12. Prior-Period Financial Statements

The Company adopted ASC 606 on January 1, 2018 using the full retrospective method and as a result the Company has revised its comparative financial statements for the prior period as if ASC 606 had been in effect for that period.

The most significant changes to revenue recognition under ASC 606 relate to the timing of revenue recognized for arrangements that include licensing of our technologies. Under ASC 606 revenue related to licensing of access to our technologies is recognized at inception of the agreement, generally the effective date of the agreement. For existing licensing arrangements, the effect of ASC 606 is to shift revenue to earlier periods. Approximately $11.3 million of licensing revenue that was being recognized over the five-year period 2016-2021 is being recognized in the second quarter of 2016.

The other significant change under ASC 606 relates to the timing of collaboration revenue when the Company completes its performance obligations for delivery of a drug candidate to its collaboration partners after applying its technologies. For existing collaborations, the effect of ASC 606 is to accelerate revenue recognition to earlier periods. Approximately $6.25 million of collaboration revenue recognized in 2017 and 2018 under historical accounting guidance is being recognized in 2016 under ASC 606. An additional $20.5 million of collaboration revenue that would be recognized in 2018 is being recognized in 2017. The following tables summarize the effects of adopting ASC topic 606 on our financial statements.

Balance Sheet


	As Reported December 31,		Effect of Adoption of		As Revised December 31,
	2017		ASC 606		2017

Assets
Current assets
Cash and cash equivalents	$	16,528	$	—	$	16,528
Marketable securities		207,603		—		207,603
Accounts receivable		1,142		—		1,142
Prepaid expenses and other current assets		5,606		—		5,606
Total current assets		230,879		—		230,879
Property and equipment, net		7,088		—		7,088
Patents, licenses, and other intangible assets, net		11,148		—		11,148
Marketable securities - long term		139,198		—		139,198
Income tax receivable		1,524		—		1,524
Loan receivable		—		86		86
Interest receivable		—		14		14
Other assets		265		—		265
Total assets	$	390,102	$	100	$	390,202
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	6,869	$	—	$	6,869
Accrued expenses		5,480		—		5,480
Current portion of deferred rent		26		—		26
Current portion of deferred revenue		88,813		(28,695)		60,118
Income taxes		157		—		157
Total current liabilities		101,345		(28,695)		72,650
Deferred rent, less current portion		1,088		—		1,088
Deferred revenue, less current portion		5,623		(5,623)		—
Total liabilities		108,056		(34,318)		73,738
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value: 10,000,000 authorized shares; -0- issued and outstanding shares at December 31, 2017		—		—		—
Common stock, $0.01 par value: 200,000,000 authorized shares at December 31, 2017; 47,002,488 issued and outstanding at December 31, 2017		470		—		470
Additional paid-in capital		570,670		—		570,670
Accumulated other comprehensive income loss		(1,808)		—		(1,808)
Accumulated deficit		(287,286)		34,418		(252,868)
Stockholders’ equity		282,046		34,418		316,464
Total liabilities and stockholders’ equity	$	390,102	$	100	$	390,202

Statement of Operation


	As Reported				As Revised
	Year Ended		Effect of		Year Ended
	December 31,		Adoption of		December 31,
	2017		ASC 606		2017

Revenue
Collaborations, licenses and milestones	$	35,711	$	10,439	$	46,150
Operating expenses
Research and development		71,772		—		71,772
General and administrative		17,501		—		17,501
Total operating expenses		89,273		—		89,273
Loss from operations		(53,562)		10,439		(43,123)
Other income (expenses)
Interest income		4,194		—		4,194
Interest expense		(13)		—		(13)
Other income		(7)		—		(7)
Total other income, net		4,174		—		4,174

Loss before income tax benefit		(49,388)		10,439		(38,949)
Income tax benefit		(463)		—		(463)
Net loss		(48,925)		10,439		(38,486)

Other comprehensive loss
Net unrealized loss on marketable securities		(367)		—		(367)
Comprehensive loss	$	(49,292)	$	10,439	$	(38,853)

Basic and diluted net loss per common share	$	(1.05)	$	0.23	$	(0.82)


	As Reported				As Revised
	Year Ended		Effect of		Year Ended
	December 31,		Adoption of		December 31,
	2016		ASC 606		2016

Revenue
Collaborations, licenses and milestones	$	87,520	$	21,500	$	109,020
Operating expenses
Research and development		51,872		—		51,872
General and administrative		13,108		—		13,108
Total operating expenses		64,980		—		64,980
Income from operations		22,540		21,500		44,040
Other income (expenses)
Interest income		2,091		—		2,091
Interest expense		(21)		—		(21)
Other income		6		—		6
Total other income, net		2,076		—		2,076

Income before income tax expense		24,616		21,500		46,116
Income tax expense		991		—		991
Net income		23,625		21,500		45,125

Other comprehensive loss
Net unrealized loss on marketable securities		(925)		—		(925)
Comprehensive income	$	22,700	$	21,500	$	44,200

Basic net income per common share	$	0.57	$	0.52	$	1.09
Diluted net income per common share	$	0.56	$	0.51	$	1.07

Statement of Stockholders’ Equity


						Accumulated
				Additional		Other				Total
	Common Stock			Paid		Comprehensive		Accumulated		Stockholders’
Stockholders’ Equity	Shares	Amount		in-Capital		Loss		Deficit		Equity
Balance, December 31, 2016 as originally reported	46,567,978	$	466	$	552,889	$	(1,441)	$	(237,960)	$	313,954
Adoption of ASU 2016-09	—		—		401		—		(401)		—
Adoption of ASC 606	—		—		—		—		23,979		23,979
Balance, December 31, 2016 as revised	46,567,978		466		553,290		(1,441)		(214,382)		337,933
Issuance of common stock upon exercise of stock awards	363,603		4		2,793		—		—		2,797
Issuance of common stock under the Employee Stock Purchase Plan	70,907		—		936		—		—		936
Comprehensive loss	—		—		—		(367)		(48,925)		(49,292)
Stock-based compensation	—		—		13,651		—		—		13,651
Balance, December 31, 2017	47,002,488	$	470	$	570,670	$	(1,808)	$	(263,307)	$	306,025
Adoption of ASC topic 606	—		—		—		—		10,439		10,439
Balance, December 31, 2017 as revised	47,002,488	$	470	$	570,670	$	(1,808)	$	(252,868)	$	316,464


						Accumulated
				Additional		Other				Total
	Common Stock			Paid		Comprehensive		Accumulated		Stockholders’
Stockholders’ Equity	Shares	Amount		in-Capital		Loss		Deficit		Equity
Balance, December 31, 2015 as originally reported	40,551,039	$	405	$	424,128	$	(516)	$	(261,585)	$	162,432
Adoption of ASC Topic 606	—		—		—		—		2,479		2,479
Balance, December 31, 2015 as revised	40,551,039		405		424,128		(516)		(259,106)		164,911
Sale of common stock, net of issuance cost	5,272,750		53		119,216		—		—		119,269
Issuance of common stock upon exercise of stock awards	699,066		7		1,153		—		—		1,160
Issuance of common stock under the Employee Stock Purchase Plan	45,123		1		544		—		—		545
Comprehensive income (loss)	—		—		—		(925)		23,625		22,700
Stock-based compensation	—		—		7,848		—		—		7,848
Balance, December 31, 2016	46,567,978		466		552,889		(1,441)		(235,481)		316,433
Adoption of ASC Topic 606	—		—		—		—		21,500		21,500
Balance, December 31, 2016 as revised	46,567,978	$	466	$	552,889	$	(1,441)	$	(213,981)	$	337,933

Statement of Cash Flows


	As Reported				As Revised
	Year Ended		Effect of		Year Ended
	December 31,		Adoption of		December 31,
	2017		ASC 606		2017
Cash flows from operating activities
Net loss	$	(48,925)	$	10,439	$	(38,486)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,030		—		2,030
Amortization of premium on marketable securities		2,845		—		2,845
Stock-based compensation		13,651		—		13,651
Abandonment of capitalized intangible assets		396		—		396
Loss on disposal of assets		83		—		83
Changes in operating assets and liabilities:
Accounts receivable		7,474		—		7,474
Interest receivable		(293)		(14)		(307)
Prepaid expenses and other assets		(2,705)		—		(2,705)
Income tax receivable		(1,524)		—		(1,524)
Other assets		(161)		—		(161)
Accounts payable		2,989		—		2,989
Accrued expenses		(1,212)		—		(1,212)
Deferred rent		589		—		589
Income tax payable		91		—		91
Deferred revenue		(9,011)		(10,339)		(19,350)
Net cash used in operating activities		(33,683)		86		(33,597)
Cash flows from investing activities
Proceeds from sale and maturities of marketable securities available-for-sale		115,757		—		115,757
Purchase of marketable securities		(76,529)		—		(76,529)
Purchase of intangible assets		(1,967)		—		(1,967)
Purchase of property and equipment		(5,311)		—		(5,311)
Issuance of loan		—		(86)		(86)
Net cash provided by (used in) investing activities		31,950		(86)		31,864
Cash flows from financing activities
Proceeds from issuance of common stock upon exercise of stock awards		2,797		—		2,797
Proceeds from issuance of common stock from Employee Stock Purchase Plan		936		—		936
Net cash provided by financing activities		3,733		—		3,733
Net increase in cash and cash equivalents		2,000		—		2,000
Cash and cash equivalents, beginning of period		14,528		—		14,528
Cash and cash equivalents, end of period	$	16,528	$	—	$	16,528











	As Reported				As Revised
	Year Ended		Effect of		Year Ended
	December 31,		Adoption of		December 31,
	2016		ASC 606		2016
Cash flows from operating activities
Net income	$	23,625	$	21,500	$	45,125
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,466		—		1,466
Amortization of premium on marketable securities		2,037		—		2,037
Stock-based compensation		7,848		—		7,848
Abandonment of capitalized intangible assets		356		—		356
Gain on sale of marketable securities available for sale		(5)		—		(5)
Changes in operating assets and liabilities:
Accounts receivable		(8,572)		—		(8,572)
Interest receivable		(530)		(79)		(609)
Prepaid expenses and other assets		(1,700)		—		(1,700)
Other assets		(40)		—		(40)
Accounts payable		(2,520)		—		(2,520)
Accrued expenses		3,058		—		3,058
Deferred rent		(89)		—		(89)
Deferred tax liability		65		—		65
Deferred revenue		69,618		(20,800)		48,818
Net cash provided by operating activities		94,617		621		95,238
Cash flows from investing activities
Proceeds from sale and maturities of marketable securities available-for-sale		105,505		—		105,505
Purchase of marketable securities		(316,149)		—		(316,149)
Purchase of intangible assets		(1,502)		—		(1,502)
Purchase of property and equipment		(1,507)		—		(1,507)
Proceeds from repayment of (investment in) loan receivable		—		(621)		(621)
Net cash used in investing activities		(213,653)		(621)		(214,274)
Cash flows from financing activities
Proceeds from issuance of common stock upon exercise of stock awards		1,160		—		1,160
Proceeds from issuance of common stock from Employee Stock Purchase Plan		545		—		545
Proceeds from issuance of common stock		126,546		—		126,546
Common stock issuance costs		(7,277)		—		(7,277)
Net cash provided by financing activities		120,974		—		120,974
Net increase in cash and cash equivalents		1,938		—		1,938
Cash and cash equivalents, beginning of period		12,590		—		12,590
Cash and cash equivalents, end of period	$	14,528	$	—	$	14,528