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Revenue recognition | 3 Months Ended
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Mar. 31, 2018
Revenue from Contract with Customer [Abstract] |
Revenue recognition | Revenue recognition Net product sales The Company views its operations and manages its business in one operating segment. During the three months ended March 31, 2018, net product sales in the United States was $19.2 million, consisting solely of Emflaza, and net product sales not in the United States was $36.8 million, consisting solely of Translarna. The following table presents changes in the Company’s contract liabilities for the three months ended March 31, 2018:
|  | Balance as of December 31, 2017 |  | Additions |  | Deductions |  | ASC 606 Adjustment |  | Balance as of March 31, 2018
Deferred Revenue |  | $ | 11,891 |  |  | $ | 1,346 |  |  | $ | — |  |  | $ | (3,937 | ) |  | $ | 9,300.265 |
The Company did not have any contract assets for the three months ended March 31, 2018. During the three months ended March 31, 2018, the Company recognized revenue in the period from:
|  | March 31, 2018
Amounts included in contract liabilities at the beginning of the period |  | $ | — |
Performance obligations satisfied in previous period |  | — |
Performance obligations satisfied in current period |  | 55,981 |
Total product revenue |  | $ | 55,981 |
The Company has not made significant changes to the judgments made in applying ASC Topic 606 for the three months ended March 31, 2018. Remaining performance obligations Remaining performance obligations represent the transaction price for goods the Company has yet to provide. As of March 31, 2018, the aggregate amount of transaction price allocated to remaining performance obligations relating to Translarna net product revenue was $9.3 million. The Company expects to recognize revenue over the next two to four years as the specific timing for satisfying the performance obligations is contingent upon a number of factors, including customers’ needs and schedules. The impact of adoption using the modified retrospective method on the Company’s consolidated financial statements is as follows: i.Consolidated balance sheets
|  | Impact of changes in accounting policies
|  | As reported March 31, 2018 |  | Adjustments |  | As reported Balances without adoption of Topic 606
Assets |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 97,675 |  |  | $ | — |  |  | $ | 97,675 |
Marketable securities |  | 80,595 |  |  | — |  |  | 80,595 |
Trade receivables, net |  | 45,611 |  |  | — |  |  | 45,611 |
Inventory |  | 12,355 |  |  | 80 |  |  | 12,435 |
Prepaid expenses and other current assets |  | 5,760 |  |  | — |  |  | 5,760 |
Total current assets |  | 241,996 |  |  | 80 |  |  | 242,076 |
Fixed assets, net |  | 8,302 |  |  | — |  |  | 8,302 |
Intangible assets, net |  | 127,565 |  |  | — |  |  | 127,565 |
Deposits and other assets |  | 1,548 |  |  | — |  |  | 1,548 |
Total assets |  | $ | 379,411 |  |  | $ | 80 |  |  | $ | 379,491 |
Liabilities and stockholders’ equity |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |
Accounts payable and accrued expenses |  | $ | 71,437 |  |  | $ | (839 | ) |  | $ | 70,598 |
Deferred revenue |  | — |  |  | 4,935 |  |  | 4,935 |
Other current liabilities |  | 1,279 |  |  | — |  |  | 1,279 |
Total current liabilities |  | 72,716 |  |  | 4,096 |  |  | 76,812 |
Deferred revenue - long-term |  | 9,300 |  |  | — |  |  | 9,300 |
Long-term debt |  | 146,878 |  |  | — |  |  | 146,878 |
Other long-term liabilities |  | 209 |  |  | — |  |  | 209 |
Total liabilities |  | 229,103 |  |  | 4,096 |  |  | 233,199 |
Stockholders’ equity: |  |  |  |  |  |  |
Common stock |  | 42 |  |  | — |  |  | 42 |
Additional paid-in capital |  | 975,418 |  |  | — |  |  | 975,418 |
Accumulated other comprehensive income |  | 4,953 |  |  | — |  |  | 4,953 |
Accumulated deficit |  | (830,105 | ) |  | (4,016 | ) |  | (834,121 | )
Total stockholders’ equity |  | 150,308 |  |  | (4,016 | ) |  | 146,292 |
Total liabilities and stockholders’ equity |  | $ | 379,411 |  |  | $ | 80 |  |  | $ | 379,491 |
ii.Consolidated statements of operations
|  | Impact of changes in accounting policies
|  | As reported for the period ended March 31, 2018 |  | Adjustments |  | As reported Balances without adoption of Topic 606
Revenues: |  |  |  |  |  |  |  |
Net product revenue |  | $ | 55,981 |  |  | $ | (829 | ) |  | $ | 55,152 |
Collaboration and grant revenue |  | 81 |  |  | — |  |  | 81 |
Total revenues |  | 56,062 |  |  | (829 | ) |  | 55,233 |
Operating expenses: |  |  |  |  |  |  |  |
Cost of product sales, excluding amortization of acquired intangible asset |  | 3,045 |  |  | (80 | ) |  | 2,965 |
Amortization of acquired intangible asset |  | 5,428 |  |  | — |  |  | 5,428 |
Research and development |  | 31,363 |  |  | — |  |  | 31,363 |
Selling, general and administrative |  | 32,969 |  |  | — |  |  | 32,969 |
Total operating expenses |  | 72,805 |  |  | (80 | ) |  | 72,725 |
Loss from operations |  | (16,743 | ) |  | (749 | ) |  | (17,492 | )
Interest expense, net |  | (3,303 | ) |  | — |  |  | (3,303 | )
Other income, net |  | 1,004 |  |  | — |  |  | 1,004 |
Loss before income tax expense |  | (19,042 | ) |  | (749 | ) |  | (19,791 | )
Income tax expense |  | (221 | ) |  | — |  |  | (221 | )
Net loss attributable to common stockholders |  | $ | (19,263 | ) |  | $ | (749 | ) |  | $ | (20,012 | )
iii.Consolidated statements of comprehensive loss
|  | Impact of changes in accounting policies
|  | As reported for the period ended March 31, 2018 |  | Adjustments |  | As reported Balances without adoption of Topic 606
Net loss |  | $ | (19,263 | ) |  | $ | (749 | ) |  | $ | (20,012 | )
Other comprehensive loss: |  |  |  |  |  |  |  |
Unrealized loss on marketable securities, net of tax |  | (123 | ) |  | — |  |  | (123 | )
Foreign currency translation gain |  | 1,107 |  |  | — |  |  | 1,107 |
Comprehensive loss |  | $ | (18,279 | ) |  | $ | (749 | ) |  | $ | (19,028 | )
iv.Consolidated statements of cash flows
|  | Impact of changes in accounting policies
|  | As reported for the period ended March 31, 2018 |  | Adjustments |  | Balances without adoption of Topic 606
Cash flows from operating activities |  |  |  |  |  |  |  |
Net loss |  | $ | (19,263 | ) |  | $ | (749 | ) |  | $ | (20,012 | )
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization |  | 6,022 |  |  | — |  |  | 6,022 |
Non-cash interest expense |  | 1,780 |  |  | — |  |  | 1,780 |
Amortization of premiums on investments |  | (96 | ) |  | — |  |  | (96 | )
Amortization of debt issuance costs |  | 126 |  |  | — |  |  | 126 |
Share-based compensation expense |  | 7,748 |  |  | — |  |  | 7,748 |
Unrealized foreign currency transaction losses, net |  | (1,300 | ) |  | — |  |  | (1,300 | )
Changes in operating assets and liabilities: |  |  |  |  |  |  | 0 |
Inventory, net |  | (1,446 | ) |  | (80 | ) |  | (1,526 | )
Prepaid expenses and other current assets |  | 958 |  |  | — |  |  | 958 |
Trade receivables, net |  | (4,223 | ) |  | — |  |  | (4,223 | )
Deposits and other assets |  | (308 | ) |  | — |  |  | (308 | )
Accounts payable and accrued expenses |  | (6,810 | ) |  | (839 | ) |  | (7,649 | )
Other liabilities |  | (475 | ) |  | — |  |  | (475 | )
Deferred revenue |  | 1,409 |  |  | 1,668 |  |  | 3,077 |
Net cash used in operating activities |  | (15,878 | ) |  | — |  |  | (15,878 | )
Cash flows from investing activities |  |  |  |  |  |  |  |
Purchases of fixed assets |  | (479 | ) |  | — |  |  | (479 | )
Purchases of marketable securities |  | (22,683 | ) |  | — |  |  | (22,683 | )
Sale and redemption of marketable securities |  | 21,514 |  |  | — |  |  | 21,514 |
Net cash used in investing activities |  | (1,648 | ) |  | — |  |  | (1,648 | )
Cash flows from financing activities |  |  |  |  |  |  |  |
Proceeds from exercise of options |  | 1,136 |  |  | — |  |  | 1,136 |
Net cash provided by financing activities |  | 1,136 |  |  | — |  |  | 1,136 |
Effect of exchange rate changes on cash |  | 2,273 |  |  | — |  |  | 2,273 |
Net decrease in cash and cash equivalents |  | (14,117 | ) |  | — |  |  | (14,117 | )
Cash and cash equivalents, beginning of period |  | 111,792 |  |  | — |  |  | 111,792 |
Cash and cash equivalents, end of period |  | $ | 97,675 |  |  | $ | — |  |  | $ | 97,675 |
Collaboration revenue The Company has ongoing collaborations with the Spinal Muscular Atrophy Foundation (SMA Foundation) and F. Hoffman-La Roche Ltd and Hoffman- La Roche Inc. (collectively, Roche) and early stage discovery arrangements with other institutions. The following are the key terms to the Company’s (i) ongoing collaborations and (ii) early stage discovery and development arrangements. Roche and SMA Foundation In November 2011, the Company and the SMA Foundation entered into a licensing and collaboration agreement with Roche for a spinal muscular atrophy program. Under the terms of the agreement, Roche acquired an exclusive worldwide license to the Company’s spinal muscular atrophy program, which includes three compounds currently in preclinical development, as well as potential back-up compounds. The Company received a nonrefundable upfront cash payment of $30.0 million during the research term, which was terminated effective December 31, 2014, after which Roche provided the Company with funding, based on an agreed- upon full-time equivalent rate, for an agreed-upon number of full- time equivalent employees that the Company contributed to the research program. The Company identified two material promises in the collaboration agreement, the license and the research activities. The Company evaluated whether these material promises are distinct and determined that the license does not have standalone functionality and there is a significant integration of the license and research activities. As such, both promises were bundled into one distinct performance obligation. As a result, the Company deferred the $30.0 million upfront payment which was recognized over the estimated performance period of two years, which was the contracted research period. As of adoption of ASC Topic 606 on January 1, 2018, all performance obligations had been satisfied and the balance of the remaining deferred upfront payment was fully recognized. Under the agreement, the Company is eligible to receive additional payments from Roche if specified events are achieved with respect to each licensed product, including up to $135.0 million in research and development event milestones, up to $325.0 million in sales milestones upon achievement of sales events, and up to double digit royalties on worldwide annual net sales of a commercial product. In January 2014, the Company announced the initiation of a Phase 1 clinical program in its spinal muscular atrophy collaboration with Roche and the SMA Foundation which triggered a $7.5 million milestone payment from Roche. Under ASC Topic 605, the Company considered this milestone event substantive because the applicable criteria of its revenue recognition policy would be satisfied and recorded it as collaboration revenue for the year ended December 31, 2014. In November 2014, the Company announced the initiation of a Phase 2 study in adult and pediatric patients in its spinal muscular atrophy collaboration with Roche and the SMA Foundation which triggered a $10 million payment from Roche. Under ASC Topic 605, the Company considered this milestone event substantive because the applicable criteria of its revenue recognition policy would be satisfied and recorded it as collaboration revenue for the year ended December 31, 2014. In October 2017, the Company announced that the Sunfish, a two-part clinical trial in pediatric and adult type 2 and type 3 spinal muscular atrophy initiated in the fourth quarter of 2016 with Roche and SMA Foundation, had transitioned into the pivotal second part of its study. The achievement of this milestone triggered a $20.0 million payment to the Company from Roche. Under ASC Topic 605, the Company considered this milestone event substantive because the applicable criteria of its revenue recognition policy would be satisfied and recorded it as collaboration revenue for the year ended December 31, 2017. For the three months ended March 31, 2018 and 2017, the Company recognized revenue related to the licensing and collaboration agreement with Roche of $0.1 million and $0.1 million, respectively. Early stage collaboration and discovery agreements From time to time, the Company has arrangements with several organizations pursuant to which the Company uses its discovery technologies to help identify potential drug candidates. The Company does not take ownership of the potential compounds, but rather provides research services to the collaborator using its specialized technology platform. Generally, these arrangements are structured such that the collaborator and the Company work together to jointly select targets from which to apply its discovery technologies. The research period for the Company to apply its technology is generally three to four years. The Company will typically receive a nonrefundable, upfront cash payment and the collaborator agrees to provide funding for research activities performed on its behalf. Generally, the two material promises in these arrangements are the license and the research activities. The Company evaluated whether these material promises are distinct and determined that the license does not have standalone functionality and there is a significant integration of the license and research activities. As such, both promises are bundled into one distinct performance obligation. As of adoption of ASC Topic 606 on January 1, 2018, all deferred revenue related to these arrangements had been recognized. For the three months ended March 31, 2018 and 2017, the Company did not recognize any revenue related to discovery agreements. The Company is eligible to receive additional payments from its early stage discovery research arrangements if the discovery compounds are ultimately developed and commercialized. The aggregate potential payments the Company is eligible for if all products are developed is $143.0 million and up to $252.0 million in sales milestones upon achievement of specified sales events and up to double digit royalties on worldwide annual net sales of the licensed product. The Company will recognize revenue when it is probable the milestones will be achieved (see Note 2). For the three months ended March 31, 2018 and 2017, the Company did not recognize any revenue related to early stage collaborations.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
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