Annual report pursuant to Section 13 and 15(d)

Restructuring Charges

v3.8.0.1
Restructuring Charges
12 Months Ended
Dec. 31, 2017
Restructuring And Related Activities [Abstract]  
Restructuring Charges

7. Restructuring Charges

On December 19, 2016, the Board of Directors approved a restructuring of its business based on its decision to focus the Company’s efforts on clinical development, with an initial focus on the X358 clinical programs. The restructuring included a reduction-in-force in which the Company terminated 57 employees (the “2016 Restructuring”). In addition, effective December 21, 2016, the Company’s Chief Executive Officer retired from his position. In early 2017, the Company further revised its business model to prioritize out-licensing activities, further curtail research and development spending, and terminated five additional employees (the “2017 Restructuring”).

During the year ended December 31, 2017, the Company recorded charges of $3.4 million related to severance, other termination benefits and outplacement services in connection with the workforce reduction resulting from the 2017 Restructuring and 2016 Restructuring activities. During the year ended December 31, 2016, the Company recorded charges of $3.8 million related to severance, other termination benefits and outplacement services in connection with the workforce reduction resulting from the 2016 Restructuring. The Company recognized $0.6 million of non-cash stock-based compensation as a result of the acceleration of a former executive’s options and RSUs under his retention benefit agreement in 2016. In addition, in 2016, the Company recognized an asset impairment charge of $0.2 million related to leasehold improvements.

On July 22, 2015, the Company announced the Phase 3 EYEGUARD-B study of gevokizumab in patients with Behçet’s disease uveitis, run by Servier, did not meet the primary endpoint of increased time to first acute ocular exacerbation. Due to the results and the Company’s belief they would be predictive of results in its other EYEGUARD studies, in August 2015, the Company announced its intention to end the EYEGUARD global Phase 3 program. On August 21, 2015, the Company, in connection with its efforts to lower operating expenses and preserve capital while continuing to focus on its endocrine product pipeline, implemented a restructuring plan (the “2015 Restructuring”) that included a workforce reduction resulting in the termination of 52 employees during the second half of 2015.

During the years ended December 31, 2016 and 2015, the Company recorded a credit of $32,000 and a charge of $2.9 million, respectively, related to severance, other termination benefits and outplacement services in connection with the workforce reduction resulting from the 2015 Restructuring. In addition, the Company recognized additional restructuring charges of $29,000 and $0.8 million in contract termination costs in 2016 and 2015, respectively, which primarily include costs in connection with the discontinuation of the EYEGUARD studies.

The outstanding restructuring liabilities are included in accrued and other liabilities on the consolidated balance sheets. As of December 31, 2017 and 2016, the components of these liabilities are shown below (in thousands):

 

 

 

Employee

Severance

 

 

Contract

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and Other

Benefits

 

 

Termination

Costs

 

 

Stock-based Compensation

 

 

Asset Impairment

 

Total

 

Balance at December 31, 2015

 

$

343

 

 

$

116

 

 

$

 

 

$

 

$

459

 

Restructuring charges

 

 

3,720

 

 

 

29

 

 

 

619

 

 

 

198

 

 

4,566

 

Non-cash charges

 

 

 

 

 

 

 

 

(619

)

 

 

(198

)

 

(817

)

Cash payments

 

 

(469

)

 

 

(145

)

 

 

 

 

 

(614

)

Balance at December 31, 2016

 

 

3,594

 

 

 

 

 

 

 

 

 

 

 

3,594

 

Restructuring charges

 

 

3,447

 

 

 

 

 

 

 

 

 

 

 

3,447

 

Cash payments

 

 

(6,911

)

 

 

 

 

 

 

 

 

 

 

(6,911

)

Balance at December 31, 2017

 

$

130

 

 

$

 

 

$

 

 

$

 

$

130

 

 

The Company expects to pay the remaining $0.1 million in 2018.