jnp-10q_20170630.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 1-10352

 

JUNIPER PHARMACEUTICALS, INC.

(Exact name of Registrant as specified in its charter)

 

 

Delaware

 

59-2758596

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

33 Arch Street

Boston, Massachusetts

 

02110

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (617) 639-1500

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

  (Do not check if a smaller reporting company)

Smaller reporting company

Emerging Growth Company ☐   

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of shares outstanding of the registrant’s common stock as of July 31, 2017: 10,844,113.

 


 

EXPLANATORY NOTE

Unless the context indicates otherwise, references in this Quarterly Report to “Juniper Pharmaceuticals,” “Juniper,” “the Company,” “we” “our,” and “us” mean Juniper Pharmaceuticals, Inc. and its subsidiaries.

 


 

Juniper Pharmaceuticals, Inc.

Table of Contents

 

 

 

 

 

Page

 

 

Part I—Financial Information

 

 

Item 1.

 

Financial Statements (unaudited)

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016

 

1

 

 

Condensed Consolidated Statements of Operations for the three and six month periods ended June 30, 2017 and 2016

 

2

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six month periods ended June 30, 2017 and 2016

 

3

 

 

Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2017 and 2016

 

4

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

5

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

29

Item 4.

 

Controls and Procedures

 

29

 

 

 

 

 

 

 

Part II—Other Information

 

 

Item 1.

 

Legal Proceedings

 

31

Item 1A.

 

Risk Factors

 

31

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

31

Item 3.

 

Defaults Upon Senior Securities

 

31

Item 4.

 

Mine Safety Disclosures

 

31

Item 5.

 

Other Information

 

31

Item 6.

 

Exhibits

 

32

Signatures

 

33

 

 

 

 


 

Part I—Financial Information

Item 1. Financial Statements

 

Juniper Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

 

 

 

June 30,

2017

 

 

December 31,

2016

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,464

 

 

$

20,994

 

Accounts receivable, net

 

 

6,900

 

 

 

6,573

 

Inventories

 

 

5,212

 

 

 

5,621

 

Prepaid expenses and other current assets

 

 

1,812

 

 

 

1,539

 

Total current assets

 

 

35,388

 

 

 

34,727

 

Property and equipment, net

 

 

14,811

 

 

 

13,366

 

Intangible assets, net

 

 

869

 

 

 

969

 

Goodwill

 

 

8,793

 

 

 

8,342

 

Other assets

 

 

167

 

 

 

167

 

Total assets

 

$

60,028

 

 

$

57,571

 

Liabilities, contingently redeemable preferred stock, and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,461

 

 

$

3,893

 

Accrued expenses and other

 

 

5,134

 

 

 

5,271

 

Deferred revenue

 

 

7,191

 

 

 

5,624

 

Current portion of long-term debt

 

 

516

 

 

 

204

 

Total current liabilities

 

 

16,302

 

 

 

14,992

 

Long-term debt, net of current portion

 

 

3,398

 

 

 

2,203

 

Other noncurrent liabilities

 

 

32

 

 

 

56

 

Total liabilities

 

 

19,732

 

 

 

17,251

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Contingently redeemable series C preferred stock, 0 and 0.55 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively (liquidation preference of $550)

 

 

 

 

 

550

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 1,000 shares authorized

Series B convertible preferred stock, 0 and 0.13 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively (liquidation preference of $13)

 

 

 

 

 

 

Common stock $0.01 par value; 150,000 shares authorized; 12,257 issued and 10,844

   outstanding at June 30, 2017 and December 31, 2016

 

 

123

 

 

 

123

 

Additional paid-in capital

 

 

291,469

 

 

 

290,636

 

Treasury stock (at cost), 1,413 shares at June 30, 2017 and December 31, 2016

 

 

(8,601

)

 

 

(8,601

)

Accumulated deficit

 

 

(238,718

)

 

 

(237,360

)

Accumulated other comprehensive loss

 

 

(3,977

)

 

 

(5,028

)

Total stockholders’ equity

 

 

40,296

 

 

 

39,770

 

Total liabilities, contingently redeemable preferred stock, and stockholders’ equity

 

$

60,028

 

 

$

57,571

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1


 

Juniper Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenues

 

$

9,569

 

 

$

7,334

 

 

$

17,295

 

 

$

13,659

 

Service revenues

 

 

4,387

 

 

 

3,374

 

 

 

7,908

 

 

 

6,627

 

Royalties

 

 

 

 

 

902

 

 

 

 

 

 

1,801

 

Total revenues

 

 

13,956

 

 

 

11,610

 

 

 

25,203

 

 

 

22,087

 

Cost of product revenues

 

 

5,303

 

 

 

4,182

 

 

 

9,617

 

 

 

8,209

 

Cost of service revenues

 

 

2,347

 

 

 

2,285

 

 

 

4,590

 

 

 

4,608

 

Total cost of revenues

 

 

7,650

 

 

 

6,467

 

 

 

14,207

 

 

 

12,817

 

Gross profit

 

 

6,306

 

 

 

5,143

 

 

 

10,996

 

 

 

9,270

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

410

 

 

 

379

 

 

 

788

 

 

 

651

 

Research and development

 

 

1,648

 

 

 

3,797

 

 

 

2,994

 

 

 

5,930

 

General and administrative

 

 

4,604

 

 

 

3,244

 

 

 

9,025

 

 

 

6,704

 

Total operating expenses

 

 

6,662

 

 

 

7,420

 

 

 

12,807

 

 

 

13,285

 

Loss from operations

 

 

(356

)

 

 

(2,277

)

 

 

(1,811

)

 

 

(4,015

)

Interest expense, net

 

 

(30

)

 

 

(24

)

 

 

(58

)

 

 

(50

)

Other income, net

 

 

10

 

 

 

81

 

 

 

52

 

 

 

206

 

Total non-operating (loss) income

 

 

(20

)

 

 

57

 

 

 

(6

)

 

 

156

 

Loss before income taxes

 

 

(376

)

 

 

(2,220

)

 

 

(1,817

)

 

 

(3,859

)

Provision for income taxes

 

 

 

 

 

48

 

 

 

 

 

 

52

 

Net loss

 

$

(376

)

 

$

(2,268

)

 

$

(1,817

)

 

$

(3,911

)

Basic net income (loss) per common share

 

$

0.01

 

 

$

(0.21

)

 

$

(0.13

)

 

$

(0.36

)

Diluted net loss per common share

 

$

(0.03

)

 

$

(0.21

)

 

$

(0.13

)

 

$

(0.36

)

Basic weighted average common shares outstanding

 

 

10,803

 

 

 

10,789

 

 

 

10,803

 

 

 

10,789

 

Diluted weighted average common shares outstanding

 

 

10,954

 

 

 

10,789

 

 

 

10,803

 

 

 

10,789

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2


 

Juniper Pharmaceuticals, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net loss

 

$

(376

)

 

$

(2,268

)

 

$

(1,817

)

 

$

(3,911

)

Other comprehensive income (loss) components:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

823

 

 

 

(1,541

)

 

 

1,051

 

 

 

(2,205

)

Total other comprehensive income (loss)

 

 

823

 

 

 

(1,541

)

 

 

1,051

 

 

 

(2,205

)

Comprehensive income (loss)

 

$

447

 

 

$

(3,809

)

 

$

(766

)

 

$

(6,116

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


 

Juniper Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Six Months Ended

June 30,

 

 

 

2017

 

 

2016

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(1,817

)

 

$

(3,911

)

Reconciliation of net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,075

 

 

 

966

 

Stock-based compensation expense

 

 

845

 

 

 

475

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(145

)

 

 

903

 

Inventories

 

 

409

 

 

 

(314

)

Prepaid expenses and other current assets

 

 

(240

)

 

 

(391

)

Other non-current assets

 

 

 

 

 

18

 

Accounts payable

 

 

(805

)

 

 

1,873

 

Accrued expenses and other

 

 

(335

)

 

 

(616

)

Deferred rent

 

 

(18

)

 

 

 

Deferred revenue

 

 

1,522

 

 

 

1,519

 

Net cash provided by operating activities

 

 

491

 

 

 

522

 

Investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,404

)

 

 

(1,202

)

Net cash used in investing activities

 

 

(1,404

)

 

 

(1,202

)

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from loan facility

 

 

954

 

 

 

 

Proceeds from equipment loans

 

 

1,501

 

 

 

 

Principal payments on debt

 

 

(1,143

)

 

 

(122

)

Dividends paid

 

 

(7

)

 

 

(14

)

Net cash provided by (used in) financing activities

 

 

1,305

 

 

 

(136

)

Effect of exchange rate changes on cash and cash equivalents

 

 

78

 

 

 

(110

)

Net increase (decrease) in cash and cash equivalents

 

 

470

 

 

 

(926

)

Cash and cash equivalents, beginning of period

 

 

20,994

 

 

 

13,901

 

Cash and cash equivalents, end of period

 

$

21,464

 

 

$

12,975

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

50

 

 

$

44

 

Supplemental noncash information

 

 

 

 

 

 

 

 

Purchases of equipment through accounts payable and accrued expenses

 

$

327

 

 

$

 

Excess of carrying value of Series C Preferred Stock over redemption value

 

$

459

 

 

$

 

Redemption of Series C Preferred Stock and dividend included in accounts payable

 

$

98

 

 

$

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


 

Juniper Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(1) Interim Condensed Consolidated Financial Statements

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. It is recommended that these financial statements be read in conjunction with the consolidated financial statements and related notes that appear in the Annual Report on Form 10-K of Juniper Pharmaceuticals, Inc. (“Juniper” or the “Company”) for the year ended December 31, 2016 filed with the SEC on March 7, 2017 (the “2016 Annual Report”). In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of June 30, 2017, and its results of operations for the three and six months ended June 30, 2017 and 2016, and cash flows for the six months ended June 30, 2017 and 2016. The condensed consolidated balance sheet at December 31, 2016, was derived from audited annual financial statements, but does not contain all of the footnote disclosures from the annual financial statements. Results of operations for the three and six months ended June 30, 2017 are not necessarily indicative of the results for the year ending December 31, 2017 or any period thereafter.

At June 30, 2017, cash and cash equivalents were $21.5 million.  The Company’s future funding requirements depend on a number of factors, including the rate of market acceptance of its current and future products and services and the resources the Company devotes to developing and supporting the same.  The Company believes that current cash and cash equivalents, as well as cash generated from operations, will be sufficient to meet anticipated cash needs for working capital, including advancing its product candidates, and capital expenditures through August 3, 2018.  The Company may be dependent on its ability to raise additional capital to finance operations and further fund research and development programs.  If the Company is not able to raise additional capital on terms acceptable to it, or at all, as and when needed, it may be required to curtail its operating spend including spend related to its research and development programs.

Management Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures at the date of the financial statements during the reporting period. Significant estimates are used for, but are not limited to, revenue recognition, allowance for doubtful accounts, inventory reserve, impairment analysis of goodwill and intangibles including their useful lives, research and development accruals, deferred tax assets, liabilities and valuation allowances, and fair value of stock options. On an ongoing basis, management evaluates its estimates. Actual results could differ from those estimates.

 

(2) Inventories

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Components of inventory cost include materials, labor and manufacturing overhead. Inventories consist of the following (in thousands):

 

 

 

June 30,

2017

 

 

December 31,

2016

 

Raw materials

 

$

785

 

 

$

856

 

Work in process

 

 

4,050

 

 

 

3,806

 

Finished goods

 

 

377

 

 

 

959

 

Total

 

$

5,212

 

 

$

5,621

 

 

The inventory reserve balance at June 30, 2017 and December 31, 2016 was $0.2 million and $0 million, respectively. During the three months ended March 31, 2017 and 2016, the Company recorded charges in the condensed consolidated statements of operations for excess and obsolete inventory of $0.2 million. No charges were recorded for the three months ended June 30, 2017 and 2016.

5


 

(3) Goodwill and Intangible Assets

Changes to goodwill during the six months ended June 30, 2017 were as follows (in thousands):

 

 

 

Total

 

Balance—December 31, 2016

 

$

8,342

 

Effects of foreign currency translation

 

 

451

 

Balance—June 30, 2017

 

$

8,793

 

 

Intangible assets consist of the following at June 30, 2017 and December 31, 2016 (in thousands):

 

 

 

Trademark

 

 

Developed

Technology

 

 

Customer

Relationships

 

 

Total

 

Gross carrying amount—June 30, 2017

 

$

300

 

 

$

1,370

 

 

$

1,240

 

 

$

2,910

 

Foreign currency translation adjustment

 

 

(65

)

 

 

(240

)

 

 

(217

)

 

 

(522

)

Accumulated amortization

 

 

(235

)

 

 

(730

)

 

 

(554

)

 

 

(1,519

)

Balance—June 30, 2017

 

$

 

 

$

400

 

 

$

469

 

 

$

869

 

 

 

 

Trademark

 

 

Developed

Technology

 

 

Customer

Relationships

 

 

Total

 

Gross carrying amount—December 31, 2016

 

$

300

 

 

$

1,370

 

 

$

1,240

 

 

$

2,910

 

Foreign currency translation adjustment

 

 

(53

)

 

 

(298

)

 

 

(270

)

 

 

(621

)

Accumulated amortization

 

 

(247

)

 

 

(617

)

 

 

(456

)

 

 

(1,320

)

Balance—December 31, 2016

 

$

 

 

$

455

 

 

$

514

 

 

$

969

 

 

Amortization expense related to developed technology is classified as a component of cost of service revenues in the accompanying consolidated statements of operations. Amortization expense related to trademark and customer relationships is classified as a component of general and administrative expenses in the accompanying consolidated statements of operations.

Amortization expense for the three months ended June 30, 2017 and 2016 was $0.1 million.  Amortization expense for the six months ended June 30, 2017 and 2016 was $0.2 million and $0.2 million, respectively.  Amortization expense on existing intangible assets as of June 30, 2017 is as follows (in thousands):

 

Year ending December 31,

 

Total

 

Remainder of 2017

 

$

152

 

2018

 

 

279

 

2019

 

 

252

 

2020

 

 

186

 

Total

 

$

869

 

 

(4) Debt and other Contractual Obligations

In September 2013, Juniper assumed debt of $3.9 million in connection with its acquisition of Juniper Pharma Services (“JPS”). JPS had entered into a Business Loan Agreement (“Loan Agreement”) covering three loan facilities (collectively referred to as the “original agreements”) with Lloyds TSB Bank (“Lloyds”) as administrative agent. During the three months ended June 30, 2017, JPS repaid one of the existing loan facilities upon which JPS subsequently entered into a new loan facility with the same administrative agent for the same outstanding balance. The refinancing was accounted for as a modification with no resulting gain or loss. The remaining original agreements and the new agreement are collectively referred to as the loan facilities.

As of June 30, 2017, the Company owed $2.4 million on the loan facilities. The loan facilities are due for repayment over periods ranging from 7-15 years. Two of the facilities bear interest at the Bank of England’s base rate plus 1.95%, and 2.55%, respectively. The interest rates at June 30, 2017 for these facilities were 2.45% and 3.05%, respectively. The third facility is a fixed rate agreement bearing interest at 2.99% per annum. The weighted average interest rate for the three loan facilities for the three months ended June 30, 2017 was 2.76%. The Loan Agreement is secured by the mortgaged property and an unlimited lien on other assets of JPS. The original agreements under the Loan Agreement contains financial covenants that limit the amount of indebtedness JPS may incur, requires JPS to maintain certain levels of net worth, and restricts JPS’s ability to materially alter the character of its business. The new loan facility contains the same financial covenants outlined above in addition to a covenant which requires that JPS

6


 

maintain certain levels of earnings before interest, taxes, depreciation and amortization. As of June 30, 2017, the Company is in compliance with all of the covenants under the Loan Agreement.

In September 2013, as part of the acquisition of JPS, Juniper assumed a $2.5 million obligation under a grant arrangement with the Regional Growth Fund on behalf of the Secretary of State for Business, Innovation, and Skills in the United Kingdom. JPS used this grant to fund the building of its second facility, which includes analytical labs, office space, and a manufacturing facility. As part of the arrangement, JPS is required to create and maintain certain full-time equivalent personnel levels through October 2017. As of June 30, 2017, the Company is in compliance with the covenants of the arrangement.

 

The income from the Regional Growth Fund will be recognized on a decelerated basis through October 2017. As of June 30, 2017, the obligation is valued at $0.2 million and is recorded as deferred revenue on the consolidated balance sheets. Other income associated with the Regional Growth Fund obligation for the three months ended June 30, 2017 and 2016 was $0.2 million, respectively. Other income associated with the Regional Growth Fund obligation for the six months ended June 30, 2017 and 2016 was $0.4 million and $0.3 million, respectively. The amount of other income on the obligation that will be recognized provided the Company remains in compliance with the covenants will be $0.2 million.

 

Juniper leases the buildings portion of its U.S. corporate office under an operating lease and debt for the Nottingham, U.K. facility.  Additionally, Juniper leases certain equipment under loan agreements with payments through March 2022.  In October 2015, the Company entered into a lease agreement for its corporate office in Boston, Massachusetts. The initial term of the lease agreement is approximately 39 months, which includes a three-month free rent period. In January and March 2017, the Company entered into loans of $0.9 million and $0.6 million, respectively, for equipment in its Nottingham, U.K. facility.  The interest rate for the two loans was 2.09% at June 30, 2017.  The transactions were considered failed sales-leaseback arrangements as the amount of the loans are less than the carrying value of the equipment. These failed sale-leaseback arrangements have been recorded as a component of long-term debt on the Company’s condensed consolidated balance sheets. The initial terms of the loans are 60 months.  

 

Commitments under Juniper’s debt and lease arrangements are as follows as of June 30, 2017 (in thousands):

 

 

 

Operating

Leases

 

 

Debt

Principal

Payments

 

 

Total

 

Remainder of 2017

 

$

219

 

 

$

256

 

 

$

475

 

2018

 

 

443

 

 

 

524

 

 

 

967

 

2019

 

 

74

 

 

 

547

 

 

 

621

 

2020

 

 

 

 

 

566

 

 

 

566

 

2021

 

 

 

 

 

584

 

 

 

584

 

Thereafter

 

 

 

 

 

1,437

 

 

 

1,437

 

Total minimum debt and lease payments

 

$

736

 

 

$

3,914

 

 

$

4,650

 

 

    

 

 

(5) Intravaginal Ring Technology License

In March 2015, the Company obtained an exclusive worldwide license (“License Agreement”) to the intellectual property rights for a novel segmented intravaginal ring (“IVR”) technology. Due to its novel polymer and segmentation composition, the Company believes the IVR has the potential to deliver one or more drugs, including hormones and larger molecules such as peptides, at different dosages and release rates within a single segmented ring. Drugs such as progesterone and leuprolide have already been tested using the technology and demonstrated sustained release for up to three weeks. This technology was developed by Dr. Robert Langer from the Massachusetts Institute of Technology (“MIT”) and Dr. William Crowley from Massachusetts General Hospital (“MGH”) and Harvard Medical School. Drs. Langer and Crowley have each agreed to serve a three-year term as strategic advisors to the Company in exchange for an upfront one-time payment plus quarterly fees and equity compensation.

Unless earlier terminated by the parties, the License Agreement will remain in effect until the later of (i) the date on which all issued patents and filed patent applications within the licensed patent rights have expired or been abandoned and (ii) one year after the last sale for which a royalty is due under the License Agreement or 10 years after such expiration or abandonment date referred to in (i), whichever is earlier. Juniper has the right to terminate the License Agreement by giving 90 days advance written notice to MGH. MGH has the right to terminate the License Agreement based on the Company’s failure to make payments due under the License

7


 

Agreement, subject to a 15 day cure period, or the Company’s failure to maintain the insurance required by the License Agreement. MGH may also terminate the License Agreement based on Juniper’s non-financial default under the License Agreement, subject to a 60 day cure period.

Pursuant to the terms of the License Agreement, Juniper has agreed to reimburse MGH for all costs associated with the preparation, filing, prosecution and maintenance of the licensed patent rights, and has agreed to pay MGH a $50,000 annual license fee on each of the first five year anniversaries of the effective date of the License Agreement, and a $100,000 annual license fee beginning on the sixth anniversary of the effective date of the License Agreement and on each subsequent anniversary thereafter. The annual license fee is creditable against any royalties or sublicense income payable in each calendar year.

Under the terms of the License Agreement, Juniper has agreed to use commercially reasonable efforts to develop and commercialize at least one product and/or process related to the IVR technology, which efforts will include the making of certain minimum annual expenditures in each of the first five years following the effective date of the License Agreement. Juniper has also agreed to pay MGH certain milestone payments totaling up to $1.2 million tied to the Company’s achievement of certain development and commercialization milestones, and certain annual royalty payments based on net sales of any such patented products or processes developed by Juniper.

 

(6) Segments and Geographic Information

The Company and its subsidiaries currently operate in two segments: product and service. The product segment oversees the supply chain and manufacturing of CRINONE, the Company’s sole commercialized product. The product segment included the royalty stream the Company received from Allergan for CRINONE sales in the United States, which ceased with the November 2016 agreement with Allergan, as well as the development of new product candidates. The service segment includes product development, clinical trial manufacturing, and advanced analytical and consulting services for the Company’s customers, as well as the characterizing and developing of pharmaceutical product candidates for the Company’s internal programs and managing certain preclinical activities including manufacturing of the Company’s pipeline products. In September 2013, the Company acquired JPS, a U.K.-based provider of pharmaceutical development, clinical trial manufacturing, and advanced analytical and consulting services to the pharmaceutical industry. The Company has integrated its supply chain management for its sole commercialized product, CRINONE, into those operations and have therefore sought to capture synergies by transferring all operational activities related to its historic business.  The Company owns certain plant and equipment physically located at third party contractor facilities in the United Kingdom and Switzerland.  The Company conducts its advanced formulation, analytical and consulting services through its subsidiary, JPS.

The Company’s largest customer, Merck KGaA, utilizes a Switzerland-based subsidiary to acquire product from the Company, which it then sells throughout the world excluding the United States.  Up until November 2016, the Company’s primary domestic customer, Allergan, Plc (“Allergan”), was responsible for the commercialization and sale of CRINONE in the United States. In November 2016, the Company entered into an agreement with Allergan to monetize future royalty payments.  Under the agreement, the Company received a one-time payment of $11.0 million representing all future royalty amounts payable.

The following tables show selected information by geographic area (in thousands):

Revenues:

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

United States

 

$

2,387

 

 

$

2,421

 

 

$

4,015

 

 

$

4,215

 

Switzerland

 

 

9,759

 

 

 

7,350

 

 

 

17,516

 

 

 

13,691

 

United Kingdom

 

 

1,088

 

 

 

1,142

 

 

 

2,037

 

 

 

2,493

 

Other countries

 

 

722

 

 

 

697

 

 

 

1,635

 

 

 

1,688

 

Total

 

$

13,956

 

 

$

11,610

 

 

$

25,203

 

 

$

22,087

 

 

8


 

Total assets:

 

 

 

June 30,

2017

 

 

December 31,

2016

 

United States

 

$

21,494

 

 

$

21,423

 

Switzerland

 

 

33,566

 

 

 

4,673

 

United Kingdom

 

 

4,838

 

 

 

31,288

 

Other countries

 

 

130

 

 

 

187

 

Total

 

$

60,028

 

 

$

57,571

 

 

Long-lived assets:

 

 

 

June 30,

2017

 

 

December 31,

2016

 

United States

 

$

667

 

 

$

663

 

Switzerland

 

 

460

 

 

 

369

 

United Kingdom

 

 

14,718

 

 

 

13,468

 

Other countries

 

 

2

 

 

 

2

 

Total

 

$

15,847

 

 

$

14,502

 

 

No other individual country represented greater than 10% of total revenues, total assets, or long-lived assets for any period presented.

For the three and six months ended June 30, 2017, Merck KGaA accounted for 100% of the product segment revenue. For the three and six months ended June 30, 2016, Merck KGaA accounted for 89% and 88% of the product segment revenue, respectively. For the three and six months ended June 30, 2016, Allergan accounted for 11% and 12% of the product segment revenue, respectively. At June 30, 2017 and December 31, 2016, Merck KGaA made up 100% of the product segment accounts receivable.

For the three and six months ended June 30, 2017 the same customer accounted for 28% and 23% of the service segment total revenue, respectively.  No customers accounted for 10% or more of the service segment total revenue for the three and six months ended June 30, 2016.  At June 30, 2017, two customers accounted for 24% and 10% of total service segment accounts receivable, respectively. No other customers accounted for greater than 10% of the service segment accounts receivable. At December 31, 2016,  two customers accounted for 18% and 13% of total service segment net accounts receivable..

The following summarizes other information by segment for the three months ended June 30, 2017 (in thousands):

 

 

 

Product

 

 

Service

 

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Product revenues

 

$

9,569

 

 

$

 

 

$

9,569

 

Service revenues

 

 

 

 

 

4,387

 

 

 

4,387

 

Total revenues

 

$

9,569

 

 

$

4,387

 

 

$

13,956

 

Cost of product revenues

 

$

5,303

 

 

$

 

 

$

5,303

 

Cost of service revenues

 

 

 

 

 

2,347

 

 

 

2,347

 

Total cost of revenues

 

$

5,303

 

 

$

2,347

 

 

$

7,650

 

Gross profit

 

$

4,266

 

 

$

2,040

 

 

$

6,306

 

Total operating expenses

 

 

 

 

 

 

 

 

 

 

6,662

 

Total non-operating expense

 

 

 

 

 

 

 

 

 

 

(20

)

Loss before income taxes

 

 

 

 

 

 

 

 

 

$

(376

)

 

9


 

The following summarizes other information by segment for the three months ended June 30, 2016 (in thousands):

 

 

 

Product

 

 

Service

 

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Product revenues

 

$

7,334

 

 

$

 

 

$

7,334

 

Service revenues

 

 

 

 

 

3,374

 

 

 

3,374

 

Royalties

 

 

902

 

 

 

 

 

 

902

 

Total revenues

 

$

8,236

 

 

$

3,374

 

 

$

11,610

 

Cost of product revenues

 

$

4,182

 

 

$

 

 

$

4,182

 

Cost of service revenues

 

 

 

 

 

2,285

 

 

 

2,285

 

Total cost of revenues

 

$

4,182

 

 

$

2,285

 

 

$

6,467

 

Gross profit

 

$

4,054

 

 

$

1,089

 

 

$

5,143

 

Total operating expenses

 

 

 

 

 

 

 

 

 

 

7,420

 

Total non-operating income

 

 

 

 

 

 

 

 

 

 

57

 

Loss before income taxes

 

 

 

 

 

 

 

 

 

$

(2,220

)

 

The following summarizes other information by segment for the six months ended June 30, 2017 (in thousands):

 

 

 

Product

 

 

Service

 

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Product revenues

 

$

17,295

 

 

$

 

 

$

17,295

 

Service revenues

 

 

 

 

 

7,908

 

 

 

7,908

 

Total revenues

 

$

17,295

 

 

$

7,908

 

 

$

25,203

 

Cost of product revenues

 

$

9,617

 

 

$

 

 

$

9,617

 

Cost of service revenues

 

 

 

 

 

4,590

 

 

 

4,590

 

Total cost of revenues

 

$

9,617

 

 

$

4,590

 

 

$

14,207

 

Gross profit

 

$

7,678

 

 

$

3,318

 

 

$

10,996

 

Total operating expenses

 

 

 

 

 

 

 

 

 

 

12,807

 

Total non-operating expense

 

 

 

 

 

 

 

 

 

 

(6

)

Loss before income taxes

 

 

 

 

 

 

 

 

 

$

(1,817

)

 

The following summarizes other information by segment for the six months ended June 30, 2016 (in thousands):

 

 

 

Product

 

 

Service

 

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Product revenues

 

$

13,659

 

 

$

 

 

$

13,659

 

Service revenues

 

 

 

 

 

6,627

 

 

 

6,627

 

Royalties

 

 

1,801

 

 

 

 

 

 

1,801

 

Total revenues

 

$

15,460

 

 

$

6,627

 

 

$

22,087

 

Cost of product revenues

 

$

8,209

 

 

$

 

 

$

8,209

 

Cost of service revenues

 

 

 

 

 

4,608

 

 

 

4,608

 

Total cost of revenues

 

$

8,209

 

 

$