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SEC Filings

S-1/A
OREXIGEN THERAPEUTICS, INC. filed this Form S-1/A on 04/09/2007
Entire Document
 
Table of Contents

 
OREXIGEN THERAPEUTICS, INC.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS — (Continued)

Restricted Cash
 
Restricted cash represents certificates of deposit pledged as collateral primarily for a letter of credit issued by the Company in connection with the execution of an operating lease in September 2006.
 
Fair Value of Financial Instruments
 
The carrying amount of cash and cash equivalents, accounts payable and accrued expenses are considered to be representative of their respective fair value because of the short-term nature of these items. Investment securities, available-for-sale, are carried at fair value.
 
Concentration of Credit Risk
 
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and investment securities, available-for-sale. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. However, management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which these deposits are held. Additionally, the Company has established guidelines regarding the diversification of its investments and their maturities, which are designed to maintain safety and liquidity.
 
Concentration of Revenue
 
Cypress Bioscience, Inc. (“Cypress”) accounted for 34%, 100% and 50% of revenue for the years ended December 31, 2005 and 2006 and for the period from September 12, 2002 (inception) to December 31, 2006, respectively. Eli Lilly and Company (“Eli Lilly”) accounted for 66%, 0%, and 50% of revenue for the years ended December 31, 2005 and 2006 and for the period from September 12, 2002 (inception) to December 31, 2006, respectively.
 
Property and Equipment
 
Property and equipment, which consists of computer equipment and laboratory equipment, are stated at cost and depreciated over the estimated useful lives of the assets (three to five years) using the straight-line method.
 
Impairment of Long-Lived Assets
 
In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment of Disposable Long-Lived Assets, the Company will record impairment losses on long-lived assets used in operations when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. While the Company’s current and historical operating losses and cash flows are indicators of impairment, the Company believes the future cash flows to be received support the carrying value of its long-lived assets and, accordingly, the Company has not recognized any impairment losses as of December 31, 2006.
 
Research and Development Costs
 
All research and development costs are charged to expense as incurred and consist principally of costs related to clinical trials managed by the Company’s contract research organizations, license fees and salaries and related benefits. Clinical trial costs are a significant component of research and development expenses. These costs are accrued based on estimates of work performed, and requires estimates of total costs incurred based on patients enrolled, progress of patient studies and other events. Clinical trial costs are subject to revision as the trials progress and revisions are charged to expense in the period in which they become known.


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