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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, 2020
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: 001-36399
ADAMAS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
42-1560076
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1900 Powell Street, Suite 1000, Emeryville, CA, 94608
(Address of principal executive offices) (Zip Code)
(510) 450-3500
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.001 per share
 
Trading Symbol(s)
ADMS
Name of each exchange on which registered
The Nasdaq Global Market
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  x   No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).   Yes  x   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller 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  x
Number of shares outstanding of the issuer’s common stock, par value $0.001 per share, as of July 31, 2020, was 28,281,840.



Table of Contents
ADAMAS PHARMACEUTICALS, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
 
   Page
 
    
  
  
  
  
  
  
 
 
 
    
 
    
 
 
 
 
 
 
 

2

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
ADAMAS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share and per share data)
 June 30,
2020
December 31,
2019
Assets  
Current assets  
Cash and cash equivalents$30,538  $65,774  
Available-for-sale securities72,876  66,833  
Accounts receivable, net6,608  5,770  
Inventory5,851  5,267  
Prepaid expenses and other current assets7,814  6,676  
Total current assets123,687  150,320  
Property and equipment, net1,989  2,449  
Operating lease right-of-use assets7,351  8,048  
Prepaid expenses and other non-current assets38  1,341  
Total assets$133,065  $162,158  
Liabilities and stockholders’ deficit  
Current liabilities  
Accounts payable$2,469  $6,932  
Accrued liabilities13,694  16,117  
Current portion of long-term debt3,232  2,041  
Other current liabilities1,820  1,858  
Total current liabilities21,215  26,948  
Long-term debt126,300  125,674  
Long-term portion of operating lease liabilities7,364  8,272  
Other non-current liabilities2,595  2,157  
Total liabilities157,474  163,051  
Commitments and Contingencies (Note 7)
Stockholders’ deficit  
Preferred stock, $0.001 par value — 5,000,000 shares authorized, and zero shares issued and outstanding at June 30, 2020 and December 31, 2019
    
Common stock, $0.001 par value — 100,000,000 shares authorized, 28,281,840 and 27,964,778 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
33  33  
Additional paid-in capital450,536  446,942  
Accumulated other comprehensive gain120  16  
Accumulated deficit(475,098) (447,884) 
Total stockholders’ deficit(24,409) (893) 
Total liabilities and stockholders’ deficit$133,065  $162,158  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3

Table of Contents
ADAMAS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
 Three Months Ended
 June 30,
Six Months Ended
 June 30,
 2020201920202019
Revenues:
Product sales$17,954  $12,691  $32,435  $24,356  
Royalty revenue840    840    
Total revenues18,794  12,691  33,275  24,356  
Costs and operating expenses:  
Cost of product sales381  685  953  1,098  
Research and development2,550  8,598  5,015  18,812  
Selling, general and administrative, net23,177  25,216  47,729  52,904  
Total costs and operating expenses26,108  34,499  53,697  72,814  
Loss from operations(7,314) (21,808) (20,422) (48,458) 
Interest and other income, net215  734  299  1,457  
Interest expense(3,467) (3,797) (7,091) (7,528) 
Net loss $(10,566) $(24,871) $(27,214) $(54,529) 
Net loss per share, basic and diluted$(0.37) $(0.90) $(0.97) $(1.98) 
Weighted average shares used in computing net loss per share, basic and diluted28,194  27,579  28,112  27,516  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

Table of Contents
ADAMAS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)
(in thousands)
 Three Months Ended
 June 30,
Six Months Ended
 June 30,
 2020201920202019
Net loss$(10,566) $(24,871) $(27,214) $(54,529) 
Other comprehensive income
Reclassification of realized gain on available-for-sale securities recognized in interest and other income, net(34)   (34)   
Unrealized gain on available-for-sale securities81  137  138  367  
Total other comprehensive income47  137  104  367  
Comprehensive loss$(10,519) $(24,734) $(27,110) $(54,162) 
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

Table of Contents
ADAMAS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(unaudited)
(in thousands, except share data)
 Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Gain (Loss)Accumulated DeficitTotal Stockholders’ Equity
 SharesAmount
Balances at December 31, 201827,434,358  $32  $432,815  $(264) $(342,698) $89,885  
Exercise of stock options18,230  —  49  —  —  49  
Restricted stock units vested67,391  —  —  —  —  —  
Other comprehensive income—  —  —  230  —  230  
Stock-based compensation—  —  3,410  —  —  3,410  
Net loss—  —  —  —  (29,658) (29,658) 
Balances at March 31, 201927,519,979  32  436,274  (34) (372,356) 63,916  
Exercise of stock options65,064  —  99  —  —  99  
Restricted stock units vested12,860  —  —  —  —  —  
Stock issued under employee stock purchase plan112,304  —  449  —  —  449  
Other comprehensive income—  —  —  137  —  137  
Stock-based compensation—  —  2,973  —  —  2,973  
Net loss—  —  —  —  (24,871) (24,871) 
Balances at June 30, 201927,710,207  $32  $439,795  $103  $(397,227) $42,703  

 Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive GainAccumulated DeficitTotal Stockholders’ Deficit
 SharesAmount
Balances at December 31, 201927,964,778  $33  $446,942  $16  $(447,884) $(893) 
Exercise of stock options61,766  —  42  —  —  42  
Restricted stock units vested131,661  —  —  —  —  —  
Other comprehensive income—  —  —  57  —  57  
Stock-based compensation—  —  1,589  —  —  1,589  
Net loss—  —  —  —  (16,648) (16,648) 
Balances at March 31, 202028,158,205  33  448,573  73  (464,532) (15,853) 
Restricted stock units vested28,541  —  —  —  —  —  
Stock issued under employee stock purchase plan95,094  —  223  —  —  223  
Other comprehensive income—  —  —  47  —  47  
Stock-based compensation—  —  1,740  —  —  1,740  
Net loss—  —  —  —  (10,566) (10,566) 
Balances at June 30, 202028,281,840  $33  $450,536  $120  $(475,098) $(24,409) 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ADAMAS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 Six Months Ended
 June 30,
 20202019
Cash flows from operating activities
Net loss$(27,214) $(54,529) 
Adjustments to reconcile net loss to net cash used in operating activities  
Depreciation460  692  
Stock-based compensation3,176  6,323  
Accretion of interest expense7,091  7,528  
Change in fair value of embedded derivative liability438  149  
Net accretion of discounts and amortization of premiums of available-for-sale securities(147) (675) 
Realized gain on available-for-sale securities(55)   
Provision for write-down of inventory340    
Changes in assets and liabilities  
Accrued interest of available-for-sale securities236  54  
Accounts receivable, net(838) (900) 
Inventory(666) (524) 
Prepaid expenses and other assets165  619  
Operating lease right-of-use assets697  413  
Accounts payable(4,436) (253) 
Current portion of long-term debt(5,274) (3,121) 
Long-term portion of operating lease liabilities(810) (482) 
Accrued liabilities and other liabilities(2,691) 899  
Net cash used in operating activities(29,528) (43,807) 
Cash flows from investing activities  
Purchases of property and equipment(18) 
Purchases of available-for-sale securities(63,939) (38,657) 
Maturities of available-for-sale securities40,900  88,000  
Sales of available-for-sale securities17,066    
Net cash provided by (used in) investing activities(5,973) 49,325  
Cash flows from financing activities  
Proceeds from Paycheck Protection Program Loan2,650    
Repayment of Paycheck Protection Program Loan(2,650)   
Proceeds from issuance of common stock upon exercise of stock options42  165  
Proceeds from employee stock purchase plan223  449  
Net cash provided by financing activities265  614  
Net increase (decrease) in cash and cash equivalents(35,236) 6,132  
Cash and cash equivalents at beginning of period65,774  56,605  
Cash and cash equivalents at end of period$30,538  $62,737  
Supplemental disclosure of noncash activities  
Right-of-use assets obtained in exchange for operating lease liabilities$  $8,005  
Stock-based compensation capitalized in inventory$153  $60  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ADAMAS PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.     DESCRIPTION OF BUSINESS
Adamas Pharmaceuticals, Inc. (the “Company”) is a commercial-stage pharmaceutical company focused on supporting its patient community and growing a portfolio of therapies to reduce the burden of neurological diseases on patients, caregivers, and society. In August 2017, the U.S. Food and Drug Administration (FDA) approved GOCOVRI® (amantadine) extended release capsules, the first and only FDA-approved medication indicated for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications.
The Company was incorporated in the State of Delaware on November 15, 2000, and operates as one segment. The Company’s headquarters and operations are located in Emeryville, California.
2.     BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, these financial statements include all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of the Company’s condensed consolidated financial statements for the periods presented. The condensed consolidated balance sheet at December 31, 2019 was derived from the audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP.
These interim financial results are not necessarily indicative of results to be expected for the full fiscal year ending December 31, 2020, or any other future period. Readers should read these interim unaudited condensed consolidated financial statements in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, or SEC. The Company’s critical accounting policies are detailed in its Annual Report on Form 10-K for the year ended December 31, 2019. The Company’s critical accounting policies have not changed materially from December 31, 2019.
Use of Estimates
The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in the consolidated financial statements and the accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition and variable consideration, lease assets and liabilities, clinical trial accruals, fair value of assets and liabilities including short-term and long-term classification, embedded derivatives, income taxes, inventory, and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results may differ from those estimates.
Risks and Uncertainties
The outbreak of the novel Coronavirus (“COVID-19”), which is understood to have begun in December 2019, continues to grow both within the U.S. and globally. The World Health Organization has declared the outbreak of COVID-19 to be a pandemic, and the U.S. federal government has declared it a national emergency. The Company is subject to risks and uncertainties as a result of the outbreak of COVID-19. Despite disruptions to the Company’s business operations, the COVID-19 pandemic did not significantly impact GOCOVRI prescription refill rates for the three and six months ended June 30, 2020, and thus far management has observed no disruptions to its inventory on hand
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or planned manufacturing schedule. However, new prescription rates have slowed due to several factors, including: many healthcare providers have temporarily closed their offices or are restricting patient visits; patients are postponing visits to healthcare provider facilities; and the sales force has moved to conducting activities virtually with healthcare providers. While management believes this decline in new prescriptions to be temporary, the duration and severity is dependent on future developments, including new information that may emerge concerning the actions taken to contain or prevent further spread, all of which are highly uncertain and cannot be predicted with confidence.
As of the date of issuance of these condensed consolidated financial statements, due to the numerous uncertainties surrounding the COVID-19 pandemic, the Company is unable to predict the extent to which the COVID-19 pandemic may materially adversely affect the Company’s future business, financial results, liquidity and cash flows.
Liquidity
Since January 1, 2017, the Company has funded its operations primarily through a royalty-backed loan agreement (“Royalty-Backed Loan”) with HealthCare Royalty Partners III, L.P., (“HCRP”), sales of GOCOVRI, and sales of its common stock. In 2017, the Company entered into a Royalty-Backed Loan with HCRP, whereby the Company borrowed a total of $100.0 million. The Company made GOCOVRI available for physician and patient use in the fourth quarter of 2017, with a full commercial launch in January 2018. In January 2018, the Company completed a follow-on public offering of its common stock from which proceeds raised were approximately $134.3 million, net of underwriting discounts, commissions, and offering-related transaction costs. Prior to the generation of revenue from GOCOVRI, the Company had not generated any commercial revenue from the sale of its products.
In November 2019, the Company entered into a sales agreement with Cowen and Company, LLC, pursuant to which it may, from time to time, issue and sell shares of common stock having an aggregate offering value of up to $50.0 million. As of June 30, 2020, no shares had been sold under the sales agreement.
As of June 30, 2020, the Company had $103.4 million of cash, cash equivalents, and investments, which management believes will be sufficient to fund its projected operating requirements, including commercialization of GOCOVRI for the treatment of dyskinesia in patients with Parkinson’s disease and operations related to activities for ADS-5102 for MSW, for at least 12 months from the issuance of this quarterly report on Form 10-Q. However, it is possible that the Company will not achieve the progress it expects, because revenues from GOCOVRI may be less than anticipated, especially in light of the current COVID-19 pandemic.
Recent Accounting Pronouncements
Accounting Pronouncements Adopted in 2020
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. The Company adopted the new guidance effective January 1, 2020, and determined the adoption did not have a material impact on its consolidated financial statements. Disclosures are updated in Note 3 “Fair Value Measurements”.
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which amends ASC 808 to clarify ASC 606 should apply in entirety to certain transactions between collaborative arrangement participants. The Company adopted the new guidance effective January 1, 2020, and determined the adoption did not have a material impact on its consolidated financial statements.
New Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments; in November 2018 the FASB issued a subsequent amendment ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses; in April 2019 the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments; in May 2019 the FASB issued ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief; and in November 2019 the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The new guidance changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are
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recorded. In November 2019 the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)—Effective Dates, which defers the effective date of ASU 2016-13 for all entities except SEC reporting companies that are not smaller reporting companies. As a smaller reporting company, this guidance is effective for fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the timing and effect the new guidance will have on its consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes, which is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating but does not expect the new guidance to have a material impact on its consolidated financial statements.
3.     FAIR VALUE MEASUREMENTS
In accordance with ASC 820-10, Fair Value Measurements and Disclosures, the Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows:
Level 1 inputs, which include quoted prices in active markets for identical assets or liabilities;
Level 2 inputs, which include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. For available-for-sale securities, the Company reviews trading activity and pricing as of the measurement date. When sufficient quoted pricing for identical securities is not available, the Company uses market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data; and
Level 3 inputs, which include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies, or similar valuation techniques, as well as significant management judgment or estimation.
The following table represents the fair value hierarchy for the Company’s financial assets and liabilities which require fair value measurement on a recurring basis (in thousands):
 June 30, 2020
 TotalLevel 1Level 2Level 3
Assets:    
Money market$10,954  $10,954  $  $  
Corporate debt13,792    13,792    
U.S. Treasury securities59,084    59,084    
Commercial paper        
Total assets measured at fair value$83,830  $10,954  $72,876  $  
Liabilities:
Embedded derivative liability$2,595  $  $  $2,595  
Total liabilities measured at fair value$2,595  $  $  $2,595  

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 December 31, 2019
 TotalLevel 1Level 2Level 3
Assets:    
Money market$27,720  $27,720  $  $  
Corporate debt22,576    22,576    
U.S. Treasury securities37,811    37,811    
Commercial paper10,928    10,928    
Total assets measured at fair value$99,035  $27,720  $71,315  $  
Liabilities:
Embedded derivative liability$2,157  $  $  $2,157  
Total liabilities measured at fair value$2,157  $  $  $2,157  
Money market funds are highly liquid investments and are actively traded. The pricing information on these investment instruments are readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.
Corporate debt, U.S. Treasury securities, and commercial paper are measured at fair value using Level 2 inputs. The Company reviews trading activity and pricing for these investments as of each measurement date. When sufficient quoted pricing for identical securities is not available, the Company uses market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs represent quoted prices for similar assets in active markets or these inputs have been derived from observable market data. This approach results in the classification of these securities as Level 2 of the fair value hierarchy. In certain cases where there is limited activity or less transparency around inputs to valuation, the related assets or liabilities are classified as Level 3. The Company classified an embedded derivative related to the Company’s Royalty-Backed Loan with HCRP as a Level 3 liability.
The fair value of the embedded derivative as a result of a change in control was calculated using a probability-weighted discounted cash flow model. The model used in valuing this embedded derivative requires the use of significant estimates and assumptions including but not limited to: 1) expected cash flows the Company expects to receive on U.S. net sales of GOCOVRI and on royalties from Allergan on U.S. net sales of Namzaric; 2) the Company’s risk adjusted discount rates; and 3) the probability of a change in control occurring during the term of the note based on the percentage of similar companies that were acquired over the previous five year period. Changes in the estimated fair value of the bifurcated embedded derivative are reported as gains or losses in interest and other income, net, in the condensed consolidated statement of operations. In the periods presented, the Company evaluated the embedded derivative value as a result of an event of default and the value as a result of increased costs due to a regulatory change and considered both to have no material value based on current assessment of probability, but could become material in future periods if a specified event of default or regulatory change became more probable than is currently estimated. See Note 8 “Long-Term Debt” for further description.
At June 30, 2020, the embedded derivative related to the Royalty-Backed Loan was the only recurring fair value measurement with Level 3 unobservable inputs. A risk-adjusted discount rate of 19.6% and a probability of a change in control of 3.0% were applied to calculate the value of the embedded derivative. Significant increases (or decreases) in the discount rate, and significant increases (or decreases) in the probability of a change in control would result in a significantly higher (or lower) fair value measurement.
The following table sets forth changes in Level 3 liabilities measured at fair value on a recurring basis for the three and six months ended June 30, 2020 and 2019 (in thousands):
Three Months Ended
 June 30,
Six Months Ended
 June 30,
2020201920202019
Beginning balance$2,498  $1,453  $2,157  $1,352  
Change in fair value included in interest and other income, net97  48  438  149  
Ending balance$2,595  $1,501  $2,595  $1,501  
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There were no transfers into or out of Level 3 during the three and six months ended June 30, 2020 and 2019.
4.     INVESTMENTS 
The Company’s investments consist of corporate debt, U.S. Treasury securities, and commercial paper classified as available-for-sale securities.
The Company limits the amount of investment exposure as to institution, maturity, and investment type. To mitigate credit risk, the Company invests in investment grade corporate debt, U.S. Treasury securities, and commercial paper. Such securities are reported at fair value, with unrealized gains and losses excluded from earnings and shown separately as a component of accumulated other comprehensive loss within stockholders’ equity. Realized gains and losses are reclassified from other comprehensive loss to other income on the condensed consolidated statements of operations when incurred. The Company may pay a premium or receive a discount upon the purchase of available-for-sale securities. Interest earned and gains realized on available-for-sale securities and amortization of discounts received and accretion of premiums paid on the purchase of available-for-sale securities are included in investment income.
The following table is a summary of amortized cost, unrealized gain and loss, and the fair value of available-for-sale securities as of June 30, 2020 and December 31, 2019 (in thousands):
June 30, 2020
 Amortized CostGross Unrealized
Gains
Gross Unrealized
Losses
Fair Value
Investments:    
Corporate debt$13,718  $74  $  $13,792  
U.S. Treasury securities59,038  47  (1) 59,084  
Commercial paper  
Total$72,756  $121  $(1) $72,876  
Reported as:    
Short-term investments$72,756  $121  $(1) $72,876  
Total$72,756  $121  $(1) $72,876  

December 31, 2019
 Amortized CostGross Unrealized
Gains
Gross Unrealized
Losses
Fair Value
Investments:    
Corporate debt$22,582  $3  $(9) $22,576  
U.S. Treasury securities37,789  22    37,811  
Commercial paper6,446      6,446  
Total$66,817  $25  $(9) $66,833  
Reported as:    
Short-term investments$66,817  $25  $(9) $66,833  
Total$66,817  $25  $(9) $66,833  
Short-term investments include accrued interest of $0.2 million and $0.4 million as of June 30, 2020 and December 31, 2019, respectively. For both the three and six months ended June 30, 2020, there were gross realized gains on investments of $55,000 and no gross realized losses. There were no gross realized gains or losses on investments for the three and six months ended June 30, 2019. Realized gains are reflected in interest and other income, net, in the condensed consolidated statements of operations, using the specific-identification method. Investments are classified as short-term or long-term depending on the underlying investment’s maturity date. The Company had no investments with a maturity date greater than 12 months as of June 30, 2020 and December 31, 2019. All investments with unrealized losses at June 30, 2020 have been in a loss position for less than twelve months or the loss is not material and were temporary in nature. The Company does not intend to sell the investments that are in an unrealized loss position before recovery of their amortized cost basis.
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5.     INVENTORY
If the Company identifies excess, obsolete or unsalable product, the Company will write down its inventory to net realizable value in the period it is identified. During the six months ended June 30, 2020, the Company recorded a $0.3 million provision for the write-down of inventory to cost of sales. There was no write-down of inventory during the six months ended June 30, 2019. Inventory consists of the following (in thousands):
June 30, 2020December 31, 2019
Raw materials$804  $1,057  
Work-in-process3,229  1,925  
Finished goods1,818  2,285  
Total inventory$5,851  $5,267  

6.     LICENSE AGREEMENTS
In November 2012, the Company granted Forest Laboratories Holdings Limited “Forest”, an indirect wholly-owned subsidiary of Allergan plc (collectively “Allergan”) an exclusive license, with right to sublicense, certain of the Company’s intellectual property rights relating to human therapeutics containing memantine in the United States. In connection with these rights, Allergan markets and sells Namzaric® and Namenda XR® for the treatment of moderate to severe dementia related to Alzheimer’s disease.
Pursuant to the agreement, Allergan made an upfront payment of $65.0 million. The Company earned and received additional cash payments totaling $95.0 million upon achievement by Allergan of certain development and regulatory milestones. Under the agreement, external costs incurred related to the prosecution and litigation of intellectual property rights are reimbursable. Reimbursable external costs are recorded as a reduction to selling, general and administrative, net. For the three and six months ended June 30, 2020 and 2019, there were no reimbursable external costs for prosecution or litigation of intellectual property rights.
In addition, the Company may earn tiered royalty payments based on net sales of Namzaric and Namenda XR. Beginning in May 2020, the Company became entitled to receive royalties at rates in the low double digits to mid-teens from Allergan for sales of Namzaric in the United States. The Company recognized $0.8 million in Namzaric royalty revenue for both the three and six months ended June 30, 2020, and recognized no royalty revenue for the three and six months ended June 30, 2019. Accrued revenue related to Namzaric royalties is recorded in prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets. Allergan’s obligation to pay royalties with respect to fixed-dose memantine-donepezil products, including Namzaric, continues until the later of (i) 15 years after the commercial launch of the first fixed-dose memantine-donepezil product by Allergan in the United States or (ii) the expiration of the Orange Book listed patents for which Allergan obtained rights from the Company covering such product, but is eliminated in any quarter where there is significant competition from generics. Based on Allergan’s and the Company’s current settlement agreements with the Namzaric ANDA filers to date, the earliest date on which any of these agreements grant a license to market a Namzaric ANDA filer’s generic version of Namzaric is January 1, 2025 (or earlier in certain circumstances). Alternatively, the Namzaric ANDA filers with the earliest license date have the option to launch an authorized generic version of Namzaric beginning on January 1, 2026 instead of launching their own generic version of Namzaric on January 1, 2025. For further discussion of Namzaric ANDA filers, see Litigation and Other Legal Proceedings in “Note 7 – Commitments and Contingencies”. Beginning in June 2018, the Company was entitled to receive royalties at rates in the low to mid-single digits for sales of Namenda XR in the United States. The Company does not expect to receive royalties on net sales of Namenda XR, due to the entry of generic versions of Namenda XR. Royalties under the license agreement will be recognized when the related sales occur, in accordance with the sales-based royalty exception.
7.     COMMITMENTS AND CONTINGENCIES
Purchase Commitments
The Company has entered into agreements for the supply of API and the manufacture of commercial supply of GOCOVRI, with Moehs Ibérica, S.L. and Catalent Pharma Solutions, LLC, respectively. Under the terms of the agreements, the Company will supply the vendors with non-cancelable firm commitment purchase orders. The Company
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has also entered into other agreements with certain vendors for the provision of services, including services related to data access and packaging, under which the Company is contractually obligated to make certain payments to the vendors.
The Company enters into contracts in the normal course of business that include, among others, arrangements with CROs for clinical trials, vendors for preclinical research, and vendors for manufacturing. These contracts generally provide for termination upon notice, and therefore the Company believes that its obligations under these agreements are not material.
Contingencies
In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown, because it involves claims that may be made against the Company in the future, but have not yet been made. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.
Indemnification 
In accordance with the Company’s amended and restated certificate of incorporation and amended and restated bylaws, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving in such capacity. The Company has a directors and officers liability insurance policy that may enable it to recover a portion of any amounts paid for claims. In addition, in the normal course of business, the Company enters into contracts and agreements that may contain a variety of representations and warranties and provide for general indemnifications. For example, the Company provided certain indemnifications to its agents and underwriters as part of the Company’s January 2018 underwritten secondary public offering of common stock. Underwriters have now made a claim to such indemnifications in conjunction with the ongoing litigation involving that transaction.
Litigation and Other Legal Proceedings
In November 2012, the Company granted Forest an exclusive license to certain of the Company’s intellectual property rights relating to human therapeutics containing memantine in the United States. Under the terms of that license agreement, Forest has the right to enforce such intellectual property rights which are related to its right to market and sell Namzaric and Namenda XR for the treatment of moderate to severe dementia related to Alzheimer’s disease. The Company has a right to participate in, but not control, such enforcement actions by Forest.
In 2018 and as of the date of this filing, multiple generic companies have launched generic versions of Namenda XR.
As of the date of this filing, a number of companies have submitted ANDAs including one or more certifications pursuant to 21 U.S.C. § 355(j)(2)(A)(vii)(iv) to the FDA requesting approval to manufacture and market generic versions of Namzaric, on which the Company is entitled to receive royalties from Forest beginning in May 2020.
As of the date of this filing, the Company and Forest have settled with all such Namzaric ANDA filers, including all first filers on all the available dosage forms of Namzaric. Subject to those agreements, the earliest date on which any of these agreements grant a license to market a Namzaric ANDA filer’s generic version of Namzaric is January 1, 2025 (or earlier in certain circumstances). Alternatively, the Namzaric ANDA filers with the earliest date have the option to launch an authorized generic version of Namzaric beginning on January 1, 2026 instead of launching their own generic version of Namzaric on January 1, 2025. The Company and Forest intend to continue to enforce the patents associated with Namzaric.
On February 16, 2018, Osmotica Pharmaceuticals LLC and Vertical Pharmaceuticals LLC (“Osmotica”) filed an action against the Company in U.S. District Court for the state of Delaware, requesting a declaratory judgment that Osmotica’s newly-approved product Osmolex ER™ (amantadine) extended release tablets do not infringe certain of the Company’s patents. On September 20, 2018, the Company filed its first amended answer including infringement counterclaims against Osmotica asserting Osmotica has infringed nine Company patents under 35 U.S.C. §§ 271(a), (b), and/or (c) and 35 U.S.C. § 271(e)(2)(A) and seeking various forms of relief, including damages, treble damages, injunctive relief, and an order pursuant to 35 U.S.C. § 271(e)(4)(A) that the effective date of any approval of Osmotica’s
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NDA for Osmolex ER™ be a date that is not earlier than the latest expiration date of the Company patents involved in the lawsuit. This action is ongoing, but was stayed on May 23, 2019 at the parties’ joint request.
On July 1, 2020, the Company received a letter dated June 29, 2020, notifying the Company that Zydus Worldwide DMCC (“Zydus”) submitted to the FDA an ANDA for Amantadine Extended-Release Capsules, 68.5 mg and 137 mg that contains certifications pursuant to 21 U.S.C. § 355(j)(2)(A)(vii)(IV) with respect to the Company’s U.S. Patent Nos. 8,389,578; 8,741,343; 8,796,337; 8,889,740; 8,895,614; 8,895,615; 8,895,616; 8,895,617; 8,895,618; 9,867,791; 9,867,792; 9,867,793; 9,877,933; and 10,154,971, that these patents are invalid or will not be infringed by the manufacture, use or sale of Zydus’s Amantadine Extended-Release Capsules, 68.5 mg and 137 mg.
On April 1, 2019, the Company was served with a complaint filed in the United States District Court for the Northern District of California (Case No. 3:18-cv-03018-JCS) against the Company and several Allergan entities alleging violations of Federal and state false claims acts (“FCA”) in connection with the commercialization of Namenda XR and Namzaric by Allergan. The lawsuit is a qui tam complaint brought by a named individual, Zachary Silbersher, asserting rights of the Federal government and various state governments. The lawsuit was originally filed in May 2018 under seal, and the Company became aware of the lawsuit when it was served. The complaint alleges that patents held by Allergan and the Company covering Namenda XR and Namzaric were procured through fraud on the United States Patent and Trademark Office and that these patents were asserted against potential generic manufacturers of Namenda XR and Namzaric to prevent the generic manufacturers from entering the market, thereby wrongfully excluding generic competition resulting in an artificially high price being charged to government payors. The Company’s patents in question were licensed exclusively to Forest. The complaint includes a claim for damages of “potentially more than $2.5 billion dollars,” treble damages “under the federal FCA and most of the State FCAs,” and “statutory penalties that can be assessed for each false claim.” This action is ongoing. The federal and state governments have declined to intervene in this action. To the Company’s knowledge, the individual plaintiff is pursuing the lawsuit in his individual capacity. The Company believes it has strong factual and legal defenses and intends to defend itself vigorously. The Company is in the early stages of this litigation.
On May 13, 2019, a putative class action lawsuit alleging violations of the federal securities laws was filed in California Superior Court for the County of Alameda (Case No. RG1901875). The lawsuit alleges violations of the Securities Act of 1933 by the Company and certain of the Company’s current and former directors and officers for allegedly making false statements and omissions in the registration statement and prospectus filed by the Company in connection with our January 24, 2018, secondary public offering of common stock. On December 10, 2019, another putative class action lawsuit alleging violations of the federal securities laws was filed in federal court in the Northern District of California (Case No. 4:19-cv-08051). This lawsuit alleges violations of the Securities Act of 1934 by the Company and certain of the Company’s current and former officers. On March 16, 2020, a shareholder derivative lawsuit was filed in federal court in the Northern District of California (Case No. 4:20-cv-01815). This lawsuit alleges breaches of fiduciary duty and violations of the Securities Act of 1934 by certain of the Company’s current and former directors and officers. The Company is named as a nominal defendant only. On April 6, 2020, another, virtually identical, shareholder derivative lawsuit was filed in federal court in the Northern District of California (Case No. 4:20-cv-02320). This lawsuit contains the same allegations, claims, and defendants as the first derivative action. Other similar cases may be filed in the future. In all of these actions, Plaintiffs seek unspecified monetary damages and other relief. These actions are ongoing. The Company believes it has strong factual and legal defenses to all actions and intends to defend itself vigorously.
From time to time, the Company may be party to legal proceedings, investigations, and claims in the ordinary course of its business. Other than the matters described above, the Company is not currently party to any material legal proceedings.