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SEC Filings

PROTEON THERAPEUTICS INC filed this Form 10-Q on 08/07/2017
Entire Document


Investment Income


Investment income consists of interest income earned on our cash, cash equivalents and marketable securities.


Other Income (Expense), Net


Other income (expense), net consists of the gain realized from non-cash gains and losses from currency exchange rate fluctuations on transactions or balances denominated in a foreign currency and realized and unrealized gains and losses on the forward foreign currency contracts we entered into in the second quarter of 2015 to purchase Swiss Francs to reduce our foreign currency exposure through 2016. This foreign currency exposure is the result of a contract with the manufacturer of active pharmaceutical ingredient, or API, for our lead product candidate, vonapanitase, which requires us to make payments in Swiss Francs. The last outstanding forward foreign currency contract was executed during December 2016.


Derivative Financial Instruments


We purchase Swiss Francs or have entered into forward foreign currency contracts to reduce our foreign currency exposure in making contractual payments under our Lonza agreement. The latter are considered derivative financial instruments that are recorded on the consolidated balance sheet at fair value. Although these derivative contracts are intended to economically hedge foreign exchange risk, we have not elected to apply hedge accounting. As such, changes in the fair value of the Swiss Francs we hold or in these derivative instruments are recorded directly in earnings as a component of other income (expense) as they occur. We execute derivative instruments with financial institutions that we judge to be credit-worthy, defined as institutions that hold an investment-grade credit rating.


Critical Accounting Policies and Significant Judgments and Estimates


Our management’s discussion and analysis of our financial position and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate estimates, which include estimates related to clinical trial accruals, stock-based compensation expense, embedded derivatives and reported amounts of revenues and expenses during the reported period. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from those estimates or assumptions.


There have been no material changes to our accounting policies from those described in our Annual Report on Form 10-K. It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies disclosed in our Annual Report on Form 10-K, as filed with the SEC on March 16, 2017.