|
ý
|
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
For the quarterly period ended September 30, 2017
|
¨
|
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
For transition period from to
|
|
|
Delaware
|
94-3023969
|
(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
|
|
Large accelerated filer
ý
|
Accelerated filer
¨
|
Non-accelerated filer
¨
|
Smaller reporting company
¨
|
Emerging growth company
¨
|
(Do not check if a smaller reporting company)
|
||||
|
|
|
|
|
If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
¨
|
|
Page
|
|
PART I - FINANCIAL INFORMATION
|
||
|
|
|
ITEM 1.
|
FINANCIAL STATEMENTS (unaudited)
|
|
|
|
|
|
Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2017 and 2016
|
|
|
|
|
|
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2017 and 2016
|
|
|
|
|
|
Condensed Consolidated Balance Sheets at September 30, 2017 and December 31, 2016
|
|
|
|
|
|
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016
|
|
|
|
|
|
Notes to the Condensed Consolidated Financial Statements
|
|
|
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
|
|
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
|
|
||
PART II - OTHER INFORMATION
|
||
|
|
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
|
|
|
|
ITEM 1A.
|
RISK FACTORS
|
|
|
|
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
|
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
|
|
|
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
|
|
|
|
ITEM 5.
|
OTHER INFORMATION
|
|
|
|
|
ITEM 6.
|
EXHIBITS
|
|
|
|
|
SIGNATURES
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenues
|
|
|
|
|
|
|
|
|
||||||||
Royalties from Queen et al. patents
|
|
$
|
1,443
|
|
|
$
|
14,958
|
|
|
$
|
31,884
|
|
|
$
|
150,645
|
|
Royalty rights - change in fair value
|
|
35,353
|
|
|
16,085
|
|
|
132,224
|
|
|
(11,872
|
)
|
||||
Interest revenue
|
|
6,051
|
|
|
8,594
|
|
|
16,968
|
|
|
24,901
|
|
||||
Product revenue, net
|
|
20,067
|
|
|
14,128
|
|
|
51,477
|
|
|
14,128
|
|
||||
License and other
|
|
(165
|
)
|
|
(127
|
)
|
|
19,471
|
|
|
7
|
|
||||
Total revenues
|
|
62,749
|
|
|
53,638
|
|
|
252,024
|
|
|
177,809
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of product revenue (excluding intangible asset amortization)
|
|
5,565
|
|
|
—
|
|
|
12,632
|
|
|
—
|
|
||||
Amortization of intangible assets
|
|
6,275
|
|
|
6,014
|
|
|
18,438
|
|
|
6,014
|
|
||||
General and administrative
|
|
11,989
|
|
|
10,396
|
|
|
35,853
|
|
|
27,193
|
|
||||
Sales and marketing
|
|
4,994
|
|
|
11
|
|
|
11,194
|
|
|
11
|
|
||||
Research and development
|
|
605
|
|
|
1,933
|
|
|
6,652
|
|
|
1,933
|
|
||||
Change in fair value of anniversary payment and contingent consideration
|
|
700
|
|
|
2,083
|
|
|
3,349
|
|
|
2,083
|
|
||||
Acquisition-related costs
|
|
—
|
|
|
546
|
|
|
—
|
|
|
3,505
|
|
||||
Total operating expenses
|
|
30,128
|
|
|
20,983
|
|
|
88,118
|
|
|
40,739
|
|
||||
Operating income
|
|
32,621
|
|
|
32,655
|
|
|
163,906
|
|
|
137,070
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Non-operating expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest and other income, net
|
|
238
|
|
|
162
|
|
|
726
|
|
|
404
|
|
||||
Interest expense
|
|
(5,096
|
)
|
|
(4,513
|
)
|
|
(15,082
|
)
|
|
(13,524
|
)
|
||||
Gain (loss) on bargain purchase
|
|
(2,276
|
)
|
|
—
|
|
|
3,995
|
|
|
—
|
|
||||
Total non-operating expense, net
|
|
(7,134
|
)
|
|
(4,351
|
)
|
|
(10,361
|
)
|
|
(13,120
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Income before income taxes
|
|
25,487
|
|
|
28,304
|
|
|
153,545
|
|
|
123,950
|
|
||||
Income tax expense
|
|
4,755
|
|
|
14,400
|
|
|
65,180
|
|
|
50,011
|
|
||||
Net income
|
|
20,732
|
|
|
13,904
|
|
|
88,365
|
|
|
73,939
|
|
||||
Less: Net income/(loss) attributable to noncontrolling interests
|
|
—
|
|
|
(3
|
)
|
|
(47
|
)
|
|
(3
|
)
|
||||
Net income attributable to PDL’s shareholders
|
|
$
|
20,732
|
|
|
$
|
13,907
|
|
|
$
|
88,412
|
|
|
$
|
73,942
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
|
$
|
0.14
|
|
|
$
|
0.08
|
|
|
$
|
0.56
|
|
|
$
|
0.45
|
|
Diluted
|
|
$
|
0.14
|
|
|
$
|
0.08
|
|
|
$
|
0.56
|
|
|
$
|
0.45
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
|
151,146
|
|
|
163,856
|
|
|
156,802
|
|
|
163,771
|
|
||||
Diluted
|
|
152,317
|
|
|
164,285
|
|
|
157,529
|
|
|
164,075
|
|
||||
Cash dividends declared per common share
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.10
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
|
$
|
20,732
|
|
|
$
|
13,904
|
|
|
$
|
88,365
|
|
|
$
|
73,939
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in unrealized gains on investments in available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
Change in fair value of investments in available-for-sale securities, net of tax
|
|
648
|
|
|
—
|
|
|
648
|
|
|
122
|
|
||||
Adjustment for net (gains) losses realized and included in net income, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(557
|
)
|
||||
Total change in unrealized gains on investments in available-for-sale securities, net of tax
(a)
|
|
648
|
|
|
—
|
|
|
648
|
|
|
(435
|
)
|
||||
Change in unrealized gains (losses) on cash flow hedges:
|
|
|
|
|
|
|
|
|
||||||||
Adjustment to royalties from Queen et al. patents for net (gains) losses realized and included in net income, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,821
|
)
|
||||
Total change in unrealized losses on cash flow hedges, net of tax
(b)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,821
|
)
|
||||
Total other comprehensive income/(loss), net of tax
|
|
648
|
|
|
—
|
|
|
648
|
|
|
(2,256
|
)
|
||||
Comprehensive income
|
|
21,380
|
|
|
13,904
|
|
|
89,013
|
|
|
71,683
|
|
||||
Less: Comprehensive income/(loss) attributable to noncontrolling interests
|
|
—
|
|
|
(3
|
)
|
|
(47
|
)
|
|
(3
|
)
|
||||
Comprehensive income attributable to PDL’s shareholders
|
|
$
|
21,380
|
|
|
$
|
13,907
|
|
|
$
|
89,060
|
|
|
$
|
71,686
|
|
|
September 30,
|
|
December 31,
|
||||
|
2017
|
|
2016
|
||||
|
(unaudited)
|
|
(Note 1)
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
510,085
|
|
|
$
|
147,154
|
|
Short-term investments
|
6,409
|
|
|
19,987
|
|
||
Accounts receivable, net
|
17,465
|
|
|
40,120
|
|
||
Notes receivable
|
57,545
|
|
|
111,182
|
|
||
Investments-other
|
—
|
|
|
75,000
|
|
||
Inventories
|
12,216
|
|
|
2,884
|
|
||
Prepaid and other current assets
|
9,510
|
|
|
1,704
|
|
||
Total current assets
|
613,230
|
|
|
398,031
|
|
||
Property and equipment, net
|
8,130
|
|
|
38
|
|
||
Escrow receivable
|
1,400
|
|
|
—
|
|
||
Royalty rights - at fair value
|
351,969
|
|
|
402,318
|
|
||
Notes and other receivables, long-term
|
13,091
|
|
|
159,768
|
|
||
Long-term deferred tax assets
|
6,186
|
|
|
19,257
|
|
||
Intangible assets, net
|
222,074
|
|
|
228,542
|
|
||
Other assets
|
7,758
|
|
|
7,433
|
|
||
Total assets
|
$
|
1,223,838
|
|
|
$
|
1,215,387
|
|
|
|
|
|
||||
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
10,448
|
|
|
$
|
7,016
|
|
Accrued liabilities
|
51,607
|
|
|
30,575
|
|
||
Accrued income taxes
|
7,155
|
|
|
4,723
|
|
||
Anniversary payment
|
—
|
|
|
88,001
|
|
||
Convertible notes payable
|
124,922
|
|
|
—
|
|
||
Total current liabilities
|
194,132
|
|
|
130,315
|
|
||
Convertible notes payable
|
115,716
|
|
|
232,443
|
|
||
Contingent consideration
|
45,000
|
|
|
42,650
|
|
||
Other long-term liabilities
|
46,008
|
|
|
54,556
|
|
||
Total liabilities
|
400,856
|
|
|
459,964
|
|
||
|
|
|
|
||||
Commitments and contingencies (Note 11)
|
|
|
|
|
|
||
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
|
|
||
Preferred stock, par value $0.01 per share, 10,000 shares authorized; no shares issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock, par value $0.01 per share, 350,000 shares authorized; 154,339 and 165,538 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively
|
1,543
|
|
|
1,655
|
|
||
Additional paid-in capital
|
(102,591
|
)
|
|
(107,628
|
)
|
||
Accumulated other comprehensive income
|
648
|
|
|
—
|
|
||
Retained earnings
|
923,382
|
|
|
857,116
|
|
||
Total PDL’s stockholders’ equity
|
822,982
|
|
|
751,143
|
|
||
Noncontrolling interests
|
—
|
|
|
4,280
|
|
||
Total stockholders’ equity
|
822,982
|
|
|
755,423
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,223,838
|
|
|
$
|
1,215,387
|
|
|
Nine Months Ended September 30,
|
||||||
|
2017
|
|
2016
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net income
|
$
|
88,365
|
|
|
$
|
73,939
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||
Amortization of convertible notes and term loan offering costs
|
8,195
|
|
|
6,067
|
|
||
Amortization of intangible assets
|
18,438
|
|
|
6,014
|
|
||
Change in fair value of royalty rights - at fair value
|
(132,224
|
)
|
|
11,872
|
|
||
Change in fair value of derivative asset
|
29
|
|
|
875
|
|
||
Change in fair value of anniversary payment and contingent consideration
|
3,349
|
|
|
2,083
|
|
||
Other amortization, depreciation and accretion of embedded derivative
|
1,478
|
|
|
16
|
|
||
Gain on sale of available-for-sale securities
|
(108
|
)
|
|
(881
|
)
|
||
Escrow receivable
|
(1,400
|
)
|
|
—
|
|
||
Bargain purchase gain
|
(3,995
|
)
|
|
—
|
|
||
Inventory obsolesence
|
30
|
|
|
—
|
|
||
Bad debt allowance
|
22
|
|
|
—
|
|
||
Stock-based compensation expense
|
3,014
|
|
|
2,649
|
|
||
Deferred income taxes
|
28,970
|
|
|
(6,013
|
)
|
||
Changes in assets and liabilities, net of affects of business acquired:
|
|
|
|
|
|
||
Accounts receivable
|
19,454
|
|
|
(26,035
|
)
|
||
Receivables from licensees and other
|
5,111
|
|
|
(5,757
|
)
|
||
Prepaid and other current assets
|
(4,166
|
)
|
|
(470
|
)
|
||
Accrued interest on notes receivable
|
1,577
|
|
|
(2,745
|
)
|
||
Inventories
|
(2,285
|
)
|
|
(1,593
|
)
|
||
Other assets
|
347
|
|
|
30
|
|
||
Accounts payable
|
1,395
|
|
|
6,740
|
|
||
Accrued liabilities
|
18,980
|
|
|
10,769
|
|
||
Accrued income taxes
|
2,432
|
|
|
2,421
|
|
||
Other long-term liabilities
|
1,055
|
|
|
6,084
|
|
||
Net cash provided by operating activities
|
58,063
|
|
|
86,065
|
|
||
Cash flows from investing activities
|
|
|
|
|
|
||
Purchase consideration paid in advance
|
—
|
|
|
(109,938
|
)
|
||
Purchase of investments
|
(23,213
|
)
|
|
(7,985
|
)
|
||
Purchase of investments-other
|
—
|
|
|
(75,000
|
)
|
||
Maturities of investments-other
|
75,000
|
|
|
—
|
|
||
Proceeds from sales of available-for-sale securities
|
37,895
|
|
|
1,680
|
|
||
Proceeds from the sale of notes receivables
|
144,829
|
|
|
—
|
|
||
Purchase of royalty rights - at fair value
|
—
|
|
|
(59,500
|
)
|
||
Proceeds from royalty rights - at fair value
|
74,404
|
|
|
47,240
|
|
||
Sale of royalty rights - at fair value
|
108,169
|
|
|
—
|
|
||
Purchase of notes receivable
|
—
|
|
|
(8,000
|
)
|
||
Proceeds from sales of assets held for sale
|
8,142
|
|
|
54,653
|
|
||
Purchase of property and equipment
|
(1,160
|
)
|
|
—
|
|
||
Net cash provided by / (used in) investing activities
|
424,066
|
|
|
(156,850
|
)
|
||
Cash flows from financing activities
|
|
|
|
|
|
||
Payment of debt issuance costs
|
—
|
|
|
(325
|
)
|
||
Repayment of term loan
|
—
|
|
|
(25,000
|
)
|
||
Cash received from noncontrolling interest holder
|
—
|
|
|
250
|
|
||
Payment of anniversary payment
|
(87,007
|
)
|
|
—
|
|
||
Cash paid for purchase of noncontrolling interest
|
(2,170
|
)
|
|
—
|
|
||
Cash dividends paid
|
(21
|
)
|
|
(16,433
|
)
|
||
Repurchase and retirement of common stock
|
(30,000
|
)
|
|
—
|
|
||
Net cash used in financing activities
|
(119,198
|
)
|
|
(41,508
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
362,931
|
|
|
(112,293
|
)
|
||
Cash and cash equivalents at beginning of the period
|
147,154
|
|
|
218,883
|
|
||
Cash and cash equivalents at end of period
|
$
|
510,085
|
|
|
$
|
106,590
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
2017
|
|
2016
|
||||
Supplemental cash flow information
|
|
|
|
|
|
||
Cash paid for income taxes
|
$
|
35,120
|
|
|
$
|
50,000
|
|
Cash paid for interest
|
$
|
7,224
|
|
|
$
|
9,930
|
|
|
|
|
|
||||
Supplemental schedule of non-cash investing and financing activities
|
|
|
|
||||
Warrants received for notes receivable
|
$
|
—
|
|
|
$
|
2,342
|
|
Asset held for sale reclassified from notes receivable to other assets
|
$
|
10,000
|
|
|
$
|
—
|
|
Extinguishment of notes receivable
|
$
|
43,909
|
|
|
$
|
—
|
|
Accrued Anniversary Payment associated with the acquisition of a business
|
$
|
—
|
|
|
$
|
87,007
|
|
Accrued contingent consideration associated with the acquisition of a business
|
$
|
—
|
|
|
$
|
47,360
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
Net Income per Basic and Diluted Share:
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
(in thousands except per share amounts)
|
|
|
|
|
|
|
|
|
||||||||
Numerator
|
|
|
|
|
|
|
|
|
||||||||
Income attributable to PDL’s shareholders used to compute net income per basic and diluted share
|
|
$
|
20,732
|
|
|
$
|
13,907
|
|
|
$
|
88,412
|
|
|
$
|
73,942
|
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator
|
|
|
|
|
|
|
|
|
|
|
||||||
Total weighted average shares used to compute net income attributable to PDL’s shareholders, per basic share
|
|
151,146
|
|
|
163,856
|
|
|
156,802
|
|
|
163,771
|
|
||||
Restricted stock outstanding
|
|
1,171
|
|
|
429
|
|
|
727
|
|
|
304
|
|
||||
Shares used to compute net income attributable to PDL’s shareholders, per diluted share
|
|
152,317
|
|
|
164,285
|
|
|
157,529
|
|
|
164,075
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income attributable to PDL’s shareholders per share - basic
|
|
$
|
0.14
|
|
|
$
|
0.08
|
|
|
$
|
0.56
|
|
|
$
|
0.45
|
|
Net income attributable to PDL’s shareholders per share - diluted
|
|
$
|
0.14
|
|
|
$
|
0.08
|
|
|
$
|
0.56
|
|
|
$
|
0.45
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
||||||||||||||||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Money market funds
|
|
$
|
14,705
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,705
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Certificates of deposit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
75,000
|
|
|
—
|
|
|
75,000
|
|
||||||||
Commercial paper
|
|
—
|
|
|
2,060
|
|
|
—
|
|
|
2,060
|
|
|
—
|
|
|
19,987
|
|
|
—
|
|
|
19,987
|
|
||||||||
Corporate securities
|
|
4,349
|
|
|
—
|
|
|
—
|
|
|
4,349
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Warrants
|
|
—
|
|
|
49
|
|
|
—
|
|
|
49
|
|
|
—
|
|
|
78
|
|
|
—
|
|
|
78
|
|
||||||||
Royalty rights - at fair value
|
|
—
|
|
|
—
|
|
|
351,969
|
|
|
351,969
|
|
|
—
|
|
|
—
|
|
|
402,318
|
|
|
402,318
|
|
||||||||
Total
|
|
$
|
19,054
|
|
|
$
|
2,109
|
|
|
$
|
351,969
|
|
|
$
|
373,132
|
|
|
$
|
4
|
|
|
$
|
95,065
|
|
|
$
|
402,318
|
|
|
$
|
497,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Anniversary payment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
88,001
|
|
|
$
|
88,001
|
|
Contingent consideration
|
|
—
|
|
|
—
|
|
|
45,000
|
|
|
45,000
|
|
|
—
|
|
|
—
|
|
|
42,650
|
|
|
42,650
|
|
||||||||
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
45,000
|
|
|
$
|
45,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
130,651
|
|
|
$
|
130,651
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) - Royalty Rights Assets
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Fair Value as of
|
|
Change of
|
|
Royalty Rights -
|
|
Fair Value as of
|
||||||||
(in thousands)
|
|
December 31, 2016
|
|
Ownership
|
|
Change in Fair Value
|
|
September 30, 2017
|
||||||||
Depomed
|
|
$
|
164,070
|
|
|
$
|
—
|
|
|
$
|
58,625
|
|
|
$
|
222,695
|
|
VB
|
|
14,997
|
|
|
—
|
|
|
440
|
|
|
15,437
|
|
||||
U-M
|
|
35,386
|
|
|
—
|
|
|
63
|
|
|
35,449
|
|
||||
ARIAD
|
|
108,631
|
|
|
(108,169
|
)
|
|
(462
|
)
|
|
—
|
|
||||
AcelRx
|
|
67,483
|
|
|
—
|
|
|
6,582
|
|
|
74,065
|
|
||||
Avinger
|
|
1,638
|
|
|
—
|
|
|
(777
|
)
|
|
861
|
|
||||
KYBELLA
|
|
10,113
|
|
|
—
|
|
|
(6,651
|
)
|
|
3,462
|
|
||||
|
|
$
|
402,318
|
|
|
$
|
(108,169
|
)
|
|
$
|
57,820
|
|
|
$
|
351,969
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) - Liabilities
|
||||||||||
|
|
|
|
|
||||||
(in thousands)
|
|
Anniversary Payment
|
|
Contingent Consideration
|
||||||
Fair value as of December 31, 2016
|
|
$
|
(88,001
|
)
|
|
$
|
(42,650
|
)
|
||
|
|
|
|
|
|
|
||||
|
Total net change in fair for the period
|
|
(999
|
)
|
|
(2,350
|
)
|
|||
|
Settlement of financial instrument
|
|
89,000
|
|
|
—
|
|
|||
|
|
|
|
|
|
|
||||
Fair value as of September 30, 2017
|
|
$
|
—
|
|
|
$
|
(45,000
|
)
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
(in thousands)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Total change in fair value for the period included in earnings for royalty right assets held at the end of the reporting period
|
|
$
|
35,353
|
|
|
$
|
16,085
|
|
|
$
|
132,224
|
|
|
$
|
(11,872
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Total change in fair value for the period included in earnings for liabilities held at the end of the reporting period
|
|
$
|
(700
|
)
|
|
$
|
(2,083
|
)
|
|
$
|
(3,349
|
)
|
|
$
|
(2,083
|
)
|
|
|
September 30, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
|
|
Carrying Value
|
|
Fair Value
Level 2
|
|
Fair Value
Level 3
|
|
Carrying Value
|
|
Fair Value
Level 2
|
|
Fair Value
Level 3
|
||||||||||||
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wellstat Diagnostics note receivable
|
|
$
|
50,191
|
|
|
$
|
—
|
|
|
$
|
52,288
|
|
|
$
|
50,191
|
|
|
$
|
—
|
|
|
$
|
52,260
|
|
Hyperion note receivable
|
|
1,200
|
|
|
—
|
|
|
1,200
|
|
|
1,200
|
|
|
—
|
|
|
1,200
|
|
||||||
LENSAR note receivable
(2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43,909
|
|
|
—
|
|
|
43,900
|
|
||||||
Direct Flow Medical note receivable
(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,000
|
|
|
—
|
|
|
10,000
|
|
||||||
kaléo note receivable
(3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
146,685
|
|
|
—
|
|
|
142,539
|
|
||||||
CareView note receivable
|
|
19,245
|
|
|
—
|
|
|
19,900
|
|
|
18,965
|
|
|
—
|
|
|
19,200
|
|
||||||
Total
|
|
$
|
70,636
|
|
|
$
|
—
|
|
|
$
|
73,388
|
|
|
$
|
270,950
|
|
|
$
|
—
|
|
|
$
|
269,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
February 2018 Notes
|
|
$
|
124,922
|
|
|
$
|
126,131
|
|
|
$
|
—
|
|
|
$
|
121,595
|
|
|
$
|
123,918
|
|
|
$
|
—
|
|
December 2021 Notes
|
|
115,716
|
|
|
163,313
|
|
|
—
|
|
|
110,848
|
|
|
122,063
|
|
|
—
|
|
||||||
Total
|
|
$
|
240,638
|
|
|
$
|
289,444
|
|
|
$
|
—
|
|
|
$
|
232,443
|
|
|
$
|
245,981
|
|
|
$
|
—
|
|
Asset
|
|
Valuation
Technique
|
|
Unobservable
Input
|
|
September 30, 2017
|
|
December 31,
2016
|
|
|
|
|
|
|
|
|
|
Wellstat Diagnostics
|
|
|
|
|
|
|
|
|
Wellstat Guarantors Intellectual Property
|
|
Income Approach
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
12%
|
|
13%
|
|
|
|
|
Royalty amount
|
|
$60 million
|
|
$54-74 million
|
Real Estate Property
|
|
Market Approach
|
|
|
|
|
|
|
|
|
|
|
Annual appreciation rate
|
|
4%
|
|
4%
|
|
|
|
|
Estimated realtor fee
|
|
6%
|
|
6%
|
|
|
|
|
Estimated disposal date
|
|
12/31/2018
|
|
12/31/2017
|
Direct Flow Medical
|
|
|
|
|
|
|
|
|
All Assets
|
|
Income Approach
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
N/A
|
|
27%
|
|
|
|
|
Implied revenue multiple
|
|
N/A
|
|
6.9
|
LENSAR
|
|
|
|
|
|
|
|
|
All Assets
|
|
Income Approach
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
N/A
|
|
25%
|
|
|
|
|
Implied revenue multiple
|
|
N/A
|
|
2.5
|
|
|
|
|
|
|
|
|
Reported as:
|
||||||||||||
|
|
Amortized Cost
|
|
Unrealized Gains
|
|
Estimated Fair Value
|
|
Cash and Cash Equivalents
|
|
Short-Term Investments
|
||||||||||
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash
|
|
$
|
495,380
|
|
|
$
|
—
|
|
|
$
|
495,380
|
|
|
$
|
495,380
|
|
|
$
|
—
|
|
Money market funds
|
|
14,705
|
|
|
—
|
|
|
14,705
|
|
|
14,705
|
|
|
—
|
|
|||||
Commercial paper
|
|
2,060
|
|
|
—
|
|
|
2,060
|
|
|
—
|
|
|
2,060
|
|
|||||
Corporate securities
|
|
3,352
|
|
|
997
|
|
|
4,349
|
|
|
—
|
|
|
4,349
|
|
|||||
Total
|
|
$
|
515,497
|
|
|
$
|
997
|
|
|
$
|
516,494
|
|
|
$
|
510,085
|
|
|
$
|
6,409
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash
|
|
$
|
147,150
|
|
|
$
|
—
|
|
|
$
|
147,150
|
|
|
$
|
147,150
|
|
|
$
|
—
|
|
Money market funds
|
|
4
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|||||
Commercial paper
|
|
19,987
|
|
|
—
|
|
|
19,987
|
|
|
—
|
|
|
19,987
|
|
|||||
Total
|
|
$
|
167,141
|
|
|
$
|
—
|
|
|
$
|
167,141
|
|
|
$
|
147,154
|
|
|
$
|
19,987
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
Licensee
|
|
Product Name
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Genentech
|
|
Avastin
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
22
|
%
|
|
|
Herceptin
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||
Biogen
|
|
Tysabri
®
|
|
2
|
%
|
|
28
|
%
|
|
13
|
%
|
|
24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depomed
|
|
Glumetza, Janumet XR, Jentadueto XR and Invokamet XR
|
|
50
|
%
|
|
18
|
%
|
|
50
|
%
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
N/A
|
|
Tekturna, Tekturna HCT, Rasilez and Rasilez HCT
|
|
24
|
%
|
|
26
|
%
|
|
17
|
%
|
|
8
|
%
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
(In thousands)
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) reclassified from accumulated OCI into “Queen et al. royalty revenue,” net of tax
(2)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,821
|
|
|
|
September 30,
|
|
December 31,
|
||||
|
|
2017
|
|
2016
|
||||
Raw materials
|
|
$
|
1,204
|
|
|
$
|
—
|
|
Work in process
|
|
3,950
|
|
|
1,625
|
|
||
Finished goods
|
|
7,062
|
|
|
1,259
|
|
||
Total inventory
|
|
$
|
12,216
|
|
|
$
|
2,884
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
(in thousands)
|
|
Cost
|
|
Accumulated Amortization
|
|
Net
|
|
Cost
|
|
Accumulated Amortization
|
|
Net
|
||||||||||||
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Acquired products rights
(1)
|
|
$
|
216,690
|
|
|
$
|
(27,086
|
)
|
|
$
|
189,604
|
|
|
$
|
216,690
|
|
|
$
|
(10,834
|
)
|
|
$
|
205,856
|
|
Customer relationships
(1) (2)
|
|
26,080
|
|
|
(3,077
|
)
|
|
23,003
|
|
|
23,880
|
|
|
(1,194
|
)
|
|
22,686
|
|
||||||
Acquired technology
(2)
|
|
9,200
|
|
|
(255
|
)
|
|
8,945
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Acquired trademarks
(2)
|
|
570
|
|
|
(48
|
)
|
|
522
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
$
|
252,540
|
|
|
$
|
(30,466
|
)
|
|
$
|
222,074
|
|
|
$
|
240,570
|
|
|
$
|
(12,028
|
)
|
|
$
|
228,542
|
|
Fiscal Year
|
|
Amount
|
||
2017 (Remaining three months)
|
|
$
|
6,251
|
|
2018
|
|
24,989
|
|
|
2019
|
|
24,969
|
|
|
2020
|
|
24,950
|
|
|
2021
|
|
24,934
|
|
|
2022
|
|
24,843
|
|
|
Thereafter
|
|
91,138
|
|
|
Total intangible assets acquired
|
|
$
|
222,074
|
|
(in thousands)
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Compensation
|
|
$
|
8,332
|
|
|
$
|
3,131
|
|
Interest
|
|
2,218
|
|
|
2,554
|
|
||
Deferred revenue
|
|
3,761
|
|
|
—
|
|
||
Dividend payable
|
|
122
|
|
|
21
|
|
||
Legal
|
|
585
|
|
|
1,594
|
|
||
Accrued rebates, chargebacks and other revenue reserves
|
|
20,652
|
|
|
12,338
|
|
||
Refund to manufacturer
|
|
693
|
|
|
8,909
|
|
||
Customer advances
|
|
13,469
|
|
|
—
|
|
||
Other
|
|
1,775
|
|
|
2,028
|
|
||
Total
|
|
$
|
51,607
|
|
|
$
|
30,575
|
|
(in thousands)
|
|
Discount and Distribution Fees
|
|
Government Rebates and Chargebacks
|
|
Assistance and Other Discounts
|
|
Product Return
|
|
Total
|
||||||||||
Balance at December 31, 2016:
|
|
$
|
2,475
|
|
|
$
|
5,514
|
|
|
$
|
2,580
|
|
|
$
|
1,769
|
|
|
$
|
12,338
|
|
Allowances for current period sales
|
|
6,565
|
|
|
14,455
|
|
|
6,625
|
|
|
3,054
|
|
|
30,699
|
|
|||||
Allowances for prior period sales
|
|
—
|
|
|
253
|
|
|
—
|
|
|
—
|
|
|
253
|
|
|||||
Credits/payments for current period sales
|
|
(3,048
|
)
|
|
(4,720
|
)
|
|
(4,435
|
)
|
|
(1,145
|
)
|
|
(13,348
|
)
|
|||||
Credits/payments for prior period sales
|
|
(2,425
|
)
|
|
(4,353
|
)
|
|
(1,488
|
)
|
|
(1,024
|
)
|
|
(9,290
|
)
|
|||||
Balance at September 30, 2017:
|
|
$
|
3,567
|
|
|
$
|
11,149
|
|
|
$
|
3,282
|
|
|
$
|
2,654
|
|
|
$
|
20,652
|
|
|
|
|
|
Principal Balance Outstanding
|
|
Carrying Value
|
|
||||||||
|
|
|
|
September 30,
|
|
September 30,
|
|
December 31,
|
|
||||||
Description
|
|
Maturity Date
|
|
2017
|
|
2017
|
|
2016
|
|
||||||
(In thousands)
|
|
|
|
|
|
|
|
|
|
||||||
Convertible Notes
|
|
|
|
|
|
|
|
|
|
||||||
February 2018 Notes
|
|
February 1, 2018
|
|
$
|
126,447
|
|
|
$
|
124,922
|
|
|
$
|
121,595
|
|
|
December 2021 Notes
|
|
December 1, 2021
|
|
$
|
150,000
|
|
|
115,716
|
|
|
110,848
|
|
|
||
Total
|
|
|
|
|
|
|
$
|
240,638
|
|
|
$
|
232,443
|
|
|
•
|
During any fiscal quarter ending after the quarter ended June 30, 2014, if the last reported sale price of the Company’s common stock for at least
20
trading days in a period of
30
consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter exceeds
130%
of the conversion price for the notes on the last day of such preceding fiscal quarter;
|
•
|
During the five business-day period immediately after any five consecutive trading-day period in which the trading price per
$1,000
principal amount of notes for each trading day of that measurement period was less than
98%
of the product of the last reported sale price of the Company’s common stock and the conversion rate for the notes for each such day;
|
•
|
Upon the occurrence of specified corporate events as described further in the indenture; or
|
•
|
At any time on or after August 1, 2017.
|
(In thousands)
|
|
September 30, 2017
|
|
December 31, 2016
|
||||
Principal amount of the February 2018 Notes
|
|
$
|
126,447
|
|
|
$
|
126,447
|
|
Unamortized discount of liability component
|
|
(1,525
|
)
|
|
(4,852
|
)
|
||
Net carrying value of the February 2018 Notes
|
|
$
|
124,922
|
|
|
$
|
121,595
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
(In thousands)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Contractual coupon interest
|
|
$
|
1,264
|
|
|
$
|
2,465
|
|
|
$
|
3,793
|
|
|
$
|
7,393
|
|
Amortization of debt issuance costs
|
|
259
|
|
|
457
|
|
|
758
|
|
|
1,337
|
|
||||
Amortization of debt discount
|
|
870
|
|
|
1,591
|
|
|
2,569
|
|
|
4,696
|
|
||||
Total
|
|
$
|
2,393
|
|
|
$
|
4,513
|
|
|
$
|
7,120
|
|
|
$
|
13,426
|
|
•
|
During any fiscal quarter (and only during such fiscal quarter) commencing after the fiscal quarter ended June 30, 2017, if the last reported sale price of Company common stock for at least
20
trading days (whether or not consecutive), in the period of
30
consecutive trading days, ending on, and including, the last trading day of the immediately preceding fiscal quarter, exceeds
130%
of the conversion price for the notes on each applicable trading day;
|
•
|
During the five business-day period immediately after any five consecutive trading-day period, which the Company refers to as the measurement period, in which the trading price per
$1,000
principal amount of notes for each trading day of that measurement period was less than
98%
of the product of the last reported sale price of Company common stock and the conversion rate for the notes for each such trading day; or
|
•
|
Upon the occurrence of specified corporate events as described in the indenture.
|
(In thousands)
|
|
September 30, 2017
|
|
December 31, 2016
|
||||
Principal amount of the December 2021 Notes
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Unamortized discount of liability component
|
|
(34,284
|
)
|
|
(39,152
|
)
|
||
Net carrying value of the December 2021 Notes
|
|
$
|
115,716
|
|
|
$
|
110,848
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
(In thousands)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Contractual coupon interest
|
|
$
|
1,031
|
|
|
$
|
—
|
|
|
$
|
3,094
|
|
|
$
|
—
|
|
Amortization of debt issuance costs
|
|
18
|
|
|
—
|
|
|
54
|
|
|
—
|
|
||||
Amortization of debt discount
|
|
132
|
|
|
—
|
|
|
393
|
|
|
—
|
|
||||
Amortization of conversion feature
|
|
1,522
|
|
|
—
|
|
|
4,421
|
|
|
—
|
|
||||
Total
|
|
$
|
2,703
|
|
|
$
|
—
|
|
|
$
|
7,962
|
|
|
$
|
—
|
|
|
|
September 30,
|
|
December 31,
|
||||
|
|
2017
|
|
2016
|
||||
(In thousands)
|
|
|
|
|
||||
Accrued lease liability
|
|
$
|
10,700
|
|
|
$
|
10,700
|
|
Long-term incentive accrual
|
|
4,255
|
|
|
1,995
|
|
||
Uncertain tax positions
|
|
30,488
|
|
|
41,591
|
|
||
Dividend payable
|
|
149
|
|
|
270
|
|
||
Other
|
|
416
|
|
|
—
|
|
||
Total
|
|
$
|
46,008
|
|
|
$
|
54,556
|
|
|
|
Stock Options
|
|
Restricted Stock Awards
|
||||||||||
(In thousands except per share amounts)
|
|
Number of Shares Outstanding
|
|
Weighted Average Exercise Price
|
|
Number of Shares Outstanding
|
|
Weighted Average Grant-date Fair Value Per Share
|
||||||
Balance at December 31, 2016
|
|
—
|
|
|
$
|
—
|
|
|
1,472
|
|
|
$
|
3.96
|
|
Granted
|
|
961
|
|
|
$
|
3.21
|
|
|
2,157
|
|
|
$
|
2.27
|
|
Vested or released
|
|
—
|
|
|
$
|
—
|
|
|
(426
|
)
|
|
$
|
3.52
|
|
Forfeited or canceled
|
|
—
|
|
|
$
|
—
|
|
|
(10
|
)
|
|
$
|
3.12
|
|
Balance at September 30, 2017
|
|
961
|
|
|
$
|
3.21
|
|
|
3,193
|
|
|
$
|
2.88
|
|
|
|
Unrealized gains (losses) on available-for-sale securities
|
|
Total Accumulated Other Comprehensive Income
|
||||
(In thousands)
|
|
|
|
|
||||
Beginning Balance at December 31, 2016
|
|
$
|
—
|
|
|
$
|
—
|
|
Activity for the nine months ended September 30, 2017
|
|
648
|
|
|
648
|
|
||
Ending Balance at September 30, 2017
|
|
$
|
648
|
|
|
$
|
648
|
|
Consideration paid in cash at closing
|
|
$
|
109,938
|
|
Discounted anniversary payment
|
|
87,007
|
|
|
Fair value of contingent consideration
|
|
47,360
|
|
|
Total fair value of consideration transferred
|
|
$
|
244,305
|
|
Acquired product rights
|
|
$
|
216,690
|
|
Customer relationships
|
|
23,880
|
|
|
Goodwill
|
|
3,735
|
|
|
Net intangible assets
|
|
$
|
244,305
|
|
Cash
|
|
$
|
1,983
|
|
Tangible assets
|
|
18,647
|
|
|
Intangible assets
(1)
|
|
11,970
|
|
|
Net deferred tax assets
|
|
20,411
|
|
|
Total identifiable assets
|
|
53,011
|
|
|
Current liabilities
|
|
(6,674
|
)
|
|
Total liabilities assumed
|
|
(6,674
|
)
|
|
Gain on bargain purchase, net of loss on extinguishment of notes receivable
|
|
3,995
|
|
|
Total fair value of consideration
|
|
$
|
31,726
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Pro forma revenues
|
|
$
|
62,749
|
|
|
$
|
57,629
|
|
|
$
|
257,569
|
|
|
$
|
262,671
|
|
Pro forma net income
|
|
$
|
20,732
|
|
|
$
|
10,016
|
|
|
$
|
84,856
|
|
|
$
|
70,246
|
|
Pro forma net income per share - basic
|
|
$
|
0.14
|
|
|
$
|
0.06
|
|
|
$
|
0.54
|
|
|
$
|
0.43
|
|
Pro forma net income per share - diluted
|
|
$
|
0.14
|
|
|
$
|
0.06
|
|
|
$
|
0.54
|
|
|
$
|
0.43
|
|
•
|
Adjustment to recognize incremental amortization expense based on the fair value of intangibles acquired;
|
•
|
Elimination of transaction costs and non-recurring charges directly related to the acquisition that were included in the historical results of operations for the Company; and
|
•
|
Adjustment to recognize pro forma income tax based on income tax benefit on the amortization of intangible asset at the statutory tax rate of Ireland (
12.5%
), and the income tax benefit on the interest expense at the statutory tax rate of the United States (
35.0%
).
|
Revenues by segment
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
(in thousands)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Income generating assets
|
|
$
|
42,682
|
|
|
$
|
39,510
|
|
|
$
|
200,547
|
|
|
$
|
163,681
|
|
Pharmaceutical
|
|
15,104
|
|
|
14,128
|
|
|
43,897
|
|
|
14,128
|
|
||||
Medical devices
|
|
4,963
|
|
|
—
|
|
|
7,580
|
|
|
—
|
|
||||
Total revenues
|
|
$
|
62,749
|
|
|
$
|
53,638
|
|
|
$
|
252,024
|
|
|
$
|
177,809
|
|
Income (loss) by segment
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
(in thousands)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Income generating assets
|
|
$
|
25,248
|
|
|
$
|
14,049
|
|
|
$
|
98,746
|
|
|
$
|
74,084
|
|
Pharmaceutical
|
|
1,082
|
|
|
(142
|
)
|
|
(3,560
|
)
|
|
(142
|
)
|
||||
Medical devices
|
|
(5,598
|
)
|
|
—
|
|
|
(6,774
|
)
|
|
—
|
|
||||
Total net income
|
|
$
|
20,732
|
|
|
$
|
13,907
|
|
|
$
|
88,412
|
|
|
$
|
73,942
|
|
Long-lived assets by segment
|
|
|
|
|
||||
(in thousands)
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Income generating assets
|
|
$
|
145
|
|
|
$
|
38
|
|
Pharmaceutical
|
|
860
|
|
|
—
|
|
||
Medical devices
|
|
7,125
|
|
|
—
|
|
||
Total long-lived assets
|
|
$
|
8,130
|
|
|
$
|
38
|
|
Licensee
|
|
Product Names
|
Genentech
|
|
Avastin
|
|
|
Herceptin
|
|
|
Xolair
|
|
|
Lucentis
|
|
|
Perjeta
®
|
|
|
Kadcyla
®
|
|
|
Three Months Ended
|
|
Change from Prior
|
|
Nine Months Ended
|
|
Change from Prior
|
||||||||||||
|
|
September 30,
|
|
|
September 30,
|
|
||||||||||||||
|
|
2017
|
|
2016
|
|
Year %
|
|
2017
|
|
2016
|
|
Year %
|
||||||||
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Royalties from Queen et al. patents
|
|
$
|
1,443
|
|
|
$
|
14,958
|
|
|
(90%)
|
|
$
|
31,884
|
|
|
$
|
150,645
|
|
|
(79%)
|
Royalty rights - change in fair value
|
|
35,353
|
|
|
16,085
|
|
|
120%
|
|
132,224
|
|
|
(11,872
|
)
|
|
1,214%
|
||||
Interest revenue
|
|
6,051
|
|
|
8,594
|
|
|
(30%)
|
|
16,968
|
|
|
24,901
|
|
|
(32%)
|
||||
Product revenue, net
|
|
20,067
|
|
|
14,128
|
|
|
42%
|
|
51,477
|
|
|
14,128
|
|
|
264%
|
||||
License and other
|
|
(165
|
)
|
|
(127
|
)
|
|
(30%)
|
|
19,471
|
|
|
7
|
|
|
278,057%
|
||||
Total revenues
|
|
$
|
62,749
|
|
|
$
|
53,638
|
|
|
17%
|
|
$
|
252,024
|
|
|
$
|
177,809
|
|
|
42%
|
(in thousands)
|
|
Discount and Distribution Fees
|
|
Government Rebates and Chargebacks
|
|
Assistance and Other Discounts
|
|
Product Return
|
|
Total
|
||||||||||
Balance at December 31, 2016:
|
|
$
|
2,475
|
|
|
$
|
5,514
|
|
|
$
|
2,580
|
|
|
$
|
1,769
|
|
|
$
|
12,338
|
|
Allowances for current period sales
|
|
6,565
|
|
|
14,455
|
|
|
6,625
|
|
|
3,054
|
|
|
30,699
|
|
|||||
Allowances for prior period sales
|
|
—
|
|
|
253
|
|
|
—
|
|
|
—
|
|
|
253
|
|
|||||
Credits/payments for current period sales
|
|
(3,048
|
)
|
|
(4,720
|
)
|
|
(4,435
|
)
|
|
(1,145
|
)
|
|
(13,348
|
)
|
|||||
Credits/payments for prior period sales
|
|
(2,425
|
)
|
|
(4,353
|
)
|
|
(1,488
|
)
|
|
(1,024
|
)
|
|
(9,290
|
)
|
|||||
Balance at September 30, 2017
|
|
$
|
3,567
|
|
|
$
|
11,149
|
|
|
$
|
3,282
|
|
|
$
|
2,654
|
|
|
$
|
20,652
|
|
|
|
|
|
Change in
|
|
Royalty Rights -
|
||||||
|
|
Cash Royalties
|
|
Fair Value
|
|
Change in Fair Value
|
||||||
Depomed
|
|
$
|
66,465
|
|
|
$
|
58,625
|
|
|
$
|
125,090
|
|
VB
|
|
1,005
|
|
|
440
|
|
|
1,445
|
|
|||
U-M
|
|
2,717
|
|
|
63
|
|
|
2,780
|
|
|||
ARIAD
|
|
3,081
|
|
|
(462
|
)
|
|
2,619
|
|
|||
AcelRx
|
|
88
|
|
|
6,582
|
|
|
6,670
|
|
|||
Avinger
|
|
915
|
|
|
(777
|
)
|
|
138
|
|
|||
KYBELLA
|
|
133
|
|
|
(6,651
|
)
|
|
(6,518
|
)
|
|||
|
|
$
|
74,404
|
|
|
$
|
57,820
|
|
|
$
|
132,224
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
|
|
|
September 30,
|
|
September 30,
|
||||||||
Licensee
|
|
Product Name
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Genentech
|
|
Avastin
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
22
|
%
|
|
|
Herceptin
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||
Biogen
|
|
Tysabri
|
|
2
|
%
|
|
28
|
%
|
|
13
|
%
|
|
24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depomed
|
|
Glumetza, Janumet XR, Jentadueto XR and Invokamet XR
|
|
50
|
%
|
|
18
|
%
|
|
N/M
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
N/M
|
|
Tekturna, Tekturna HCT, Rasilez and Rasilez HCT
|
|
24
|
%
|
|
26
|
%
|
|
17
|
%
|
|
8
|
%
|
|
|
Three Months Ended
|
|
Change from Prior
|
|
Nine Months Ended
|
|
Change from Prior
|
||||||||||||
|
|
September 30,
|
|
|
September 30,
|
|
||||||||||||||
|
|
2017
|
|
2016
|
|
Year %
|
|
2017
|
|
2016
|
|
Year %
|
||||||||
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of product revenue, (excluding intangible amortization)
|
|
$
|
5,565
|
|
|
$
|
—
|
|
|
N/M
|
|
$
|
12,632
|
|
|
$
|
—
|
|
|
N/M
|
Amortization of intangible assets
|
|
6,275
|
|
|
6,014
|
|
|
4%
|
|
18,438
|
|
|
6,014
|
|
|
207%
|
||||
General and administrative
|
|
11,989
|
|
|
10,396
|
|
|
15%
|
|
35,853
|
|
|
27,193
|
|
|
32%
|
||||
Sales and marketing
|
|
4,994
|
|
|
11
|
|
|
N/M
|
|
11,194
|
|
|
11
|
|
|
N/M
|
||||
Research and development
|
|
605
|
|
|
1,933
|
|
|
(69)%
|
|
6,652
|
|
|
1,933
|
|
|
244%
|
||||
Change in fair value of acquisition-related contingent consideration
|
|
700
|
|
|
2,083
|
|
|
(66)%
|
|
3,349
|
|
|
2,083
|
|
|
61%
|
||||
Acquisition-related costs
|
|
—
|
|
|
546
|
|
|
N/M
|
|
—
|
|
|
3,505
|
|
|
N/M
|
||||
Total operating expenses
|
|
$
|
30,128
|
|
|
$
|
20,983
|
|
|
44%
|
|
$
|
88,118
|
|
|
$
|
40,739
|
|
|
116%
|
Percentage of total revenues
|
|
48
|
%
|
|
39
|
%
|
|
|
|
35
|
%
|
|
23
|
%
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net income per share - basic
|
$
|
0.14
|
|
|
$
|
0.08
|
|
|
$
|
0.56
|
|
|
$
|
0.45
|
|
Net income per share - diluted
|
$
|
0.14
|
|
|
$
|
0.08
|
|
|
$
|
0.56
|
|
|
$
|
0.45
|
|
Dated:
|
November 13, 2017
|
|
PDL BIOPHARMA, INC. (REGISTRANT)
|
|
|
|
|
|
|
|
|
/s/ John P. McLaughlin
|
|
|
John P. McLaughlin
|
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
/s/ Peter S. Garcia
|
|
|
Peter S. Garcia
|
|
|
Vice President and Chief Financial Officer (Principal Financial Officer)
|
|
/s/ Steffen Pietzke
|
|
|
Steffen Pietzke
|
|
|
Vice President, Finance and Chief Accounting Officer (Principal Accounting Officer)
|
|
#
|
Filed herewith.
|
*
|
Management contract or compensatory plan or arrangement.
|
**
|
This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.
|
2.
|
Consideration
: In consideration for entering this Agreement, the Company agrees to provide to Executive:
a one-time payment of $2,305,438.00 USD.
|
3.
|
Entire Consideration
.
Executive agrees that the Severance Amount shall constitute the entire monetary consideration provided to Executive under this Agreement, and that he will not seek any further remuneration from the Company for any other damage, penalty, expense, wage, bonus, compensation, incentive equity program, commission, benefit, action, attorney fee or cost either individually or as part of a class in connection with the matters encompassed or released by this Agreement and/or arising out of Executive’s employment with and/or termination from the
|
7.
|
Confidentiality; Confidential Information; Non-Disparagement; Return of PDL Property
.
|
a.
|
Executive agrees that he will keep the facts and terms of this Agreement completely confidential and that he will not hereafter disclose any information concerning this Agreement to anyone other than his spouse, lawyers and/or accountants, provided that any party hereto may make such disclosures as are required by law and as are necessary for legitimate law.
|
b.
|
Executive acknowledges that during the course of his employment with PDL, he had access to and was entrusted with confidential personnel and business information (the “Confidential Information”). Executive agrees that he was obligated during employment with the Company
|
c.
|
Executive agrees that he does not have any of PDL’s property in his possession, custody and control, including, but not limited to, all equipment (including electronic equipment such as hard drives), files, documents and data of any kind, whether stored in paper, disk, tape, or any other electronic form containing any information of PDL, all keys, cards, badges or other access devices. Executive agrees that to the extent that he has any PDL property in his possession, custody or control, he will immediately return all PDL property in both hard and soft form and will delete any such information for any computer or other device he has in his possession, custody or control.
|
8.
|
Non-Disparagement
.
Executive agrees not to make any disparaging or defamatory comments to any third party concerning any Releasee or the Company’s clients, Executives, products, services, methods of doing business or employment practices. Executive further agrees not to encourage or assist in any litigation against any Releasee, except insofar as Executive’s testimony is required by law. Executive agrees further not to testify in any matter in which the Company has an interest unless he is under compulsory process or is asked to testify by the Company. If Executive is served with process concerning any matter in which the Employer has an interest, then Executive will immediately notify the President of the Company of such in writing and provide the President of the Company a copy of the process received by the Executive or Executive’s representative.
|
9.
|
Non-Disparagement of Clients/Prospects
.
Executive also agrees, on behalf of himself and his spouse, attorneys, representatives and agents, that neither he nor any of them will make any disparaging or defamatory comments to any third party concerning the Company’s prospects and/or clients, their respective Executives, products, services, methods of doing business and/or employment practices.
|
10.
|
Breach
.
If Executive breaches Paragraphs 8 or 9, then the Company shall have, in addition to and without limiting any other remedy or right it may have at law or in equity, the right to a temporary and permanent injunction restraining any such breach, without any bond or security being required. In any such proceeding, Executive waives any defense that the Company has an adequate remedy at law or that the injury suffered as a consequence of such breach is not irreparable.
|
11.
|
Non-Disclosure of Confidential or Proprietary Information
. Executive further understands and agrees that Executive shall not disclose to any third party any confidential or proprietary information of the Company and/or its clients regardless of how acquired or learned. By way of example and not limitation, such information includes client lists and/or related information, product plans and design, pricing, management organization or other organization charts, sales or marketing plans, compensation structures and data, product quality, research and development plans, and other business activities and plans. This Paragraph shall not restrict Executive’s obligation to disclose such information pursuant to legal requirements, provided Executive first gives the Company prompt notice of such legal process and a copy of same in order that it shall have the opportunity to object to the disclosure of such information. Executive reaffirms the obligations Executive undertook when Executive signed the Proprietary Information And Invention Assignment (For Employees), attached
|
12.
|
Enforcement of Agreement
. Should any party to this Agreement seek intervention of a court to resolve a dispute under this Agreement the prevailing party shall be entitled to recover costs and expenses, including reasonable attorney fees incurred.
|
a.
|
In consideration of the benefits provided to Executive described in this Agreement, Executive, for himself, his spouse, and his successors and assigns, hereby irrevocably and unconditionally releases and forever discharges the Company and each and all of its owners, parents, subsidiaries, representatives, agents, insurers, directors, officers, agents, supervisors, Executives, attorneys, and their successors and assigns and all persons acting by, through, under, or in concert with any of them, from any and all charges, complaints, claims, and liabilities of any kind or nature whatsoever, known or unknown, suspected or unsuspected (“claim” or “claims”) which Executive at any time heretofore had or claimed to have, including, without limitation, any and all claims related or in any manner incidental to Executive’s employment with PDL or the ending of that relationship.
|
b.
|
The parties understand the word “claims” to include all actions, complaints, claims, and grievances, whether actual or potential, known or unknown, and specifically but not exclusively, all claims arising out of Executive’s employment with THE COMPANY and the termination thereof. All such claims (including related attorneys’ fees and costs) as may exist as of the date of this Agreement are forever barred, including but not limited to any and all tort claims, contract claims, wrongful termination claims, public policy claims, retaliation claims, statutory claims, personal injury claims, emotional distress claims, privacy claims, defamation claims, fraud claims, and any and all claims arising under any federal, state or other governmental statute, law, regulation or ordinance relating to employment, including but not limited to Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Family and Medical Leave Act, the Executive Retirement Income Security Act, the Fair Labor Standards Act, the Nevada Fair Employment Practices Act (codified in Nevada Revised Statutes Chapter 613.310,
et. seq.
),
and any federal, state or local laws covering discrimination in employment, including race, color, religious creed, national origin, ancestry, physical or mental disability, medical condition, marital status, military status, family care leave, pregnancy, sex, sexual orientation and harassment or retaliation. The only claims that are not released by this Agreement are claims that controlling law clearly states may not be released by settlement and claims that may arise after the execution of this Agreement.
|
c.
|
Release of Age Discrimination Claims
.
In accordance with the Older Workers
Benefit Protection Act of 1990, Executive acknowledges that he agrees to the release
of all known and unknown claims as of the date of this Agreement, including expressly
the waiver of any rights or claims arising out of the Age Discrimination in Employment
Act (“ADEA”) 29 U.S.C. § 621, et seq., and in connection with such waiver:
|
(i)
|
Executive is hereby advised to consult with an attorney prior to signing this Agreement.
|
(ii)
|
Executive shall have a period of twenty-one (21) days from the date of receipt of this Agreement in which to consider the terms of the Agreement. Executive may at his option execute this Agreement at any time during the 21- day period. Executive acknowledges receipt of this Agreement as of October 20, 2017.
|
(iii)
|
Executive may revoke this Agreement at any time during the first seven (7) days following the execution of this Agreement, and this Agreement shall not be effective or enforceable until the seven-day period has expired. Executive may revoke this Agreement by notifying Chris Stone of the Company at
Chris.Stone@pdl.com
prior to the expiration of the 7-day period. This Agreement shall not become valid, effective or enforceable until the seven day period has expired, assuming that Executive has not previously revoked his assent to this Agreement (the “Effective Date”).
|
(iv)
|
Executive acknowledges and agrees that the consideration provided in this Agreement is in addition to anything of value that Executive would otherwise be entitled to receive from the Company and constitutes valid consideration in exchange for the releases set forth in this Agreement.
|
d.
|
Nothing in this Release prevents Executive from filing a charge or complaint with, or from participating in, an investigation or proceeding conducted by the EEOC, the National Labor Relations Board, the Securities and Exchange Commission, or any other federal, state or local agency charged with the enforcement of any laws, including providing documents or other information, or prevents Executive from exercising rights under Section 7 of the NLRA to engage in protected, concerted activity with other Executives, although by signing this Release, Executive is waiving the right to recover any individual relief (including back pay, front pay, reinstatement or other legal or equitable relief) in any charge, complaint, or lawsuit or other proceeding brought by Executive or on his behalf by any third party, except for any right Executive may have to receive a payment from a government agency (and not the Company) for information provided to the government agency.
|
14.
|
Miscellaneous Acknowledgments by Executive
.
Executive understands and agrees that he:
|
a.
|
Has had a reasonable opportunity to consider this Agreement before executing it.
|
b.
|
Has carefully read and fully understands all of the provisions of this Agreement.
|
c.
|
Is, through this Agreement, releasing the Company from any and all claims Executive may have against the Company.
|
d.
|
Knowingly and voluntarily agrees to all of the terms set forth in this Agreement.
|
e.
|
Knowingly and voluntarily intends to be legally bound by the same.
|
f.
|
Was advised and hereby is advised in writing to consider the terms of this Agreement and consult with an attorney of his choice prior to executing this Agreement.
|
16.
|
General Provisions
.
This Agreement shall be interpreted in accordance with the plain meaning of its terms and not strictly for or against any of the parties hereto. Additionally, this Agreement shall be governed by the laws of the State of Nevada. This Agreement shall constitute the complete and total agreement between the Company and Executive. Executive represents that he is not relying on any other agreements or oral representations not fully expressed in this Agreement. Executive agrees that this Agreement shall not be modified, altered, or discharged except by written instrument signed by an authorized Company representative and Executive. The headings in this Agreement are for reference only, and shall not in any way affect the meaning or interpretation of this Agreement. Executive further agrees that this Agreement may be used as evidence in a subsequent proceeding in which the Company or Executive alleges a breach of this Agreement or as a complete defense to any lawsuit. Other than this exception, Executive agrees that this Agreement will not be introduced as evidence in any legal or administrative proceeding or in any lawsuit.
|
17.
|
Enforceability.
Should any provision of this Agreement be declared or be determined by any court of competent jurisdic-tion to be wholly or partially illegal, invalid, or unenforceable, the legality, validity, and enforceability of the remaining parts, terms, or provisions shall not be affected thereby, and said illegal, unenforceable, or invalid part, term, or provision shall be deemed not to be a part of this Agreement.
|
20.
|
Agreement Is Knowing and Voluntary
.
Executive understands and agrees that Executive:
|
a.
|
has had a reasonable time within which to consider this Agreement before executing it;
|
b.
|
has carefully read and fully understands all of the provisions of this Agreement;
|
c.
|
knowingly and voluntarily agrees to all of the terms set forth in this Agreement; and
|
d.
|
knowingly and voluntarily intends to be legally bound by the same.
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2017
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
|||||||||||||
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income before income taxes
|
|
$
|
327,133
|
|
|
$
|
401,876
|
|
|
$
|
501,272
|
|
|
$
|
530,138
|
|
|
$
|
106,670
|
|
|
$
|
153,545
|
|
Add: fixed charges
|
|
29,097
|
|
|
24,931
|
|
|
39,274
|
|
|
27,123
|
|
|
18,330
|
|
|
15,253
|
|
||||||
Earnings
|
|
$
|
356,230
|
|
|
$
|
426,807
|
|
|
$
|
540,546
|
|
|
$
|
557,261
|
|
|
$
|
125,000
|
|
|
$
|
168,798
|
|
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
1
|
|
$
|
29,036
|
|
|
$
|
24,871
|
|
|
$
|
39,211
|
|
|
$
|
27,059
|
|
|
$
|
18,267
|
|
|
$
|
15,082
|
|
Estimated interest portion of rent expense
2
|
|
61
|
|
|
60
|
|
|
63
|
|
|
64
|
|
|
63
|
|
|
171
|
|
||||||
Fixed charges
|
|
29,097
|
|
|
$
|
24,931
|
|
|
$
|
39,274
|
|
|
$
|
27,123
|
|
|
$
|
18,330
|
|
|
$
|
15,253
|
|
|
Ratio of earnings to fixed charges
|
|
12.24
|
|
|
17.12
|
|
|
13.76
|
|
|
20.55
|
|
|
6.82
|
|
|
11.07
|
|
Date:
|
November 13, 2017
|
|
|
|
|
/s/ John P. McLaughlin
|
|
|
John P. McLaughlin
Chief Executive Officer
(Principal Executive Officer)
|
|
Date:
|
November 13, 2017
|
|
|
|
|
/s/ Peter S. Garcia
|
|
|
Peter S. Garcia
Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
By:
|
|
|
|
/s/ JOHN P. MCLAUGHLIN
|
|
|
John P. McLaughlin
|
|
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
By:
|
|
|
|
/s/ PETER S. GARCIA
|
|
|
Peter S. Garcia
|
|
|
Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
(1)
|
This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of PDL BioPharma, Inc. under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing. A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to PDL BioPharma, Inc. and will be retained by PDL BioPharma, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
|