SAR	1,046,264		1,648,942
Weighted average shares outstanding, diluted	53,581,051		53,985,385

Earnings per share, basic	$	0.41	$	0.35
Earnings per share, diluted	$	0.40	$	0.34

Intangible Assets

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Intangible AssetsIntangible assets consist of patent defense costs, which are deferred legal fees incurred in conjunction with defending patents for Oxtellar XR and Trokendi XR. The Company amortizes these 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 (dollars in thousands):


	Weighted- Average Life (Years)	March 31, 2020		December 31, 2019
	(unaudited)
Capitalized patent defense costs	2.76 - 7.01 years	$	43,375	$	43,375
Less accumulated amortization		(19,796)		(18,535)
Total		$	23,579	$	24,840

U.S. patents covering Oxtellar XR and Trokendi XR will expire no earlier than 2027. As regards Trokendi XR, the Company entered into settlement agreements that allow third parties to enter the market by January 1, 2023, or earlier under certain circumstances. Amortization expense on intangible assets was approximately $1.3 million for both three month periods ended March 31, 2020 and 2019, respectively.

As of March 31, 2020, there were no identified indicators of impairment.

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock shares authorized (in shares)	130,000,000	130,000,000
Common stock shares issued (in shares)	52,537,159	52,533,348
Common stock shares outstanding (in shares)	52,537,159	52,533,348

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities
Net earnings	$ 21,518	$ 18,340
Adjustments to reconcile net earnings to net cash provided by operating activities:
Share-based compensation expense	3,988	3,287
Depreciation and amortization	1,732	1,679
Amortization of premium/discount on marketable securities	(451)	(1,102)
Amortization of deferred financing costs and debt discount	4,061	3,848
Noncash interest expense	1,366	1,437
Noncash royalty revenue	(1,567)	(1,576)
Noncash operating lease cost	991	879
Deferred income tax benefit	538	279
Changes in operating assets and liabilities:
Accounts receivable	(31,823)	23,013
Inventories	2,210	(859)
Prepaid expenses and other current assets	(454)	(1,799)
Other noncurrent assets	0	(196)
Accounts payable	(7,017)	4,045
Accrued product returns and rebates	11,824	(18,863)
Accrued expenses and other current liabilities	(3,634)	(3,177)
Income taxes payable	6,654	4,856
Other liabilities	(1,020)	(1,098)
Net cash provided by operating activities	8,916	32,993
Cash flows from investing activities
Purchases of marketable securities	(15,382)	(150,167)
Sales and maturities of marketable securities	53,357	47,143
Purchases of property and equipment	(2,537)	(221)
Deferred legal fees	0	(1)
Net cash provided by (used in) investing activities	35,438	(103,246)
Cash flows from financing activities
Proceeds from issuance of common stock	32	783
Net cash provided by financing activities	32	783
Net change in cash and cash equivalents	44,386	(69,470)
Cash and cash equivalents at beginning of year	181,381	192,248
Cash and cash equivalents at end of period	225,767	122,778
Supplemental cash flow information
Cash paid for interest on convertible notes	1,258	1,258
Income taxes paid	324	800
Noncash investing and financing activities
Deferred legal fees and fixed assets included in accounts payable and accrued expenses	708	250
Property and equipment additions from utilization of tenant improvement allowance	$ 0	$ 282

Accrued Product Returns and Rebates (Tables)

3 Months Ended

Mar. 31, 2020

Accrued Product Returns and Rebates

Schedule of accrued product returns and rebates

Accrued product returns and rebates consist of the following (dollars in thousands):


	March 31, 2020		December 31, 2019
	(unaudited)
Accrued product rebates	$	94,612	$	88,811
Accrued product returns	24,841		18,818
Total	$	119,453	$	107,629

Subsequent Events	3 Months Ended
Subsequent Events	Mar. 31, 2020
Subsequent Events [Abstract]
Subsequent Events	Subsequent Events Joint Development and Option Agreement with Navitor On April 21, 2020, the Company entered into a Development and Option Agreement (Development Agreement) with Navitor Pharmaceuticals, Inc. (Navitor). Under the terms of the Development Agreement, the Company and Navitor will jointly conduct a Phase II clinical program for NV-5138 in treatment-resistant depression. In addition, Navitor has granted the Company an exclusive option to license or acquire NV-5138 in all world territories, excluding Greater China, prior to initiation of a Phase III clinical program. In consideration of the rights granted under the Development Agreement, the Company will acquire Series D Preferred Shares of Navitor for $15 million, representing approximately 13% ownership in Navitor. In addition, the Company will pay to Navitor a one time, non-refundable and non-creditable option issue fee of $10 million. Total payments, exclusive of royalty payments on net sales of NV-5138 and development costs under the Development Agreement, have the potential to reach $410 million to $475 million, which include the upfront cash payment of $25 million described above, an additional license or acquisition fee depending on whether the Company ultimately licenses or acquires NV-5138, and subsequent clinical, regulatory and sales milestone payments. The Company will bear all development costs incurred by either the Company or Navitor up to a maximum of $50 million. The Development Agreement provides Navitor an option to request that the Company pay certain development costs in excess of $50 million once expenses reach this threshold and grants the Company a right of first refusal to negotiate for rights to develop and commercialize any composition of matter that has a similar mechanism of action as NV-5138. CNS Portfolio Acquisition from US WorldMeds On April 28, 2020, the Company entered into a definitive Sales and Purchase Agreement with US WorldMeds Partners, LLC, pursuant to which the Company will purchase all of the outstanding equity of USWM Enterprises, LLC (USWM Enterprises), comprising the entire issued share capital of USWM Enterprises, for total consideration of $530 million, consisting of an upfront cash payment of $300 million and additional cash payments of up to $230 million upon the achievement of certain commercial milestones. With the acquisition, the Company will add three established, marketed products and one product candidate in late-stage development to its CNS portfolio. The transaction is expected to close in the second quarter of 2020, subject to certain conditions, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions. Paragraph IV Filing for Oxtellar XR On May 14, 2020, the Company received a Paragraph IV Notice Letter from Apotex Inc. and Apotex Corp advising Supernus of the submission by Apotex of an Abbreviated New Drug Application to the U.S. Food and Drug Administration (FDA) seeking approval for oxcarbazepine extended-release tablets. The Company is currently reviewing the details of this Notice Letter and intends to vigorously enforce its intellectual property rights relating to Oxtellar XR.

Leases (Tables)

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Schedule of balance sheet information related to leases

Supplemental balance sheet information related to leases is as follows (dollars in thousands):


	March 31, 2020			December 31, 2019
	(unaudited)
Assets
Lease assets	$	21,911		$	21,279

Liabilities
Accrued expenses and other current liabilities
Lease liabilities, current	$	3,456		$	2,825
Non-current
Lease liabilities, long term	30,804			30,440
Total lease liabilities	$	34,260		$	33,265

Weighted-average remaining lease term (years)	12.1			12.5
Weighted-average discount rate	4.3		%	4.4		%

Schedule of lease costs and supplemental cash flow information

Operating lease costs are as follows (dollars in thousands):


	Three Months ended March 31,
	2020		2019
	(unaudited)
Fixed lease cost	$	1,497	$	1,032
Variable lease cost	627		465
Total operating lease cost	$	2,124	$	1,497

Supplemental cash flow information related to leases is as follows (dollars in thousands):


	Three Months ended March 31,
	2020		2019
	(unaudited)
Cash paid for operating leases	$	1,261	$	1,313
Lease assets and tenant receivables obtained for new operating leases	$	1,715	$	17,136

Schedule of maturities of operating lease liabilities

Future minimum lease payments under noncancellable operating leases, as of March 31, 2020, are as follows (dollars in thousands, unaudited):


2020 (remaining)	$	3,672
2021	4,760
2022	4,226
2023	2,537
2024	2,587
Thereafter	26,784
Total future minimum lease payments	$	44,566
Less: Imputed interest ⁽¹⁾	(10,306)
Present value of lease liabilities	$	34,260

________________________________________________________________

⁽¹⁾Calculated using the interest rate for each lease.

Accounts Receivable	3 Months Ended
Accounts Receivable	Mar. 31, 2020
Receivables [Abstract]
Accounts Receivable	Accounts ReceivableAs of March 31, 2020 and December 31, 2019, the Company recorded allowances of approximately $10.3 million and $11.0 million, respectively, for prompt pay discounts and contractual service fees paid to the Company’s customers.

Summary of Significant Accounting Policies (Policies)	3 Months Ended
Summary of Significant Accounting Policies (Policies)	Mar. 31, 2020
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation The Company’s condensed consolidated financial statements include the accounts of: Supernus Pharmaceuticals, Inc.; Supernus Europe Ltd.; Biscayne Neurotherapeutics, Inc.; and Biscayne Neurotherapeutics Australia Pty Ltd. These are collectively referred to herein as “Supernus” or “the Company.” All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission (SEC) for interim financial information. As permitted under Generally Accepted Accounting Principles in the United States (U.S. GAAP), certain notes and other information have been omitted from the interim unaudited condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company’s most recent Annual Report on Form 10-K, for the year ended December 31, 2019, filed with the SEC. In management’s opinion, the condensed consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows. The results of operations for any interim period are not necessarily indicative of the Company’s future quarterly or annual results. The Company, which is primarily located in the United States (U.S.), operates in one operating segment.
Use of Estimates	Use of Estimates The Company bases its estimates on: historical experience; various forecasts; information received from its service providers; information from other sources; and other assumptions that the Company believes are reasonable under the circumstances. Actual results could differ materially from the Company’s estimates. The Company evaluates the methodologies employed in making its estimates on an ongoing basis.
Inventories	Inventories Inventories, which are recorded at the lower of cost or net realizable value, include materials, labor, direct costs and indirect costs. These are valued using the first-in, first-out method. The Company writes down inventory that has become obsolete, or has a cost basis in excess of its expected net realizable value. Expired inventory is disposed of, and the related costs are recognized as Cost of goods sold in the condensed consolidated statement of earnings. Inventories Produced in Preparation of Product Launches The Company capitalizes inventories produced in preparation for product launches when future commercialization of a product is probable and when future economic benefit is expected to be realized. The determination to capitalize is based on the particular facts and circumstances relating to the product. Capitalization of such inventory begins when the Company determines that (i) positive results have been obtained for the clinical trials that are necessary to support regulatory approval; (ii) uncertainties regarding regulatory approval have been significantly reduced; and (iii) it is probable that these capitalized costs will provide future economic benefit in excess of capitalized costs. In evaluating whether these conditions are met, the Company considers the following factors: the product candidate’s current status in the regulatory approval process; results from the related pivotal clinical trials; results from meetings with relevant regulatory agencies prior to the filing of regulatory applications; compilation of the regulatory applications; consequent acceptance by the regulatory body; potential impediments to the approval process, such as product safety or efficacy concerns, potential labeling restrictions, and other impediments; historical experience with manufacturing and commercializing similar products as well as the relevant product candidate; and the resilience of the Company’s manufacturing environment, including its supply chain, in determining logistical constraints that could hamper approval or commercialization. In assessing the economic benefit that the Company is likely to realize, the Company considers: the shelf life of the product in relation to the expected timeline for approval; patent related or contract issues that may prevent or delay commercialization; product stability data of all pre-approval production to determine whether there is adequate expected shelf life; viability of commercialization, taking into account competitive dynamics in the marketplace and market acceptance; anticipated future sales; and anticipated reimbursement strategies that may prevail with respect to the product, if approved. In applying the lower of cost or net realizable value to pre-launch inventory, the Company estimates a range of likely commercial prices based on comparable commercial products and pre-launch discussions with managed care providers. The Company could be required to write down previously capitalized costs related to pre-launch inventories upon a change in such judgment(s), due to, among other potential factors, a denial or significant delay of approval by regulatory bodies, a delay in commercialization, or other adverse factors.
Revenue Recognition	Revenue from Product Sales The Company’s customers, who are primarily pharmaceutical wholesalers and distributors, purchase product to fulfill orders from retail pharmacy chains and independent pharmacies of varying size and purchasing power. The Company recognizes gross revenue when its products are physically received by its customers, upon shipment from a third party fulfillment center. Customers take control of our products, including title and ownership, upon physical receipt of our products at the customers' facilities. Customer orders are generally fulfilled within a few days of receipt, resulting in minimal order backlog. The Company does not adjust revenue for any financing effects, in transactions where the Company expects the period between the transfer of the goods or services and collection to be less than one year. There are no minimum product purchase requirements with customers. The Company recognizes revenue from product sales in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Product sales are recorded net of various forms of variable consideration, including: provision for estimated rebates; provision for estimated future product returns; and an estimated allowance for discounts. These are collectively considered "sales deductions." As described below, variability in the net transaction price for the Company’s products arises primarily from the aforementioned sales deductions. Variable consideration on product sales is only recognized when it is probable that a significant reversal will not occur. Significant judgment is required in estimating certain sales deductions. In making these estimates, the Company considers: historical experience; product price increases; current contractual arrangements under applicable payor programs; unbilled claims; processing time lags; and inventory levels in the wholesale and retail distribution channel. The Company adjusts its estimates of revenue either 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 our estimates, the Company adjusts these estimates. These adjustments could materially affect net product sales and earnings in the period that such adjustments are recorded. Sales Deductions The Company records product sales net of the following sales deductions: •Rebates: Rebates are discounts which the Company pays under either public sector or private sector health care programs. Public sector rebate programs encompass: various Medicaid drug rebate programs; Medicare gap coverage programs; programs covering public health service institutions; and government entities. All federal employees and agencies purchase drugs under the Federal Supply Schedule. 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 be obligated to pay to their managed care provider in order to fill their prescription. 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. Both types of rebates vary over time. Rebates are owed upon dispensing our product to a patient; i.e., filling a prescription. The accrual balance for rebates consists of the following 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 an estimate for known or estimated prior quarters’ unpaid rebates, to cover prescriptions dispensed in past quarters, but for which no invoice has yet been received. Third, the accrual balance includes an estimate for rebates that will be prospectively owed, for prescriptions filled in future quarters. This pertains to product that has been sold by the Company to wholesalers or distributors, and which resides either as wholesaler/distributor inventory or as inventory held at pharmacies, but as of the end of the reporting period, this product has not been dispensed to a patient. The Company’s estimates of expected rebate claims vary by program and by type of customer, because the period from the date at which the prescription is filled and the date at which the Company receives and pays the invoice varies substantially. For each of its products, the Company bases its estimates of expected rebate claims on 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 contracts; prospective changes in co-pay assistance programs; and anticipated changes in program utilization rates i.e., patient participation rates under each specific program. 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), and records this liability as a reduction to gross product sales. This liability is recorded as an increase in Accrued product returns and rebates, in current liabilities on our condensed consolidated balance sheets. The sensitivity of the Company’s estimates varies by program and by type of customer. If actual rebates vary from estimated amounts, the Company will adjust the balances of such accrued rebates to reflect actual experience with respect to these programs. These adjustments could materially affect the estimated liability balance, net product sales and earnings in the period in which the adjustment(s) is made. •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 return of product that is damaged or defective when shipped from its third party fulfillment center. 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 is therefore destroyed. 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. This liability is recorded as an increase in Accrued product returns and rebates, in current liabilities on our condensed consolidated balance sheets. The Company estimates the liability for returns based primarily on the actual returns experience for its two commercial products. Because the Company’s products have a shelf life of 48 months from date of manufacture, and because the Company accepts return of product up to 12 months post expiry, there is a significant time lag of several years between the time when the product is sold and the time when the Company issues credit on expired product. The Company’s returns policy generally permits product returns to be processed at current wholesaler price rather than at historical acquisition price. Hence, the Company’s estimated liability for product returns is affected by price increases taken subsequent to the date of sale. When the Company adjusts its estimates for product returns, the adjustment affects the estimated liability, product sales and earnings in the period of adjustment. Those adjustments may be material to our financial results. •Sales discounts: Distributors and wholesalers of the Company's pharmaceutical products are generally offered various forms of consideration, including allowances, service fees and prompt payment discounts for distributing our 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, distributors and wholesalers 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 discounts as a valuation allowance against Accounts receivable on the condensed consolidated balance sheets. License Revenues License and Collaboration Agreements The Company has entered into collaboration agreements to facilitate commercialization of both Oxtellar XR and Trokendi XR outside of the U.S. Those agreements include the right to use the Company’s intellectual property as a functional license, and generally include an up-front license fee and ongoing milestone payments upon the achievement of certain specific events. These agreements may also require minimum royalty payments based on sales of products which use the applicable intellectual property. Up-front license fees are recognized once the license has been executed between the Company and its licensee. Milestones are a form of variable consideration that are recognized when either the underlying events have transpired (i.e., event-based milestone) or when the sales-based targets have been met by the collaborative partner (i.e., sales-based milestone). Both types of milestone payments are nonrefundable. The Company estimates the amount of the milestone to be included in the transaction price by using the most likely amount method. The Company includes in the transaction price some or all of the amount of variable consideration (i.e., the value of the associated milestone), but includes this only to the extent that it is probable that a significant revenue reversal will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Assessing whether it is probable that a significant revenue reversal will not occur once the uncertainty related to the variable consideration is subsequently resolved requires management judgment, and may require assessing factors that are outside of the Company’s influence, such as: likelihood of regulatory success; availability of third party information; and expected time period until achievement of the event. These factors are evaluated based on the specific facts and circumstances. Event-based milestones are recognized in the period that the related event, such as regulatory approval, occurs. Sales-based milestones are recognized as revenue only when the sales-based target is achieved. There are no guaranteed minimum amounts owed to the Company related to license and collaboration agreements. Royalty Revenues The Company recognizes noncash royalty revenue for amounts earned pursuant to its royalty agreement with United Therapeutics Corporation (United Therapeutics), based on estimated product sales by United Therapeutics (see Note 3). This agreement includes 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 17, Commitments and Contingencies). Sales of Orenitram by United Therapeutics result in payments made by United Therapeutics to HC Royalty, in accordance with these agreements. Consequent to this agreement, the Company recorded a nonrecourse liability related to this transaction, and amortizes this amount as noncash royalty revenue. The Company also recognizes noncash interest expense related to this liability, and accrues interest expense at an effective interest rate (see Note 16). The interest rate is determined based on projections of HC Royalty’s rate of return. Royalty revenue also includes cash royalty amounts received from collaboration partners, including from Shire Plc (Shire, a subsidiary of Takeda Pharmaceutical Company Ltd), based on net product sales in the current period of Shire’s product, Mydayis. Royalty revenue is only recognized when the underlying product sale by Shire occurs. The Shire arrangement also includes Shire's right to use the Company’s intellectual property as a functional license. There are no guaranteed minimum amounts owed to the Company related to any of these royalty revenue agreements.
Research and Development Expense and Related Accrued Research and Development Expenses	Research and Development Expense and Related Accrued Research and Development Expenses Research and development expenditures are expensed as incurred. These expenses include: salaries, benefits and share-based compensation; contract research and development services provided by third parties; costs for conducting preclinical and clinical studies; cost of acquiring or manufacturing clinical trial materials; regulatory costs; facilities costs; depreciation expense and other allocated expenses; and license fees and milestone payments related to in-licensed products and technologies. Assets acquired that are used for research and development and that have no future alternative use are expensed as in-process research and development. The Company estimates preclinical and clinical trial expenses based on services performed pursuant to contracts with research institutions, clinical investigators, clinical research organizations (CROs) and other service providers that provide services on the Company’s behalf. In recording service fees, the Company estimates the cost of those services which have been performed on behalf of the Company during the current period, and compares those costs with the cumulative expenses recorded and cumulative payments made for such services. As appropriate, the Company accrues additional service fees, or defers nonrefundable 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 adjusts its accrued expenses, or its deferred advance payments, accordingly. If the Company subsequently determines that it no longer expects the services associated with a nonrefundable advance payment to be rendered, the remaining portion of that advance payment is charged to expense in the period in which such a determination is made.
Marketable Securities	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 governmental, 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 condensed consolidated statement of comprehensive earnings. Realized gains and losses are included in interest income, and are determined using the specific identification method for determining the cost of securities sold. The Company adopted Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326) on January 1, 2020, using the allowance approach. Declines in fair value below amortized cost related to credit losses (i.e., impairment due to credit losses), if any, are included in the condensed consolidated statement of earnings. A corresponding allowance is established. If the estimate of expected credit losses decreases in subsequent periods, the Company will reverse the credit losses through current period earnings, and adjust accordingly the allowance (see Note 2 - Recently Issued Accounting Pronouncements).
Share-Based Compensation	Share-Based Compensation Stock Options The Company recognizes share-based compensation expense over the service period using the straight-line method. Employee share-based compensation for stock options is measured based on estimated fair value as of the grant date, using the Black-Scholes option-pricing model, in calculating the fair value of option grants as of the grant date. The Company uses the following assumptions for estimating fair value of option grants: Fair Value of Common Stock—The fair value of common stock underlying the option grants is determined based on observable market prices of the Company’s common stock. Expected Volatility—Volatility is a measure of the amount by which the Company’s share price has historically fluctuated or is expected to fluctuate (i.e., expected volatility) during a period. Beginning in the first quarter of 2019, the Company began using the historical volatility of its common stock to measure expected volatility. Prior to the first quarter of 2019, volatility was estimated using the observed volatility of the common stock of several public entities of similar size, complexity, and stage of development, as well as taking into consideration the Company’s actual volatility since the Company’s IPO in 2012. 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 during which options are expected to remain unexercised. Options have a maximum contractual term of ten years. Beginning in the first quarter of 2019, the Company began estimating the average expected life of stock options using its historical experience. Prior to the first quarter of 2019, the Company determined 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. Risk-Free Interest Rate—This is the observed U.S. Treasury Note rate, as of the week each option grant is issued, with a term that most closely resembles the expected term of the option. Expected Forfeiture Rate—Forfeitures are accounted for as they occur. Restricted Stock Units (RSUs) Compensation expense is recorded based on amortizing the fair market value as of the date of the grant over the implied service period. RSUs generally vest one year from the date of grant and are subject to continued service requirements. Performance Stock Units (PSUs) Performance-Based Awards Compensation expense for performance-based awards is recognized based on amortizing the fair market value as of the grant date over the periods during which the achievement of the performance is probable. Performance-based PSU awards require certain performance targets to be achieved in order for these awards to vest. These awards vest on the date of achievement of the performance target. Market-Based Awards Compensation expense for market-based awards is recognized on a straight-line basis over the requisite service period, regardless of whether the market condition is satisfied. Market-based PSU awards subject to market-based performance targets require achievement of the performance target in order for these units to vest. The Company estimates fair value as of the grant date and expected term using a Monte Carlo simulation that incorporates option-pricing inputs covering the period from the grant date through the end of the derived requisite service period. The expected volatility as of grant date is estimated based historical daily volatility of the Company's common stock over the expected term of the award. The risk-free interest rate is based on the U.S. Treasury Note rate, as of the week the award is issued, with a term that most closely resembles the expected term of the award.
Advertising Expense	Advertising Expense Advertising expense includes the cost of promotional materials and activities, such as printed marketing materials, marketing programs and speaker programs. The cost of the Company's advertising efforts are expensed as incurred. The Company incurred approximately $11.6 million and $9.9 million in advertising costs for the three months ended March 31, 2020 and 2019, respectively. These expenses are recorded as a component of Selling, general and administrative expenses in the condensed consolidated statements of earnings.
Income Taxes	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 for 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, based on 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	Recently Issued Accounting Pronouncements Accounting Pronouncements Adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) - The new standard, issued in July 2016, requires credit losses on financial assets to be measured as the net amount expected to be collected, rather than based on incurred losses. For available-for-sale debt securities, the new standard did not revise the definition of impairment; i.e., the investment is impaired if the fair value of the investment is less than its cost. It also did not revise the requirement under ASC 320, for an entity to recognize in net income only the impairment amount related to credit risk, and to recognize, in other comprehensive income, the noncredit impairment amount. The new standard made certain targeted changes to the impairment of available-for-sale debt securities, to eliminate the concept of "other than temporary" from the impairment model. Targeted changes to the impairment model included recognition of credit losses on available-for-sale debt securities using the allowance method, and limiting the allowance 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 Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract - The new standard, issued in August 2018, aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or to obtain internal-use software. This includes hosting arrangements that include an internal-use software license. This ASU also requires that the implementation costs of a hosting arrangement that is a service contract are expensed over the term of the hosting arrangement, which includes reasonably certain renewals. The Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. ASU 2018-18, Clarifying the Interaction Between Topic 808 and Topic 606 - The new standard, issued in November 2018, clarifies when transactions between participants in a collaborative arrangement are within the scope of Topic 606. The Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. ASU 2018-13, Changes to Disclosure Requirements for Fair Value Measurements (Topic 820) - The new standard, issued in August 2018, improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies and adds certain disclosure requirements. The Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. New Accounting Pronouncements Not Yet Adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes - The new standard, issued in December 2019, simplifies the accounting for income taxes. This guidance will be effective on January 1, 2021 on a prospective basis, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and will adopt the new standard effective January 1, 2021.

Leases

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases

The Company has operating leases for its new headquarters office at 9715 Key West Ave, Rockville, MD; its former headquarters office and lab space at 1550 East Gude Drive in Rockville, MD; and for its fleet vehicles. The Company’s existing leases for its former headquarters office and lab space run through April 2020. With respect to the fleet vehicle leases, given the volume of individual leases involved in the overall arrangement, the Company applies a portfolio approach to effectively account for the operating lease assets and liabilities.

New Headquarters Lease

The Company entered into a new lease agreement, effective January 31, 2019, with Advent Key West, LLC (Landlord), for its new headquarters office in Rockville, MD (Premises). The term of the new headquarters lease commenced on February 1, 2019 (the Commencement Date) and will continue until April 30, 2034, unless earlier terminated in accordance with the terms of the lease. The lease includes options to extend the lease for up to 10 years, beyond 2034. Fixed rent with respect to the Premises began on the Commencement Date. However, the Landlord agreed to a rent abatement from the Commencement Date through April 30, 2020.

The initial fixed rental rate is approximately $195,000 per month for the first 12 months, and 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 be required to pay all utility charges for the Premises, in addition to its pro rata share of any operating expenses and real estate taxes.

The lease also provides for a tenant improvement allowance of approximately $10.2 million in the aggregate. As of December 31, 2019, the tenant improvement allowance was fully utilized and recorded as leasehold improvements within Property and equipment on the condensed consolidated balance sheets.

Supplemental balance sheet information related to leases is as follows (dollars in thousands):


	March 31, 2020			December 31, 2019
	(unaudited)
Assets
Lease assets	$	21,911		$	21,279

Liabilities
Accrued expenses and other current liabilities
Lease liabilities, current	$	3,456		$	2,825
Non-current
Lease liabilities, long term	30,804			30,440
Total lease liabilities	$	34,260		$	33,265

Weighted-average remaining lease term (years)	12.1			12.5
Weighted-average discount rate	4.3		%	4.4		%

Operating lease costs are as follows (dollars in thousands):


	Three Months ended March 31,
	2020		2019
	(unaudited)
Fixed lease cost	$	1,497	$	1,032
Variable lease cost	627		465
Total operating lease cost	$	2,124	$	1,497

Supplemental cash flow information related to leases is as follows (dollars in thousands):


	Three Months ended March 31,
	2020		2019
	(unaudited)
Cash paid for operating leases	$	1,261	$	1,313
Lease assets and tenant receivables obtained for new operating leases	$	1,715	$	17,136

Future minimum lease payments under noncancellable operating leases, as of March 31, 2020, are as follows (dollars in thousands, unaudited):


2020 (remaining)	$	3,672
2021	4,760
2022	4,226
2023	2,537
2024	2,587
Thereafter	26,784
Total future minimum lease payments	$	44,566
Less: Imputed interest ⁽¹⁾	(10,306)
Present value of lease liabilities	$	34,260

________________________________________________________________

⁽¹⁾Calculated using the interest rate for each lease.

Accrued Product Returns and Rebates

3 Months Ended

Mar. 31, 2020

Accrued Product Returns and Rebates

Accrued Product Returns and Rebates

Accrued product returns and rebates consist of the following (dollars in thousands):


	March 31, 2020		December 31, 2019
	(unaudited)
Accrued product rebates	$	94,612	$	88,811
Accrued product returns	24,841		18,818
Total	$	119,453	$	107,629

Condensed Consolidated Statements of Earnings - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenues
Total revenues	$ 94,976	$ 85,474
Costs and expenses
Cost of goods sold	4,152	3,684
Research and development	18,937	15,394
Selling, general and administrative	42,875	40,968
Total costs and expenses	65,964	60,046
Operating earnings	29,012	25,428
Other income (expense)
Interest expense	(5,755)	(5,870)
Interest income, net	5,777	4,681
Total other income (expense)	22	(1,189)
Earnings before income taxes	29,034	24,239
Income tax expense	7,516	5,899
Net earnings	$ 21,518	$ 18,340
Earnings per share
Basic (in dollars per share)	$ 0.41	$ 0.35
Diluted (in dollars per share)	$ 0.40	$ 0.34
Weighted-average shares outstanding
Basic (in shares)	52,534,787	52,336,443
Diluted (in shares)	53,581,051	53,985,385
Net product sales
Revenues
Total revenues	$ 92,490	$ 83,099
Royalty revenues
Revenues
Total revenues	$ 2,486	$ 2,375

Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Sep. 30, 2018	Mar. 31, 2018
Income per share
Strike price of the warrant transactions (in dollars per share)			$ 80.9063	$ 80.9063
Common stock equivalents excluded in the calculation of diluted income per share (in shares)	3,034,099	608,948
Numerator, dollars in thousands:
Net earnings	$ 21,518	$ 18,340
Denominator:
Weighted average shares outstanding, basic (in shares)	52,534,787	52,336,443
Effect of dilutive securities:
Stock options, PSU, RSU and SAR (in shares)	1,046,264	1,648,942
Weighted average shares outstanding, diluted (in shares)	53,581,051	53,985,385
Earnings per share, basic (in dollars per share)	$ 0.41	$ 0.35
Earnings per share, diluted (in dollars per share)	$ 0.40	$ 0.34
2023 Notes
Income per share
Conversion price, per share of common stock (in dollars per share)			$ 59.33	$ 59.33

Accrued Product Returns and Rebates (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Accrued Product Returns and Rebates
Accrued product rebates	$ 94,612	$ 88,811
Accrued product returns	24,841	18,818
Total	$ 119,453	$ 107,629

Property and Equipment

3 Months Ended

Mar. 31, 2020

Property, Plant and Equipment [Abstract]

Property and Equipment

Property and equipment consists of the following (dollars in thousands):


	March 31, 2020		December 31, 2019
	(unaudited)
Lab equipment and furniture	$	11,538	$	11,053
Leasehold improvements	14,974		14,217
Software	2,225		2,225
Computer equipment	2,013		1,839
Construction-in-progress	431		433
	31,181		29,767
Less accumulated depreciation and amortization	(13,170)		(12,699)
Total	$	18,011	$	17,068

Depreciation and amortization expense on property and equipment was approximately $0.5 million and $0.4 million for the three months ended March 31, 2020 and 2019, respectively.

As of March 31, 2020, there were no identified indicators of impairment.

Leases - New Headquarters Lease (Details) - Advent Key West, LLC (Landlord) $ in Thousands	Feb. 01, 2019 USD ($)
Leases
Optional lease renewal term	10 years
Initial fixed monthly rental rate	$ 195
Increase in fixed monthly rental payments	2.00%
Required security deposit	$ 195
Tenant improvement allowance	$ 10,200

Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

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 are as follows (dollars in thousands):


			Fair Value Measurements at March 31, 2020 (unaudited)
	Total Fair Value at March 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Cash and cash equivalents
Cash	$	19,911	$	19,911	$	—
Money market funds	205,856		205,856
Marketable securities
Corporate debt securities	174,939		—		174,939
Municipal debt securities	165		—		165
Long term marketable securities
Corporate debt securities	524,683		255		524,428
U.S. government agency debt securities	10,029		—		10,029
Other noncurrent assets
Marketable securities - restricted (SERP)	342		8		334
Total assets at fair value	$	935,925	$	226,030	$	709,895


			Fair Value Measurements at December 31, 2019 (unaudited)
	Total Fair Value at December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Cash and cash equivalents
Cash	$	78,912	$	78,912	$	—
Money market funds	102,469		102,469		—
Marketable securities
Corporate debt securities	165,527		—		165,527
Municipal debt securities	165		—		165
Long term marketable securities
Corporate debt securities	571,828		254		571,574
U.S. government agency and municipal debt securities	19,945		—		19,945
Other noncurrent assets
Marketable securities - restricted (SERP)	418		3		415
Total assets at fair value	$	939,264	$	181,638	$	757,626

Schedule of unrestricted available-for-sale marketable securities

Unrestricted available-for-sale marketable securities held by the Company are as follows, (dollars in thousands):


	March 31, 2020		December 31, 2019
	(unaudited)
Corporate and U.S. government agency and municipal debt securities
Amortized cost	$	710,072	$	747,598
Gross unrealized gains	5,362		10,031
Gross unrealized losses	(5,618)		(164)
Total fair value	$	709,816	$	757,465

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 are as follows, (dollars in thousands):


	March 31, 2020
	(unaudited)
Less than 1 year	$	175,104
1 year to 2 years	181,141
2 years to 3 years	199,207
3 years to 4 years	154,364
Greater than 4 years	—
Total	$	709,816

Schedule of financial liabilities that are not carried at fair value

The following table sets forth the Company’s financial liabilities that are not carried at fair value, (dollars in thousands):


	March 31, 2020						December 31, 2019
	(unaudited)
	Carrying Value		Fair Value (Level 2)		Carrying Value		Fair Value (Level 2)
2023 Notes	$	349,232	$	328,038	$	345,170	$	366,023

Summary of Significant Accounting Policies	3 Months Ended
Summary of Significant Accounting Policies	Mar. 31, 2020
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	Summary of Significant Accounting Policies Basis of Presentation The Company’s condensed consolidated financial statements include the accounts of: Supernus Pharmaceuticals, Inc.; Supernus Europe Ltd.; Biscayne Neurotherapeutics, Inc.; and Biscayne Neurotherapeutics Australia Pty Ltd. These are collectively referred to herein as “Supernus” or “the Company.” All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission (SEC) for interim financial information. As permitted under Generally Accepted Accounting Principles in the United States (U.S. GAAP), certain notes and other information have been omitted from the interim unaudited condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company’s most recent Annual Report on Form 10-K, for the year ended December 31, 2019, filed with the SEC. In management’s opinion, the condensed consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows. The results of operations for any interim period are not necessarily indicative of the Company’s future quarterly or annual results. The Company, which is primarily located in the United States (U.S.), operates in one operating segment. Use of Estimates The Company bases its estimates on: historical experience; various forecasts; information received from its service providers; information from other sources; and other assumptions that the Company believes are reasonable under the circumstances. Actual results could differ materially from the Company’s estimates. The Company evaluates the methodologies employed in making its estimates on an ongoing basis. Inventories Inventories, which are recorded at the lower of cost or net realizable value, include materials, labor, direct costs and indirect costs. These are valued using the first-in, first-out method. The Company writes down inventory that has become obsolete, or has a cost basis in excess of its expected net realizable value. Expired inventory is disposed of, and the related costs are recognized as Cost of goods sold in the condensed consolidated statement of earnings. Inventories Produced in Preparation of Product Launches The Company capitalizes inventories produced in preparation for product launches when future commercialization of a product is probable and when future economic benefit is expected to be realized. The determination to capitalize is based on the particular facts and circumstances relating to the product. Capitalization of such inventory begins when the Company determines that (i) positive results have been obtained for the clinical trials that are necessary to support regulatory approval; (ii) uncertainties regarding regulatory approval have been significantly reduced; and (iii) it is probable that these capitalized costs will provide future economic benefit in excess of capitalized costs. In evaluating whether these conditions are met, the Company considers the following factors: the product candidate’s current status in the regulatory approval process; results from the related pivotal clinical trials; results from meetings with relevant regulatory agencies prior to the filing of regulatory applications; compilation of the regulatory applications; consequent acceptance by the regulatory body; potential impediments to the approval process, such as product safety or efficacy concerns, potential labeling restrictions, and other impediments; historical experience with manufacturing and commercializing similar products as well as the relevant product candidate; and the resilience of the Company’s manufacturing environment, including its supply chain, in determining logistical constraints that could hamper approval or commercialization. In assessing the economic benefit that the Company is likely to realize, the Company considers: the shelf life of the product in relation to the expected timeline for approval; patent related or contract issues that may prevent or delay commercialization; product stability data of all pre-approval production to determine whether there is adequate expected shelf life; viability of commercialization, taking into account competitive dynamics in the marketplace and market acceptance; anticipated future sales; and anticipated reimbursement strategies that may prevail with respect to the product, if approved. In applying the lower of cost or net realizable value to pre-launch inventory, the Company estimates a range of likely commercial prices based on comparable commercial products and pre-launch discussions with managed care providers. The Company could be required to write down previously capitalized costs related to pre-launch inventories upon a change in such judgment(s), due to, among other potential factors, a denial or significant delay of approval by regulatory bodies, a delay in commercialization, or other adverse factors. Revenue from Product Sales The Company’s customers, who are primarily pharmaceutical wholesalers and distributors, purchase product to fulfill orders from retail pharmacy chains and independent pharmacies of varying size and purchasing power. The Company recognizes gross revenue when its products are physically received by its customers, upon shipment from a third party fulfillment center. Customers take control of our products, including title and ownership, upon physical receipt of our products at the customers' facilities. Customer orders are generally fulfilled within a few days of receipt, resulting in minimal order backlog. The Company does not adjust revenue for any financing effects, in transactions where the Company expects the period between the transfer of the goods or services and collection to be less than one year. There are no minimum product purchase requirements with customers. The Company recognizes revenue from product sales in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Product sales are recorded net of various forms of variable consideration, including: provision for estimated rebates; provision for estimated future product returns; and an estimated allowance for discounts. These are collectively considered "sales deductions." As described below, variability in the net transaction price for the Company’s products arises primarily from the aforementioned sales deductions. Variable consideration on product sales is only recognized when it is probable that a significant reversal will not occur. Significant judgment is required in estimating certain sales deductions. In making these estimates, the Company considers: historical experience; product price increases; current contractual arrangements under applicable payor programs; unbilled claims; processing time lags; and inventory levels in the wholesale and retail distribution channel. The Company adjusts its estimates of revenue either 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 our estimates, the Company adjusts these estimates. These adjustments could materially affect net product sales and earnings in the period that such adjustments are recorded. Sales Deductions The Company records product sales net of the following sales deductions: •Rebates: Rebates are discounts which the Company pays under either public sector or private sector health care programs. Public sector rebate programs encompass: various Medicaid drug rebate programs; Medicare gap coverage programs; programs covering public health service institutions; and government entities. All federal employees and agencies purchase drugs under the Federal Supply Schedule. 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 be obligated to pay to their managed care provider in order to fill their prescription. 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. Both types of rebates vary over time. Rebates are owed upon dispensing our product to a patient; i.e., filling a prescription. The accrual balance for rebates consists of the following 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 an estimate for known or estimated prior quarters’ unpaid rebates, to cover prescriptions dispensed in past quarters, but for which no invoice has yet been received. Third, the accrual balance includes an estimate for rebates that will be prospectively owed, for prescriptions filled in future quarters. This pertains to product that has been sold by the Company to wholesalers or distributors, and which resides either as wholesaler/distributor inventory or as inventory held at pharmacies, but as of the end of the reporting period, this product has not been dispensed to a patient. The Company’s estimates of expected rebate claims vary by program and by type of customer, because the period from the date at which the prescription is filled and the date at which the Company receives and pays the invoice varies substantially. For each of its products, the Company bases its estimates of expected rebate claims on 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 contracts; prospective changes in co-pay assistance programs; and anticipated changes in program utilization rates i.e., patient participation rates under each specific program. 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), and records this liability as a reduction to gross product sales. This liability is recorded as an increase in Accrued product returns and rebates, in current liabilities on our condensed consolidated balance sheets. The sensitivity of the Company’s estimates varies by program and by type of customer. If actual rebates vary from estimated amounts, the Company will adjust the balances of such accrued rebates to reflect actual experience with respect to these programs. These adjustments could materially affect the estimated liability balance, net product sales and earnings in the period in which the adjustment(s) is made. •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 return of product that is damaged or defective when shipped from its third party fulfillment center. 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 is therefore destroyed. 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. This liability is recorded as an increase in Accrued product returns and rebates, in current liabilities on our condensed consolidated balance sheets. The Company estimates the liability for returns based primarily on the actual returns experience for its two commercial products. Because the Company’s products have a shelf life of 48 months from date of manufacture, and because the Company accepts return of product up to 12 months post expiry, there is a significant time lag of several years between the time when the product is sold and the time when the Company issues credit on expired product. The Company’s returns policy generally permits product returns to be processed at current wholesaler price rather than at historical acquisition price. Hence, the Company’s estimated liability for product returns is affected by price increases taken subsequent to the date of sale. When the Company adjusts its estimates for product returns, the adjustment affects the estimated liability, product sales and earnings in the period of adjustment. Those adjustments may be material to our financial results. •Sales discounts: Distributors and wholesalers of the Company's pharmaceutical products are generally offered various forms of consideration, including allowances, service fees and prompt payment discounts for distributing our 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, distributors and wholesalers 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 discounts as a valuation allowance against Accounts receivable on the condensed consolidated balance sheets. License Revenues License and Collaboration Agreements The Company has entered into collaboration agreements to facilitate commercialization of both Oxtellar XR and Trokendi XR outside of the U.S. Those agreements include the right to use the Company’s intellectual property as a functional license, and generally include an up-front license fee and ongoing milestone payments upon the achievement of certain specific events. These agreements may also require minimum royalty payments based on sales of products which use the applicable intellectual property. Up-front license fees are recognized once the license has been executed between the Company and its licensee. Milestones are a form of variable consideration that are recognized when either the underlying events have transpired (i.e., event-based milestone) or when the sales-based targets have been met by the collaborative partner (i.e., sales-based milestone). Both types of milestone payments are nonrefundable. The Company estimates the amount of the milestone to be included in the transaction price by using the most likely amount method. The Company includes in the transaction price some or all of the amount of variable consideration (i.e., the value of the associated milestone), but includes this only to the extent that it is probable that a significant revenue reversal will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Assessing whether it is probable that a significant revenue reversal will not occur once the uncertainty related to the variable consideration is subsequently resolved requires management judgment, and may require assessing factors that are outside of the Company’s influence, such as: likelihood of regulatory success; availability of third party information; and expected time period until achievement of the event. These factors are evaluated based on the specific facts and circumstances. Event-based milestones are recognized in the period that the related event, such as regulatory approval, occurs. Sales-based milestones are recognized as revenue only when the sales-based target is achieved. There are no guaranteed minimum amounts owed to the Company related to license and collaboration agreements. Royalty Revenues The Company recognizes noncash royalty revenue for amounts earned pursuant to its royalty agreement with United Therapeutics Corporation (United Therapeutics), based on estimated product sales by United Therapeutics (see Note 3). This agreement includes 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 17, Commitments and Contingencies). Sales of Orenitram by United Therapeutics result in payments made by United Therapeutics to HC Royalty, in accordance with these agreements. Consequent to this agreement, the Company recorded a nonrecourse liability related to this transaction, and amortizes this amount as noncash royalty revenue. The Company also recognizes noncash interest expense related to this liability, and accrues interest expense at an effective interest rate (see Note 16). The interest rate is determined based on projections of HC Royalty’s rate of return. Royalty revenue also includes cash royalty amounts received from collaboration partners, including from Shire Plc (Shire, a subsidiary of Takeda Pharmaceutical Company Ltd), based on net product sales in the current period of Shire’s product, Mydayis. Royalty revenue is only recognized when the underlying product sale by Shire occurs. The Shire arrangement also includes Shire's right to use the Company’s intellectual property as a functional license. There are no guaranteed minimum amounts owed to the Company related to any of these royalty revenue agreements. Research and Development Expense and Related Accrued Research and Development Expenses Research and development expenditures are expensed as incurred. These expenses include: salaries, benefits and share-based compensation; contract research and development services provided by third parties; costs for conducting preclinical and clinical studies; cost of acquiring or manufacturing clinical trial materials; regulatory costs; facilities costs; depreciation expense and other allocated expenses; and license fees and milestone payments related to in-licensed products and technologies. Assets acquired that are used for research and development and that have no future alternative use are expensed as in-process research and development. The Company estimates preclinical and clinical trial expenses based on services performed pursuant to contracts with research institutions, clinical investigators, clinical research organizations (CROs) and other service providers that provide services on the Company’s behalf. In recording service fees, the Company estimates the cost of those services which have been performed on behalf of the Company during the current period, and compares those costs with the cumulative expenses recorded and cumulative payments made for such services. As appropriate, the Company accrues additional service fees, or defers nonrefundable 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 adjusts its accrued expenses, or its deferred advance payments, accordingly. If the Company subsequently determines that it no longer expects the services associated with a nonrefundable advance payment to be rendered, the remaining portion of that advance payment is charged to expense in the period in which such a determination is made. 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 governmental, 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 condensed consolidated statement of comprehensive earnings. Realized gains and losses are included in interest income, and are determined using the specific identification method for determining the cost of securities sold. The Company adopted Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326) on January 1, 2020, using the allowance approach. Declines in fair value below amortized cost related to credit losses (i.e., impairment due to credit losses), if any, are included in the condensed consolidated statement of earnings. A corresponding allowance is established. If the estimate of expected credit losses decreases in subsequent periods, the Company will reverse the credit losses through current period earnings, and adjust accordingly the allowance (see Note 2 - Recently Issued Accounting Pronouncements). Share-Based Compensation Stock Options The Company recognizes share-based compensation expense over the service period using the straight-line method. Employee share-based compensation for stock options is measured based on estimated fair value as of the grant date, using the Black-Scholes option-pricing model, in calculating the fair value of option grants as of the grant date. The Company uses the following assumptions for estimating fair value of option grants: Fair Value of Common Stock—The fair value of common stock underlying the option grants is determined based on observable market prices of the Company’s common stock. Expected Volatility—Volatility is a measure of the amount by which the Company’s share price has historically fluctuated or is expected to fluctuate (i.e., expected volatility) during a period. Beginning in the first quarter of 2019, the Company began using the historical volatility of its common stock to measure expected volatility. Prior to the first quarter of 2019, volatility was estimated using the observed volatility of the common stock of several public entities of similar size, complexity, and stage of development, as well as taking into consideration the Company’s actual volatility since the Company’s IPO in 2012. 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 during which options are expected to remain unexercised. Options have a maximum contractual term of ten years. Beginning in the first quarter of 2019, the Company began estimating the average expected life of stock options using its historical experience. Prior to the first quarter of 2019, the Company determined 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. Risk-Free Interest Rate—This is the observed U.S. Treasury Note rate, as of the week each option grant is issued, with a term that most closely resembles the expected term of the option. Expected Forfeiture Rate—Forfeitures are accounted for as they occur. Restricted Stock Units (RSUs) Compensation expense is recorded based on amortizing the fair market value as of the date of the grant over the implied service period. RSUs generally vest one year from the date of grant and are subject to continued service requirements. Performance Stock Units (PSUs) Performance-Based Awards Compensation expense for performance-based awards is recognized based on amortizing the fair market value as of the grant date over the periods during which the achievement of the performance is probable. Performance-based PSU awards require certain performance targets to be achieved in order for these awards to vest. These awards vest on the date of achievement of the performance target. Market-Based Awards Compensation expense for market-based awards is recognized on a straight-line basis over the requisite service period, regardless of whether the market condition is satisfied. Market-based PSU awards subject to market-based performance targets require achievement of the performance target in order for these units to vest. The Company estimates fair value as of the grant date and expected term using a Monte Carlo simulation that incorporates option-pricing inputs covering the period from the grant date through the end of the derived requisite service period. The expected volatility as of grant date is estimated based historical daily volatility of the Company's common stock over the expected term of the award. The risk-free interest rate is based on the U.S. Treasury Note rate, as of the week the award is issued, with a term that most closely resembles the expected term of the award. Advertising Expense Advertising expense includes the cost of promotional materials and activities, such as printed marketing materials, marketing programs and speaker programs. The cost of the Company's advertising efforts are expensed as incurred. The Company incurred approximately $11.6 million and $9.9 million in advertising costs for the three months ended March 31, 2020 and 2019, respectively. These expenses are recorded as a component of Selling, general and administrative expenses in the condensed consolidated statements of earnings. 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 for 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, based on 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 ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) - The new standard, issued in July 2016, requires credit losses on financial assets to be measured as the net amount expected to be collected, rather than based on incurred losses. For available-for-sale debt securities, the new standard did not revise the definition of impairment; i.e., the investment is impaired if the fair value of the investment is less than its cost. It also did not revise the requirement under ASC 320, for an entity to recognize in net income only the impairment amount related to credit risk, and to recognize, in other comprehensive income, the noncredit impairment amount. The new standard made certain targeted changes to the impairment of available-for-sale debt securities, to eliminate the concept of "other than temporary" from the impairment model. Targeted changes to the impairment model included recognition of credit losses on available-for-sale debt securities using the allowance method, and limiting the allowance 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 Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract - The new standard, issued in August 2018, aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or to obtain internal-use software. This includes hosting arrangements that include an internal-use software license. This ASU also requires that the implementation costs of a hosting arrangement that is a service contract are expensed over the term of the hosting arrangement, which includes reasonably certain renewals. The Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. ASU 2018-18, Clarifying the Interaction Between Topic 808 and Topic 606 - The new standard, issued in November 2018, clarifies when transactions between participants in a collaborative arrangement are within the scope of Topic 606. The Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. ASU 2018-13, Changes to Disclosure Requirements for Fair Value Measurements (Topic 820) - The new standard, issued in August 2018, improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies and adds certain disclosure requirements. The Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. New Accounting Pronouncements Not Yet Adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes - The new standard, issued in December 2019, simplifies the accounting for income taxes. This guidance will be effective on January 1, 2021 on a prospective basis, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and will adopt the new standard effective January 1, 2021.

Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

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.

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

•Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets. The Company has the ability to access these prices as of the measurement date.

Level 1 assets include: cash held at banks; certificates of deposit; money market funds; investment grade corporate debt securities and U.S. government agency and municipal debt securities.

•Level 2—Level 2 securities are valued using third-party pricing sources that apply relevant inputs and data in their models to estimate fair value. Inputs are quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; inputs other than quoted prices but that are observable for the asset or liability (e.g., interest rates; yield curves); and inputs that are derived principally from or corroborated by observable market data, by correlation, or by other means (i.e., market corroborated inputs).

Level 2 assets include: investment grade corporate debt securities, U.S. government agency and municipal debt securities; other fixed income securities; and SERP (Supplemental Executive Retirement Plan) assets. The fair

value of the restricted marketable securities is recorded in Other assets on the condensed consolidated balance sheets.

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

There were no level 3 assets as of March 31, 2020 or December 31, 2019.

Financial Assets

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


			Fair Value Measurements at March 31, 2020 (unaudited)
	Total Fair Value at March 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Cash and cash equivalents
Cash	$	19,911	$	19,911	$	—
Money market funds	205,856		205,856
Marketable securities
Corporate debt securities	174,939		—		174,939
Municipal debt securities	165		—		165
Long term marketable securities
Corporate debt securities	524,683		255		524,428
U.S. government agency debt securities	10,029		—		10,029
Other noncurrent assets
Marketable securities - restricted (SERP)	342		8		334
Total assets at fair value	$	935,925	$	226,030	$	709,895


			Fair Value Measurements at December 31, 2019 (unaudited)
	Total Fair Value at December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Cash and cash equivalents
Cash	$	78,912	$	78,912	$	—
Money market funds	102,469		102,469		—
Marketable securities
Corporate debt securities	165,527		—		165,527
Municipal debt securities	165		—		165
Long term marketable securities
Corporate debt securities	571,828		254		571,574
U.S. government agency and municipal debt securities	19,945		—		19,945
Other noncurrent assets
Marketable securities - restricted (SERP)	418		3		415
Total assets at fair value	$	939,264	$	181,638	$	757,626

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 available-for-sale marketable securities held by the Company are as follows, (dollars in thousands):


	March 31, 2020		December 31, 2019
	(unaudited)
Corporate and U.S. government agency and municipal debt securities
Amortized cost	$	710,072	$	747,598
Gross unrealized gains	5,362		10,031
Gross unrealized losses	(5,618)		(164)
Total fair value	$	709,816	$	757,465

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


	March 31, 2020
	(unaudited)
Less than 1 year	$	175,104
1 year to 2 years	181,141
2 years to 3 years	199,207
3 years to 4 years	154,364
Greater than 4 years	—
Total	$	709,816

As of March 31, 2020, there was no impairment due to credit loss on any available-for-sale marketable securities.

Financial Liabilities

The following table sets forth the Company’s financial liabilities that are not carried at fair value, (dollars in thousands):


	March 31, 2020						December 31, 2019
	(unaudited)
	Carrying Value		Fair Value (Level 2)		Carrying Value		Fair Value (Level 2)
2023 Notes	$	349,232	$	328,038	$	345,170	$	366,023

The fair value is estimated based on actual trading information, as well as quoted prices provided by bond traders.

- 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

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019
Income Tax Disclosure [Abstract]
Income tax expense	$ 7,516	$ 5,899
Effective tax rate	25.90%	24.30%

Disaggregated Revenues Summary of Revenues (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Disaggregation of Revenue [Line Items]
Total revenues	$ 94,976	$ 85,474
Trokendi XR
Disaggregation of Revenue [Line Items]
Total revenues	68,551	63,693
Oxtellar XR
Disaggregation of Revenue [Line Items]
Total revenues	23,939	19,406
Net product sales
Disaggregation of Revenue [Line Items]
Total revenues	92,490	83,099
Royalty revenues
Disaggregation of Revenue [Line Items]
Total revenues	$ 2,486	$ 2,375

Convertible Senior Notes Due 2023 (Tables)

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Summary of liability component of 2023 Notes

The liability component of the 2023 Notes consists of the following, (dollars in thousands):


	March 31, 2020		December 31, 2019
	(unaudited)
2023 Notes	$	402,500	$	402,500
Unamortized debt discount and deferred financing costs	(53,268)		(57,330)
Total carrying value	$	349,232	$	345,170

Share-Based Payments - Narrative (Details)	3 Months Ended
Share-Based Payments - Narrative (Details)	Mar. 31, 2020 $ / shares shares
RSUs
Share-Based Payments
Granted (in shares) \| shares	26,055
Weighted average fair value, grant date, (in dollars per share) \| $ / shares	$ 23.99
Performance-Based Awards
Share-Based Payments
Granted (in shares) \| shares	15,625
Weighted average fair value, grant date, (in dollars per share) \| $ / shares	$ 23.99
Market-Based Awards
Share-Based Payments
Granted options (in shares) \| shares	15,625
Weighted average fair value, grant date, options (in dollars per share) \| $ / shares	$ 23.41

Disaggregated Revenues (Tables)

3 Months Ended

Mar. 31, 2020

Disaggregation of Revenue [Abstract]

Summary of disaggregation of revenues by nature

The following table summarizes the disaggregation of revenues by nature, (dollars in thousands):


	Three Months ended March 31,
	2020		2019
	(unaudited)
Net product sales
Trokendi XR	$	68,551	$	63,693
Oxtellar XR	23,939		19,406
Total net product sales	$	92,490	$	83,099
Royalty revenues	2,486		2,375
Total revenues	$	94,976	$	85,474

Condensed Consolidated Statements of Changes in Stockholder's Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Earnings (Loss)	Retained Earnings
Balance (in shares) at Dec. 31, 2018		52,316,583
Balance at Dec. 31, 2018	$ 453,023	$ 52	$ 369,637	$ (3,158)	$ 86,492
Increase (Decrease) in Stockholders' Equity
Share-based compensation	3,287		3,287
Exercise of stock options (in shares)		57,665
Exercise of stock options	783		783
Net earnings	18,340				18,340
Unrealized (loss) gain on marketable securities, net of tax	4,585			4,585
Balance (in shares) at Mar. 31, 2019		52,374,248
Balance at Mar. 31, 2019	480,018	$ 52	373,707	1,427	104,832
Balance (in shares) at Dec. 31, 2019		52,533,348
Balance at Dec. 31, 2019	595,428	$ 53	388,410	7,417	199,548
Increase (Decrease) in Stockholders' Equity
Share-based compensation	3,988		3,988
Exercise of stock options (in shares)		3,811
Exercise of stock options	32		32
Net earnings	21,518				21,518
Unrealized (loss) gain on marketable securities, net of tax	(7,583)			(7,583)
Balance (in shares) at Mar. 31, 2020		52,537,159
Balance at Mar. 31, 2020	$ 613,383	$ 53	$ 392,430	$ (166)	$ 221,066

- Definition

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

+ References + Details

Organization and Business (Details)	3 Months Ended
Organization and Business (Details)	Mar. 31, 2020 product
Organization and Nature of Operations
Number of commercial products	2

Income Taxes (Tables)

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

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

The following table provides information regarding the Company’s income tax expense for the three months ended March 31, 2020 and 2019, (dollars in thousands):


	Three Months ended March 31,
	2020			2019
	(unaudited)
Income tax expense	$	7,516		$	5,899
Effective tax rate	25.9		%	24.3		%

Summary of Significant Accounting Policies - Revenue Recognition (Details)	3 Months Ended
	Mar. 31, 2020 USD ($) product
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
Maximum
Revenue Recognition
Product shelf life	48 months
License and collaboration agreements
Revenue Recognition
Guaranteed minimum amounts	$ 0
Royalty revenue agreements
Revenue Recognition
Guaranteed minimum amounts	$ 0

Leases - Schedule of Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Operating leases
2020 (remaining)	$ 3,672
2021	4,760
2022	4,226
2023	2,537
2024	2,587
Thereafter	26,784
Total future minimum lease payments	44,566
Less: Imputed interest	(10,306)
Present value of lease liabilities	$ 34,260	$ 33,265

Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

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 (dollars in thousands):


	Weighted- Average Life (Years)	March 31, 2020		December 31, 2019
	(unaudited)
Capitalized patent defense costs	2.76 - 7.01 years	$	43,375	$	43,375
Less accumulated amortization		(19,796)		(18,535)
Total		$	23,579	$	24,840

Fair Value of Financial Instruments Fair Value of Financial Instruments - Contractual Maturities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Fair Value Disclosures [Abstract]
Less than 1 year	$ 175,104
1 year to 2 years	181,141
2 years to 3 years	199,207
3 years to 4 years	154,364
Greater than 4 years	0
Total	$ 709,816	$ 757,465

Leases - Leases Balance Sheet Information (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Balance sheet information related to leases
Lease assets	$ 21,911	$ 21,279
Lease liabilities, current	3,456	2,825
Lease liabilities, long term	30,804	30,440
Total lease liabilities	$ 34,260	$ 33,265
Weighted-average remaining lease term (years)	12 years 1 month 6 days	12 years 6 months
Weighted-average discount rate	4.30%	4.40%

Disaggregated Revenues

3 Months Ended

Mar. 31, 2020

Disaggregation of Revenue [Abstract]

Disaggregated Revenues

The following table summarizes the disaggregation of revenues by nature, (dollars in thousands):


	Three Months ended March 31,
	2020		2019
	(unaudited)
Net product sales
Trokendi XR	$	68,551	$	63,693
Oxtellar XR	23,939		19,406
Total net product sales	$	92,490	$	83,099
Royalty revenues	2,486		2,375
Total revenues	$	94,976	$	85,474

Trokendi XR accounted for 74% and 77% of the Company’s total net product sales for the three months ended March 31, 2020 and 2019, respectively.

The Company recognized noncash royalty revenue of $1.6 million for the three months ended March 31, 2020 and 2019, respectively, consequent to the Company's agreement with HC Royalty (see Note 2).

The Company ceased production and distribution of all blister pack configurations for Trokendi XR in 2017. Subsequent to ceasing blister pack production and distribution in 2017, the observed rate of product return for all blister pack configurations of Trokendi XR steadily declined over time. This return rate trend was firmly established over a multi-year period. However, in the first quarter of 2020, the return rate for the final blister pack lots of Trokendi XR produced in 2017 exhibited a return rate significantly higher than had been experienced with all previous lots. The lots for which a higher return rate was observed are the last lots which were produced and distributed.

As a result, the Company changed its estimate of the provision for product returns, based on the most recent experience. This change in estimate resulted in an increase to the provision for product returns of $8.0 million, decreased net product sales of $8.0 million and decreased net earnings of $5.9 million, or $0.11 per basic and per diluted share, for the three months ended March 31, 2020.

Accrued Expenses and Other Current Liabilities (Tables)

3 Months Ended

Mar. 31, 2020

Payables and Accruals [Abstract]

Schedule of accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following (dollars in thousands):


	March 31, 2020		December 31, 2019
	(unaudited)
Accrued clinical trial costs⁽¹⁾	$	11,224	$	13,285
Accrued compensation	9,549		11,223
Accrued professional fees	4,706		3,936
Lease liabilities, current	3,456		2,825
Other accrued expenses	4,068		5,861
Total	$	33,003	$	37,130

_____________________________________________________________________

⁽¹⁾ Includes preclinical and all clinical trial-related costs.

Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Intangible Assets
Less accumulated amortization	$ (19,796)		$ (18,535)
Total	23,579		24,840
Additional disclosures
Amortization expense	1,300	$ 1,300
Capitalized patent defense costs
Intangible Assets
Capitalized patent defense costs	$ 43,375		$ 43,375
Capitalized patent defense costs \| Minimum
Intangible Assets
Weighted- Average Life (Years)	2 years 9 months 3 days
Capitalized patent defense costs \| Maximum
Intangible Assets
Weighted- Average Life (Years)	7 years 3 days

Leases - Supplemental Cash Flows (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Leases [Abstract]
Cash paid for operating leases	$ 1,261	$ 1,313
Lease assets and tenant receivables obtained for new operating leases	$ 1,715	$ 17,136

Share-Based Payments (Tables)

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Schedule of share-based compensation expense

Share-based compensation expense is as follows (dollars in thousands):


	Three Months ended March 31,
	2020		2019
	(unaudited)
Research and development	$	681	$	574
Selling, general and administrative	3,307		2,713
Total	$	3,988	$	3,287

Summary of stock options and SAR activities

The following table summarizes stock option and stock appreciation rights (SAR) activities:


	Number of Options	Weighted- Average Exercise Price (per share)		Weighted- Average Remaining Contractual Term (in years)
Outstanding, December 31, 2019	4,606,559	$	23.05	6.66
Granted	1,105,925	$	23.99
Exercised	(3,811)	$	8.33
Forfeited	(25,275)	$	28.12
Outstanding, March 31, 2020 (unaudited)	5,683,398	$	23.22	7.08

As of December 31, 2019:
Vested and expected to vest	4,606,559	$	23.05	6.66
Exercisable	2,598,112	$	15.68	5.48

As of March 31, 2020:
Vested and expected to vest	5,683,398	$	23.22	7.08
Exercisable	3,394,315	$	18.71	5.75

Convertible Senior Notes Due 2023

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Convertible Senior Notes Due 2023

The 0.625% Convertible Senior Notes Due 2023 (2023 Notes), which were issued in March 2018, bear interest at an annual rate of 0.625%, payable semi-annually in arrears on April 1 and October 1 of each year. The 2023 Notes will mature on April 1, 2023, unless earlier converted or repurchased by the Company. The Notes are being amortized to interest expense at an effective interest rate of 5.41% over the contractual term of the 2023 Notes. The Company may not redeem the 2023 Notes at its option before maturity. The total principal amount of 2023 Notes is $402.5 million.

The 2023 Notes were issued pursuant to an 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 does not contain any financial or operating covenants or restrictions on the payment of dividends, the issuance of other indebtedness, or the issuance or repurchase of securities by the Company.

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. In the event of conversion, if converted in cash, the holders would forgo all future interest payments, any unpaid accrued interest, and the possibility of further stock price appreciation.

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.

Contemporaneous with the issuance of the 2023 Notes, the Company also entered into separate privately negotiated convertible note hedge transactions (collectively, the Convertible Note Hedge Transactions) with each of the call spread counterparties. The Company issued 402,500 convertible note hedge options. 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 to pay cash to the Company in a similar amount as the value that the Company delivers to the holders of the 2023 Notes, based on a conversion price of $59.33 per share.

Concurrently with entering into the Convertible Note Hedge Transactions, the Company also entered into separate privately negotiated warrant transactions (collectively, the Warrant Transactions) with each of the call spread counterparties. The Company issued a total of 6,783,939 warrants. The warrants entitle the holder to one share per warrant. The strike price of the Warrant Transactions will initially be $80.9063 per share of the Company’s common stock, and is subject to adjustment.

The Convertible Note Hedge Transactions are expected to reduce the potential dilution of 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.

The liability component of the 2023 Notes consists of the following, (dollars in thousands):


	March 31, 2020		December 31, 2019
	(unaudited)
2023 Notes	$	402,500	$	402,500
Unamortized debt discount and deferred financing costs	(53,268)		(57,330)
Total carrying value	$	349,232	$	345,170

No 2023 Notes were converted as of March 31, 2020

Summary of Significant Accounting Policies - Share-based Compensation (Details)	3 Months Ended
	Mar. 31, 2020
Share-Based Payments
Maximum contractual term of share-based grants	10 years
RSUs
Share-Based Payments
Vesting period	1 year

Other Income (Expense) (Details) - USD ($) $ in Thousands	3 Months Ended
Other Income (Expense) (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019
Other Income and Expenses [Abstract]
Interest income	$ 5,777	$ 4,681
Interest expense	(4,693)	(4,710)
Interest expense on nonrecourse liability related to sale of future royalties	(1,062)	(1,160)
Total other income (expense)	22	(1,189)
Non-cash interest expense	$ 4,061	$ 3,848