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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 001-36306
 
Eagle Pharmaceuticals, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware283420-8179278
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
50 Tice Boulevard, Suite 315
Woodcliff Lake, NJ 07677
(201) 326-5300
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Common stock, $0.001 par value per shareEGRXThe Nasdaq Stock Market LLC
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 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     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" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer Non-accelerated filerSmaller reporting company
Emerging growth company 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No  
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.
The number of shares outstanding of the registrant’s common stock as of August 3, 2020: 13,606,971 shares.



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, or this Quarterly Report, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “will,” “would,” “should,” “expect,” “plan,”, “anticipate,” “believe,” “estimate,” “intend,” “predict,” “seek,” “contemplate,” “project,” “continue,” “potential,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these identifying words. These forward-looking statements include, but are not limited to, statements about:

our expectations regarding the impact of the ongoing coronavirus 2019, or COVID-19, pandemic including the expected duration of disruption and immediate and long-term delays; disruption in the sales of our marketed products; delays, interruptions or other adverse effects to clinical trials and patient enrollment; delays in regulatory review; manufacturing and supply chain interruptions; adverse effects on healthcare systems and disruption of the global economy overall, and the overall impact of the COVID-19 pandemic on our business, financial condition and results of operations;
the potential benefits and commercial potential of Bendeka, Ryanodex and Belrapzo for approved indications and any expanded uses;
the commercial potential of additional indications for our products;
sales of our products in various markets worldwide, pricing for our products, level of insurance coverage and reimbursement for our products, timing regarding development and regulatory approvals for our products or for additional indications or in additional territories; 
future expansion of our commercial organization and transition to third-parties in certain jurisdictions to perform sales, marketing and distribution functions;
the initiation, timing, progress and results of our preclinical and clinical studies, and our research and development program;
our ability to obtain and maintain regulatory approval of our products and product candidates, and any related restrictions, limitations, and/or warnings in the label of an approved product;
our ability to obtain funding for our operations and to expand business and sales;
our plans to research, develop and commercialize our products and product candidates and our ability to successfully commercialize our products and product candidates;
our ability to attract collaborators with development, regulatory and commercialization expertise;
the size and growth potential of the markets for our products and product candidates, and our ability to serve those markets;
the diversion of healthcare resources away from the conduct of clinical trials as a result of the ongoing COVID-19 pandemic, including the diversion of hospitals and doctor offices serving as locations for administration of our products, including Bendeka and hospital staff supporting the conduct of such administration;
the interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel, quarantines or social distancing protocols imposed or recommended by federal or state governments, employers and others in connection with the ongoing COVID-19 pandemic;
the rate and degree of market acceptance of our products and product candidates;
our ability to develop sales and marketing capabilities, whether alone or with potential future collaborators;
the performance of our strategic collaborators and success of our current strategic collaborations;
regulatory developments in the United States and foreign countries;
the performance of our third-party suppliers and manufacturers;
the success of competing drugs that are or become available;
the retention of key scientific or management personnel;
the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;
our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates;
our ability to prevent or minimize the effects of Paragraph IV patent litigation; and 
our anticipated future costs, operating expenses and capital requirements.





Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. Risk Factors and elsewhere in this Quarterly Report. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.


NOTE REGARDING COMPANY REFERENCES

References to the ”Company,” “Eagle Pharmaceuticals,” “Eagle,” “we,” “us” or “our” mean Eagle Pharmaceuticals, Inc., a Delaware corporation and its subsidiaries, references to “Eagle Biologics” mean Eagle Biologics, Inc. and references to “Eagle Research Lab” means Eagle Research Lab Limited.


NOTE REGARDING TRADEMARKS

All trademarks, trade names and service marks appearing in this Quarterly Report are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this Quarterly Report may appear without the ® or TM symbols.








TABLE OF CONTENTS
Page
Part I - Financial Information
Item 1.Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2020 and December 31, 2019
Condensed Consolidated Statements of Operations (unaudited) for the three months and six months ended June 30, 2020 and 2019
Condensed Consolidated Statements of Changes in Stockholders' Equity (unaudited) for the three months and six months ended June 30, 2020 and 2019
Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2020 and 2019
Notes to Condensed Consolidated Financial Statements (unaudited)
Item 2.
Item 3.
Item 4.
Part II - Other Information
Item 1.
Item 1A.
Risk Factors
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.





EAGLE PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share amounts)

June 30, 2020December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents$108,213  $109,775  
Accounts receivable, net46,781  48,004  
Inventories7,891  6,566  
Prepaid expenses and other current assets5,551  15,104  
Total current assets168,436  179,449  
Property and equipment, net2,118  2,202  
Intangible assets, net14,250  15,583  
Goodwill 39,743  39,743  
Deferred tax asset, net 14,585  13,669  
Other assets17,578  3,908  
Total assets$256,710  $254,554  
LIABILITIES AND STOCKHOLDERS' EQUITY 
Current liabilities: 
Accounts payable$13,708  $5,462  
Accrued expenses and other liabilities19,778  28,361  
Current portion of long-term debt7,000  5,000  
Total current liabilities40,486  38,823  
Other long-term liabilities3,361  3,000  
Long-term debt, less current portion28,899  33,557  
Total liabilities
72,746  75,380  
Commitments and Contingencies
Stockholders' equity:
Preferred stock, 1,500,000 shares authorized and no shares issued or outstanding as of June 30, 2020 and December 31, 2019
    
Common stock, $0.001 par value; 50,000,000 shares authorized; 16,621,681 and 16,537,846 shares issued as of June 30, 2020 and December 31, 2019, respectively
17  17  
Additional paid in capital291,434  278,518  
Retained earnings 69,373  72,500  
Treasury stock, at cost, 3,017,710 and 2,907,687 shares as of June 30, 2020 and December 31, 2019, respectively
(176,860) (171,861) 
Total stockholders' equity183,964  179,174  
Total liabilities and stockholders' equity$256,710  $254,554  
See accompanying notes to unaudited condensed consolidated financial statements.
1


EAGLE PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share and per share amounts)

 Three Months Ended
June 30,
Six Months Ended
June 30,
 2020201920202019
Revenue:  
Product sales$14,376  $29,437  $32,070  $43,909  
Royalty revenue27,562  27,265  55,888  53,578  
License and other revenue      9,000  
Total revenue41,938  56,702  87,958  106,487  
Operating expenses: 
Cost of product sales 10,313  18,175  15,078  27,729  
Cost of royalty revenue2,822  3,109  5,860  6,655  
Research and development7,135  8,957  16,562  15,332  
Selling, general and administrative17,959  17,228  42,714  35,369  
Total operating expenses38,229  47,469  80,214  85,085  
Income from operations3,709  9,233  7,744  21,402  
Interest income150  637  496  1,131  
Interest expense(786) (665) (1,675) (1,351) 
Other income (expense)2,300    (4,200)   
Total other income (expense), net1,664  (28) (5,379) (220) 
Income before income tax provision5,373  9,205  2,365  21,182  
Income tax provision(5,629) (2,480) (5,492) (5,484) 
Net (Loss) Income$(256) $6,725  $(3,127) $15,698  
(Loss) Earnings per share attributable to common stockholders:
Basic $(0.02) $0.49  $(0.23) $1.13  
Diluted $(0.02) $0.48  $(0.23) $1.11  
Weighted average number of common shares outstanding:
Basic 13,664,951  13,782,720  13,666,279  13,853,580  
Diluted 13,664,951  14,156,627  13,666,279  14,176,297  
See accompanying notes to unaudited condensed consolidated financial statements.

2


EAGLE PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
(In thousands)
Common StockAdditional
Paid-In Capital
Treasury StockRetained EarningsTotal
Stockholders'
Equity
Number of
Shares
Amount
Balance at March 31, 202016,598  $17  $285,044  $(172,860) $69,629  $181,830  
Stock-based compensation expense—  —  6,241  —  —  $6,241  
Issuance of common stock upon exercise of stock option grants23  —  183  —  —  183  
Payment of employee withholding tax upon vesting of stock-based awards—  —  (34) —  —  (34) 
Issuance of common stock related to vesting of restricted stock units1  —  —  —  —  —  
Common stock repurchases—  —  —  (4,000) —  (4,000) 
Net loss—  —  —  —  (256) (256) 
Balance at June 30, 202016,622  $17  $291,434  $(176,860) $69,373  $183,964  

Common StockAdditional Paid-In CapitalTreasury StockRetained EarningsTotal Stockholders' Equity
Number of SharesAmount
Balance at March 31, 201916,520  $17  $262,084  $(153,900) $67,160  $175,361  
Stock-based compensation expense—  —  5,382  —  —  $5,382  
Issuance of common stock upon exercise of stock option grants2  —  13  —  —  13  
Common stock repurchases—  —  —  (15,000) —  (15,000) 
Net income—  —  —  —  6,725  6,725  
Balance at June 30, 201916,522  $17  $267,479  $(168,900) $73,885  $172,481  

3


 Common StockAdditional
Paid-In Capital
Treasury Stock Retained EarningsTotal
Stockholders'
Equity
 Number of
Shares
Amount
Balance at December 31, 201916,538  $17  $278,518  $(171,861) $72,500  $179,174  
Stock-based compensation expense—  —  13,713  —  —  13,713  
Issuance of common stock upon exercise of stock option grants39  —  513  —  —  513  
Payment of employee withholding tax upon vesting of stock-based awards—  —  (1,310) —  —  (1,310) 
Issuance of common stock related to vesting of restricted stock units45  —  —  —  —  —  
Common stock repurchases—  —  —  (4,999) —  (4,999) 
Net loss—  —  —  —  (3,127) (3,127) 
Balance at June 30, 202016,622  $17  $291,434  $(176,860) $69,373  $183,964  


 Common StockAdditional
Paid-In Capital
Treasury Stock Retained EarningsTotal
Stockholders'
Equity
 Number of
Shares
Amount
Balance at December 31, 201816,504  $17  $256,458  $(153,900) $58,187  $160,762  
Stock-based compensation expense—  —  11,164  —  —  11,164  
Issuance of common stock upon exercise of stock option grants9  —  55  —  —  55  
Payment of employee withholding tax for net option exercise —  —  (198) —  —  (198) 
Issuance of common stock related to vesting of restricted stock units9  —  —  —  —  —  
Common stock repurchases—  —  —  (15,000) —  (15,000) 
Net income—  —  —  —  15,698  15,698  
Balance at June 30, 201916,522  $17  $267,479  $(168,900) $73,885  $172,481  


See accompanying notes to unaudited condensed consolidated financial statements.
4


EAGLE PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
 Six Months Ended June 30,
 20202019
Cash flows from operating activities:  
Net (loss) income$(3,127) $15,698  
Adjustments to reconcile net (loss) income to net cash provided by operating activities:  
Deferred income taxes(916) (127) 
Depreciation expense931  1,005  
Amortization expense1,333  1,260  
Fair value adjustments on equity investment 4,200    
Stock-based compensation expense13,713  11,164  
Amortization of debt issuance costs 183  188  
Changes in operating assets and liabilities which provided (used) cash: 
Accounts receivable1,223  6,147  
Inventories(1,325) (3,290) 
Prepaid expenses and other current assets9,553  4,665  
Accounts payable8,246  7,379  
Accrued expenses and other liabilities(8,583) 4,880  
Other assets and other long-term liabilities, net(1,321) (396) 
Net cash provided by operating activities24,110  48,573  
Cash flows from investing activities:  
Purchase of equity investment security (17,500)   
Purchase of property and equipment(376) (343) 
Net cash used in investing activities(17,876) (343) 
Cash flows from financing activities:  
Proceeds from common stock option exercises 513  55  
Employee withholding taxes related to stock-based awards(1,310) (198) 
Proceeds from existing revolving credit facility 110,000    
Repayment of existing revolving credit facility(110,000)   
Payment of debt (2,000) (3,750) 
Repurchases of common stock (4,999) (15,000) 
Net cash used in financing activities(7,796) (18,893) 
Net (decrease) increase in cash and cash equivalents(1,562) 29,337  
Cash and cash equivalents at beginning of period109,775  78,791  
Cash and cash equivalents at end of period$108,213  $108,128  
Supplemental disclosures of cash flow information: 
Cash paid during the period for:  
Income taxes, net$502  $2,874  
Interest 1,458  1,221  
Right-of-use asset obtained in exchange for lease obligation - lease amendment842  2,871  
See accompanying notes to unaudited condensed consolidated financial statements.
5


EAGLE PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In thousands, except share and per share amounts)

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 (“SEC”) for reporting quarterly information. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. The condensed consolidated balance sheet at December 31, 2019 was derived from audited financial statements, but certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements have been condensed or omitted. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of the financial information for the interim periods reported have been made. Results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results for the year ending December 31, 2020 or any period thereafter. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 2, 2020.

2. Organization and Business Activities
We are an integrated pharmaceutical company focused on finding ways to help medicines do more for patients. Eagle and our collaborators have the capabilities to take a molecule from preclinical research through regulatory approval and into the marketplace, including development, manufacturing and commercialization. Our business model applies our scientific expertise, proprietary research-based insights and marketplace proficiency to identify challenging-to-treat diseases of the central nervous system or metabolic critical care therapeutic areas as well as in oncology. By focusing on patients' unmet needs, Eagle strives to provide healthcare professionals with urgently needed treatment solutions that are designed to improve patient care and outcomes and create near- and long-term value for our stakeholders, including patients and healthcare providers and our employees, marketing partners, collaborators and investors.
Our science-based business model has a proven track record with U.S. Food and Drug Administration ("FDA") approval and commercial launches of three products: Ryanodex® (dantrolene sodium) ("Ryanodex"), bendamustine ready-to-dilute ("RTD") 500ml solution ("Belrapzo"), and rapidly infused bendamustine RTD ("Bendeka"). We market our products through marketing partners and/or our internal direct sales force. Eagle markets Ryanodex and Belrapzo, and Teva Pharmaceutical Industries Ltd. ("Teva") markets Bendeka through its subsidiary Cephalon, Inc.
Reflecting further expansion of our oncology portfolio, in February 2020, we received final FDA approval for Pemfexy® (“Pemfexy”) and in July 2020, we announced that the Centers for Medicare & Medicaid Services (“CMS”) had established a unique, product-specific billing code for Pemfexy, effective on October 1, 2020. Pemfexy is our novel pemetrexed product, a branded alternative to Alimta® for metastatic non-squamous non-small cell lung cancer and malignant pleural mesothelioma. The conversion from tentative to a final approval follows the Company’s settlement agreement reached with Eli Lilly and Company (“Lilly”) on December 13, 2019. This agreement provides for a release of all claims by the parties and allows for an initial entry of Pemfexy into the market (equivalent to approximately a three-week supply of current ALIMTA utilization) on February 1, 2022, and a subsequent uncapped entry on April 1, 2022.

On August 7, 2020, the Company received a Complete Response Letter for its NDA for Ryanodex for the treatment of exertional heat stroke (“EHS”); Eagle has decided that it will no longer pursue this indication.


3. Summary of Significant Accounting Policies
Significant Accounting Policies
The Company’s significant accounting policies are described in the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and the notes thereto filed with the SEC on
6



EAGLE PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
(Unaudited)


March 2, 2020. Since the date of those consolidated financial statements, there have been no material changes to the Company’s significant accounting policies other than as listed below.
Significant Risks and Uncertainties
In response to the ongoing COVID-19 pandemic, the Company has taken and continues to take active measures designed to address and mitigate the impact of the COVID-19 pandemic on its business, such as remote working policies, facilitating management’s daily communication to address employee and business concerns and providing frequent updates to the Company’s Board of Directors (“Board”). The Company anticipates that the COVID-19 pandemic may also have an impact on the clinical development timelines for certain of its clinical programs, such as EA-114. The Company also anticipates that the COVID-19 pandemic may have an impact on the Company’s supply chain. The COVID-19 pandemic and associated lockdowns have resulted in a decrease in healthcare utilization broadly and specifically lead to a reduction in the utilization of physician-administered oncology products including Belrapzo and Bendeka. In addition, the Company anticipates that the COVID-19 pandemic may continue to delay the timing of ongoing litigation, including the litigation with Par (as defined below) with respect to Vasopressin. The extent to which the COVID-19 pandemic will impact the Company’s business, its clinical development and regulatory efforts, its supply chain and sales efforts, its corporate development objectives and the value of, and market for, its common stock will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States, and other countries, and the effectiveness of actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global healthcare systems and other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.
In addition, the Company is subject to other challenges and risks specific to its business and its ability to execute on its business plan and strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with research and development operations, including, without limitation, risks and uncertainties associated with: delays or problems in obtaining clinical supply; obtaining regulatory approval of its product candidates; loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or product candidates; product development and the inherent uncertainty of clinical success; the challenges of protecting and enhancing its intellectual property rights; and the challenges of complying with applicable regulatory requirements. In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company’s business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above.
Use of Estimates
These financial statements are presented in U.S. dollars and are prepared in accordance with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements including disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period and accompanying notes. The Company’s critical accounting policies are those that are both most important to the Company’s financial condition and results of operations and require the most difficult, subjective or complex judgments on the part of management in their application, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company anticipates that the COVID-19 pandemic may disrupt the Company’s supply chain and marketing and sales efforts for certain of its products, including Bendeka, although it is not currently expected that any disruption would be significant. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Because of the uncertainty of factors surrounding the estimates or judgments used in the preparation of the financial statements, actual results may materially vary from these estimates, and any such differences may be material to the Company’s financial statements.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform with the current year presentation. None of the reclassifications were significant.
7



EAGLE PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
(Unaudited)


Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. All cash and cash equivalents are held in United States financial institutions. The carrying amount of cash and cash equivalents approximates its fair value due to its short-term nature.
The Company, at times, maintains balances with financial institutions in excess of the Federal Deposit Insurance Corporation (“FDIC”) limit.
Fair Value Measurements

U.S. GAAP establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices 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 assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The fair value of interest-bearing cash, cash equivalents, accounts receivable and accounts payable approximate fair value due to their life being short term in nature, and are classified as Level 1 for all periods presented.
Our investment in restricted shares of Tyme’s common stock are classified as Level 1. Refer to Note 13, Collaboration with Tyme for further details.
The fair value of debt is classified as Level 2 for the periods presented and approximates its fair value due to the variable interest rate.
The fair value of any contingent consideration/accrued royalty was classified as Level 3 for the periods presented.
Intangible Assets
The Company capitalizes and includes in intangible assets the costs of acquired product licenses and developed technology purchased individually or identified in a business combination. Intangible assets are recorded at fair value at the time of their acquisition and stated net of accumulated amortization. The Company amortizes its definite-lived intangible assets using either the straight-line or accelerated method, based on the useful life of the asset over which it is expected to be consumed utilizing expected undiscounted future cash flows. The Company will evaluate the potential impairment of intangible assets if events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Events giving rise to impairment are an inherent risk in our industry and many factors cannot be predicted. Factors that we consider in deciding when to perform an impairment review include significant changes in our forecasted projections for the asset or asset group for reasons including, but not limited to, significant under-performance of a product in relation to expectations, significant changes or planned changes in our use of the assets, significant negative industry or economic trends, and new or competing products that enter the marketplace. The impairment test is based on a comparison of the undiscounted cash flows expected to be generated from the use of the asset group and its eventual disposition to the carrying value of the asset group. If impairment is indicated, the asset is written down by the amount by which the carrying value of the asset exceeds the related fair value of the asset with the related impairment charge recognized within the condensed consolidated statements of operations.
With respect to determining an asset’s fair value and useful life, because this process involves management making certain estimates and these estimates form the basis of the determination of whether or not an impairment charge should be recorded,
8



EAGLE PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
(Unaudited)


these estimates are considered to be critical accounting estimates. The Company did not identify any impairment to intangible assets for the periods presented.
Goodwill
Goodwill represents the excess of purchase price over the fair value of net assets acquired in the Eagle Biologics acquisition. Goodwill is not amortized, but is evaluated for impairment on an annual basis, in the fourth quarter, or more frequently if events or changes in circumstances indicate that the reporting unit’s goodwill is less than its carrying amount. The Company did not identify any impairment to goodwill during the periods presented.
Concentration of Major Customers and Vendors
The Company is dependent on commercial partners to market and sell Bendeka. The Company's customers for Bendeka are its commercial and licensing partners; therefore, the Company's future revenues are highly dependent on these collaboration and distribution arrangements.
Teva markets Bendeka pursuant to the Bendeka License. Pursuant to the agreement, Teva pays the Company a royalty based on net sales of the product and also purchases the product from the Company. A disruption in this arrangement, caused by among other things, a supply disruption, loss of exclusivity or the launch of a superior product would have a material adverse effect of the Company’s financial position, results of operations and cash flows.
The total revenues and accounts receivables broken down by major customers as a percentage of the total are as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Net revenues
Cephalon, Inc. (Teva) - See Revenue Recognition
78 %67 %71 %75 %
Other22 %33 %29 %25 %
100 %100 %100 %100 %
June 30, December 31,
20202019
Accounts receivable
Cephalon, Inc. (Teva) - See Revenue Recognition
76 %80 %
Other24 %20 %
100 %100 %

Inventories
Inventories are recorded at the lower of cost or expected net realizable value, with cost determined on a first-in first-out basis. The Company periodically reviews the composition of inventory in order to identify obsolete, slow-moving or otherwise non-saleable items. If non-saleable items are observed and there are no alternate uses for the inventory, the Company will record a write-down to net realizable value in the period that the decline in value is first recognized.
Property and Equipment
Property and equipment are stated at cost. Depreciation is recorded over the estimated useful lives of the assets utilizing the straight-line method. Leasehold improvements are being amortized over the shorter of their useful lives or the lease term.
9



EAGLE PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
(Unaudited)


Research and Development Expense
Costs for research and development are charged to expense as incurred and include; employee-related expenses including salaries, benefits, travel and stock-based compensation expense for research and development personnel; expenses incurred under agreements with contract research organizations, contract manufacturing organizations and service providers that assist in conducting clinical and preclinical studies; costs associated with preclinical activities and development activities, costs associated with regulatory operations; and depreciation expense for assets used in research and development activities.
Costs for certain development activities, such as clinical studies, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided to the Company by its vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the patterns of costs incurred, and are reflected in the condensed consolidated financial statements as prepaid expenses or accrued expenses as deemed appropriate. Recoveries of previously recognized research and development expenses from third parties are recorded as a reduction to research and development expense in the period it becomes realizable.
Advertising and Marketing
Advertising and marketing costs are expensed as incurred. Advertising and marketing costs were $775 and $491 for the three months ended June 30, 2020 and 2019, respectively. Advertising and marketing costs were $1,888 and $1,117 for the six months ended June 30, 2020 and 2019, respectively.
Income Taxes
The Company accounts for income taxes using the liability method in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), Topic 740 - Income Taxes (“ASC 740”). Deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and are measured by applying enacted rates and laws to taxable years in which differences are expected to be recovered or settled.  Further, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income (loss) in the period that the rate changes. A valuation allowance is required when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. ASC 740 also prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return, including a decision whether to file or not file a return in a particular jurisdiction. We recognize any interest and penalties accrued related to unrecognized tax benefits as income tax expense.
Revenue Recognition
Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue. Receivables from our product sales have payment terms ranging from 30 to 75 days with select extended terms to wholesalers on initial purchases of product launch quantities. Our receivables from royalty revenue are due 45 days from the end of the quarter.
Product revenue - The Company recognizes net revenue on sales to its commercial partners and to end users. In each instance, revenue is generally recognized when the customer obtains control of the Company’s product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract.
10



EAGLE PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
(Unaudited)


Revenue on sales to commercial partners relates to Argatroban and Bendeka. Sales to our commercial partners are presented gross because the Company is primarily responsible for fulfilling the promise to provide the product, is responsible to ensure that the product is produced in accordance with the related supply agreement and bears risk of loss while the inventory is in-transit to the commercial partner.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing the expected value method to which the Company expects to be entitled. As such, revenue on sales to customers for Belrapzo, Non-Alcohol Docetaxel Injection, Ryanodex and diclofenac-misoprostol are recorded net of chargebacks, rebates, returns, prompt pay discounts, wholesaler fees and other deductions. Our products are contracted with a limited number of oncology distributors and hospital buying groups with narrow differences in ultimate realized contract prices used to estimate our chargeback and rebate reserves. The Company has a product return policy on some of its products that allows the customer to return pharmaceutical products within a specified period of time both prior to and subsequent to the product’s expiration date. The Company's estimate of the provision for returns is analyzed quarterly and is based upon many factors, including historical experience of actual returns and analysis of the level of inventory in the distribution channel, if any. The Company has terms on sales of Ryanodex by which the Company does not accept returns. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration are made using the expected value method and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available. The Company believes that the estimates it has established are reasonable based upon current facts and circumstances. Applying different judgments to the same facts and circumstances could result in the estimated amounts to vary.
Royalty Revenue — The Company recognizes revenue from license arrangements with its commercial partners' net sales of products. In accordance with ASC 606-10-55-65, royalties are recognized when the subsequent sale of the commercial partner’s products occurs. The Company's commercial partners are obligated to report their net product sales and the resulting royalty due to the Company within 25 days for Bendeka and 60 days for Argatroban from the end of each quarter. Based on historical product sales, royalty receipts and other relevant information, the Company accrues royalty revenue each quarter and subsequently determines a true-up when it receives royalty reports from its commercial partners. Historically, these true-up adjustments have been immaterial.
License and other revenue — The Company analyzes each element of its licensing agreements to determine the appropriate revenue recognition. The terms of the license agreement may include payment to us of non-refundable up-front license fees, milestone payments if specified objectives are achieved, and/or royalties on product sales. The Company recognizes revenue from upfront payments at a point in time, typically upon fulfilling the delivery of the associated intellectual property to the customer.
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
The Company recognizes sales-based milestone payments as revenue upon the achievement of the cumulative sales amount specified in the contract in accordance with ASC 606-10-55-65. For those milestone payments which are contingent on the occurrence of particular future events, the Company determined that these need to be considered for inclusion in the calculation of total consideration from the contract as a component of variable consideration using the most-likely amount method. As such, the Company assesses each milestone to determine the probability and substance behind achieving each milestone. Given the inherent uncertainty of the occurrence of these future events, the Company will not recognize revenue from the milestone until there is not a high probability of a reversal of revenue, which typically occurs near or upon achievement of the event.
11



EAGLE PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
(Unaudited)


When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component as of June 30, 2020.
Collaborative licensing and development revenue — The Company recognizes revenue from reimbursements received in connection with feasibility studies and development work for third parties when its contractual services are performed, provided collectability is reasonably assured. Its principal costs under these agreements include its personnel conducting research and development, its allocated overhead, as well as the research and development performed by outside contractors or consultants.
Upon termination of a collaboration agreement, any remaining non-refundable license fees received by the Company, which had been deferred, are generally recognized in full. All such recognized revenues are included in collaborative licensing and development revenue in its condensed consolidated statements of operations. The Company recognizes revenue from milestone payments received under collaboration agreements when earned, provided that the milestone event is substantive, its achievability was not reasonably assured at the inception of the agreement, the Company has no further performance obligations relating to the event, and collectability is reasonably assured. If these criteria are not met, the Company recognizes milestone payments ratably over the remaining period of its performance obligations under the collaboration agreement.
Stock-Based Compensation
The Company accounts for stock-based compensation using the fair value provisions of ASC 718, Compensation - Stock Compensation that requires the recognition of compensation expense, using a fair-value based method, for costs related to all stock-based payments including stock options and restricted stock. This topic requires companies to estimate the fair value of the stock-based awards on the date of grant for options issued to employees and directors and record expense over the employees' service periods, which are generally the vesting period of the equity awards.
The Company accounts for stock-based compensation by measuring and recognizing compensation expense for all stock-based payments made to employees and directors based on estimated grant date fair values. The straight-line method is used to allocate compensation cost to reporting periods over each optionee's requisite service period, which is generally the vesting period. The fair value of the Company's stock-based awards to employees and directors is estimated using the Black-Scholes valuation model or a Monte Carlo simulation model. These models require the input of subjective assumptions, including the expected stock price volatility, the calculation of expected term, forfeitures and the fair value of the underlying common stock on the date of grant, among other inputs. The risk-free interest rate is determined with the implied yield currently available for zero-coupon U.S. government issues with a remaining term approximating the expected life of the options.
Earnings Per Share
Basic earnings per common share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share is computed in a manner similar to the basic earnings per share, except that the weighted-average number of shares outstanding is increased to include all common shares, including those with the potential to be issued by virtue of warrants, options, convertible debt and other such convertible instruments. Diluted earnings per share contemplate a complete conversion to common shares of all convertible instruments only if they are dilutive in nature with regards to earnings per share.
The anti-dilutive common shares equivalents outstanding for the three and six months ended June 30, 2020 and 2019 were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Stock Options2,909,289  2,437,505  2,909,289  2,567,433  
Restricted stock units
229,100  38,947  253,677  40,133  
Total3,138,389  2,476,452  3,162,966  2,607,566  
12



EAGLE PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
(Unaudited)



The following table sets forth the computation for basic and diluted net (loss) earnings per share for the three and six months ended June 30, 2020 and 2019:
Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Numerator
Numerator for basic and diluted earnings per share-net (loss) income$(256) $6,725  $(3,127) $15,698  
Denominator
Basic weighted average common shares outstanding 13,664,951  13,782,720  13,666,279  13,853,580  
Dilutive effect of stock awards   373,907    322,717  
Diluted weighted average common shares outstanding 13,664,951  14,156,627  13,666,279  14,176,297  
Basic net (loss) earnings per share
Basic net (loss) earnings per share $(0.02) $0.49  $(0.23) $1.13  
Diluted net (loss) earnings per share
Diluted net (loss) earnings per share $(0.02) $0.48  $(0.23) $1.11  

All potentially dilutive items were excluded from the diluted share calculation for the three months and six months ended June 30, 2020 because their effect would have been anti-dilutive, as the Company was in a loss position.

Recent Accounting Pronouncements
Recent Accounting Pronouncements - Not Yet Adopted
In March 2020, the FASB issued Update 2020-04 Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting to provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The amendments in Update 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR, formerly known as the London Interbank Offered Rate,
or another reference rate expected to be discontinued due to reference rate reform. The new guidance provides optional expedients, including; (1) Simplify accounting analyses under current GAAP for contract modifications, such as modifications of contracts within the scope of Topic 470, Debt, that will be accounted for by prospectively adjusting the effective interest rate, as if any modification was not substantial. That is, the original contract and the new contract shall be accounted for as if they were not substantially different from one another; (2) Simplify the assessment of hedge effectiveness and allow hedging relationships affected by reference rate reform to continue; (3) Allow a one-time election to sell or transfer debt securities classified as held to maturity before January 1, 2020 that reference a rate affected by reference rate reform. The amendments are effective for all entities from the beginning of an interim period that includes the issuance date of the ASU. An entity may elect to apply the amendments prospectively through December 31, 2022. The adoption of ASU 2020-4 is not expected to have a material impact on the Company's financial position or results of operations.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses which requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard is effective for fiscal years beginning after December 15, 2019 and the Company adopted the standard effective January 1, 2020. The adoption of ASU 2016-13 had no material impact on the Company's financial position and results of operations.
13



EAGLE PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
(Unaudited)


CARES Act
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into U.S. federal law, which is aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions related to refundable payroll tax credits, deferment of the employer portion of social security payments, net operating loss carryback periods, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act has not had, and the Company does not currently expect it to have, a material impact on the Company’s financial statements at this time.

4. Property and equipment, net
Property and equipment consisted of the following:
 June 30, 2020December 31, 2019Estimated Useful Life (years)
Furniture and fixtures$1,476  $1,188  7
Office equipment1,077  1,094  3
Equipment3,189  3,095  7
Leasehold improvements1,155  1,144  2
 6,897  6,521   
Less accumulated depreciation(4,779) (4,319) 
Property and equipment, net$2,118  $2,202   

Depreciation expense related to property and equipment amounted to $209 and $241 for the three months ended June 30, 2020 and 2019, respectively, and $460 and $483 for the six months ended June 30, 2020 and 2019, respectively.


5. Inventories
Inventories consist of the following:
June 30, December 31,
20202019
Raw material $5,385  $2,460  
Work in process 2,323  3,243  
Finished products183  863  
$7,891  $6,566  

14



EAGLE PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
(Unaudited)


6. Balance Sheet Accounts
Prepaid and Other Current Assets
Prepaid and other current assets consist of the following:
June 30, December 31,
20202019
Prepaid income taxes$341  $4,661  
Prepaid FDA user fee and advances to clinical research organization325  6,345  
Prepaid insurance697  191  
Advances to commercial manufacturers2,938  2,462  
All other