Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

v3.19.3
Commitments and Contingencies
9 Months Ended
Sep. 30, 2019
Commitments and Contingencies.  
Commitments and Contingencies

6. Commitments and Contingencies

Leases

We lease office space in Chesterbrook, Pennsylvania and equipment. We sublease the second floor of our Chesterbrook, Pennsylvania office space to a third party. Rent expense and associated sublease income are recorded in the Company’s statements of operations and comprehensive loss as other income (expense).

Supplemental balance sheet information related to leases was as follows (in thousands):

 

 

 

 

 

 

 

 

 

    

September 30, 2019

    

December 31, 2018

 

Operating Leases

 

 

  

 

 

  

 

Operating lease right-of-use assets

 

$

5,552

 

$

 —

 

Other current liabilities

 

 

591

 

 

 —

 

Operating lease liabilities

 

 

7,954

 

 

 —

 

Total operating lease liabilities

 

$

8,545

 

$

 —

 

 

 

 

 

 

 

 

 

Finance Leases

 

 

 

 

 

 

 

Property and equipment, at cost

 

$

45

 

$

59

 

Accumulated depreciation

 

 

(23)

 

 

(29)

 

Property and equipment, net

 

 

22

 

 

30

 

Other current liabilities

 

 

 9

 

 

10

 

Other long-term liabilities

 

 

14

 

 

20

 

Total finance lease liabilities

 

$

23

 

$

30

 

 

The components of lease expense were as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30, 

 

September 30, 

 

    

2019

    

2018

    

2019

    

2018

Operating lease costs:

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease rental expense

 

$

310

 

$

213

 

$

886

 

$

1,011

Other income

 

 

(358)

 

 

 —

 

 

(987)

 

 

 —

Total operating lease costs

 

$

(48)

 

$

213

 

$

(101)

 

$

1,011

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance lease costs:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of right-of-use assets

 

 

2

 

 

3

 

 

8

 

 

9

Interest on lease liabilities

 

 

 —

 

 

 —

 

 

1

 

 

2

Total finance lease costs

 

$

 2

 

$

 3

 

$

 9

 

$

11

 

Supplemental cash flow information related to leases was as follows (in thousands):

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

September 30, 

 

    

2019

    

2018

Cash paid for amounts included in the measurement of lease liabilities

 

 

  

 

 

  

Operating cash flows from operating leases

 

$

(18)

 

$

(1,011)

Operating cash flows from finance leases

 

 

 —

 

 

 —

Financing cash flows from finance leases

 

 

(10)

 

 

(10)

 

Our operating lease liabilities will mature, as follows (in thousands):

 

 

 

 

 

 

 

 

    

Operating Leases

 

Financing Leases

2019 (October 1 - December 31)

 

$

335

 

$

 3

2020

 

 

1,352

 

 

10

2021

 

 

1,376

 

 

 8

2022

 

 

1,401

 

 

 4

2023

 

 

1,425

 

 

 —

2024 and beyond

 

 

6,586

 

 

 —

Total minimum lease payments

 

$

12,475

 

$

25

Interest Expense

 

 

(3,930)

 

 

(2)

Lease liability

 

$

8,545

 

$

23

 

Per the terms of our sublease, we expect the following inflows (in thousands):

 

 

 

 

 

    

Sublease

2019 (October 1 - December 31)

 

$

269

2020

 

 

1,078

2021

 

 

943

2022

 

 

 —

2023

 

 

 —

2024 and beyond

 

 

 —

Total minimum lease payments

 

$

2,290

 

Lease term and discount rates are as follows:

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

 

 

2019

 

2018

Weighted average remaining lease term (years)

 

 

 

 

 

 

Operating leases

 

 

 9

 

 

10

Finance leases

 

 

 2

 

 

 3

Weighted average discount rate

 

 

 

 

 

 

Operating leases

 

 

9.2%

 

 

0.0%

Finance leases

 

 

6.5%

 

 

6.5%

 

Legal Proceedings

In October and November 2018, the Company and certain current and former officers and directors were sued in three purported class actions filed in the U.S. District Court for the Eastern District of Pennsylvania, or the EDPA, alleging violations of the federal securities laws. In January 2019, the three lawsuits were consolidated into one action, and on May 29, 2019, the District Court appointed a group of five individual investors as lead plaintiffs. A consolidated amended complaint was filed on August 2, 2019, alleging, among other things, that the Company and two former officers made false and misleading statements regarding the Company’s business, operations, and prospects, including certain statements made relating to the Company’s End-of-Phase 2 meeting with the FDA, and certain statements concerning top-line results from the Company’s Phase 3 studies. The plaintiffs seek, among other remedies, unspecified damages, attorneys’ fees and other costs, and unspecified equitable or injunctive relief. The Company believes that the claims are without merit, and the Company intends to vigorously defend itself against the allegations. On October 2, 2019, the Company moved to dismiss the consolidated amended complaint on the basis that there were no false statements and no scienter as a matter of law. 

In December 2018, a shareholder derivative action was filed on behalf of the Company and against certain current and former officers and directors in the EDPA, and in February 2019, two additional, similar shareholder derivative actions were filed in the U.S. District Court for the District of Delaware. A fourth similar shareholder derivative action was filed in the EDPA in September 2019.  These cases, which involve facts similar to the consolidated securities lawsuits, assert claims against the individual defendants for, among other things, breach of fiduciary duty, waste of corporate assets, violations of the federal securities laws, and unjust enrichment, and they make a number of demands, including for monetary damages and other equitable and injunctive relief. The derivative actions have been stayed in favor of the consolidated securities lawsuits.