The unaudited interim
condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany
balances and transactions have been eliminated in consolidation. These condensed consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference
in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles
as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the
Financial Accounting Standards Board (“FASB”).
The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which
include, but are not limited to, estimates related to stock-based compensation expense, clinical trial accruals and reported amounts
of revenues and expenses during the reported period. The Company bases its estimates on historical experience and other market-specific
or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates
Fair Value of Financial Instruments
financial instruments consist of cash and cash equivalents, available-for-sale investments, forward foreign currency contracts
(see Note 4), accounts payable, and accrued liabilities. The Company is required to disclose information on all assets and liabilities
reported at fair value that enables an assessment of the inputs used in determining the reported fair values. FASB ASC Topic 820,
Fair Value Measurement and Disclosures, established a hierarchy of inputs used in measuring fair value that maximizes the
use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available.
Observable inputs are inputs that market participants would use in pricing the financial instrument based on market data obtained
from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the
inputs that market participants would use in pricing the financial instrument and are developed based on the best information available
under the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported or disclosed
fair value of the financial instruments and is not a measure of the investment credit quality. Fair value measurements are classified
and disclosed in one of the following three categories:
||Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.|
||Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.|
||Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable. |
To the extent that valuation
is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more
judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized
in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that
is significant to the fair value measurement.
measured at fair value on a recurring basis include cash equivalents, short-term investments and forward foreign currency contracts
(see Note 3). There have been no changes to the valuation methods utilized by the Company during the nine months ended September
30, 2017 and 2016. The Company evaluates transfers between levels at the end of each reporting period. There were no transfers
of financial instruments between levels during the nine months ended September 30, 2017 and 2016.
The Company purchases
Swiss Francs and enters into forward foreign currency contracts from time to time to mitigate its exposure to fluctuations in the
exchange rates between the Swiss Franc and the U.S. dollar (see Note 4). The latter are considered derivative financial instruments
that the Company records on the consolidated balance sheet at fair value. Although these derivative contracts are intended to economically
hedge foreign exchange risk, the Company has not elected to apply hedge accounting. As such, changes in the fair value of these
instruments are recorded directly in earnings as a component of other income (expense), as they occur. The Company executes its
derivative instruments with financial institutions that the Company judges to be credit-worthy, defined as institutions that hold
an investment-grade credit rating.
Net Loss per Share Attributable to Common Stockholders
Basic net loss per share is calculated by dividing
net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Net
loss attributable to common stockholders is calculated by adjusting the net loss of the Company for cumulative preferred stock
dividends and accretion of preferred stock. Diluted net loss per share is calculated by dividing the net loss attributable to common
stockholders by the weighted-average number of common equivalent shares outstanding for the period, including any dilutive effect
from outstanding stock options and warrants using the treasury stock method.
The Company computes basic and diluted
loss per share using a methodology that gives effect to the impact of outstanding participating securities (the “two-class
method”). As the three and nine months ended September 30, 2017 and 2016 resulted in net losses, there is no income allocation
required under the two-class method or dilution attributed to weighted-average shares outstanding in the calculation of diluted
loss per share.