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Discontinued Operations, Assets Held for Sale (Notes)
 6 Months Ended
Jun. 30, 2016
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations,Assets Held for Sale
Discontinued Operations, Assets Held for Sale

During the fourth quarter of 2015, The Company sold its rights to its commercial products Abstral® (fentanyl) Sublingual Tablets and Zuplenz® (ondansetron) Oral Soluble Film.

The Company entered into an agreement with a third party firm to assist the company with the divestiture of its commercial operations including identifying potential acquirers. Pursuant to the terms of the agreement, the Company paid a success fee to the third party firm in an amount of $900,000 and agreed to pay 5% of realized future revenue and payment streams.

The Company entered into compensatory arrangements related to the divestiture of our commercial business with certain members of commercial management. Under the terms of these arrangements, the Company paid a retention fee to the three employees in a combined total amount equal to $352,000 or 3% of cash consideration received as upfront payment in the transactions. These employees also received severance payments equal to one month’s salary for between four and seven months. In addition to these compensatory agreements loss from discontinued operations includes one-time termination benefits provided to employees who were part of the commercial business and did not accept employment opportunities at the companies that purchased Abstral and Zuplenz.

The following table describes the net proceeds from the sale and the assets and liabilities sold, net of selling costs (in thousands):
 
Sale of Abstral and related assets on November 19, 2015

 
Sale of Zuplenz and related assets on December 24, 2015

Net proceeds from sales
 
 
 
Total consideration
$
8,348

 
$
3,750

Less selling costs*
(815
)
 
(1,050
)
Proceeds from sale, net of selling costs
$
7,533

 
$
2,700

*Selling costs related to the sale of Zuplenz and related assets were included in accrued liabilities as of December 31, 2015 and were paid in the first quarter of 2016. All other amounts were received or paid in the fourth quarter of 2015.

In addition to the upfront proceeds received from the sale of Abstral and Zuplenz and their related assets, the Company is eligible to receive up to $30 million in future milestone payments based on future net revenue of the products. The additional consideration will be recognized in the period that the net revenue milestones are achieved.

The following table presents amounts related to the discontinued operations in the balance sheets (in thousands):
 
June 30, 2016
 
December 31, 2015
Carrying amounts of assets included as part of discontinued operations:
Accounts receivable, net
$
83

 
$
392

Total current assets of discontinued operations, net
83

 
392

 
 
 
 
Carrying amounts of liabilities included as part of discontinued operations:
Accounts payable
$
1,299

 
$
1,491

Accrued expenses and other current liabilities
2,428

 
4,434

Total current liabilities of discontinued operations
$
3,727

 
$
5,925


The following table represents the components attributable to the commercial operations that are presented in the condensed consolidated statements of operations as discontinued operations (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Net revenue
$
—

 
$
3,382

 
$
—

 
$
6,132

Additional channel obligations
(656
)
 
—

 
(1,666
)
 
—

Cost of revenue
—

 
(468
)
 
—

 
(861
)
Amortization of certain acquired intangible assets
—

 
(442
)
 
—

 
(588
)
Research and development
—

 
(94
)
 
—

 
(179
)
Selling, general, and administrative
(2,233
)
 
(4,581
)
 
(4,614
)
 
(8,921
)
Non-operating income (expense)
—

 
17

 
—

 
—

Impairment charge from classification as assets held for sale
—

 
—

 
—

 
—

Loss from discontinued operations
$
(2,889
)
 
$
(2,186
)
 
$
(6,280
)
 
$
(4,417
)

Additional channel obligations included in discontinued operations in the first half of 2016 is comprised of larger than anticipated rebates of Abstral sales for which we are responsible for through the end of the first quarter of 2016. The increase in rebates was driven by larger than expected volumes through these rebate channels and additional price protection provisions over which the Company has no control. The increase in rebates was partially offset by lower than expect patient assistance program reimbursement.
Selling, general and administrative expense included in discontinued operations consists of all other expenses of our commercial operations that are required in order to market and sell our marketed products. These expenses include all personnel related costs, marketing, data, consulting, legal, and other outside services necessary to support the commercial operations. During the three and months ended June 30,2016 we incurred $2.2 million and $4.6 million respectively, in selling, general, and administrative expense in discontinued operations. of which $2.2 million and $4.4 million, for the three and six months ended June 30, 2016, respectively, related to legal fees from external counsel associated with document production for the subpoenas related to the sales and marketing practices of Abstral. These legal proceedings are further disclosed in Part II., Item 1.

The following table presents significant operating non-cash items and capital expenditures related to discontinued operations (in thousands):
 
June 30, 2016
 
June 30, 2015
Depreciation and amortization
$
—

 
$
20

Stock-based compensation
$
—

 
$
512

Purchases of property and equipment
$
—

 
$
(34
)
Cash paid for acquisition of Zuplenz rights
$
—

 
$
(500
)