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September 30, 2018

Estimated useful life

Acquired and in-licensed rights

Less: accumulated amortization

Total intangible assets, net

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2018	Nov. 02, 2018
Document and Entity Information
Entity Registrant Name	Verastem, Inc.
Entity Central Index Key	0001526119
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		73,740,167
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Entity Small Business	true
Entity Emerging Growth Company	false

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 130,727	$ 82,176
Short-term investments	14,912	4,496
Accounts receivable, net	10,562
Inventory	131
Prepaid expenses and other current assets	2,397	1,115
Total current assets	158,729	87,787
Property and equipment, net	1,210	861
Intangible assets, net	21,969
Restricted cash	242	162
Other assets	1,005	981
Total assets	183,155	89,791
Current liabilities:
Accounts payable	11,249	9,186
Accrued expenses	38,664	7,942
Current portion of long-term debt	3,528
Total current liabilities	53,441	17,128
Non-current liabilities:
Long-term debt	21,535	14,828
Other non-current liabilities	566	151
Total liabilities	75,542	32,107
Stockholders' equity
Preferred stock, $0.0001 par value; 5,000 shares authorized, no shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively
Common stock, $0.0001 par value; 100,000 shares authorized, 73,703 and 50,801 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively	7	5
Additional paid-in capital	471,831	360,823
Accumulated other comprehensive income (loss)	2	(2)
Accumulated deficit	(364,227)	(303,142)
Total stockholders' equity	107,613	57,684
Total liabilities and stockholders' equity	$ 183,155	$ 89,791

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2018	Dec. 31, 2017
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	73,703,000	50,801,000
Common stock, shares outstanding	73,703,000	50,801,000

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenue
Total revenue	$ 15,508,000		$ 25,508,000
Operating expenses:
Costs of revenues, excluding amortization of acquired intangible assets	49,000		49,000
Research and development	11,571,000	$ 17,743,000	34,886,000	$ 35,170,000
Selling, general and administrative	25,426,000	5,394,000	51,066,000	14,582,000
Amortization of acquired intangible assets	31,000		31,000
Total operating expenses	37,077,000	23,137,000	86,032,000	49,752,000
Loss from operations	(21,569,000)	(23,137,000)	(60,524,000)	(49,752,000)
Interest income	763,000	121,000	1,297,000	416,000
Interest expense	(862,000)	(110,000)	(1,858,000)	(231,000)
Net loss	$ (21,668,000)	$ (23,126,000)	$ (61,085,000)	$ (49,567,000)
Net loss per share - basic and diluted	$ (0.29)	$ (0.61)	$ (0.99)	$ (1.33)
Weighted-average number of common shares used in net loss per share-basic and diluted (in shares)	73,644	37,630	61,995	37,207
Net loss	$ (21,668,000)	$ (23,126,000)	$ (61,085,000)	$ (49,567,000)
Unrealized (loss) gain on available-for-sale securities	(2,000)	7,000	4,000	(27,000)
Comprehensive loss	(21,670,000)	$ (23,119,000)	(61,081,000)	$ (49,594,000)
License
Revenue
Total revenue	15,000,000		25,000,000
Product
Revenue
Total revenue	$ 508,000		$ 508,000

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Operating activities
Net loss	$ (61,085,000)	$ (49,567,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	892,000	428,000
Amortization of acquired intangible assets	31,000
Stock-based compensation expense	4,908,000	4,070,000
Amortization of deferred financing costs, debt discounts and premiums and discounts on available-for-sale marketable securities	335,000	170,000
Gain on sale of fixed assets	(79,000)
Changes in operating assets and liabilities:
Accounts receivable, net	(10,562,000)
Inventory	(131,000)
Prepaid expenses, other current assets and other assets	(1,145,000)	(571,000)
Accounts payable	2,108,000	3,268,000
Accrued expenses and other liabilities	9,401,000	5,219,000
Net cash used in operating activities	(55,327,000)	(36,983,000)
Investing activities
Purchases of property and equipment	(1,244,000)
Sales of property and equipment	82,000
Purchases of investments	(14,912,000)	(6,461,000)
Maturities of investments	4,500,000	45,905,000
Net cash (used in) provided by investing activities	(11,574,000)	39,444,000
Financing activities
Proceeds from long-term debt, net	9,900,000	2,386,000
Deferred debt financing costs		(138,000)
Proceeds from the exercise of stock options	637,000	91,000
Proceeds from the issuance of common stock, net	105,156,000	14,121,000
Net cash provided by financing activities	115,693,000	16,460,000
Increase in cash, cash equivalents and restricted cash	48,792,000	18,921,000
Cash, cash equivalents and restricted cash at beginning of period	82,338,000	32,511,000
Cash, cash equivalents and restricted cash at end of period	131,130,000	$ 51,432,000
Supplemental disclosure of non-cash investing activities
Acquired intangible assets included in intangible assets, net and accrued expenses	22,000,000
Supplemental disclosure of non-cash financing activities
Common stock issuance costs included in accounts payable and accrued expenses	$ 15,000

Nature of business	9 Months Ended
Nature of business	Sep. 30, 2018
Nature of business
Nature of business	1. Nature of business Verastem, Inc. (the Company) is a biopharmaceutical company focused on developing and commercializing medicines to improve the survival and quality of life of cancer patients. On September 24, 2018, the Company’s first commercial product, COPIKTRA™ (duvelisib), was approved by the U.S. Food and Drug Administration (the FDA) for the treatment of patients with hematologic cancers including chronic lymphocytic leukemia and small lymphocytic lymphoma (CLL/SLL) and follicular lymphoma (FL). Both its marketed product, COPIKTRA, and most advanced product candidate, defactinib, utilize a multi-faceted approach designed to treat cancers originating either in the blood or major organ systems. The Company is currently developing its product candidates in both preclinical and clinical studies as potential therapies for certain cancers, including leukemia, lymphoma, lung cancer, ovarian cancer, mesothelioma, and pancreatic cancer. The Company believes that these compounds may be beneficial as therapeutics either as single agents or when used in combination with immuno-oncology agents or other current and emerging standard of care treatments in aggressive cancers that are poorly served by currently available therapies. The Company is subject to a number of risks similar to other life science companies, including, but not limited to, possible failure of preclinical testing or clinical trials, competitors developing new technological innovations, market acceptance and the successful commercialization of COPIKTRA, or any of the Company’s investigational product candidates following receipt of regulatory approval and protection of proprietary technology. If the Company does not successfully commercialize COPIKTRA or any of its other product candidates, it will be unable to generate product revenue or achieve profitability and may need to raise additional capital. The Company has historical losses from operations and anticipates that it will continue to incur losses for the foreseeable future as it continues the commercialization of COPIKTRA and the research and development of its product candidates. As of September 30, 2018, the Company had cash, cash equivalents and investments of $145.6 million and accumulated deficit of $364.2 million. In October 2018, the Company closed a registered direct public offering of $150.0 million aggregate principal amount of the Company’s 5.00% Convertible Senior Notes due 2048 (the Notes), for net proceeds of approximately $145.1 million. The Company expects that its cash, cash equivalents and investments will be sufficient to fund its obligations for at least twelve months from the date of issuance of these condensed consolidated financial statements.

Summary of significant accounting policies

9 Months Ended

Sep. 30, 2018

Summary of significant accounting policies

Summary of significant accounting policies

2. Summary of significant accounting policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2018. For further information, refer to the financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission (SEC) on March 13, 2018.

Significant Accounting Policies

The significant accounting policies identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 that require the Company to make estimates and assumptions include accrued research and development expenses and stock-based compensation. During the nine months ended September 30, 2018, there were no material changes to the significant accounting policies, except for the adoption of Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, issued by the Financial Accounting Standards Board (the FASB), as well as significant accounting policies over revenue recognition, collaborative arrangements, accounts receivable, inventory and intangible assets, each of which is detailed below.

Revenue Recognition

Effective January 1, 2018, the Company adopted ASC 606. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five step assessment: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception and once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines which goods and services are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Product Revenue, Net – The Company sells COPIKTRA to a limited number of specialty pharmacies and specialty distributors in the United States (collectively, Customers). These Customers subsequently resell COPIKTRA either directly to patients, or to community hospitals or oncology clinics with in-office dispensaries who in turn distribute COPIKTRA to patients. In addition to distribution agreements with Customers, the Company also enters into arrangements with (1) certain government agencies and various private organizations (Third-Party Payers), which may provide for chargebacks or discounts with respect to the purchase of COPIKTRA, and (2) Medicare and Medicaid, which may provide for certain rebates with respect to the purchase of COPIKTRA.

The Company recognizes revenue on sales of COPIKTRA when a Customer obtains control of the product, which occurs at a point in time (typically upon delivery). Product revenues are recorded at the wholesale acquisition costs, net of applicable reserves for variable consideration. Components of variable consideration include trade discounts and allowances, Third-Party Payer chargebacks and discounts, government rebates, other incentives, such as voluntary co-pay assistance, product returns, and other allowances that are offered within contracts between the Company and Customers, payors, and other indirect customers relating to the Company’s sale of COPIKTRA. These reserves, as detailed below, are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts receivable or a current liability. These estimates take into consideration a range of possible outcomes based upon relevant factors such as, Customer contract terms, information received from third parties regarding the anticipated payor mix for COPIKTRA, known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled with respect to sales made.

The amount of variable consideration which is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under contracts will not occur in a future period. The Company’s analyses contemplate the application of the constraint in accordance with ASC 606. For the three and nine months ended September 30, 2018, the Company determined a material reversal of revenue would not occur in a future period for the estimates detailed below and, therefore, the transaction price was not reduced further. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

Trade Discounts and Allowances: The Company generally provides Customers with invoice discounts on sales of COPIKTRA for prompt payment, which are explicitly stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, the Company compensates its specialty distributor Customers for sales order management, data, and distribution services. The Company has determined such services are not distinct from the Company’s sale of COPIKTRA to the specialty distributor Customers and, therefore, these payments have also been recorded as a reduction of revenue within the condensed consolidated statements of operations and comprehensive loss through September 30, 2018.

Third-Party Payer Chargebacks, Discounts and Fees: The Company executes contracts with Third-Party Payers which allow for eligible purchases of COPIKTRA at prices lower than the wholesale acquisition cost charged to Customers who directly purchase the product from the Company. In some cases, Customers charge the Company for the difference between what they pay for COPIKTRA and the ultimate selling price to the Third-Party Payers. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable, net. Chargeback amounts are generally determined at the time of resale to the qualified Third-Party Payer by Customers, and the Company generally issues credits for such amounts within a few weeks of the Customer’s notification to the Company of the resale. Reserves for chargebacks consist of credits that the Company expects to issue for units that remain in the distribution channel inventories at the end of each reporting period that the Company expects will be sold to Third-Party Payers, and chargebacks that Customers have claimed, but for which the Company has not yet issued a credit. In addition, the Company compensates certain Third-Party Payers for administrative services, such as account management and data reporting. These administrative service fees have also been recorded as a reduction of product revenue within the condensed consolidated statements of operations and comprehensive loss through September 30, 2018.

Government Rebates: The Company is subject to discount obligations under state Medicaid programs and Medicare. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses on the condensed consolidated balance sheets. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel inventories at the end of each reporting period.

Other Incentives: Other incentives which the Company offers include voluntary co-pay assistance programs, which are intended to provide financial assistance to qualified commercially-insured patients with prescription drug co-payments required by payors. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to receive for product that has been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period. The adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included as a component of accrued expenses on the condensed consolidated balance sheets.

Product Returns: Consistent with industry practice, the Company generally offers Customers a limited right of return for product that has been purchased from the Company. The Company estimates the amount of its product sales that may be returned by its Customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company estimates product return liabilities using available industry data and its own sales information, including its visibility into the inventory remaining in the distribution channel.

The Company’s limited return policy allows for eligible returns of COPIKTRA for credit under the following circumstances:

Receipt of damaged product;

Shipment errors that were a result of an error by the Company;

Expired product that is returned during the period beginning three months prior to the product’s expiration and ending six months after the expiration date;

Product subject to a recall; and

Product that the Company, at its sole discretion, has specified can be returned for credit.

The Company has not received any returns to date and believes that returns of its products will be minimal.

If taxes should be collected from Customers relating to product sales and remitted to governmental authorities, they will be excluded from product revenue. The Company expenses incremental costs of obtaining a contract when incurred, if the expected amortization period of the asset that the Company would have recognized is one year or less. However, no such costs were incurred during the three and nine months ended September 30, 2018.

Exclusive Licenses of Intellectual Property - The Company may enter into collaboration and licensing arrangements for research and development, manufacturing, and commercialization activities with collaboration partners for the development and commercialization of its product candidates, which have components within the scope of ASC 606. The arrangements generally contain multiple elements or deliverables, which may include (1) licenses, or options to obtain licenses, to the Company's intellectual property, (2) research and development activities performed for the collaboration partner, (3) participation on joint steering committees, and (4) the manufacturing of commercial, clinical or preclinical material. Payments pursuant to these arrangements typically include non-refundable, upfront payments, milestone payments upon the achievement of significant development events, research and development reimbursements, sales milestones, and royalties on future product sales. The amount of variable consideration is constrained until it is probable that the revenue is not at a significant risk of reversal in a future period. The contracts into which the Company enters generally do not include significant financing components.

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its collaboration and license agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract within the scope of ASC 606; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. As part of the accounting for these arrangements, the Company must use significant judgment to determine: a) the number of performance obligations based on the determination under step (ii) above; b) the transaction price under step (iii) above; c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above; and d) the measure of progress in step (v) above. The Company uses judgment to determine whether milestones or other variable consideration, except for royalties, should be included in the transaction price as described further below.

If a license to the Company’s intellectual property is determined to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. In assessing whether a promise or performance obligation is distinct from the other elements, the Company considers factors such as the research, development, manufacturing and commercialization capabilities of the collaboration partner and the availability of its associated expertise in the general marketplace. In addition, the Company considers whether the collaboration partner can benefit from a promise for its intended purpose without the receipt of the remaining elements, whether the value of the promise is dependent on the unsatisfied promise, whether there are other vendors that could provide the remaining promise, and whether it is separately identifiable from the remaining promise. For licenses that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress of each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. The measure of progress, and thereby periods over which revenue should be recognized, is subject to estimates by management and may change over the course of the arrangement. Such a change could have a material impact on the amount of revenue the Company records in future periods.

Customer Options: If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services such as research and development services or manufacturing services, the goods and services underlying the customer options are not considered to be performance obligations at the inception of the arrangement; rather, such goods and services are contingent on exercise of the option, and the associated option fees are not included in the transaction price. The Company evaluates customer options for material rights or options to acquire additional goods or services for free or at a discount. If a customer option is determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. The Company allocates the transaction price to material rights based on the relative standalone selling price, which is determined based on the identified discount and the estimated probability that the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised.

Milestone Payments: At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the respective milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

Royalties: For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements.

Collaborative Arrangements: Contracts are considered to be collaborative arrangements when they satisfy the following criteria defined in ASC 808, Collaborative Arrangements: (i) the parties to the contract must actively participate in the joint operating activity and (ii) the joint operating activity must expose the parties to the possibility of significant risk and rewards, based on whether or not the activity is successful. Payments received from or made to a partner that are the result of a collaborative relationship with a partner, instead of a customer relationship, such as co-development activities, are recorded as a reduction or increase to research and development expense, respectively.

For a complete discussion of the Company’s accounting for its license and collaboration agreements, see Note 14, License and collaboration agreements.

Accounts Receivable, Net

Accounts receivable, net primarily relates to amounts due from Customers, net of applicable revenue reserves, or from the Company’s license and collaboration partners. Accounts receivable are typically due within 31 days. The Company analyzes accounts that are past due for collectability and provides an allowance for receivables when collection becomes doubtful. Given the nature and limited history of collectability of the Company’s accounts receivable, an allowance for doubtful accounts is not deemed necessary at September 30, 2018.

Inventory

The Company capitalizes inventories manufactured in preparation for initiating sales of a product candidate when the related product candidate is considered to have a high likelihood of regulatory approval and the related costs are expected to be recoverable through sales of the inventories. In determining whether or not to capitalize such inventories, the Company evaluates, among other factors, information regarding the product candidate’s safety and efficacy, the status of regulatory submissions and communications with regulatory authorities and the outlook for commercial sales, including the existence of current or anticipated competitive drugs and the availability of reimbursement. In addition, the Company evaluates risks associated with manufacturing the product candidate, including the ability of the Company’s third-party suppliers to complete the validation batches and the remaining shelf life of the inventories. Costs associated with manufacturing product candidates prior to satisfying the inventory capitalization criteria are charged to research and development expense as incurred.

The Company values its inventories at the lower of cost or estimated net realizable value. The Company determines the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and it writes down any excess and obsolete inventories to their estimated realizable value in the period in which the impairment is first identified. Such impairment charges, should they occur, are recorded within cost of product revenues. The determination of whether inventory costs will be realizable requires estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required which would be recorded as a cost of product revenues in the condensed consolidated statements of operations and comprehensive loss.

Shipping and handling costs for product shipments are recorded as incurred in cost of product revenues along with costs associated with manufacturing the product, and any inventory write-downs.

Intangible Assets

The Company records finite-lived intangible assets related to certain capitalized milestone payments at their fair value. These assets are amortized over their remaining useful lives, which are estimated based on the shorter of the remaining underlying patent life or the estimated useful life of the underlying product. Intangible assets are amortized using the economic consumption method if anticipated future revenues can be reasonably estimated. The straight-line method is used when future revenues cannot be reasonably estimated.

The Company assesses its finite-lived intangible assets for impairment at least annually, or if indicators are present or changes in circumstance suggest that impairment may exist. Events that could result in an impairment, or trigger an interim impairment assessment, include the receipt of additional clinical or nonclinical data regarding one of the Company’s drug candidates or a potentially competitive drug candidate, changes in the clinical development program for a drug candidate, or new information regarding potential sales for the drug. If impairment indicators are present or changes in circumstance suggest that impairment may exist, the Company performs a recoverability test by comparing the sum of the estimated undiscounted cash flows of each finite-lived intangible asset to its carrying value on the condensed consolidated balance sheets. If the undiscounted cash flows used in the recoverability test are less than the carrying value, the Company would determine the fair value of the finite-lived intangible asset and recognize an impairment loss if the carrying value of the finite-lived intangible asset exceeds its fair value.

Recently Issued Accounting Standards Updates

In August 2018, the FASB issued Accounting Standards Update (ASU) 2018-15, Intangibles-Goodwill and Other-Internal Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which 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 obtain internal-use software. ASU 2018-15 is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. The Company has not elected to early adopt this standard and is currently evaluating the impact the adoption of the standard will have on its condensed consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements. ASU 2018-13 is effective for all entities for annual and interim periods beginning after December 15, 2019. An entity is permitted to early adopt either the entire standard or only the provisions that eliminate or modify requirements. The Company has not elected to early adopt this standard and is currently evaluating the impact the adoption of the standard will have on its condensed consolidated financial statements and related disclosures.

In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services to be used or consumed in its own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract and services from nonemployees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions accounted for under ASC 606. ASU 2018-07 is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted, but no earlier than the date on which ASC 606 is adopted. The Company has not elected to early adopt this standard and is currently evaluating the impact the adoption of the standard will have on its condensed consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the guidance under FASB Accounting Standards Codification (ASC) Topic 840, Leases, resulting in the creation of FASB ASC Topic 842, Leases. ASU 2016-02 requires lessees to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases. The guidance also eliminates the current real estate-specific provisions for all entities. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides entities with relief from the costs of implementing certain aspects of the new leasing standard, ASU 2016-02. Under the amendments in ASU 2018-11, entities may elect not to restate the comparative periods presented when transitioning to ASC 842 (optional transition method) and lessors may elect not to separate lease and non-lease components when certain conditions are met (lessor relief practical expedient). The optional transition method applies to entities that have not yet adopted ASU 2016-02, which is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. The Company has not elected to early adopt this standard and is currently evaluating the impact the adoption of the standard will have on its condensed consolidated financial statements and related disclosures. The Company’s analysis includes, but is not limited to, reviewing existing leases, reviewing other service agreements for embedded leases, establishing policies and procedures, assessing potential disclosures and evaluating the impact of adoption on the Company’s condensed consolidated financial statements.

Recently Adopted Accounting Standards Updates

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based award require an entity to apply modification accounting under Topic 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and after a modification. ASU 2017-09 was effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard prospectively effective January 1, 2018. The adoption of this ASU did not have an effect on the Company’s condensed consolidated financial statements or related disclosures.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 was effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard effective January 1, 2018. Upon adoption of ASU 2016-18, the Company applied the retrospective transition method for each period presented and included approximately $162,000 of restricted cash in the beginning-of-period and end-of-period cash, cash equivalents and restricted cash balance reflected in the condensed consolidated statements of cash flows for the nine months ended September 30, 2017. A reconciliation of cash, cash equivalents and restricted cash for each period presented is provided in Note 3 to the condensed consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. The standard was effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard effective January 1, 2018. The adoption of this ASU did not have an effect on the Company’s condensed consolidated financial statements or related disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which amends the guidance for accounting for revenue from contracts with customers. This ASU supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. In 2015 and 2016, the FASB issued additional ASUs related to ASC 606 that delayed the effective date of the guidance and clarified various aspects of the new revenue guidance, including principal versus agent considerations, identifying performance obligations, and licensing, and they include other improvements and practical expedients. The Company adopted this new standard on January 1, 2018 using the full retrospective method. There was no change to the Company’s condensed consolidated financial statements as a result of the adoption.

Cash, cash equivalents and restricted cash

9 Months Ended

Sep. 30, 2018

Cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash

3. Cash, cash equivalents and restricted cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands):


	September 30, 2018		December 31, 2017
Cash and cash equivalents	$	130,727	$	82,176
Restricted cash (included in prepaid expenses and other current assets)		161		—
Restricted cash		242		162
Total cash, cash equivalents and restricted cash	$	131,130	$	82,338

Amounts included in restricted cash represent cash held to collateralize outstanding letters of credit in the amount of approximately $403,000 and $162,000 as of September 30, 2018 and December 31, 2017, respectively, provided as a security deposit for the Company’s office space located in Needham, Massachusetts.

Fair value of financial instruments

9 Months Ended

Sep. 30, 2018

Fair value of financial instruments

Fair value of financial instruments

4. Fair value of financial instruments

The Company determines the fair value of its financial instruments based upon the fair value hierarchy, which prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs:

Level 1 inputs	Quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.
Level 2 inputs	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs	Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

Items Measured at Fair Value on a Recurring Basis

The following table presents information about the Company’s financial instruments that are measured at fair value on a recurring basis (in thousands):




	September 30, 2018
Description	Total		Level 1		Level 2		Level 3
Financial assets
Cash equivalents	$	129,309	$	100,006	$	29,303	$	—
Short-term investments		14,912		—		14,912		—
Total financial assets	$	144,221	$	100,006	$	44,215	$	—




	December 31, 2017
Description	Total		Level 1		Level 2		Level 3
Financial assets
Cash equivalents	$	80,894	$	75,478	$	5,416	$	—
Short-term investments		4,496		—		4,496		—
Total financial assets	$	85,390	$	75,478	$	9,912	$	—

The Company’s cash equivalents and investments are comprised of U.S. Government money market funds, government-sponsored enterprise securities, and corporate bonds and commercial paper of publicly traded companies. These investments and cash equivalents have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validates the prices provided by third party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active. After completing its validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of September 30, 2018 and December 31, 2017.

Fair Value of Financial Instruments

The fair value of the Company’s long-term debt is determined using a discounted cash flow analysis using current applicable rates for similar instruments as of the condensed consolidated balance sheet dates. The carrying value of the Company’s long-term debt, including the current portion, at September 30, 2018 and December 31, 2017 was approximately $25.1 million and $14.8 million, respectively. At September 30, 2018, the Company estimates that the fair value of its long-term debt, including the current portion, was approximately $26.9 million. The fair value of the Company’s long-term debt was determined using Level 3 inputs.

- 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

Investments

9 Months Ended

Sep. 30, 2018

Investments

Investments

5. Investments

Cash, cash equivalents, and investments consist of the following (in thousands):


	September 30, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Cash and cash equivalents:
Cash and money market accounts	$	101,424	$	—	$	—	$	101,424
Government-sponsored enterprise securities (due within 90 days)		9,987		—		—		9,987
Corporate bonds and commercial paper (due within 90 days)		19,318		—		(2)		19,316
Total cash and cash equivalents	$	130,729	$	—	$	(2)	$	130,727
Investments:
Corporate bonds and commercial paper (due within 1 year)	$	14,908	$	4	$	—	$	14,912
Total investments	$	14,908	$	4	$	—	$	14,912
Total cash, cash equivalents and investments	$	145,637	$	4	$	(2)	$	145,639


	December 31, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Cash and cash equivalents:
Cash and money market accounts	$	76,760	$	—	$	—	$	76,760
Corporate bonds and commercial paper (due within 90 days)		5,418	$	—	$	(2)	$	5,416
Total cash and cash equivalents	$	82,178	$	—	$	(2)	$	82,176
Investments:
Corporate bonds and commercial paper (due within 1 year)	$	4,496	$	—	$	—	$	4,496
Total investments	$	4,496	$	—	$	—	$	4,496
Total cash, cash equivalents and investments	$	86,674	$	—	$	(2)	$	86,672

There were no realized gains or losses on investments for the three and nine months ended September 30, 2018 or 2017, respectively. There were seven and five investments in an unrealized loss position as of September 30, 2018 and December 31, 2017, respectively. None of these investments had been in an unrealized loss position for more than 12 months as of September 30, 2018 and December 31, 2017, respectively. The aggregate unrealized loss on these securities as of September 30, 2018 and December 31, 2017 was approximately $2,000 and $2,000, respectively, and the fair value was $18.3 million and $9.9 million, respectively. The Company considered the decline in the market value for these investments to be primarily attributable to current economic conditions. As it was not more likely than not that the Company would be required to sell these investments before the recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired as of September 30, 2018 and December 31, 2017, respectively.

Inventory

9 Months Ended

Sep. 30, 2018

Inventory

Inventory

6. Inventory

During the third quarter of 2018, the Company began capitalizing inventory costs for COPIKTRA manufactured in preparation for its launch in the United States based on its evaluation of, among other factors, the status of the COPIKTRA New Drug Application (NDA) in the United States and the ability of its third-party suppliers to successfully manufacture commercial quantities of COPIKTRA, which provided the Company with reasonable assurance that the net realizable value of the inventory would be recoverable.

Inventory consists of the following (in thousands):



	September 30, 2018		December 31, 2017
Raw materials	$	—	$	—
Work in process		108		—
Finished goods		23		—
Total inventories	$	131	$	—

Costs incurred prior to the quarter-ended September 30, 2018 to manufacture COPIKTRA were expensed as operating expenses as incurred.

Intangible assets

9 Months Ended

Sep. 30, 2018

Intangible assets

Intangible assets

7. Intangible assets

The Company’s intangible assets consist of the following (in thousands):

Acquired and in-licensed rights as of September 30, 2018, consist of a $22.0 million milestone payment which became payable upon the FDA marketing approval on September 24, 2018 pursuant to the amended and restated license agreement with Infinity Pharmaceuticals, Inc. (Infinity). The Company made a milestone payment of $22.0 million to Infinity in November 2018.

The Company recorded approximately $31,000 in amortization expense related to finite-lived intangible assets during the three and nine months ended September 30, 2018 using the straight-line methodology. Estimated future amortization expense for finite-lived intangible assets as of September 30, 2018 is approximately $392,000 for the remainder of 2018 and approximately $1.6 million per year thereafter.

Accrued expenses

9 Months Ended

Sep. 30, 2018

Accrued expenses

Accrued expenses

8. Accrued expenses

Accrued expenses consist of the following (in thousands):



	September 30, 2018		December 31, 2017
Infinity milestone	$	22,000	$	—
Contract research organization costs		7,301		3,774
Compensation and related benefits		5,916		2,622
Commercialization costs		1,673		131
Professional fees		720		617
Consulting fees		519		448
Other		535		350
Total accrued expenses	$	38,664	$	7,942

Long-term debt

9 Months Ended

Sep. 30, 2018

Long-term debt

Long-term debt

9. Long-term debt

On March 21, 2017 (Closing Date), Verastem, Inc. (the Borrower) entered into a term loan facility of up to $25.0 million with Hercules. The term loan facility is governed by a loan and security agreement, dated March 21, 2017 (the Original Loan Agreement), which was amended on January 4, 2018 and March 6, 2018 (the Amended Loan Agreement) to increase the total borrowing limit under the Original Loan Agreement from up to $25.0 million to up to $50.0 million (the Term Loan), pursuant to certain conditions of funding.

As of September 30, 2018, the Company has borrowed a total of $25.0 million in term loans. The availability of the remaining $25.0 million of borrowing capacity under the Amended Loan Agreement is subject to Hercules’ sole discretion and may be drawn as term loans (each a Term F Loan Advance) in minimum increments of $5.0 million.

The Term Loan will mature on December 1, 2020 (Loan Maturity Date). Each advance accrues interest at a floating per annum rate equal to the greater of either (a) 10.5% or (b) the lesser of (i) 12.75% and (ii) the sum of (x) 10.5% plus (y) (A) the prime rate minus (B) 4.5%. The Term Loan provided for interest-only payments until November 1, 2018, which was extended to May 1, 2019 pursuant to the Amended Loan Agreement upon the Borrower’s receipt of a minimum of $20.0 million in cash proceeds from a sale of equity securities in December 2017. Thereafter, amortization payments will be payable monthly in 20 installments of principal and interest (subject to recalculation upon a change in prime rates).

The Term Loan is secured by a lien on substantially all of the assets of the Borrower, other than intellectual property, and contains customary covenants and representations.

The Company assessed all terms and features of the Amended Loan Agreement in order to identify any potential embedded features that would require bifurcation or any beneficial conversion features. As part of this analysis, the Company assessed the economic characteristics and risks of the Amended Loan Agreement, including put and call features. The Company determined that all features of the Amended Loan Agreement were clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company’s condensed consolidated financial statements. The Company reassesses the features on a quarterly basis to determine if they require separate accounting. There have been no changes to the Company’s original assessment through September 30, 2018.

The future principal payments under the Amended Loan Agreement are as follows as of September 30, 2018 (in thousands):


Remainder of 2018	$	—
2019		5,984
2020		19,016
Total principal payments	$	25,000

Product revenue reserves and allowances

9 Months Ended

Sep. 30, 2018

Product revenue reserves and allowances

Product revenue reserves and allowances

10. Product revenue reserves and allowances

As of September 30, 2018, the Company’s sole source of product revenue has been from sales of COPIKTRA in the United States, which it began shipping to Customers on September 25, 2018. The following table summarizes activity in each of the product revenue allowance and reserve categories for the nine months ended September 30, 2018 (in thousands):



	Trade discounts and allowances		Third-Party Payer chargebacks, discounts and fees		Government rebates and other incentives		Returns		Total
Beginning balance at December 31, 2017	$	—	$	—	$	—	$	—	$	—
Provision related to sales in the current year		27		72		29		1		129
Adjustments related to prior period sales		—		—		—		—		—
Credits and payments made		—		—		—		—		—
Ending balance at September 30, 2018	$	27	$	72	$	29	$	1	$	129

Trade discounts and Third-Party Payer chargebacks and discounts are recorded as a reduction to accounts receivable, net on the condensed consolidated balance sheets. Trade allowances and Third-Party Payer fees, government rebates, other incentives and returns are recorded as a component of accrued expenses on the condensed consolidated balance sheets.

Net loss per share

9 Months Ended

Sep. 30, 2018

Net loss per share

Net loss per share

11. Net loss per share

Basic and diluted net loss per common share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents. The Company’s potentially dilutive shares, which include outstanding stock options and restricted stock units (RSUs), are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

The following potentially dilutive securities were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:


	Three months ended September 30,		Nine months ended September 30,
	2018	2017	2018	2017
Outstanding stock options	12,915,463	8,431,355	12,915,463	8,431,355
Outstanding restricted stock units	316,875	—	316,875	—
Total potentially dilutive securities	13,232,338	8,431,355	13,232,338	8,431,355

Stock-based compensation

9 Months Ended

Sep. 30, 2018

Stock-based compensation

Stock-based compensation

12. Stock‑based compensation

Stock options

A summary of the Company’s stock option activity and related information for the nine months ended September 30, 2018 is as follows:


				Weighted-average
		Weighted-average		remaining	Aggregate
		exercise price per		contractual term	intrinsic value
	Shares	share		(years)	(in thousands)
Outstanding at December 31, 2017	8,719,978	$	5.19	7.9	$	6,150
Granted	5,250,121	$	5.29
Exercised	(331,851)	$	2.09
Forfeited/cancelled	(722,785)	$	5.43
Outstanding at September 30, 2018	12,915,463	$	5.30	8.1	$	37,095
Vested at September 30, 2018	5,782,349	$	6.13	6.7	$	16,154
Vested and expected to vest at September 30, 2018(1)	12,472,463	$	5.32	8.0	$	35,661

(1)

This represents the number of vested options as of September 30, 2018, plus the number of unvested options expected to vest as of September 30, 2018.

The fair value of each stock option granted during the nine months ended September 30, 2018 and 2017 was estimated on the grant date using the Black-Scholes option-pricing model using the following weighted-average assumptions:


	Nine months ended September 30,
	2018		2017
Risk-free interest rate	2.63	%	1.98	%
Volatility	81	%	79	%
Dividend yield	—		—
Expected term (years)	6.0		5.9

During the first quarter of 2018, the Company granted stock options to purchase a total of 582,500 shares of common stock to certain executives that vest only upon the achievement of specified performance conditions. The Company determined that two of the performance conditions had been achieved as of September 30, 2018. As a result, the Company has recognized approximately $161,000 and $669,000 of stock-based compensation expense during the three and nine months ended September 30, 2018, respectively, related to awards that vest upon the achievement of performance conditions.

At September 30, 2018, there was $21.0 million of total unrecognized compensation cost related to unvested stock options and the Company expects to recognize this cost over a remaining weighted-average period of approximately 4 years.

Restricted stock units

The Company awards RSUs to employees under its 2012 Incentive Plan. Each RSU entitles the holder to receive one share of the Company’s common stock when the RSU vests. The RSUs generally vest in either (i) four substantially equal installments on each of the first four anniversaries of the vesting commencement date, or (ii) 100 percent on the first anniversary of the vesting commencement date, subject to the employee’s continued employment with, or service to, the Company on such vesting date. Compensation expense is recognized on a straight-line basis.

A summary of RSU activity during the nine months ended September 30, 2018 is as follows:


	Shares	Weighted-average grant date fair value per share
Outstanding at December 31, 2017	—	$	—
Granted	336,000	$	5.51
Vested	—	$	—
Forfeited	(19,125)	$	3.00
Outstanding at September 30, 2018	316,875	$	5.66

At September 30, 2018, there was approximately $1.6 million of total unrecognized compensation cost related to unvested RSUs and the Company expects to recognize this cost over a remaining weighted-average period of approximately 2 years.

Common stock	9 Months Ended
Common stock	Sep. 30, 2018
Common stock.
Common stock	13. Common stock At-the-market equity offering programs In March 2017, the Company terminated the at-the-market equity offering program established in December 2013 and established a new at-the-market equity offering program pursuant to which it was able to offer and sell up to $35.0 million of its common stock at then current market prices from time to time through Cantor Fitzgerald & Co. (Cantor) as sales agent. In August 2017, the Company amended its sales agreement with Cantor to increase the maximum aggregate offering price of shares of common stock that can be sold under the at-the-market equity offering program to $75.0 million. During the three months ended September 30, 2018, there were no sales under the at-the-market equity program. During the nine months ended September 30, 2018, the Company sold 6,481,475 shares under this program for net proceeds of approximately $24.3 million (after deducting commissions and other offering expenses). Through September 30, 2018, the Company has sold a total of 11,518,354 shares under this program for net proceeds of approximately $47.3 million (after deducting commissions and other offering expenses). Equity offerings On May 16, 2018, the Company entered into an underwriting agreement with Cantor relating to the underwritten offering of 7,777,778 shares (the Shares) of the Company’s common stock (Underwriting Agreement). Cantor agreed to purchase the Shares pursuant to the Underwriting Agreement at a price of $4.31 per share. In addition, the Company granted Cantor an option to purchase, at the public offering price less any underwriting discounts and commissions, an additional 1,166,666 shares of the Company’s common stock, exercisable for 30 days from the date of the prospectus supplement. The option was exercised by Cantor in full on May 23, 2018. The aggregate proceeds from Cantor, net of underwriting discounts and offering costs, were approximately $38.3 million. On June 14, 2018, the Company entered into a purchase agreement with Consonance Capital Master Account L.P. and P Consonance Opportunities Ltd. (collectively, Consonance) relating to the registered offering of 7,166,666 shares of its common stock at a price of $6.00 per share. The aggregate proceeds from Consonance, net of offering costs, were approximately $42.8 million.

License and collaboration agreements	9 Months Ended
License and collaboration agreements	Sep. 30, 2018
License and collaboration agreements
License and collaboration agreements	14. License and collaboration agreements Yakult Honsha Co., Ltd. (Yakult) On June 5, 2018, the Company entered into a license and collaboration agreement (the Agreement) with Yakult, under which the Company granted exclusive rights to Yakult to develop and commercialize products containing duvelisib in Japan for the treatment, prevention, palliation or diagnosis of all oncology indications in humans or animals. Under the terms of the Agreement, Yakult received an exclusive right to develop and commercialize products containing duvelisib in Japan under mutually agreed upon development and commercialization plans at its own cost and expense. Yakult also received certain limited manufacturing rights in the event that the Company is unable to manufacture or supply sufficient quantities of duvelisib or products containing duvelisib to Yakult during the term of the Agreement. The Company retained all rights to duvelisib outside of Japan. Yakult paid the Company an upfront, non-refundable payment of $10.0 million in June 2018. The Company is also entitled to receive aggregate payments of up to $90.0 million if certain development, regulatory and commercial milestones are successfully achieved. Yakult is obligated to pay the Company a double-digit royalty on net sales of products containing duvelisib in Japan, subject to reduction in certain circumstances, and to fund certain global development costs related to worldwide clinical trials conducted by the Company in which Yakult has opted to participate (Global Clinical Trials) on a pro-rata basis. Unless earlier terminated by either party, the Agreement will expire upon the fulfillment of Yakult’s royalty obligations to the Company for the sale of any products containing duvelisib in Japan, which royalty obligations expire, on a product-by-product basis, upon the last to occur of (a) expiration of valid claims covering such product, (b) expiration of regulatory exclusivity for such product or (c) 10 years from first commercial sale of such product. Yakult may terminate the Agreement in its entirety at any time with 180 days’ written notice. Either party may terminate the Agreement in its entirety with 60 days’ written notice for the other party’s material breach if such party fails to cure the breach. The Company may terminate the Agreement if (i) Yakult fails to use commercially reasonable efforts to develop and commercialize products containing duvelisib in Japan or (ii) Yakult challenges any patent licensed by the Company to Yakult under the Agreement. Either party may terminate the Agreement in its entirety upon certain insolvency events involving the other party. The Company first assessed the Agreement under ASC 808 to determine whether the Agreement (or part of the Agreement) represents a collaborative arrangement based on the risks and rewards and activities of the parties pursuant to the Agreement. The Company accounts for collaborative arrangements (or elements within the contract that are deemed part of a collaborative arrangement), which represent a collaborative relationship and not a customer relationship, outside the scope of ASC 606. For a component of the Agreement, the Company concluded that both the Company and Yakult are exposed to significant risks while developing duvelisib and ultimately would share in the reward upon successful commercialization of duvelisib. The Company then considered each remaining component in the Agreement to determine if ASC 606 should be applied to those components. Generally, the components in the Agreement fall under one of two potential research and development activities: (i) the parties’ joint participation in Global Clinical Trials and (ii) the territory-specific development of duvelisib. For the parties’ participation in the Global Clinical Trials, the Company concluded that the research and development activities and payments related to such activities are not within the scope of ASC 606 as Yakult is not a customer of the Company with regards to these activities in the context of the Agreement. As such, costs incurred to execute the Global Clinical Trials will be recorded as research and development expense and payments received from Yakult related to such will be recorded as a reduction of research and development expense. For Territory-specific activities, the Company concluded that Yakult is a customer with regard to this component in the context of the Agreement. As such, the Territory-specific component and all related payments are within the scope of ASC 606. The Company determined that there were two material promises associated with the territory-specific activities: (i) an exclusive license to develop and commercialize duvelisib in the territory and (ii) the initial technology transfer. The Company determined that the exclusive license and initial technology transfer were not distinct from another, as the license has limited value without the initial technology. Therefore, the exclusive license and initial technology transfer are combined as a single performance obligation. The Company evaluated the option rights for manufacturing and supply services to determine whether they represent material rights to Yakult and concluded that the options were not issued at a significant and incremental discount and therefore do not represent material rights. As such, they are not performance obligations at the outset of the arrangement. Based on this assessment, the Company concluded one performance obligation exists at the outset of the Agreement: the exclusive license combined with the initial technology transfer. The Company determined that the upfront payment of $10.0 million constitutes the transaction price as of the outset of the Agreement. Future potential milestone payments were fully constrained as the risk of significant revenue reversal related to these amounts has not yet been resolved. The achievement of the future potential milestones is not within the Company’s control and is subject to certain research and development success or regulatory approvals and therefore carry significant uncertainty. The Company will reevaluate the likelihood of achieving future milestones at the end of each reporting period. As all performance obligations have been satisfied, if the risk of significant revenue reversal is resolved, any future milestone revenue from the arrangement will be added to the transaction price (and thereby recognized as revenue) in the period the risk is relieved. The Company satisfied the performance obligation upon delivery of the license and initial technology transfer and recognized the upfront payment of $10.0 million as license revenue during the three months ended June 30, 2018. CSPC Pharmaceutical Group Limited (CSPC) On July 26, 2018, the Company and CSPC entered into an Exclusivity Agreement which granted CSPC the exclusive right to negotiate a licensing agreement with the Company for duvelisib in China. CSPC paid the Company a non-refundable exclusivity fee of $5.0 million in August 2018 (Exclusivity Fee) which was creditable against any payments agreed to under the terms of a potential definitive license agreement. On September 25, 2018, the Company entered into a license and collaboration agreement with CSPC (the CSPC Agreement), under which the Company granted exclusive rights to CSPC to develop and commercialize products containing duvelisib in the People’s Republic of China (China), Hong Kong, Macau and Taiwan (collectively, the CSPC Territory) for the treatment, prevention, palliation or diagnosis of all oncology indications in humans. Under the terms of the CSPC Agreement, CSPC received an exclusive right to develop and commercialize products containing duvelisib in the CSPC Territory under mutually agreed upon development and commercialization plans at its own cost and expense. CSPC also received certain limited manufacturing rights in the event that the Company is unable to manufacture or supply sufficient quantities of duvelisib or products containing duvelisib to CSPC during the term of the CSPC Agreement. The Company retained all rights to duvelisib outside of the CSPC Territory. As of September 30, 2018, CSPC became obligated to pay the Company an aggregate upfront, non-refundable payment of $15.0 million, less the previously paid $5.0 million Exclusivity Fee, resulting in an outstanding payment due of $10.0 million, which is included in accounts receivable, net within the condensed consolidated balance sheets. The remaining $10.0 million upfront payment was paid in full in November 2018. The Company is also entitled to receive aggregate payments of up to $160.0 million if certain development, regulatory and commercial milestones are successfully achieved. CSPC is obligated to pay the Company a double-digit royalty on net sales of products containing duvelisib in the CSPC Territory, subject to reduction in certain circumstances, and to fund certain global development costs related to worldwide clinical trials conducted by the Company in which CSPC has opted to participate (Global Clinical Trials) on a pro-rata basis. Unless earlier terminated by either party, the CSPC Agreement will expire upon the fulfillment of CSPC’s royalty obligations to the Company for the sale of any products containing duvelisib in the CSPC Territory, which royalty obligations expire, on a product-by-product basis, upon the last to occur of (a) expiration of valid claims covering such product, (b) expiration of regulatory exclusivity for such product or (c) 10 years from first commercial sale of such product. CSPC may terminate the CSPC Agreement in its entirety at any time with 180 days’ written notice. Either party may terminate the CSPC Agreement in its entirety with 60 days’ written notice for the other party’s material breach if such party fails to cure the breach. The Company may terminate the CSPC Agreement if (i) CSPC fails to use commercially reasonable efforts to develop and commercialize products containing duvelisib in the CSPC Territory or (ii) CSPC challenges any patent licensed by the Company to CSPC under the CSPC Agreement. Either party may terminate the CSPC Agreement in its entirety upon certain insolvency events involving the other party. The Company first assessed the CSPC Agreement under ASC 808 to determine whether the CSPC Agreement (or part of the CSPC Agreement) represents a collaborative arrangement based on the risks and rewards and activities of the parties pursuant to the CSPC Agreement. The Company accounts for collaborative arrangements (or elements within the contract that are deemed part of a collaborative arrangement), which represent a collaborative relationship and not a customer relationship, outside the scope of ASC 606. For a component of the CSPC Agreement, the Company concluded that both the Company and CSPC are exposed to significant risks while developing duvelisib and ultimately would share in the reward upon successful commercialization of duvelisib. The Company then considered each remaining component in the CSPC Agreement to determine if ASC 606 should be applied to those components. Generally, the components in the CSPC Agreement fall under one of two potential research and development activities: (i) the parties’ joint participation in Global Clinical Trials and (ii) the territory-specific development of duvelisib. For the parties’ participation in the Global Clinical Trials, the Company concluded that the research and development activities and payments related to such activities are not within the scope of ASC 606 as CSPC is not a customer of the Company with regards to these activities in the context of the CSPC Agreement. As such, costs incurred to execute the Global Clinical Trials will be recorded as research and development expense and payments received from CSPC related to such will be recorded as a reduction of research and development expense. For CSPC Territory-specific activities, the Company concluded that CSPC is a customer with regard to this component in the context of the CSPC Agreement. As such, the CSPC Territory-specific component and all related payments are within the scope of ASC 606. The Company determined that there were two material promises associated with the territory-specific activities: (i) an exclusive license to develop and commercialize duvelisib in the territory and (ii) the initial technology transfer. The Company determined that the exclusive license and initial technology transfer were not distinct from another, as the license has limited value without the initial technology. Therefore, the exclusive license and initial technology transfer are combined as a single performance obligation. The Company evaluated the option rights for manufacturing and supply services to determine whether they represent material rights to CSPC and concluded that the options were not issued at a significant and incremental discount and therefore do not represent material rights. As such, they are not performance obligations at the outset of the arrangement. Based on this assessment, the Company concluded one performance obligation exists at the outset of the CSPC Agreement: the exclusive license combined with the initial technology transfer. The Company determined that the upfront payment of $15.0 million constitutes the transaction price as of the outset of the CSPC Agreement. Future potential milestone payments were fully constrained as the risk of significant revenue reversal related to these amounts has not yet been resolved. The achievement of the future potential milestones is not within the Company’s control and is subject to certain research and development success or regulatory approvals and therefore carry significant uncertainty. The Company will reevaluate the likelihood of achieving future milestones at the end of each reporting period. As all performance obligations have been satisfied, if the risk of significant revenue reversal is resolved, any future milestone revenue from the arrangement will be added to the transaction price (and thereby recognized as revenue) in the period the risk is relieved. The Company satisfied the performance obligation upon delivery of the license and initial technology transfer and recognized the upfront payment of $15.0 million as license revenue during the three months ended September 30, 2018.

Income taxes	9 Months Ended
Income taxes	Sep. 30, 2018
Income taxes
Income taxes	15. Income taxes The Company did not record a federal or state income tax provision or benefit for the three and nine months ended September 30, 2018 and 2017 due to the expected loss before income taxes to be incurred for the years ended December 31, 2018 and 2017, as well as the Company’s continued maintenance of a full valuation allowance against its net deferred tax assets.

Commitments and contingencies

9 Months Ended

Sep. 30, 2018

Commitments and contingencies

Commitments and contingencies

16. Commitments and contingencies

On April 15, 2014, the Company entered into a lease agreement for approximately 15,197 square feet of office and laboratory space in Needham, Massachusetts. Effective February 15, 2018, the Company amended its lease agreement to relocate within the facility to another location consisting of 27,810 square feet of office space (the Amended Lease Agreement). The Amended Lease Agreement extends the expiration date of the lease from September 2019 through May 2025. Pursuant to the Amended Lease Agreement, the initial annual base rent amount is approximately $660,000, which increases during the lease term to $1.1 million for the last twelve-month period. The deferred rent obligation is included in accrued expenses (current portion) and other liabilities (noncurrent portion) in the condensed consolidated balance sheets. The Company has also agreed to pay its proportionate share of increases in operating expenses and property taxes for the building in which the leased space is located.

The minimum aggregate future lease commitments as of September 30, 2018 are as follows (in thousands):


Remainder of 2018	$	165
2019		716
2020		971
2021		1,020
2022		1,041
Thereafter		2,600
Total	$	6,513

In conjunction with the execution of the Amended Lease Agreement, the Company increased its security deposit by increasing its existing letter of credit to approximately $403,000. The amount is included in prepaid expenses and other current assets and restricted cash on the condensed consolidated balance sheets as of September 30, 2018.

Subsequent events	9 Months Ended
Subsequent events	Sep. 30, 2018
Subsequent events.
Subsequent events	17. Subsequent events The Company reviews all activity subsequent to the end of the quarter but prior to issuance of the condensed consolidated financial statements for events that could require disclosure or that could impact the carrying value of assets or liabilities as of the balance sheet date. The Company is not aware of any material subsequent events other than the following: Hercules Amendment On October 11, 2018, the Company entered into Amendment No. 3 to the Amended Loan Agreement (the Third Amendment). The Third Amendment permits the Company to issue convertible notes in an aggregate principal amount of not more than $175.0 million, provided that such convertible notes meet certain stipulations. 5.00% Convertible Senior Notes Due 2048 On October 17, 2018, the Company closed a registered direct public offering of $150.0 million aggregate principal amount of the Company’s 5.00% Convertible Senior Notes due 2048 (the Notes), for net proceeds of approximately $145.1 million. The Notes are governed by the terms of a base indenture for senior debt securities (the Base Indenture), as supplemented by the first supplemental indenture thereto (the Supplemental Indenture and together with the Base Indenture, the Indenture), each dated October 17, 2018, by and between the Company and Wilmington Trust, National Association, as trustee. The Notes are senior unsecured obligations of the Company and bear interest at a rate of 5.00% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2019. The Notes will mature on November 1, 2048, unless earlier repurchased, redeemed or converted in accordance with their terms. The Notes are convertible into shares of the Company’s common stock, par value $0.0001 per share (the Common Stock), together, if applicable, with cash in lieu of any fractional share, at an initial conversion rate of 139.5771 shares of Common Stock per $1,000 principal amount of the Notes, which corresponds to an initial conversion price of approximately $7.16 per share of Common Stock and represents a conversion premium of approximately 15.0% above the last reported sale price of the Common Stock of $6.23 per share on October 11, 2018. Upon conversion, converting noteholders will be entitled to receive accrued interest on their converted Notes. To the extent the Company has insufficient authorized but unissued shares to settle conversions in shares of Common Stock, the Company would be required to settle the deficiency in cash. The Company will have the right, exercisable at its option, to cause all Notes then outstanding to be converted automatically if the “Daily VWAP” (as defined in the Indenture) per share of the Common Stock equals or exceeds 130% of the conversion price on each of at least 20 VWAP Trading Days (as defined in the Indenture), whether or not consecutive, during any 30 consecutive VWAP Trading Day period commencing on or after the date the Company first issued the Notes. The conversion rate is subject to adjustment from time to time upon the occurrence of certain events, including, but not limited to, the issuance of stock dividends and payment of cash dividends, but will not be adjusted for any accrued and unpaid interest. The Notes are the Company’s senior, unsecured obligations and are senior in right of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment with the Company’s existing and future indebtedness that is not so subordinated, and effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing such indebtedness. The Notes are structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries. The Indenture includes customary covenants and set forth certain events of default after which the Notes may be declared immediately due and payable and set forth certain types of bankruptcy or insolvency events of default involving the Company or certain of its subsidiaries after which the Notes become automatically due and payable.

Summary of significant accounting policies (Policies)

9 Months Ended

Sep. 30, 2018

Summary of significant accounting policies

Basis of Presentation

Revenue Recognition

The Company’s limited return policy allows for eligible returns of COPIKTRA for credit under the following circumstances:

Receipt of damaged product;

Shipment errors that were a result of an error by the Company;

Expired product that is returned during the period beginning three months prior to the product’s expiration and ending six months after the expiration date;

Product subject to a recall; and

Product that the Company, at its sole discretion, has specified can be returned for credit.

The Company has not received any returns to date and believes that returns of its products will be minimal.

For a complete discussion of the Company’s accounting for its license and collaboration agreements, see Note 14, License and collaboration agreements.

Accounts Receivable, Net

Inventory

Shipping and handling costs for product shipments are recorded as incurred in cost of product revenues along with costs associated with manufacturing the product, and any inventory write-downs.

Intangible Assets

Recently Issued and/or Adopted Accounting Standards Updates

Recently Issued Accounting Standards Updates

Recently Adopted Accounting Standards Updates

- Definition

Disclosure of accounting policy for trade and other accounts receivables. This disclosure may include the basis at which such receivables are carried in the entity's statements of financial position (for example, net realizable value), how the entity determines the level of its allowance for doubtful accounts, when impairments, charge-offs or recoveries are recognized, and the entity's income recognition policies for such receivables, including its treatment of related fees and costs, its treatment of premiums, discounts or unearned income, when accrual of interest is discontinued, how the entity records payments received on nonaccrual receivables and its policy for resuming accrual of interest on such receivables. If the enterprise holds a large number of similar loans, disclosure may include the accounting policy for the anticipation of prepayments and significant assumptions underlying prepayment estimates for amortization of premiums, discounts, and nonrefundable fees and costs.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
-Paragraph 15
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=84173941&loc=d3e5212-111524

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
-Paragraph 11B
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=84173941&loc=SL6953423-111524

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-03(a)(5))
-URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02(3))
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
-Paragraph 6
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Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-03(9))
-URI http://asc.fasb.org/extlink&oid=6876686&loc=d3e534808-122878

Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=84159169&loc=d3e10133-111534

Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=84158767&loc=d3e18780-107790

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02(4))
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

+ Details

Cash, cash equivalents and restricted cash (Tables)

9 Months Ended

Sep. 30, 2018

Cash, cash equivalents and restricted cash

Schedule of reconciliation of cash, cash equivalents and restricted cash


	September 30, 2018		December 31, 2017
Cash and cash equivalents	$	130,727	$	82,176
Restricted cash (included in prepaid expenses and other current assets)		161		—
Restricted cash		242		162
Total cash, cash equivalents and restricted cash	$	131,130	$	82,338

Fair value of financial instruments (Tables)

9 Months Ended

Sep. 30, 2018

Fair value of financial instruments

Schedule of financial instruments measured at fair value on a recurring basis

The following table presents information about the Company’s financial instruments that are measured at fair value on a recurring basis (in thousands):




	September 30, 2018
Description	Total		Level 1		Level 2		Level 3
Financial assets
Cash equivalents	$	129,309	$	100,006	$	29,303	$	—
Short-term investments		14,912		—		14,912		—
Total financial assets	$	144,221	$	100,006	$	44,215	$	—




	December 31, 2017
Description	Total		Level 1		Level 2		Level 3
Financial assets
Cash equivalents	$	80,894	$	75,478	$	5,416	$	—
Short-term investments		4,496		—		4,496		—
Total financial assets	$	85,390	$	75,478	$	9,912	$	—

Investments (Tables)

9 Months Ended

Sep. 30, 2018

Investments

Schedule of cash, cash equivalents and investments

Cash, cash equivalents, and investments consist of the following (in thousands):


	September 30, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Cash and cash equivalents:
Cash and money market accounts	$	101,424	$	—	$	—	$	101,424
Government-sponsored enterprise securities (due within 90 days)		9,987		—		—		9,987
Corporate bonds and commercial paper (due within 90 days)		19,318		—		(2)		19,316
Total cash and cash equivalents	$	130,729	$	—	$	(2)	$	130,727
Investments:
Corporate bonds and commercial paper (due within 1 year)	$	14,908	$	4	$	—	$	14,912
Total investments	$	14,908	$	4	$	—	$	14,912
Total cash, cash equivalents and investments	$	145,637	$	4	$	(2)	$	145,639


	December 31, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Cash and cash equivalents:
Cash and money market accounts	$	76,760	$	—	$	—	$	76,760
Corporate bonds and commercial paper (due within 90 days)		5,418	$	—	$	(2)	$	5,416
Total cash and cash equivalents	$	82,178	$	—	$	(2)	$	82,176
Investments:
Corporate bonds and commercial paper (due within 1 year)	$	4,496	$	—	$	—	$	4,496
Total investments	$	4,496	$	—	$	—	$	4,496
Total cash, cash equivalents and investments	$	86,674	$	—	$	(2)	$	86,672

Inventory (Tables)

9 Months Ended

Sep. 30, 2018

Inventory

Schedule of inventory

Inventory consists of the following (in thousands):



	September 30, 2018		December 31, 2017
Raw materials	$	—	$	—
Work in process		108		—
Finished goods		23		—
Total inventories	$	131	$	—

Intangible assets (Tables)

9 Months Ended

Sep. 30, 2018

Intangible assets

Schedule of intangible assets

The Company’s intangible assets consist of the following (in thousands):

Accrued expenses (Tables)

9 Months Ended

Sep. 30, 2018

Accrued expenses

Schedule of accrued expenses

Accrued expenses consist of the following (in thousands):



	September 30, 2018		December 31, 2017
Infinity milestone	$	22,000	$	—
Contract research organization costs		7,301		3,774
Compensation and related benefits		5,916		2,622
Commercialization costs		1,673		131
Professional fees		720		617
Consulting fees		519		448
Other		535		350
Total accrued expenses	$	38,664	$	7,942

Long-term debt (Tables)

9 Months Ended

Sep. 30, 2018

Long-term debt

Schedule of future principal payments under the Loan Agreement

The future principal payments under the Amended Loan Agreement are as follows as of September 30, 2018 (in thousands):


Remainder of 2018	$	—
2019		5,984
2020		19,016
Total principal payments	$	25,000

Product revenue reserves and allowances (Tables)

9 Months Ended

Sep. 30, 2018

Product revenue reserves and allowances

Schedule of product revenue allowance and reserve categories

The following table summarizes activity in each of the product revenue allowance and reserve categories for the nine months ended September 30, 2018 (in thousands):



	Trade discounts and allowances		Third-Party Payer chargebacks, discounts and fees		Government rebates and other incentives		Returns		Total
Beginning balance at December 31, 2017	$	—	$	—	$	—	$	—	$	—
Provision related to sales in the current year		27		72		29		1		129
Adjustments related to prior period sales		—		—		—		—		—
Credits and payments made		—		—		—		—		—
Ending balance at September 30, 2018	$	27	$	72	$	29	$	1	$	129

Net loss per share (Tables)

9 Months Ended

Sep. 30, 2018

Net loss per share

Schedule of potentially anti-dilutive securities excluded from calculation of diluted net loss per share


	Three months ended September 30,		Nine months ended September 30,
	2018	2017	2018	2017
Outstanding stock options	12,915,463	8,431,355	12,915,463	8,431,355
Outstanding restricted stock units	316,875	—	316,875	—
Total potentially dilutive securities	13,232,338	8,431,355	13,232,338	8,431,355

Stock-based compensation (Tables)

9 Months Ended

Sep. 30, 2018

Stock-based compensation

Summary of stock option activity and related information


				Weighted-average
		Weighted-average		remaining	Aggregate
		exercise price per		contractual term	intrinsic value
	Shares	share		(years)	(in thousands)
Outstanding at December 31, 2017	8,719,978	$	5.19	7.9	$	6,150
Granted	5,250,121	$	5.29
Exercised	(331,851)	$	2.09
Forfeited/cancelled	(722,785)	$	5.43
Outstanding at September 30, 2018	12,915,463	$	5.30	8.1	$	37,095
Vested at September 30, 2018	5,782,349	$	6.13	6.7	$	16,154
Vested and expected to vest at September 30, 2018(1)	12,472,463	$	5.32	8.0	$	35,661

(1)

This represents the number of vested options as of September 30, 2018, plus the number of unvested options expected to vest as of September 30, 2018.

Schedule of assumptions used to estimate fair value of each stock option on grant date


	Nine months ended September 30,
	2018		2017
Risk-free interest rate	2.63	%	1.98	%
Volatility	81	%	79	%
Dividend yield	—		—
Expected term (years)	6.0		5.9

Schedule of restricted stock units


	Shares	Weighted-average grant date fair value per share
Outstanding at December 31, 2017	—	$	—
Granted	336,000	$	5.51
Vested	—	$	—
Forfeited	(19,125)	$	3.00
Outstanding at September 30, 2018	316,875	$	5.66

Commitments and contingencies (Tables)

9 Months Ended

Sep. 30, 2018

Commitments and contingencies

Schedule of minimum aggregate future lease commitments

The minimum aggregate future lease commitments as of September 30, 2018 are as follows (in thousands):


Remainder of 2018	$	165
2019		716
2020		971
2021		1,020
2022		1,041
Thereafter		2,600
Total	$	6,513

Nature of business (Details) - USD ($) $ in Thousands		1 Months Ended	9 Months Ended
Nature of business (Details) - USD ($) $ in Thousands	Oct. 17, 2018	Oct. 31, 2018	Sep. 30, 2018	Dec. 31, 2017
Nature of business
Cash, cash equivalents, and investments			$ 145,600
Accumulated deficit			$ 364,227	$ 303,142
Substantial doubt about the ability to continue as a going concern			false
5.00% Convertible Senior Notes Due 2048 \| Subsequent events
Nature of business
Aggregate principal amount	$ 150,000	$ 150,000
Interest rate (as a percent)	5.00%	5.00%
Net proceeds	$ 145,100	$ 145,100

Summary of significant accounting policies, Revenue Recognition (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018
Revenue Recognition
Practical expedient, incremental cost of obtaining contract		true
Incremental costs of obtaining a contract	$ 0	$ 0
Accounts Receivable
Threshold accounts receivable typically due		31 days
Prior to product's expiration
Revenue Recognition
Period for eligible returns of expired product		3 months
After product's expiration date
Revenue Recognition
Period for eligible returns of expired product		6 months

Summary of significant accounting policies (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017
Recently Adopted Accounting Standards Updates
Restricted cash	$ 242,000	$ 162,000
ASU 2016-18 \| Adjustment
Recently Adopted Accounting Standards Updates
Restricted cash			$ 162,000

Cash, cash equivalents and restricted cash (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
Cash, cash equivalents and restricted cash
Cash and cash equivalents	$ 130,727	$ 82,176
Restricted cash (included in prepaid expenses and other current assets)	161
Restricted cash	242	162
Cash, cash equivalents and restricted cash	$ 131,130	$ 82,338	$ 51,432	$ 32,511

Cash, cash equivalents and restricted cash - Security deposit (Details) - USD ($)	Sep. 30, 2018	Feb. 15, 2018	Dec. 31, 2017
Letter of credit \| Office and Laboratory Space in Needham, Massachusetts
Operating lease
Security deposit	$ 403,000	$ 403,000	$ 162,000

Fair value of financial instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Financial liabilities
Long-term debt	$ 25,100	$ 14,800
Recurring basis
Financial assets
Cash equivalents	129,309	80,894
Short-term investments	14,912	4,496
Total financial assets	144,221	85,390
Level 1 \| Recurring basis
Financial assets
Cash equivalents	100,006	75,478
Total financial assets	100,006	75,478
Level 2 \| Recurring basis
Financial assets
Cash equivalents	29,303	5,416
Short-term investments	14,912	4,496
Total financial assets	44,215	$ 9,912
Level 3
Financial liabilities
Fair value of long-term debt	$ 26,900

Investments (Details)	3 Months Ended		9 Months Ended		12 Months Ended
Investments (Details)	Sep. 30, 2018 USD ($) item	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) item	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($) item
Investments
Cash and cash equivalents	$ 130,727,000		$ 130,727,000		$ 82,176,000
Gross unrealized gains	4,000		4,000
Gross unrealized losses	(2,000)		(2,000)		$ (2,000)
Total cash, cash equivalents, and investments, Fair Value	145,600,000		145,600,000
Realized gains or losses on investments	$ 0	$ 0	$ 0	$ 0
Number of investments in unrealized loss position \| item	7		7		5
Number of investments in unrealized loss position for more than 12 months \| item	0		0		0
Aggregate unrealized loss	$ 2,000		$ 2,000		$ 2,000
Unrealized loss on fair value	18,300,000		$ 18,300,000		$ 9,900,000
Government-sponsored enterprise securities
Investments
Original maturity period, cash and cash equivalents			90 days
Corporate bonds and commercial paper
Investments
Original maturity period, cash and cash equivalents			90 days		90 days
Gross unrealized losses	(2,000)		$ (2,000)		$ (2,000)
Corporate bonds and commercial paper
Investments
Maximum maturity period, investments			1 year		1 year
Gross unrealized gains	4,000		$ 4,000
Amortized Cost
Investments
Cash and cash equivalents	130,729,000		130,729,000		$ 82,178,000
Investments	14,908,000		14,908,000		4,496,000
Total cash, cash equivalents, and investments	145,637,000		145,637,000		86,674,000
Amortized Cost \| Cash and money market accounts
Investments
Cash and cash equivalents	101,424,000		101,424,000		76,760,000
Amortized Cost \| Government-sponsored enterprise securities
Investments
Cash and cash equivalents	9,987,000		9,987,000
Amortized Cost \| Corporate bonds and commercial paper
Investments
Cash and cash equivalents	19,318,000		19,318,000		5,418,000
Amortized Cost \| Corporate bonds and commercial paper
Investments
Due within 1 year	14,908,000		14,908,000		4,496,000
Fair Value
Investments
Cash and cash equivalents, Fair value	130,727,000		130,727,000		82,176,000
Short-term investments	14,912,000		14,912,000		4,496,000
Total cash, cash equivalents, and investments, Fair Value	145,639,000		145,639,000		86,672,000
Fair Value \| Cash and money market accounts
Investments
Cash and cash equivalents, Fair value	101,424,000		101,424,000		76,760,000
Fair Value \| Government-sponsored enterprise securities
Investments
Cash and cash equivalents, Fair value	9,987,000		9,987,000
Fair Value \| Corporate bonds and commercial paper
Investments
Cash and cash equivalents, Fair value	19,316,000		19,316,000		5,416,000
Fair Value \| Corporate bonds and commercial paper
Investments
Due within 1 year	$ 14,912,000		$ 14,912,000		$ 4,496,000

Inventory (Details) $ in Thousands	Sep. 30, 2018 USD ($)
Inventory
Work in process	$ 108
Finished goods	23
Total inventories	$ 131

Intangible assets (Details) - USD ($)	1 Months Ended	3 Months Ended	9 Months Ended
Intangible assets (Details) - USD ($)	Nov. 30, 2018	Sep. 30, 2018	Sep. 30, 2018
Intangible assets
Less: accumulated amortization		$ (31,000)	$ (31,000)
Intangible assets, net		21,969,000	21,969,000
Milestone payment payable		22,000,000	22,000,000
Amortization of acquired intangible assets		31,000	31,000
Amortization for the remainder of year		392,000	392,000
Future amortization per year thereafter		1,600,000	1,600,000
Acquired and in-license rights
Intangible assets
Intangible assets, gross		22,000,000	$ 22,000,000
Estimated useful life			14 years
Milestone payment payable		$ 22,000,000	$ 22,000,000
Acquired and in-license rights \| Subsequent events
Intangible assets
Payments for milestone payment	$ 22,000,000

Accrued expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Accrued expenses
Infinity milestone	$ 22,000
Contract research organization costs	7,301	$ 3,774
Compensation and related benefits	5,916	2,622
Commercialization costs	1,673	131
Professional fees	720	617
Consulting fees	519	448
Other	535	350
Total accrued expenses	$ 38,664	$ 7,942

Long-term debt (Details) $ in Thousands		9 Months Ended
Long-term debt (Details) $ in Thousands	Mar. 06, 2018 USD ($) item	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Mar. 21, 2017 USD ($)
Long-term debt
Amount drawn		$ 9,900	$ 2,386
Future principal payments
Total		25,100		$ 14,800
Term loan
Long-term debt
Maximum borrowing capacity	$ 50,000				$ 25,000
Outstanding amount		25,000
Remaining borrowing capacity		25,000
Interest rate	10.50%
Basis spread	(4.50%)
Minimum cash proceeds to extend interest only payment period	$ 20,000
Amortization payments, installments \| item	20
Future principal payments
2019		5,984
2020		19,016
Total		25,000
Term loan \| Minimum
Long-term debt
Interest rate	10.50%
Term loan \| Minimum \| Plan
Long-term debt
Amount drawn		$ 5,000
Term loan \| Maximum
Long-term debt
Interest rate	12.75%

Product revenue reserves and allowances (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($)
Product revenue reserves and allowances
Provision related to sales in the current year	$ 129
Product revenue reserves and allowances at ending	129
Trade discounts and allowances
Product revenue reserves and allowances
Provision related to sales in the current year	27
Product revenue reserves and allowances at ending	27
Third-Party Payer chargebacks, discounts and fees
Product revenue reserves and allowances
Provision related to sales in the current year	72
Product revenue reserves and allowances at ending	72
Government rebates and other incentives
Product revenue reserves and allowances
Provision related to sales in the current year	29
Product revenue reserves and allowances at ending	29
Returns
Product revenue reserves and allowances
Provision related to sales in the current year	1
Product revenue reserves and allowances at ending	$ 1

Net loss per share (Details) - shares	3 Months Ended		9 Months Ended
Net loss per share (Details) - shares	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Net loss per share
Potentially anti-dilutive securities excluded from calculation of diluted net loss per share (in shares)	13,232,338	8,431,355	13,232,338	8,431,355
Stock options
Net loss per share
Potentially anti-dilutive securities excluded from calculation of diluted net loss per share (in shares)	12,915,463	8,431,355	12,915,463	8,431,355
Restricted Stock Units
Net loss per share
Potentially anti-dilutive securities excluded from calculation of diluted net loss per share (in shares)	316,875		316,875

Stock-based compensation - Stock Options (Details) - Stock options	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018 USD ($) $ / shares shares	Mar. 31, 2018 USD ($) $ / shares shares	Sep. 30, 2018 USD ($) item $ / shares shares	Sep. 30, 2017	Dec. 31, 2017 USD ($) $ / shares shares
Shares
Outstanding at the beginning of the period (in shares)		8,719,978	8,719,978
Granted (in shares)			5,250,121
Exercised (in shares)			(331,851)
Forfeited/cancelled (in shares)			(722,785)
Outstanding at the end of the period (in shares)	12,915,463		12,915,463		8,719,978
Vested at the end of the period (in shares)			5,782,349
Vested and expected to vest at end of period (in shares)	12,472,463		12,472,463
Weighted-average exercise price per share
Outstanding at the beginning of the period (in dollars per share) \| $ / shares		$ 5.19	$ 5.19
Granted (in dollars per share) \| $ / shares			5.29
Exercised (in dollars per share) \| $ / shares			2.09
Forfeited/cancelled (in dollars per share) \| $ / shares			5.43
Outstanding at the end of the period (in dollars per share) \| $ / shares	$ 5.30		5.30		$ 5.19
Vested at the end of the period (in dollars per share) \| $ / shares	6.13		6.13
Vested and expected to vest at end of the period (in dollars per share) \| $ / shares	$ 5.32		$ 5.32
Weighted-average remaining contractual term
Outstanding at the end of the period			8 years 1 month 6 days		7 years 10 months 24 days
Vested at the end of the period			6 years 8 months 12 days
Vested and expected to vest at the end of the period			8 years
Exercisable at the end of the period			6 years 8 months 12 days
Aggregate intrinsic value
Outstanding at the beginning of the period (in dollars) \| $		$ 6,150,000	$ 6,150,000
Outstanding at the end of the period (in dollars) \| $	$ 37,095,000		37,095,000		$ 6,150,000
Vested at the end of the period (in dollars) \| $	16,154,000		16,154,000
Vested and expected to vest at end of the period (in dollars) \| $	35,661,000		$ 35,661,000
Assumptions used to estimate fair value of each stock-based award on the grant date
Risk-free interest rate (as a percent)			2.63%	1.98%
Volatility (as a percent)			81.00%	79.00%
Expected term			6 years	5 years 10 months 24 days
Additional disclosures
Total unrecognized stock-based compensation expense (in dollars) \| $	21,000,000		$ 21,000,000
Weighted-average recognition period			4 years
Executives
Shares
Granted (in shares)		582,500
Additional disclosures
Number of performance conditions achieved \| item			2
Stock-based compensation expense \| $	$ 161,000		$ 669,000

Stock-based compensation - Restricted Stock (Details) - Restricted Stock Units $ / shares in Units, $ in Millions	9 Months Ended
	Sep. 30, 2018 USD ($) item $ / shares shares
Stock-based compensation
Number of shares holder to receive when RSU vests	1
Number of installments \| item	4
Number of anniversaries \| item	4
Vesting percentage	100.00%
Shares
Granted (in shares)	336,000
Forfeited (in shares)	(19,125)
Unvested at the end of the period (in shares)	316,875
Weighted-average grant date fair value
Granted (in dollars per share) \| $ / shares	$ 5.51
Forfeited (in dollars per share) \| $ / shares	3.00
Unvested at the end of the period (in dollars per share) \| $ / shares	$ 5.66
Additional disclosures
Total unrecognized stock-based compensation expense (in dollars) \| $	$ 1.6
Weighted-average recognition period	2 years

Common stock (Details) - USD ($) $ / shares in Units, $ in Thousands				1 Months Ended		3 Months Ended	9 Months Ended		19 Months Ended
	Jun. 14, 2018	May 23, 2018	May 16, 2018	Aug. 31, 2017	Mar. 31, 2017	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018
Common stock
Number of shares of common stock issued	7,166,666	1,166,666	7,777,778
Net proceeds from issuance of stock	$ 42,800	$ 38,300					$ 105,156	$ 14,121
Share price (in dollars per share)	$ 6.00		$ 4.31
At-the-market equity offering program
Common stock
Maximum value of common stock allowed to be sold				$ 75,000	$ 35,000
Number of shares of common stock issued						0	6,481,475		11,518,354
Net proceeds from issuance of stock							$ 24,300		$ 47,300

Common stock - Equity offerings (Details) - USD ($) $ / shares in Units, $ in Thousands				9 Months Ended
	Jun. 14, 2018	May 23, 2018	May 16, 2018	Sep. 30, 2018	Sep. 30, 2017
Common stock.
Number of shares of common stock offered	7,166,666	1,166,666	7,777,778
Share price (in dollars per share)	$ 6.00		$ 4.31
Net proceeds from issuance of stock	$ 42,800	$ 38,300		$ 105,156	$ 14,121
Options are exercisable from date of prospectus supplement			30 days

License and collaboration agreements (Details) $ in Thousands				1 Months Ended		3 Months Ended		9 Months Ended
	Nov. 07, 2018 USD ($)	Sep. 25, 2018 USD ($) item	Jun. 05, 2018 item	Aug. 31, 2018 USD ($)	Jun. 30, 2018 USD ($)	Sep. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Sep. 30, 2018 USD ($)
License and collaboration agreements
Revenue recognized						$ 15,508		$ 25,508
The Agreement \| Yakult
License and collaboration agreements
Proceeds received					$ 10,000
Maximum aggregate payments entitled to receive if all milestones successfully achieved					$ 90,000
Agreement obligations expire from first commercial sale of product (in years)			10 years
Number of days written prior notice required for other party to terminate agreement			180 days
Number of days written notice required to terminate agreement if fails to cure breach			60 days
Number of material promises \| item			2
Number of performance obligations at outset of the Agreement \| item			1
Revenue recognized							$ 10,000
The Agreement \| CSPC
License and collaboration agreements
Proceeds received	$ 10,000
Upfront, non-refundable payment obligation to be received prior to initial Exclusivity Fee		$ 15,000
Maximum aggregate payments entitled to receive if all milestones successfully achieved		$ 160,000
Agreement obligations expire from first commercial sale of product (in years)		10 years
Number of days written prior notice required for other party to terminate agreement		180 days
Number of days written notice required to terminate agreement if fails to cure breach		60 days
Number of material promises \| item		2
Number of performance obligations at outset of the Agreement \| item		1
Revenue recognized						15,000
The Agreement \| CSPC \| Accounts receivable
License and collaboration agreements
Upfront fees receivable						$ 10,000		$ 10,000
Exclusivity Agreement \| CSPC
License and collaboration agreements
Proceeds received				$ 5,000

Commitments and contingencies (Details) - Office and Laboratory Space in Needham, Massachusetts	Feb. 15, 2018 USD ($) ft²	Apr. 15, 2014 ft²
Operating Leased Assets
Area of space \| ft²	27,810	15,197
Initial annual base rent	$ 660,000
Base rent for last twelve-month period	$ 1,100,000

Commitments and contingencies - Future Lease Commitments (Details) $ in Thousands	Sep. 30, 2018 USD ($)
Minimum aggregate future lease commitments
Remainder of 2018	$ 165
2019	716
2020	971
2021	1,020
2022	1,041
Thereafter	2,600
Total	$ 6,513

Commitments and contingencies - Security deposit (Details) - USD ($)	Sep. 30, 2018	Feb. 15, 2018	Dec. 31, 2017
Letter of credit \| Office and Laboratory Space in Needham, Massachusetts
Operating Leased Assets
Security deposit	$ 403,000	$ 403,000	$ 162,000

Subsequent events (Details) $ / shares in Units, $ in Millions		1 Months Ended
	Oct. 17, 2018 USD ($) D $ / shares	Oct. 31, 2018 USD ($)	Oct. 11, 2018 USD ($)	Sep. 30, 2018 $ / shares	Mar. 06, 2018 USD ($)	Dec. 31, 2017 $ / shares	Mar. 21, 2017 USD ($)
Subsequent events
Common stock, par value (in dollars per share) \| $ / shares				$ 0.0001		$ 0.0001
Term loan
Subsequent events
Maximum borrowing capacity \| $					$ 50.0		$ 25.0
Interest rate (as a percent)					10.50%
Subsequent events \| 5.00% Convertible Senior Notes Due 2048
Subsequent events
Aggregate principal amount \| $	$ 150.0	$ 150.0
Interest rate (as a percent)	5.00%	5.00%
Net proceeds \| $	$ 145.1	$ 145.1
Frequency of periodic payment	P6M
Common stock, par value (in dollars per share) \| $ / shares	$ 0.0001
Conversion rate of the notes to common stock, per $1,000 principal amount of notes	139.5771
Conversion price per share of common stock \| $ / shares	$ 7.16
Conversion premium (as a percent)	15.00%
Common stock sale price \| $ / shares	$ 6.23
Percentage of stock price trigger for conversion	130.00%
Trading days \| D	20
Consecutive trading days \| D	30
Subsequent events \| Term loan
Subsequent events
Maximum borrowing capacity \| $			$ 175.0