Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2019	Nov. 08, 2019
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Trading Symbol	TTPH
Entity Registrant Name	TETRAPHASE PHARMACEUTICALS INC
Entity Central Index Key	0001373707
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Shell Company	false
Entity Small Business	true
Entity Emerging Growth Company	false
Entity File Number	001-35837
Entity Tax Identification Number	20-5276217
Entity Address, Address Line One	480 Arsenal Way
Entity Address, City or Town	Watertown
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02472
City Area Code	617
Local Phone Number	715-3600
Entity Common Stock, Shares Outstanding		3,015,824
Document Quarterly Report	true
Document Transition Report	false
Entity Incorporation, State or Country Code	DE
Entity Interactive Data Current	Yes
Title of 12(b) Security	Common Stock, $0.001 par value
Security Exchange Name	NASDAQ

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 24,508	$ 107,776
Accounts receivable, net	1,710	2,274
Contract asset		3,000
Assets held for sale	544
Inventory	2,434	748
Prepaid expenses and other current assets	2,718	2,674
Total current assets	31,914	116,472
Property and equipment, net	113	1,121
Intangible assets, net	4,357	4,652
Operating lease right-of-use assets	5,197
Restricted cash	699	699
Total assets	42,280	122,944
Current liabilities:
Accounts payable	1,752	3,210
Accrued expenses	8,568	11,761
Operating lease liabilities	1,497
Total current liabilities	11,817	14,971
Long-term operating lease liabilities	3,850
Loan payable, long-term		28,291
Total liabilities	15,667	43,262
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, par value $0.001 per share; 5,000 shares authorized; no shares issued and outstanding
Common stock, par value $0.001 per share; 125,000 shares authorized; 2,716 and 2,684 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	3	3
Additional paid-in capital	619,364	613,721
Accumulated deficit	(592,754)	(534,042)
Total stockholders’ equity	26,613	79,682
Total liabilities and stockholders’ equity	$ 42,280	$ 122,944

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	125,000,000	125,000,000
Common stock, shares issued	2,716,000	2,684,000
Common stock, shares outstanding	2,716,000	2,684,000

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues:
Total revenue	$ 3,340	$ 1,151	$ 5,686	$ 14,620
Expenses:
Research and development	5,348	11,665	20,252	44,162
Selling, general and administrative	11,350	9,481	39,776	22,350
Total expenses	17,678	21,146	61,676	66,512
Loss from operations	(14,338)	(19,995)	(55,990)	(51,892)
Other income and expenses
Loss on extinguishment of debt	(1,568)		(1,568)
Other income			250
Interest income	252	437	1,175	1,215
Interest expense	(650)		(2,580)
Net loss	$ (16,304)	$ (19,558)	$ (58,713)	$ (50,677)
Net loss per share-basic and diluted	$ (6.00)	$ (7.39)	$ (21.70)	$ (19.44)
Weighted-average number of common shares used in net loss per share-basic and diluted	2,716	2,647	2,706	2,607
Comprehensive loss	$ (16,304)	$ (19,558)	$ (58,713)	$ (50,677)
Product Revenue, net [Member]
Revenues:
Total revenue	978		2,115
Expenses:
Cost of revenue	882		1,353
License and Collaboration Revenue [Member]
Revenues:
Total revenue	2,000		2,000	9,500
Government Revenue [Member]
Revenues:
Total revenue	362	$ 1,151	1,571	$ 5,120
Intangible asset amortization [Member]
Expenses:
Cost of revenue	$ 98		$ 295

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Operating activities
Net loss	$ (58,713)	$ (50,677)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	520	357
Non-cash interest expense related to notes payable	621
Stock-based compensation expense	5,603	9,880
Loss on extinguishment of debt	1,568
Impairment of equipment related to restructuring	335
Changes in operating assets and liabilities:
Accounts receivable	565	2,056
Contract asset	3,000
Inventory	(1,686)
Prepaid expenses and other assets	(44)	1,081
Accounts payable	(1,458)	(1,852)
Accrued expenses and other liabilities	(3,078)	(3,397)
Deferred revenue	(6)	(651)
Operating lease right-of-use assets	1,042
Operating lease liabilities	(1,000)
Net cash used in operating activities	(52,731)	(43,203)
Investing activities
Acquisition of intangible assets		(3,000)
Proceeds from sale of property and equipment	12
Purchases of property and equipment	(108)	(105)
Net cash used in investing activities	(96)	(3,105)
Financing activities
Repayment of debt, including final payment	(30,480)
Proceeds from sale of common stock, net of issuance costs		6,985
Proceeds from issuance of stock under stock plans	39	371
Net cash provided by (used in) financing activities	(30,441)	7,356
Net decrease in cash, cash equivalents and restricted cash	(83,268)	(38,952)
Cash, cash equivalents and restricted cash at beginning of period	108,475	136,610
Cash, cash equivalents and restricted cash at end of period	25,207	97,658
Supplemental cash flow information:
Cash paid for interest on long-term debt	$ 1,955
Acquisition of intangible asset included in accounts payable		$ 1,750

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Common Shares [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]
Beginning Balance at Dec. 31, 2017	$ 130,410	$ 3	$ 592,291	$ (461,884)
Beginning Balance, shares at Dec. 31, 2017		2,577
Issuance of common stock under stock plans	231		231
Issuance of common stock under stock plans, shares		9
Stock-based compensation expense	2,972		2,972
Net loss	(21,576)			(21,576)
Ending Balance at Mar. 31, 2018	112,037	$ 3	595,494	(483,460)
Ending Balance, shares at Mar. 31, 2018		2,586
Beginning Balance at Dec. 31, 2017	130,410	$ 3	592,291	(461,884)
Beginning Balance, shares at Dec. 31, 2017		2,577
Net loss	(50,677)
Ending Balance at Sep. 30, 2018	96,970	$ 3	609,528	(512,561)
Ending Balance, shares at Sep. 30, 2018		2,684
Beginning Balance at Mar. 31, 2018	112,037	$ 3	595,494	(483,460)
Beginning Balance, shares at Mar. 31, 2018		2,586
Issuance of common stock under stock plans	30		30
Issuance of common stock under "at-the-market" equity offering sales agreement, less issuance costs	4,713		4,713
Issuance of common stock under "at-the-market" equity offering sales agreement, less issuance costs, shares		59
Issuance of common stock under employee stock purchase plan	101		101
Issuance of common stock under employee stock purchase plan, shares		2
Stock-based compensation expense	3,392		3,392
Net loss	(9,543)			(9,543)
Ending Balance at Jun. 30, 2018	110,730	$ 3	603,730	(493,003)
Ending Balance, shares at Jun. 30, 2018		2,647
Issuance of common stock under stock plans	9		9
Issuance of common stock under "at-the-market" equity offering sales agreement, less issuance costs	2,273		2,273
Issuance of common stock under "at-the-market" equity offering sales agreement, less issuance costs, shares		37
Stock-based compensation expense	3,516		3,516
Net loss	(19,558)			(19,558)
Ending Balance at Sep. 30, 2018	96,970	$ 3	609,528	(512,561)
Ending Balance, shares at Sep. 30, 2018		2,684
Beginning Balance at Dec. 31, 2018	79,682	$ 3	613,721	(534,042)
Beginning Balance, shares at Dec. 31, 2018		2,684
Issuance of common stock under stock plans, shares		3
Stock-based compensation expense	2,723		2,723
Net loss	(19,488)			(19,488)
Ending Balance at Mar. 31, 2019	62,917	$ 3	616,444	(553,530)
Ending Balance, shares at Mar. 31, 2019		2,687
Beginning Balance at Dec. 31, 2018	79,682	$ 3	613,721	(534,042)
Beginning Balance, shares at Dec. 31, 2018		2,684
Net loss	(58,713)
Ending Balance at Sep. 30, 2019	26,613	$ 3	619,364	(592,754)
Ending Balance, shares at Sep. 30, 2019		2,716
Beginning Balance at Mar. 31, 2019	62,917	$ 3	616,444	(553,530)
Beginning Balance, shares at Mar. 31, 2019		2,687
Issuance of common stock under stock plans, shares		26
Issuance of common stock under employee stock purchase plan	40		40
Issuance of common stock under employee stock purchase plan, shares		3
Stock-based compensation expense	1,709		1,709
Net loss	(22,920)			(22,920)
Ending Balance at Jun. 30, 2019	41,746	$ 3	618,193	(576,450)
Ending Balance, shares at Jun. 30, 2019		2,716
Stock-based compensation expense	1,171		1,171
Net loss	(16,304)			(16,304)
Ending Balance at Sep. 30, 2019	$ 26,613	$ 3	$ 619,364	$ (592,754)
Ending Balance, shares at Sep. 30, 2019		2,716

Organization and Operations

9 Months Ended

Sep. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Operations

1. Organization and Operations

Tetraphase Pharmaceuticals, Inc., or the Company, is a biopharmaceutical company using its proprietary chemistry technology to develop and commercialize novel tetracyclines for serious and life-threatening conditions, including bacterial infections caused by multidrug-resistant, or MDR, bacteria. The Company’s commercial product, Xerava^TM (eravacycline), a fully synthetic fluorocycline, is an intravenous, or IV, antibiotic that is approved for use as a first-line empiric monotherapy for the treatment of MDR infections, including those found in complicated intra-abdominal infections, or cIAI.

On August 27, 2018, the United States Food and Drug Administration, or FDA, approved Xerava for the treatment of cIAI in adults. Approval of Xerava was based on the Company’s IGNITE (Investigating Gram-Negative Infections Treated with Eravacycline) phase 3 program. In October 2018, the Company commenced sales of Xerava in the United States.

On September 20, 2018, based on the results of the IGNITE phase 3 clinical program, the European Commission, or EC, granted marketing authorization for Xerava for the treatment of cIAI in adults in all 28 countries of the European Union, or EU, plus Norway, Iceland and Liechtenstein.

In addition to Xerava, the Company has also developed TP-6076, a fully synthetic fluorocycline, targeted at addressing unmet medical needs, including MDR Gram-negative bacteria, and TP-271, a fully synthetic fluorocycline developed for respiratory disease caused by bacterial biothreat pathogens, as well as bacterial pathogens associated with community-acquired pneumonia. Both of these programs have completed phase 1. The Company also developed TP-2846, a tetracycline for the treatment of acute myeloid leukemia, or AML. The Company has completed pre-clinical toxicology studies in this program and intends to file an investigational new drug application, or IND, with the FDA for TP-2846. The Company is seeking to out-license each of these product candidates.

On June 10, 2019, the Company announced a restructuring of its organization, including a 20% reduction in headcount, designed to focus its cash resources on commercializing Xerava primarily in the hospital setting. This reorganization included the elimination of the Company’s internal research function and an exploration of out-licensing opportunities for all of the Company’s pipeline of early-stage antibiotics and oncology product candidates. The reduction in headcount did not impact the commercial organization. Following the restructuring, over 50% of the Company’s full-time employees are commercial and medical affairs personnel.

The Company has incurred annual net operating losses every year since its inception. As of September 30, 2019, the Company had incurred losses since inception of $592.8 million. The Company has financed its operations primarily through public offerings and private placements of equity securities, debt financings, revenue from United States government grants and contract awards, milestone payments from a licensing agreement and Xerava product revenue.

Liquidity and Going Concern Assessment

Accounting Standards Update, or ASU, No. 2014-15, Presentation of Financial Statements - Going Concern, requires management to evaluate the Company’s ability to continue as a going concern one year beyond the filing date of the given financial statements. This evaluation requires management to perform two steps. First, management must evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern. Second, if management concludes that substantial doubt is raised, management is required to consider whether it has plans in place to alleviate that doubt. Disclosures in the notes to the financial statements are required if management concludes that substantial doubt exists or that its plans alleviate the substantial doubt that was raised.

Based on its current operating plan, the Company expects that its cash and cash equivalents as of September 30, 2019, its projected revenues from sales of Xerava and the net proceeds from the Company’s registered direct offering of equity securities completed on November 1, 2019 (note 13) will not be sufficient to fund the Company’s operations for more than one year beyond the filing date of this quarterly report, but only into the third quarter of 2020. This estimate is based on certain significant assumptions, which are uncertain and may turn out to be incorrect. In particular, the forecast assumes continued significant growth of Xerava revenue, for which the Company has limited historical experience to base its estimate. In addition, the Company has forecast a significant reduction in expenses as a result of the restructuring announced in June 2019. If these estimates are incorrect, the Company may use its cash resources sooner than expected.

In addition, the Company will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources to fund its operations including ongoing spending to commercialize Xerava. In light of its limited cash resources, the Company may also determine to explore strategic alternatives to maximize shareholder value, including the potential sale or merger of the Company or its assets. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

If the Company is unable to raise capital when needed or if its operating results fall short of its current projections, or if the Company determines to explore strategic alternatives but is unable to consummate such a transaction or transactions on a timely basis or at all, the Company could be forced to significantly delay, scale back or discontinue the commercialization of Xerava or reduce other expenditures, seek collaborators at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available, and relinquish or license, potentially on unfavorable terms, the Company’s rights to Xerava and its product candidates. The failure of the Company to obtain sufficient funds on acceptable terms would have a material adverse effect on the Company’s business, results of operations and financial condition.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim condensed consolidated financial statements are unaudited. These unaudited financial statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission, or SEC, for interim financial information. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles, or GAAP, for complete financial statements. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2018 contained in the Company’s annual report on Form 10-K filed with the SEC on March 15, 2019, or the 2018 Form 10-K. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of September 30, 2019 and the results of its operations and comprehensive loss and cash flows for the three and nine months ended September 30, 2019 and 2018. Interim operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for future interim periods or for the fiscal year ending December 31, 2019. The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” in the 2018 Form 10-K. The Company is disclosing certain significant policies as well as changes in its accounting policies related to guidance that became effective January 1, 2019 and April 1, 2019 in this Quarterly Report on Form 10-Q.

The December 31, 2018 condensed consolidated balance sheet included herein was derived from audited consolidated financial statements, but does not include all disclosures including notes required by GAAP for complete financial statements.

Reverse Stock Split

On September 25, 2019, the Company’s Board of Directors authorized a 1-for-20 reverse stock split and approved an amendment to the Company’s Certificate of Incorporation (the “Amendment”) to effect the 1-for-20 reverse split of the Company’s common stock, which was effected at 5:00 p.m. ET on September 26, 2019. All of the share and per share amounts disclosed in these condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q have been adjusted to reflect the reverse stock split.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. On an ongoing basis, the Company’s management evaluates its estimates, including product revenue, license and collaboration revenue, inventory, impairment of intangible assets, stock-based compensation expense, contract and grant revenues, and going concern considerations. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

Accounts Receivable

Accounts receivable as of September 30, 2019 and December 31, 2018 represent amounts due from two main sources: (1) trade accounts receivable of $0.5 million and $0.1 million, respectively, consisting of payments to be received from customers for sales of Xerava, net of prompt payment discounts, chargebacks, rebates and certain fees and (2) contract accounts receivable of $1.2 million and $2.2 million, respectively, related to the Company’s government-related agreements.

Contract accounts receivable relate to payments from entities administering the Company’s government-related agreements which include unbilled contract accounts receivable of $0.5 million and $0.7 million as of September 30, 2019 and December 31, 2018, respectively.

Contract Balances

The Company recognizes a contract asset when the Company transfers goods or services to a customer before the customer pays consideration or before payment is due, excluding any amounts presented as a receivable (i.e., accounts receivable). A contract asset represents the Company’s right to consideration in exchange for goods or services that the Company has transferred to a customer.

Inventory

Inventory is stated at the lower of cost or net realizable value on a first-in, first-out (FIFO) basis. Prior to the regulatory approval of Xerava, given the uncertainty of approval, the Company recognized as research and development expense costs related to the manufacture of Xerava. Upon approval of Xerava, the Company began to capitalize such costs as inventory.

During each quarter, the Company performs an assessment quantifying any potential excess or obsolete inventory and writes down any such inventory to its net realizable value in the period in which the impairment is identified. These adjustments are based upon multiple factors, including inventory levels at the Company and at its specialty distributors, projected demand and product shelf life. These impairment charges, if required, are recorded as a cost of revenue. As of September 30, 2019, there was no excess or obsolete inventory.

Leases

Effective January 1, 2019, the Company adopted Accounting Standards Codification, or ASC, Topic 842, Leases. The Company adopted the new guidance as of January 1, 2019 using the modified retrospective adoption method in which it did not restate prior periods. Prior periods are presented in accordance with ASC 840, Leases.

The Company’s review and approval process for new leases, contracts, amendments and renewals includes an evaluation at the inception of each agreement to determine whether the contract is within the scope of ASC Topic 842, or other areas of accounting guidance. The Company’s contracts are determined to contain a lease within the scope of ASC Topic 842 when all of the following criteria based on the specific circumstances of the agreement are met: (1) there is an identified asset for which there are no substantive substitution rights; (2) the Company has the right to obtain substantially all of the economic benefits from the identified asset; and (3) the Company has the right to direct the use of the identified asset.

Upon transition to ASC 842, an operating lease asset is valued at the amount of the lease liability adjusted for prepaid or accrued lease payments, the remaining balance of any lease incentives received, unamortized initial direct costs and impairment of the operating lease asset. Once the Company assesses a contract for a lease, it will only reassess whether a contract is or contains a lease if the terms and conditions of the contract are amended. Leases with a greater than one-year duration are categorized on the balance sheet as operating lease assets, lease liabilities, and if applicable, long-term lease liabilities. Leases with a duration of less than one year are not presented on the balance sheet.

The Company records the operating lease asset and related lease liability based upon the present value of the lease payments not yet paid using the discount rate for the lease established at the commencement date. The discount rate associated with each lease agreement is based upon either (i) the rate implicit in the lease or (ii) the Company’s incremental borrowing rate if the rate implicit in the lease is indeterminable.

Although separation of lease and non-lease components is required, certain practical expedients are available to entities. The Company’s facilities operating leases have lease and non-lease components which the Company has elected to account for as one single lease component. The lease component results in an operating lease asset being recorded on the balance sheet and amortized as lease expense on a straight-line basis to the statements of operations.

Property and Equipment

Property and equipment are stated at cost. Costs of major additions and betterments are capitalized; maintenance and repairs which do not improve or extend the life of the respective assets are charged to expense. Upon disposal, the related cost and accumulated depreciation or amortization is removed from the accounts and any resulting gain or loss is included in the consolidated statements of operations and comprehensive loss. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Leasehold improvements are amortized over the estimated useful lives of the assets or related lease terms, whichever is shorter.

Assets Held-for-Sale

The Company classifies assets as held-for-sale when the following conditions are met: (1) management has committed to a plan to sell, (2) the assets are available for immediate sale in their present condition, (3) the Company has initiated an active program to identify a buyer, (4) it is probable that a sale will occur within one year, (5) the assets are actively marketed for sale at a reasonable price in relation to their current fair value, and (6) there is a low likelihood of significant changes to the plan or that the plan will be withdrawn. If all of the criteria are met as of the balance sheet date, the assets are presented separately in the balance sheet as held-for-sale at the lower of the carrying amount or fair value less costs to sell. The assets are then no longer depreciated or amortized while classified as held-for-sale.

Long-Lived Assets

The Company evaluates the recoverability of its property, equipment and intangible assets when circumstances indicate that an event of impairment may have occurred. The Company recognizes an impairment loss only if the carrying amount of a long-lived asset is not recoverable based on its undiscounted future cash flows. Impairment is measured based on the difference between the carrying value of the related assets or businesses and the fair value of such assets or businesses.

Revenue Recognition

Product Revenue

Revenue recognition under ASC Topic 606 is applied through a five-step model as follows: (1) identify the contract(s) with the customer; (2) identify performance obligations in the contract; (3) determine the transaction price; (4) allocate transaction price to the performance obligation; and (5) recognize revenue when (or as) each performance obligation is satisfied.

The Company’s arrangements with its distributors are determined to be contracts within the scope of ASC Topic 606 when all five criteria in ASC Topic 606 are met. These five criteria were assessed at the inception of each arrangement. Since the criteria were met during this initial assessment, the Company will not reassess the criteria unless there is an indication of a significant change in facts and circumstances. In order to meet the definition of a contract, it must also be probable that the Company will collect the consideration to which it is entitled for goods or services to be transferred. Once the contract is determined to be within the scope of ASC Topic 606, the Company assesses the goods or services to be delivered with each contract, determines whether those are performance obligations and the related transaction price. The Company then recognizes revenue based on the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied.

The Company’s product revenue consists of the sales of Xerava, which the Company began selling to customers in October 2018. The Company sells Xerava to specialty distributors and these customers resell Xerava to hospitals or other treatment centers. In addition to these distributor agreements and the related discounts and allowances, the Company is subject to government mandated rebates, chargebacks, and discounts with respect to the purchase of the Company’s product. Product revenue is recognized net of reserves for all variable consideration, including discounts, chargebacks, government rebates and product returns. The Company is expensing the costs of obtaining and fulfilling these contracts when incurred. The Company has opted to immediately expense the incremental cost of obtaining a contract when the underlying related asset would have been amortized over one year or less.

Reserves for Variable Consideration

The Company evaluates its contracts with customers for forms of variable consideration which may require an adjustment to the transaction price based on their estimated impact. Revenues from product sales are recorded at the gross sales price, net of variable consideration, as described above.

The Company estimates variable consideration using the expected value method, which is the sum of probability-weighted amounts in a range of possible outcomes. These outcomes include market events and trends, forecasted product demand patterns, customer buying patterns and statutory requirements. The resulting reserves represent the Company’s best estimates of variable consideration it expects to occur.

Before it can include an amount of variable consideration in the transaction price, the Company must consider whether the amount of variable consideration is constrained. To include variable consideration in the estimated transaction price, the entity has to conclude that it is “probable” that a significant revenue reversal will not occur in future periods, considering both the likelihood and magnitude of a revenue reversal to apply the constraint. Based on the above, the Company applies the constraint to variable consideration included in its contracts if it cannot conclude that it is probable that a significant revenue reversal will not occur in future periods.

Trade Discounts and Allowances: The Company offers its customers prompt pay discounts and service fees as stated in its customer contracts. The Company pays these service fees to its customers in exchange for their performance of various product distribution, marketing and promotional services targeted at advancing end-user sales of the Company’s product. The related reserves are set in the same period the corresponding revenue is recognized, resulting in a reduction of product revenue.

Government Chargebacks and Rebates: Under the terms of the Company’s master agreements, customers may charge back the Company for reimbursement when they are contractually obligated to sell products to government entities at a lower price than the wholesale acquisition cost at which those products were acquired from the Company. These rebates consist of Medicare and Medicaid rebates as well as those related to other government drug pricing and reimbursement programs.

Product Returns: Products are eligible for return by the Customers in various scenarios under the Company’s returns policies included as part of its master distribution agreements. Return options are provided for expired merchandise, short-dated merchandise, products damaged in transit, or any discontinued, withdrawn, or recalled products. The Company estimates the amount of product that may be returned and records this as a reduction in revenue in the relevant period. The Company currently estimates product return liabilities using available industry data, sales information and visibility into the inventory remaining in the distribution channel. The Company has not received any returns to date since launch.

The Company will continue to assess its estimates of the various components of variable consideration as it accumulates additional historical data and will make adjustments to these estimates and allowances accordingly.

Collaboration Revenue

The Company has entered into an out-licensing agreement that is evaluated under Accounting Standards Codification, Topic 606, or Topic 606, Revenue from Contracts with Customers, through which the Company licenses certain of its product candidates’ rights to a third party. Any future out-licensing agreements entered into by the Company and additional third parties shall also be evaluated under Topic 606. Terms of these arrangements include various payment types, typically including one or more of the following: upfront license fees; development, regulatory and commercial milestone payments; payments for manufacturing supply services; and/or royalties on net sales of licensed products.

To determine the amount and timing of revenue to be recognized under each agreement, the Company evaluates the following criteria: (i) confirming the goods or services in the contract; (ii) defining the performance obligations under the agreement; (iii) determining the transaction price, including any constraint on variable consideration; (iv) allocating the transaction price to the performance obligations; and (v) defining how the revenue will be recognized for each performance obligation. In determining the accounting treatment for these arrangements, the Company develops assumptions to determine the stand-alone selling price for each performance obligation in the contract. These assumptions may include forecasted revenues, development timelines, discount rates and probabilities of technical and regulatory success.

Licenses of Intellectual Property: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from upfront fees allocated to the license when the license, including any associated know-how, is transferred to the licensee and the licensee can use and benefit from the license. For licenses that are bundled with other obligations, the Company uses judgment to evaluate the combined performance obligation to determine whether it is satisfied over time or at a point in time and the appropriate method of measuring completion for purposes of recognizing revenue.

Milestone Payments: For arrangements that include development milestone payments, the Company evaluates whether the milestones are considered probable and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.

Manufacturing Supply: Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations. If the Company is entitled to additional payments when the licensee exercises these options, the Company recognizes revenue when the licensee obtains control of the goods, which is upon delivery.

Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Government Contract Revenue

The Company’s government contract revenue has been derived from its subcontracts with CUBRC, Inc., or CUBRC, an independent, not-for-profit, research corporation that specializes in U.S. government-based contracts, with which the Company is collaborating. These subcontracts with CUBRC relate to the following funding awards: (1) an award from the Biomedical Advanced Research and Development Authority, or BARDA, an agency of the U.S. Department of Health and Human Services, for the development of Xerava, which the Company refers to as the BARDA Contract; (2) two awards from the National Institute of Allergy and Infectious Diseases, or NIAID, for the development, manufacturing and clinical evaluation of TP-271, which the Company refers to as the NIAID Contract and the NIAID Grant, respectively. The Company is also the recipient of its cost reimbursement Sub-Award Agreement with the Trustees of Boston University, the administrator of the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator, or CARB-X, program, for the development of TP-6076 (see Note 6). The Company recognizes revenue under these best-efforts, cost-reimbursable and cost-plus-fixed-fee subcontracts and subaward as the Company performs services under the subcontracts and subaward so long as a subcontract and subaward has been executed and the fees for these services are fixed or determinable, legally billable and reasonably assured of collection. Recognized amounts reflect the Company’s partial performance under the subcontracts and subaward and equal direct and indirect costs incurred plus fixed fees, where applicable. The Company does not recognize revenue under these arrangements for amounts related to contract periods where funding is not yet committed as amounts above committed funding thresholds would not be considered fixed or determinable or reasonably assured of collection. Revenues and expenses under these arrangements are presented gross on the consolidated statements of operations and comprehensive loss as the Company has determined it is the primary obligor under these arrangements relative to the research and development services it performs as lead technical expert.

Revenue under the Company’s subcontracts under the BARDA Contract and under the CARB-X Award are earned under a cost-plus-fixed-fee arrangement in which the Company is reimbursed for direct costs incurred plus allowable indirect costs and a fixed-fee earned. Billings under these arrangements are based on approved provisional indirect billing rates, which permit recovery of allowable fringe benefits, allowable overhead and general and administrative expenses and a fixed fee.

Revenue under the Company’s subaward under the NIAID Contract and NIAID Grant were earned under a cost-reimbursable arrangement in which the Company was reimbursed for direct costs incurred plus allowable indirect costs. Billings under the NIAID Contract and NIAID Grant were based on approved provisional indirect billing rates, which permit recovery of fringe benefits and allowable general and administrative expenses.

Cost of Revenue

Cost of revenue consists primarily of the manufacturing and distribution costs for Xerava, Xerava net sales-based royalties and the amortization of the intangible asset associated with certain milestones paid to Harvard University, or Harvard, related to Xerava. All manufacturing costs incurred prior to Xerava’s approval in the United States on August 27, 2018 have been expensed in research and development and are not included in cost of revenue.

Recently Adopted Accounting Pronouncements

In June 2018, the FASB issued ASU 2018-07, Compensation – “Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payment Accounting, which addresses aspects of the accounting for nonemployee share-based payment transactions. This pronouncement is effective for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019. The Company early adopted ASU 2018-07 on April 1, 2019 and there was no impact on adoption.

In February 2016, the Financial Accounting Standards Board, or FASB, issued ASU No. 2016-02, Leases (Topic 842), which among other things, results in the recognition of lease assets and lease liabilities by lessees on the Company’s balance sheets for virtually all leases. ASU 2016-02 supersedes most previous lease accounting guidance and is effective for interim and annual periods beginning after December 15, 2018. The Company adopted the new guidance as of January 1, 2019 using the modified retrospective adoption method in which it did not restate prior periods. The Company has elected the transition relief package of practical expedients permitted within Topic 842. Accordingly, the Company has not reassessed the classification of its existing leases as the transition date, whether existing contracts at the transition date contain a lease, or whether unamortized initial direct costs before the transition adjustments would have met the definition of initial direct costs at lease commencement. The Company does not allocate consideration in its leases to lease and non-lease components and does not record leases on its balance sheet with terms of 12 months or less.

The Company uses its estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. The Company’s incremental borrowing rate represents the rate of interest that the Company would have to pay to borrow over a similar term an amount equal to the lease payments in a similar economic environment. The Company considers its recent debt issuances and publicly available data for instruments with similar terms and characteristics when calculating its incremental borrowing rates.

The adoption had a material impact on the consolidated balance sheet related to the recognition of operating lease assets of $6.2 million and lease liabilities of $6.3 million as of January 1, 2019, along with derecognition of deferred rent originally accounted for under the legacy guidance. The adoption did not have a material impact on the consolidated statement of operations. The Company has implemented changes to related processes, controls and disclosures upon adoption of the standard.

There have been no other significant changes to the Company’s significant accounting policies since the beginning of this fiscal year.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. ASU 2016-13 will change how companies account for credit losses for most financial assets and certain other instruments. For trade receivables, loans and held-to-maturity debt securities, companies will be required to recognize an allowance for credit losses rather than reducing the carrying value of the asset. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential impact that the adoption of ASU 2016-13 will have on the Company’s financial position and results of operations.

Fair Value Measurements

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The Company records its cash and cash equivalents at fair value. Fair value measurements are classified and disclosed in one of the following three categories:

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.

Financial instruments measured at fair value as of September 30, 2019 and December 31, 2018 are classified below based on the three fair value hierarchy tiers described above (in thousands):

			Fair Value Measurements at Reporting Date Using
	Balance		Level 1		Level 2		Level 3
September 30, 2019
Cash and money market funds	$	24,508	$	24,508	$	—	$	—
December 31, 2018
Cash and money market funds	$	107,776	$	107,776	$	—	$	—

The Company measures cash equivalents at fair value on a recurring basis. The fair value of cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Net Loss per Common Share

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Net Loss per Common Share

4. Net Loss per Common Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding for the period, without consideration for common stock equivalents. The Company’s potentially dilutive shares, which include outstanding stock options, unvested restricted stock units, or RSU’s, and warrants, are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

The amounts in the table below were excluded from the calculation of net loss per share, due to their anti-dilutive effect:

	September 30,
	2019		2018
Warrants		20,718		—
Unvested restricted stock units		141,716		54,426
Outstanding stock options		269,689		358,574
Totals		432,123		413,000

Property and Equipment and Assets Held-for-Sale

9 Months Ended

Sep. 30, 2019

Property Plant And Equipment [Abstract]

Property and Equipment and Assets Held-for-Sale

5. Property and Equipment and Assets Held-for-Sale

As of September 30, 2019, and December 31, 2018, property and equipment, net and assets held-for-sale consists of the following (in thousands):

	As of September 30, 2019			As of December 31, 2018			Depreciable lives
Leasehold improvements	$	923		$	923		shorter of assets life or lease term
Furniture and fixtures		234			509		5 years
Office and computer equipment		135			217		3 years
Laboratory Equipment		-			3,278		5 years
Less accumulated depreciation		(1,179	)		(3,806	)
Property and equipment, net	$	113		$	1,121

Assets held-for-sale	$	544			-

During the third quarter of 2019, the Company disposed of property and equipment with a gross carrying amount of $0.1 million and accumulated depreciation of $0.1 million. The Company did not dispose of any property and equipment during 2018. Depreciation and amortization expense amounted to $0.2 million, and $0.5 million in the periods ended September 30, 2019 and December 31, 2018, respectively.

The Company initially recorded certain laboratory equipment asset impairments in the second quarter of 2019 in accordance with ASC 360 Property, Plant and Equipment for assets held-and-used, as the criteria to classify the laboratory equipment as held-for-sale had not been met. The Company identified an indicator of impairment related to this held-and-used laboratory equipment as it was more likely than not that some of its laboratory equipment would be sold or otherwise disposed of significantly before the end of its previously estimated useful life primarily as a result of the restructuring described in Note 14. For the laboratory equipment where its fair value did not exceed its carrying amount, an impairment was recognized. Fair value was an estimate of the sales price less cost to sell. In the third quarter of 2019, the Company committed to a plan to actively sell certain of its laboratory equipment. Having met all other criteria, the laboratory equipment met the criteria to classify that equipment as held-for-sale. At September 30, 2019, $0.5 million of laboratory equipment was classified as held-for-sale as reflected in the consolidated balance sheet. The sale is expected to be complete by the end of the fourth quarter of 2019. Laboratory equipment held-for-sale is reflected at the lower of its carrying amount or fair value less the cost to sell, with any excess recorded as an impairment. In aggregate, impairment losses recognized in connection with laboratory equipment was $0.3 million and included in research and development costs in the consolidated statement of operations for the period ended September 30, 2019.

Intangible Assets

9 Months Ended

Sep. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets

6. Intangible Assets

Intangible assets consist solely of the payments made to Harvard related to the regulatory approvals of Xerava. The intangible assets are being amortized using the straight-line method over the estimated useful life of approximately 12 years. As of September 30, 2019, and December 31, 2018, intangible assets, net of accumulated amortization, are as follows (in thousands):

	As of September 30, 2019				As of December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization

Total intangible asset for Harvard milestones	$	4,750	$	393	$	4,750	$	98

Amortization expense was approximately $0.3 million, and $0.1 million in the periods ended September 30, 2019 and December 31, 2018, respectively.

The Company expects to incur amortization expense of approximately $0.4 million per period from 2019 to 2029 and $0.3 million in the final year (2030).

During the three months ended September 30, 2019, management identified impairment indicators related to the intangible assets for the Harvard milestones. As result, an interim test of recoverability of the intangible asset was performed based on the estimated undiscounted future cash flows related to the intangible asset, and concluded the intangible asset was recoverable. The Company’s quantitative assessment considered significant assumptions related to estimates of future Xerava sales, offset by direct costs to derive the sales. The estimates of future Xerava sales include estimates of significant growth as the product was recently launched in the fourth quarter of 2018. Given the limited history of sales and the inherent difficulty in making a long-range forecast, such estimates contain significant uncertainty. If the assumptions regarding forecasted revenue or the costs to derive such revenues are not achieved, we may be required to perform future impairment analyses and record an impairment charge for the intangible asset in future periods. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material.

Inventory

9 Months Ended

Sep. 30, 2019

Inventory Disclosure [Abstract]

Inventory

7. Inventory

Inventory consisted of the following (in thousands):

	As of September 30, 2019		As of December 31, 2018
Work in progress	$	115	$	655
Finished goods		2,319		93
Total inventory	$	2,434	$	748

There were no charges related to excess inventory for the three and nine months ended September 30, 2019 or 2018.

Significant Agreements and Contracts

9 Months Ended

Sep. 30, 2019

Research And Development [Abstract]

Significant Agreements and Contracts

8. Significant Agreements and Contracts

License Agreements

Harvard University

In August 2006, the Company entered into a license agreement for certain intellectual property with Harvard. Under the license agreement, as of September 30, 2019, the Company has incurred expense in aggregate of $16.8 million in upfront license fees, sublicense fees and development milestone payments for the licensed Harvard technology, and has issued 1,569 shares of common stock to Harvard.

For each product covered by the license agreement, the Company is obligated to make certain payments totaling up to approximately $15.1 million upon achievement of certain development and regulatory milestones and to pay additional royalties on net sales of such product. The Company is also obligated to make certain payments to Harvard based on amounts received under its license agreement with Everest Medicines Limited. During the nine months ended September 30, 2019 and September 30, 2018, the Company incurred expense of $1.0 million and $1.9 million, respectively, related to the Everest Medicines license agreement. During the three months ended September 30, 2019 the Company incurred expense of $0.4 million related to the Everest Medicines license agreement. During the three months ended September 30, 2018, the Company incurred expense of $3.0 million in regulatory milestone payments.

Paratek

On March 18, 2019, the Company and Paratek Pharmaceuticals, Inc., or Paratek, entered into a license agreement, or the Paratek License Agreement. Under the terms of the Paratek License Agreement, Paratek granted to Tetraphase a non-exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses, under certain Paratek patents.

The terms of the Paratek License Agreement provide for the Company to pay Paratek royalties at a low single digit percent on net sales of Xerava sold in the United States. The Company’s obligation to pay royalties with respect to the licensed product is retroactive to the date of the first commercial sale of Xerava and shall continue until there is no longer any valid claims of the Paratek patents which will expire in October 2023.

Everest Medicines License Agreement

In February 2018, the Company entered into the Everest License Agreement with Everest Medicines, whereby the Company granted Everest Medicines an exclusive license to develop and commercialize Xerava, for the treatment of cIAI and other indications, in mainland China, Taiwan, Hong Kong, Macau, South Korea and Singapore, or the Territory.

Under the terms of the Everest License Agreement, the Company received from Everest Medicines an upfront cash payment of $7.0 million in the first quarter of 2018 and a cash payment of $2.5 million related to Everest Medicines’ submission of an IND with the National Medical Products Administration (formerly China FDA) in June 2018. In the second quarter of 2019, the Company received a cash payment of $3.0 million related to Everest Medicine’s initiation of a Phase 3 clinical trial.

The Company is eligible to receive up to an aggregate of $11.0 million in future clinical development and regulatory milestone payments and up to an aggregate of $20.0 million in sales milestone payments. There can be no guarantee that any such milestones or sales thresholds will in fact be met. The Company is obligated to make certain payments to Harvard based on amounts received from Everest Medicines under the Everest License Agreement pursuant to the existing license agreement by and between Harvard and the Company.

The Company will also be entitled to receive low double-digit tiered royalties on sales in the Territory, if any, of products containing eravacycline. Royalties are payable with respect to each jurisdiction in the Territory until the latest to occur of: (i) the last-to-expire of specified patent rights in such jurisdiction in the Territory; (ii) expiration of marketing or regulatory exclusivity in such jurisdiction in the Territory; or (iii) ten (10) years after the first commercial sale of a product in such jurisdiction in the Territory. In addition, royalties payable under the Everest License Agreement will be subject to reduction on account of generic competition and after patent expiry in a jurisdiction if required by applicable law, with any such reductions capped at certain percentages of the amounts otherwise payable during the applicable royalty payment period.

In addition, on July 29, 2019, the Company amended its original agreement with Everest Medicines to extend Everest Medicines’ exclusive license to develop and commercialize Xerava to the jurisdictions of the Malaysian Federation, the Kingdom of Thailand, the Republic of Indonesia, the Socialist Republic of Vietnam and the Republic of the Philippines. Under the terms of this amendment, the Company received from Everest Medicines an upfront, nonrefundable cash payment of $2.0 million in September 2019. As with the milestones discussed above, the Company is obligated to make certain payments to Harvard based on amounts received from Everest under this amendment pursuant to the existing license agreement by and between Harvard and the Company. During the three months ended September 30, 2019, the Company incurred expense of $0.4 million related to this milestone.

Under the terms and conditions of the Everest License Agreement, Everest Medicines will be solely responsible for the development and commercialization of licensed products in the Territory. The Company agreed to manufacture clinical material, which will be paid by Everest Medicines at the Company’s cost, as well as commercial supply, which will be paid by Everest at cost plus a reasonable margin.

In evaluating the recognition of revenue under the Everest License Agreement, the Company identified the following three performance obligations under the Agreement: (i) exclusive license to develop and commercialize eravacycline for the treatment of cIAI and other potential, future indications, in the Territory, (ii) provision of information and technical assistance related to the know-how transfer for the development of eravacycline; and (iii) provision of clinical supply to Everest Medicines.

The Company evaluated the Everest License Agreement under Topic 606 at the time of execution of the arrangement. Based on that evaluation, the upfront fee of $7.0 million represented the amount of the consideration to be included in the transaction price, which will be allocated to the identified performance obligations. Subsequent to execution, the Company determined that the milestones for the Chinese IND and Phase 3 clinical trial were probable to be achieved and that a significant revenue reversal would not occur, and included the payment amounts of $2.5 and $3.0 million, respectively, in the transaction price.

No other clinical milestones, regulatory milestones, sales-based milestones or sales royalties have been included in the transaction price, as these milestones are not considered probable given Everest Medicines relatively short operating history, the uncertainty of regulatory processes in China and that commercial sales have not commenced. The Company determined that the license and related know-how were a combined performance obligation as the license is not distinct without the provision of the related know-how transfer. The Company’s requirement to manufacture clinical supply for Everest Medicines is dependent on Everest Medicines’ future purchases, the payment for which was determined to be at cost and therefore potentially represents a material right. However, based on the amount of clinical supply expected to be ordered by Everest Medicines, the Company has estimated that the value of this right would be immaterial.

The Company recognized the $2.0 million territory expansion upfront payment associated with the July 2019 amendment as collaboration revenue during the three months ended September 30, 2019 as the Company has no further performance obligations pursuant to the arrangement.

Other Material Agreements

Patheon UK Limited Master Manufacturing Services Agreement

In June 2017, the Company and Patheon UK Limited and certain of its affiliates, or Patheon, entered into a master manufacturing services agreement. Under the Patheon agreement, the Company is responsible for supplying the active pharmaceutical ingredient for eravacycline to Patheon, and Patheon is responsible for manufacturing eravacycline, conducting quality control, quality assurance, analytical testing and stability testing and packaging. The Company and Patheon entered into two related product agreements pursuant to the Patheon agreement that govern the terms and conditions of Patheon’s manufacture of commercial supplies of eravacycline at Patheon’s Greenville, North Carolina and Ferentino, Italy manufacturing sites. Pursuant to the Patheon agreement, the Company has agreed to order from Patheon at least a certain percentage of its annual commercial requirements for eravacycline in the United States and European Union each year for the term of the Patheon agreement. The Patheon agreement has an initial term ending December 31, 2022, and will automatically renew after the initial term for successive terms of two years each, unless either party gives notice of its intention to terminate at least 18 months prior to the end of the then current term. The Company may terminate a product agreement upon 30 days’ prior written notice under certain circumstances.

Finorga SAS Commercial Supply Agreement

In October 2017, the Company and Finorga SAS, or Novasep, entered into a commercial supply agreement. Under the agreement, Novasep will, pursuant to accepted purchase orders entered into under the agreement, manufacture for commercial supply the active pharmaceutical ingredient for eravacycline. This agreement has an initial term ending October 16, 2022, and will automatically renew after the initial term, unless either party gives notice of its intention to terminate at least 18 months prior to the end of the then current term. The Company may terminate the Novasep agreement upon 30 days’ prior written notice under certain circumstances.

Government Grant and Contracts

BARDA Contract for Eravacycline

The Company received funding for the development of Xerava under an award from BARDA, an agency of the U.S. Department of Health and Human Services. In January 2012, BARDA awarded a five-year contract, which has since been extended, that provides for up to a total of $67.3 million in funding for the development, manufacturing and clinical evaluation of eravacycline for the treatment of disease caused by bacterial biothreat pathogens (or BARDA Contract). The funding under the BARDA Contract is also being used for the development, manufacturing and clinical evaluation of Xerava to treat certain infections caused by life-threatening MDR bacteria.

In connection with the BARDA Contract, in February 2012, the Company entered into a cost-plus-fixed-fee subcontract with CUBRC, an independent, not for profit, research corporation that specializes in U.S. government-based contracts, which is also the direct recipient of the BARDA Contract. This subcontract, which currently expires on December 31, 2019, granted the Company initial funding of up to approximately $41.3 million, reflecting the portion of the BARDA Contract funding that could be paid to the Company for its activities.

The BARDA Contract and the Company’s subcontract with CUBRC under the BARDA Contract have terms which currently expire on December 31, 2019, BARDA is entitled to terminate the project for convenience at any time and is not obligated to provide continued funding beyond current-year amounts from congressionally approved annual appropriations. To the extent that BARDA ceases to provide funding of the program to CUBRC, CUBRC has the right to cease providing funding to the Company. Committed funding from CUBRC under the Company’s BARDA subcontract is for up to approximately $41.3 million through December 31, 2019, the current contract end date, as a result of the exercise of several options by BARDA under the BARDA Contract. Total funds of $40.0 million had been received by the Company through September 30, 2019 under this contract. During the three months ended September 30, 2019 and 2018, the Company recognized revenue of $0.4 million and $0.2 million, respectively, from the Company’s subcontract under the BARDA Contract. During the nine months ended September 30, 2019 and 2018, the Company recognized revenue of $1.0 million and $1.2 million, respectively, from the Company’s subcontract under the BARDA Contract.

NIAID Grant and Contract for TP-271

The Company received funding for its phase 1 compound TP-271 from NIAID for the development, manufacturing and clinical evaluation of TP-271 for respiratory diseases caused by biothreat and antibiotic-resistant public health pathogens, as well as bacterial pathogens associated with community-acquired pneumonia:

•

The NIAID Contract awarded in September 2011 provided up to a total of approximately $35.8 million and expired on March 31, 2019.

In connection with the NIAID Contract, in October 2011, the Company entered into a cost-plus-fixed-fee subcontract with CUBRC, the direct recipient of the NIAID Contract, which subcontract expired on March 31, 2019 under which the Company could have originally received funding of up to approximately $16.9 million (which was subsequently reduced to $16.3 million based on actual work performed), reflecting the portion of the NIAID Contract funding that could be paid to the Company for its activities.

The NIAID Contract and the Company’s subcontract with CUBRC under the NIAID Contract expired on March 31, 2019. As of September 30, 2019, the Company had received $16.2 million. The Company has not received any additional funds under this agreement since that date.

During the three months ended September 30, 2019 the Company recognized no revenue under the NIAID Contract compared to $0.7 million for the three months ended September 30, 2018, as the contract expired on March 31, 2019. During the nine months ended September 30, 2019 and 2018, the Company recognized revenue of $0.1 million and $2.3 million, respectively, from the Company’s subcontract under the NIAID Contract.

CARB-X Award for TP-6076

In March 2017, Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator (CARB-X) selected the Company to receive up to $4.0 million in research funding over eighteen months for TP-6076. In connection with this funding, the Company entered into a cost reimbursement Sub-Award Agreement, or the Sub-Award Agreement, with the Trustees of Boston University, the administrator of the program. The Company began recognizing revenue from the Sub-Award Agreement in April 2017. During the three months ended September 30, 2019 the Company did not recognize any revenue as the Sub-Award Agreement expired on June 30, 2019. During the three months ended September 30, 2018 the Company recognized revenue of $0.2 million under this Sub-Award Agreement. During the nine months ended September 30, 2019 and 2018, the Company recognized revenue of $0.5 million and $1.6 million, respectively, under this Sub-Award Agreement and does not expect to receive any additional revenue under the award.

Accrued Expenses

9 Months Ended

Sep. 30, 2019

Payables And Accruals [Abstract]

Accrued Expenses

9. Accrued Expenses

Accrued expenses at September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30,		December 31,
	2019		2018
Salaries and benefits	$	3,303	$	3,801
Drug supply and development		2,893		3,901
Professional fees		811		1,178
Commercial		1,057		910
Royalties and license payments		71		617
Other		433		1,354
Total	$	8,568	$	11,761

Stock-Based Compensation

9 Months Ended

Sep. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

10. Stock-Based Compensation

In January 2019, the number of shares available for issuance under the Tetraphase Pharmaceuticals, Inc. 2013 Stock Incentive Plan, as amended, or 2013 Plan, was increased by approximately 0.1 million shares as a result of the automatic increase provision of the 2013 Plan. As of September 30, 2019, the total number of shares of common stock available for issuance under the 2013 Plan was approximately 0.1 million.

Stock-Based Compensation Expense

During the three and nine months ended September 30, 2019 and 2018, the Company recognized the following stock-based compensation expense (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Research and development	$	218	$	1,639	$	1,691	$	4,585
General and administrative		953		1,877		3,912		5,295
Total	$	1,171	$	3,516	$	5,603	$	9,880

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Stock options	$	736	$	2,820	$	4,301	$	8,406
Restricted stock units		424		661		1,254		1,387
Employee stock purchase plan		11		35		48		87
Total	$	1,171	$	3,516	$	5,603	$	9,880

Stock Options

The following table summarizes the stock option activity for the nine months ended September 30, 2019:

	Shares			Weighted- Average Exercise Price
Outstanding at December 31, 2018		366,020		$	223.11
Granted		9,200		$	17.72
Forfeited		(105,531	)	$	151.71
Outstanding at September 30, 2019		269,689		$	244.04
Exercisable at September 30, 2019		199,178		$	298.11

As of September 30, 2019, there was $4.4 million of total unrecognized stock-based compensation cost related to employee unvested stock options granted under the 2013 Plan. The Company expects to recognize that cost over a remaining weighted-average period of 2.0 years.

Restricted Stock Units and Performance Stock Units

In 2019 the Company awarded 127,742 restricted stock units, or RSU’s, to employees. These RSU’s vest in annual increments over two to three years, subject to continued employment with the Company. In connection with the restructuring in June 2019 (see Note 14), the Company modified certain RSUs.

In January 2019 and August 2019 the Company issued to certain employees 16,650 performance stock units, or PSU’s, which vest based on service and performance conditions. The number of units represents the target number of shares of common stock that may be earned; however, the actual number of shares that may be earned ranges from 0%-150% of the target number. None of these awards vested as of September 30, 2019. Vesting of these awards is contingent on the occurrence of certain milestone events and fulfillment of any remaining service condition. As a result, the related compensation cost is recognized as an expense when achievement of the milestone is considered probable over the remaining requisite service period.

The following table summarizes the RSU and PSU activity for the nine months ended September 30, 2019:

	Shares			Weighted- Average Grant Date Fair Value
Unvested at December 31, 2018		54,035		$	60.10
Awarded		144,392		$	22.99
Forfeited		(27,498	)	$	36.20
Vested/Released		(29,213	)	$	69.57
Unvested at September 30, 2019		141,716		$	24.97

As of September 30, 2019, there was total unrecognized stock-based expense of $1.5 million related to RSU’s and $0.1 million related to PSU’s. The expense is expected to be recognized over a weighted-average period of 1.3 years.

Employee stock purchase plan

Under the Company’s 2014 Employee Stock Purchase Plan, as amended, or 2014 ESPP, an aggregate of 30,000 shares of common stock have been reserved for issuance pursuant to purchase rights granted to the Company’s employees. As of September 30, 2019, 15,000 shares remained available for issuance.

Debt Facility

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Debt Facility

12. Debt Facility

On November 2, 2018, the Company entered into a loan and security agreement, or the Loan Agreement, with Solar Capital, as collateral agent and lender, and the other lenders named therein (Solar Capital and the other lenders collectively, the Lenders). The Lenders agreed to make available to the Company term loans in an aggregate principal amount of up to $75.0 million under the Loan Agreement. A $30.0 million term loan was funded on November 2, 2018, with a maturity date of May 2, 2023. Borrowings under the term loan bore interest at a floating per annum rate equal to the 1 Month LIBOR Rate plus 7.25%. The loan facility also included a final fee equal to 4.00% of the aggregate amount of the term loans funded, to occur upon the earliest of (i) the maturity date, (ii) the acceleration of the term loans, and (iii) the prepayment of the term loans. The Company was also subject a prepayment penalty fee based on a percentage of the outstanding principal balance, equal to 3% if the payment occurred on or before 12 months after the initial funding date, 2% if the prepayment occurred more than 12 months after, but on or before 24 months after, the initial funding date, or 1% if the prepayment occurred more than 24 months after the initial funding date.

The Loan Agreement was amended in March 2019 for the primary purpose of adding a newly opened operating bank account to the agreement as collateral.

On August 30, 2019, the Company entered into a payoff letter with the Lenders, pursuant to which the Company agreed to pay off and thereby terminate the Loan Agreement. Pursuant to the payoff letter, the Company paid a total of $30.7 million to the Lenders, representing the principal balance, accrued interest outstanding and a portion of the final fee under the Loan Agreement in repayment of the Company’s outstanding obligations under the Loan Agreement. The Company recorded a loss from debt extinguishment of $1.6 million as the difference between the net carrying amount of the indebtedness under the Loan Agreement and the amount paid.

The Company recorded interest expense related to the loan facility of $0.7 and $2.6 million and for the three and nine months ended September 30, 2019, respectively.

Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

13. Commitments and Contingencies

Operating Leases

The Company’s leases consist of office equipment and office and laboratory space in Watertown, MA. On March 24, 2015, the Company amended its existing operating lease to expand its existing premises by an additional 13,711 square feet, and on June 18, 2015, the Company amended its existing operating lease to expand its existing premises by an additional 7,828 square feet, resulting in a total of 37,438 square feet of office and laboratory space.

In the third quarter of 2016, the Company entered into a sublease with respect to a portion of its principal facilities with an unrelated third party. The term of the sublease expires in November 2019, with the sublessee obligated to pay rent to the Company that approximates the rent the Company is currently paying to its landlord with respect to such portion of its facility.

On November 29, 2018, the Company amended its existing operating lease to extend the lease term through November 30, 2022 for all of its existing operating leases. There are no extension or early termination options available to the Company which it is reasonably certain to exercise.

The Company identified and assessed significant assumptions in recognizing the right-of-use asset and lease liability as follows:

•

Incremental borrowing rate - The Company’s lease agreements do not provide implicit rates. The Company has one outstanding loan facility which was utilized to derive the Company’s incremental borrowing rate for its existing leases at the transition date. The Company estimated its incremental borrowing rate based on its credit quality indicators from its outstanding loan facility. The Company compared its incremental borrowing rate to rates available in the market for similar borrowings, and adjusted these rates based on the impact of collateral over the term of the lease to substantiate the incremental borrowing rate applied to its leases at the transition date.

•

Lease and non-lease components – The Company is required to pay fixed fees for operating expenses in addition to monthly base rent for certain operating leases. The amounts of additional rent associated with these fees are considered non-lease components. The Company has elected the practical expedient which allows non-lease components to be combined with lease components and will therefore include these additional rent amounts in its lease payments. Any variable components of these operating costs are excluded from lease payments and are recognized in the period incurred.

The components of lease expense were as follows:

	Three Months Ended			Nine Months Ended
	September 30,			September 30,
	2019			2019
Operating lease cost	$	474		$	1,423
Variable lease cost		314			893
Total lease cost	$	788		$	2,316

Weighted-average remaining lease term (years)		3.15			3.15
Weighted-average discount rate		9.25	%		9.25	%

Cash paid for amounts included in the measurement of the lease liabilities were $0.5 million and $1.4 million for the three and nine months ended September 30, 2019, respectively.

As of September 30, 2019, the Company’s operating lease liabilities were as follows (in thousands):


	Amount
2019 (excluding the nine months ended September 30, 2019)	$	466
2020		1,916
2021		1,950
2022		1,785
Thereafter		—
Less: Imputed interest		(770	)
Present value of lease payments	$	5,347

Disclosures related to periods prior to adoption of the New Lease Standard

The Company recorded $0.4 million and $1.1 million in rent expense for the three and nine months ended September 30, 2018, respectively.

Corporate Restructuring Charges

9 Months Ended

Sep. 30, 2019

Restructuring Charges [Abstract]

Corporate Restructuring Charges

14. Corporate Restructuring Charges

On June 10, 2019, the Company announced a restructuring of its organization, including a 20% reduction in headcount, designed to focus its cash resources on commercializing Xerava. This reorganization included the elimination of its internal research function and an exploration of out-licensing opportunities for all of its pipeline of early-stage antibiotics and oncology product candidates. The Company expects the total costs associated with the restructuring to be $2.4 million, of which the Company incurred $2.4 million during the three months ended June 30, 2019. The Company expects the restructuring liability to be paid by the third quarter of 2020. The restructuring charges consist primarily of severance and benefit costs and asset impairment costs, offset in part by stock-based compensation adjustments associated with award modifications.

The restructuring charges recorded during the nine months ended September 30, 2019 and the related liability balance as of September 30, 2019 for each major type of cost associated with this restructuring plan are as follows:

	Restructuring Expense			Cash payments			Non-cash expense			Restructuring Liability at September 30, 2019
Employee severance, benefits and related costs	$	2,130		$	(1,324	)	$	—		$	806
Asset impairments		335			-			(335	)		-
Compensation expense		(97	)		-			97			-
	$	2,368		$	(1,324	)	$	(238	)	$	806

The company did not incur any restructuring charges during the three months ended September 30, 2019.

Summary of Significant Accounting Policies (Policies)	9 Months Ended
Summary of Significant Accounting Policies (Policies)	Sep. 30, 2019
Accounting Policies [Abstract]
Liquidity and Going Concern Assessment	Liquidity and Going Concern Assessment Accounting Standards Update, or ASU, No. 2014-15, Presentation of Financial Statements - Going Concern, requires management to evaluate the Company’s ability to continue as a going concern one year beyond the filing date of the given financial statements. This evaluation requires management to perform two steps. First, management must evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern. Second, if management concludes that substantial doubt is raised, management is required to consider whether it has plans in place to alleviate that doubt. Disclosures in the notes to the financial statements are required if management concludes that substantial doubt exists or that its plans alleviate the substantial doubt that was raised. Based on its current operating plan, the Company expects that its cash and cash equivalents as of September 30, 2019, its projected revenues from sales of Xerava and the net proceeds from the Company’s registered direct offering of equity securities completed on November 1, 2019 (note 13) will not be sufficient to fund the Company’s operations for more than one year beyond the filing date of this quarterly report, but only into the third quarter of 2020. This estimate is based on certain significant assumptions, which are uncertain and may turn out to be incorrect. In particular, the forecast assumes continued significant growth of Xerava revenue, for which the Company has limited historical experience to base its estimate. In addition, the Company has forecast a significant reduction in expenses as a result of the restructuring announced in June 2019. If these estimates are incorrect, the Company may use its cash resources sooner than expected. In addition, the Company will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources to fund its operations including ongoing spending to commercialize Xerava. In light of its limited cash resources, the Company may also determine to explore strategic alternatives to maximize shareholder value, including the potential sale or merger of the Company or its assets. These factors raise substantial doubt about the Company’s ability to continue as a going concern. If the Company is unable to raise capital when needed or if its operating results fall short of its current projections, or if the Company determines to explore strategic alternatives but is unable to consummate such a transaction or transactions on a timely basis or at all, the Company could be forced to significantly delay, scale back or discontinue the commercialization of Xerava or reduce other expenditures, seek collaborators at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available, and relinquish or license, potentially on unfavorable terms, the Company’s rights to Xerava and its product candidates. The failure of the Company to obtain sufficient funds on acceptable terms would have a material adverse effect on the Company’s business, results of operations and financial condition. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.
Basis of Presentation	Basis of Presentation The accompanying interim condensed consolidated financial statements are unaudited. These unaudited financial statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission, or SEC, for interim financial information. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles, or GAAP, for complete financial statements. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2018 contained in the Company’s annual report on Form 10-K filed with the SEC on March 15, 2019, or the 2018 Form 10-K. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of September 30, 2019 and the results of its operations and comprehensive loss and cash flows for the three and nine months ended September 30, 2019 and 2018. Interim operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for future interim periods or for the fiscal year ending December 31, 2019. The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” in the 2018 Form 10-K. The Company is disclosing certain significant policies as well as changes in its accounting policies related to guidance that became effective January 1, 2019 and April 1, 2019 in this Quarterly Report on Form 10-Q. The December 31, 2018 condensed consolidated balance sheet included herein was derived from audited consolidated financial statements, but does not include all disclosures including notes required by GAAP for complete financial statements. Reverse Stock Split On September 25, 2019, the Company’s Board of Directors authorized a 1-for-20 reverse stock split and approved an amendment to the Company’s Certificate of Incorporation (the “Amendment”) to effect the 1-for-20 reverse split of the Company’s common stock, which was effected at 5:00 p.m. ET on September 26, 2019. All of the share and per share amounts disclosed in these condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q have been adjusted to reflect the reverse stock split.
Reverse Stock Split	Reverse Stock Split On September 25, 2019, the Company’s Board of Directors authorized a 1-for-20 reverse stock split and approved an amendment to the Company’s Certificate of Incorporation (the “Amendment”) to effect the 1-for-20 reverse split of the Company’s common stock, which was effected at 5:00 p.m. ET on September 26, 2019. All of the share and per share amounts disclosed in these condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q have been adjusted to reflect the reverse stock split.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. On an ongoing basis, the Company’s management evaluates its estimates, including product revenue, license and collaboration revenue, inventory, impairment of intangible assets, stock-based compensation expense, contract and grant revenues, and going concern considerations. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.
Accounts Receivable	Accounts Receivable Accounts receivable as of September 30, 2019 and December 31, 2018 represent amounts due from two main sources: (1) trade accounts receivable of $0.5 million and $0.1 million, respectively, consisting of payments to be received from customers for sales of Xerava, net of prompt payment discounts, chargebacks, rebates and certain fees and (2) contract accounts receivable of $1.2 million and $2.2 million, respectively, related to the Company’s government-related agreements. Contract accounts receivable relate to payments from entities administering the Company’s government-related agreements which include unbilled contract accounts receivable of $0.5 million and $0.7 million as of September 30, 2019 and December 31, 2018, respectively.
Contract Balances	Contract Balances The Company recognizes a contract asset when the Company transfers goods or services to a customer before the customer pays consideration or before payment is due, excluding any amounts presented as a receivable (i.e., accounts receivable). A contract asset represents the Company’s right to consideration in exchange for goods or services that the Company has transferred to a customer.
Inventory	Inventory Inventory is stated at the lower of cost or net realizable value on a first-in, first-out (FIFO) basis. Prior to the regulatory approval of Xerava, given the uncertainty of approval, the Company recognized as research and development expense costs related to the manufacture of Xerava. Upon approval of Xerava, the Company began to capitalize such costs as inventory. During each quarter, the Company performs an assessment quantifying any potential excess or obsolete inventory and writes down any such inventory to its net realizable value in the period in which the impairment is identified. These adjustments are based upon multiple factors, including inventory levels at the Company and at its specialty distributors, projected demand and product shelf life. These impairment charges, if required, are recorded as a cost of revenue. As of September 30, 2019, there was no excess or obsolete inventory.
Leases	Leases Effective January 1, 2019, the Company adopted Accounting Standards Codification, or ASC, Topic 842, Leases. The Company adopted the new guidance as of January 1, 2019 using the modified retrospective adoption method in which it did not restate prior periods. Prior periods are presented in accordance with ASC 840, Leases. The Company’s review and approval process for new leases, contracts, amendments and renewals includes an evaluation at the inception of each agreement to determine whether the contract is within the scope of ASC Topic 842, or other areas of accounting guidance. The Company’s contracts are determined to contain a lease within the scope of ASC Topic 842 when all of the following criteria based on the specific circumstances of the agreement are met: (1) there is an identified asset for which there are no substantive substitution rights; (2) the Company has the right to obtain substantially all of the economic benefits from the identified asset; and (3) the Company has the right to direct the use of the identified asset. Upon transition to ASC 842, an operating lease asset is valued at the amount of the lease liability adjusted for prepaid or accrued lease payments, the remaining balance of any lease incentives received, unamortized initial direct costs and impairment of the operating lease asset. Once the Company assesses a contract for a lease, it will only reassess whether a contract is or contains a lease if the terms and conditions of the contract are amended. Leases with a greater than one-year duration are categorized on the balance sheet as operating lease assets, lease liabilities, and if applicable, long-term lease liabilities. Leases with a duration of less than one year are not presented on the balance sheet. The Company records the operating lease asset and related lease liability based upon the present value of the lease payments not yet paid using the discount rate for the lease established at the commencement date. The discount rate associated with each lease agreement is based upon either (i) the rate implicit in the lease or (ii) the Company’s incremental borrowing rate if the rate implicit in the lease is indeterminable. Although separation of lease and non-lease components is required, certain practical expedients are available to entities. The Company’s facilities operating leases have lease and non-lease components which the Company has elected to account for as one single lease component. The lease component results in an operating lease asset being recorded on the balance sheet and amortized as lease expense on a straight-line basis to the statements of operations.
Property and Equipment	Property and Equipment Property and equipment are stated at cost. Costs of major additions and betterments are capitalized; maintenance and repairs which do not improve or extend the life of the respective assets are charged to expense. Upon disposal, the related cost and accumulated depreciation or amortization is removed from the accounts and any resulting gain or loss is included in the consolidated statements of operations and comprehensive loss. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Leasehold improvements are amortized over the estimated useful lives of the assets or related lease terms, whichever is shorter.
Assets Held for Sale	Assets Held-for-Sale The Company classifies assets as held-for-sale when the following conditions are met: (1) management has committed to a plan to sell, (2) the assets are available for immediate sale in their present condition, (3) the Company has initiated an active program to identify a buyer, (4) it is probable that a sale will occur within one year, (5) the assets are actively marketed for sale at a reasonable price in relation to their current fair value, and (6) there is a low likelihood of significant changes to the plan or that the plan will be withdrawn. If all of the criteria are met as of the balance sheet date, the assets are presented separately in the balance sheet as held-for-sale at the lower of the carrying amount or fair value less costs to sell. The assets are then no longer depreciated or amortized while classified as held-for-sale.
Long-Lived Assets	Long-Lived Assets The Company evaluates the recoverability of its property, equipment and intangible assets when circumstances indicate that an event of impairment may have occurred. The Company recognizes an impairment loss only if the carrying amount of a long-lived asset is not recoverable based on its undiscounted future cash flows. Impairment is measured based on the difference between the carrying value of the related assets or businesses and the fair value of such assets or businesses.
Revenue Recognition	Revenue Recognition Product Revenue Revenue recognition under ASC Topic 606 is applied through a five-step model as follows: (1) identify the contract(s) with the customer; (2) identify performance obligations in the contract; (3) determine the transaction price; (4) allocate transaction price to the performance obligation; and (5) recognize revenue when (or as) each performance obligation is satisfied. The Company’s arrangements with its distributors are determined to be contracts within the scope of ASC Topic 606 when all five criteria in ASC Topic 606 are met. These five criteria were assessed at the inception of each arrangement. Since the criteria were met during this initial assessment, the Company will not reassess the criteria unless there is an indication of a significant change in facts and circumstances. In order to meet the definition of a contract, it must also be probable that the Company will collect the consideration to which it is entitled for goods or services to be transferred. Once the contract is determined to be within the scope of ASC Topic 606, the Company assesses the goods or services to be delivered with each contract, determines whether those are performance obligations and the related transaction price. The Company then recognizes revenue based on the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied. The Company’s product revenue consists of the sales of Xerava, which the Company began selling to customers in October 2018. The Company sells Xerava to specialty distributors and these customers resell Xerava to hospitals or other treatment centers. In addition to these distributor agreements and the related discounts and allowances, the Company is subject to government mandated rebates, chargebacks, and discounts with respect to the purchase of the Company’s product. Product revenue is recognized net of reserves for all variable consideration, including discounts, chargebacks, government rebates and product returns. The Company is expensing the costs of obtaining and fulfilling these contracts when incurred. The Company has opted to immediately expense the incremental cost of obtaining a contract when the underlying related asset would have been amortized over one year or less. Reserves for Variable Consideration The Company evaluates its contracts with customers for forms of variable consideration which may require an adjustment to the transaction price based on their estimated impact. Revenues from product sales are recorded at the gross sales price, net of variable consideration, as described above. The Company estimates variable consideration using the expected value method, which is the sum of probability-weighted amounts in a range of possible outcomes. These outcomes include market events and trends, forecasted product demand patterns, customer buying patterns and statutory requirements. The resulting reserves represent the Company’s best estimates of variable consideration it expects to occur. Before it can include an amount of variable consideration in the transaction price, the Company must consider whether the amount of variable consideration is constrained. To include variable consideration in the estimated transaction price, the entity has to conclude that it is “probable” that a significant revenue reversal will not occur in future periods, considering both the likelihood and magnitude of a revenue reversal to apply the constraint. Based on the above, the Company applies the constraint to variable consideration included in its contracts if it cannot conclude that it is probable that a significant revenue reversal will not occur in future periods. Trade Discounts and Allowances: The Company offers its customers prompt pay discounts and service fees as stated in its customer contracts. The Company pays these service fees to its customers in exchange for their performance of various product distribution, marketing and promotional services targeted at advancing end-user sales of the Company’s product. The related reserves are set in the same period the corresponding revenue is recognized, resulting in a reduction of product revenue. Government Chargebacks and Rebates: Under the terms of the Company’s master agreements, customers may charge back the Company for reimbursement when they are contractually obligated to sell products to government entities at a lower price than the wholesale acquisition cost at which those products were acquired from the Company. These rebates consist of Medicare and Medicaid rebates as well as those related to other government drug pricing and reimbursement programs. Product Returns: Products are eligible for return by the Customers in various scenarios under the Company’s returns policies included as part of its master distribution agreements. Return options are provided for expired merchandise, short-dated merchandise, products damaged in transit, or any discontinued, withdrawn, or recalled products. The Company estimates the amount of product that may be returned and records this as a reduction in revenue in the relevant period. The Company currently estimates product return liabilities using available industry data, sales information and visibility into the inventory remaining in the distribution channel. The Company has not received any returns to date since launch. The Company will continue to assess its estimates of the various components of variable consideration as it accumulates additional historical data and will make adjustments to these estimates and allowances accordingly. Collaboration Revenue The Company has entered into an out-licensing agreement that is evaluated under Accounting Standards Codification, Topic 606, or Topic 606, Revenue from Contracts with Customers, through which the Company licenses certain of its product candidates’ rights to a third party. Any future out-licensing agreements entered into by the Company and additional third parties shall also be evaluated under Topic 606. Terms of these arrangements include various payment types, typically including one or more of the following: upfront license fees; development, regulatory and commercial milestone payments; payments for manufacturing supply services; and/or royalties on net sales of licensed products. To determine the amount and timing of revenue to be recognized under each agreement, the Company evaluates the following criteria: (i) confirming the goods or services in the contract; (ii) defining the performance obligations under the agreement; (iii) determining the transaction price, including any constraint on variable consideration; (iv) allocating the transaction price to the performance obligations; and (v) defining how the revenue will be recognized for each performance obligation. In determining the accounting treatment for these arrangements, the Company develops assumptions to determine the stand-alone selling price for each performance obligation in the contract. These assumptions may include forecasted revenues, development timelines, discount rates and probabilities of technical and regulatory success. Licenses of Intellectual Property: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from upfront fees allocated to the license when the license, including any associated know-how, is transferred to the licensee and the licensee can use and benefit from the license. For licenses that are bundled with other obligations, the Company uses judgment to evaluate the combined performance obligation to determine whether it is satisfied over time or at a point in time and the appropriate method of measuring completion for purposes of recognizing revenue. Milestone Payments: For arrangements that include development milestone payments, the Company evaluates whether the milestones are considered probable and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. Manufacturing Supply: Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations. If the Company is entitled to additional payments when the licensee exercises these options, the Company recognizes revenue when the licensee obtains control of the goods, which is upon delivery. Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Government Contract Revenue The Company’s government contract revenue has been derived from its subcontracts with CUBRC, Inc., or CUBRC, an independent, not-for-profit, research corporation that specializes in U.S. government-based contracts, with which the Company is collaborating. These subcontracts with CUBRC relate to the following funding awards: (1) an award from the Biomedical Advanced Research and Development Authority, or BARDA, an agency of the U.S. Department of Health and Human Services, for the development of Xerava, which the Company refers to as the BARDA Contract; (2) two awards from the National Institute of Allergy and Infectious Diseases, or NIAID, for the development, manufacturing and clinical evaluation of TP-271, which the Company refers to as the NIAID Contract and the NIAID Grant, respectively. The Company is also the recipient of its cost reimbursement Sub-Award Agreement with the Trustees of Boston University, the administrator of the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator, or CARB-X, program, for the development of TP-6076 (see Note 6). The Company recognizes revenue under these best-efforts, cost-reimbursable and cost-plus-fixed-fee subcontracts and subaward as the Company performs services under the subcontracts and subaward so long as a subcontract and subaward has been executed and the fees for these services are fixed or determinable, legally billable and reasonably assured of collection. Recognized amounts reflect the Company’s partial performance under the subcontracts and subaward and equal direct and indirect costs incurred plus fixed fees, where applicable. The Company does not recognize revenue under these arrangements for amounts related to contract periods where funding is not yet committed as amounts above committed funding thresholds would not be considered fixed or determinable or reasonably assured of collection. Revenues and expenses under these arrangements are presented gross on the consolidated statements of operations and comprehensive loss as the Company has determined it is the primary obligor under these arrangements relative to the research and development services it performs as lead technical expert. Revenue under the Company’s subcontracts under the BARDA Contract and under the CARB-X Award are earned under a cost-plus-fixed-fee arrangement in which the Company is reimbursed for direct costs incurred plus allowable indirect costs and a fixed-fee earned. Billings under these arrangements are based on approved provisional indirect billing rates, which permit recovery of allowable fringe benefits, allowable overhead and general and administrative expenses and a fixed fee. Revenue under the Company’s subaward under the NIAID Contract and NIAID Grant were earned under a cost-reimbursable arrangement in which the Company was reimbursed for direct costs incurred plus allowable indirect costs. Billings under the NIAID Contract and NIAID Grant were based on approved provisional indirect billing rates, which permit recovery of fringe benefits and allowable general and administrative expenses.
Cost of Revenue	Cost of Revenue Cost of revenue consists primarily of the manufacturing and distribution costs for Xerava, Xerava net sales-based royalties and the amortization of the intangible asset associated with certain milestones paid to Harvard University, or Harvard, related to Xerava. All manufacturing costs incurred prior to Xerava’s approval in the United States on August 27, 2018 have been expensed in research and development and are not included in cost of revenue.
Recently Adopted Accounting Pronouncements	Recently Adopted Accounting Pronouncements In June 2018, the FASB issued ASU 2018-07, Compensation – “Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payment Accounting, which addresses aspects of the accounting for nonemployee share-based payment transactions. This pronouncement is effective for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019. The Company early adopted ASU 2018-07 on April 1, 2019 and there was no impact on adoption. In February 2016, the Financial Accounting Standards Board, or FASB, issued ASU No. 2016-02, Leases (Topic 842), which among other things, results in the recognition of lease assets and lease liabilities by lessees on the Company’s balance sheets for virtually all leases. ASU 2016-02 supersedes most previous lease accounting guidance and is effective for interim and annual periods beginning after December 15, 2018. The Company adopted the new guidance as of January 1, 2019 using the modified retrospective adoption method in which it did not restate prior periods. The Company has elected the transition relief package of practical expedients permitted within Topic 842. Accordingly, the Company has not reassessed the classification of its existing leases as the transition date, whether existing contracts at the transition date contain a lease, or whether unamortized initial direct costs before the transition adjustments would have met the definition of initial direct costs at lease commencement. The Company does not allocate consideration in its leases to lease and non-lease components and does not record leases on its balance sheet with terms of 12 months or less. The Company uses its estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. The Company’s incremental borrowing rate represents the rate of interest that the Company would have to pay to borrow over a similar term an amount equal to the lease payments in a similar economic environment. The Company considers its recent debt issuances and publicly available data for instruments with similar terms and characteristics when calculating its incremental borrowing rates. The adoption had a material impact on the consolidated balance sheet related to the recognition of operating lease assets of $6.2 million and lease liabilities of $6.3 million as of January 1, 2019, along with derecognition of deferred rent originally accounted for under the legacy guidance. The adoption did not have a material impact on the consolidated statement of operations. The Company has implemented changes to related processes, controls and disclosures upon adoption of the standard. There have been no other significant changes to the Company’s significant accounting policies since the beginning of this fiscal year.
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. ASU 2016-13 will change how companies account for credit losses for most financial assets and certain other instruments. For trade receivables, loans and held-to-maturity debt securities, companies will be required to recognize an allowance for credit losses rather than reducing the carrying value of the asset. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential impact that the adoption of ASU 2016-13 will have on the Company’s financial position and results of operations.