|
ý
|
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
For the quarterly period ended June 30, 2018
|
¨
|
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)
|
(I.R.S. Employer Identification No.)
|
|
Large accelerated filer
¨
|
Accelerated filer
ý
|
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 Six Months Ended June 30, 2018 and 2017
|
|
|
|
|
|
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2018 and 2017
|
|
|
|
|
|
Condensed Consolidated Balance Sheets at June 30, 2018 and December 31, 2017
|
|
|
|
|
|
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017
|
|
|
|
|
|
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
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenues
|
|
|
|
|
|
|
|
|
||||||||
Royalties from Queen et al. patents
|
|
$
|
1,218
|
|
|
$
|
16,285
|
|
|
$
|
4,001
|
|
|
$
|
30,441
|
|
Royalty rights - change in fair value
|
|
12,842
|
|
|
83,725
|
|
|
23,933
|
|
|
96,871
|
|
||||
Interest revenue
|
|
751
|
|
|
5,460
|
|
|
1,500
|
|
|
10,917
|
|
||||
Product revenue, net
|
|
31,761
|
|
|
18,829
|
|
|
55,085
|
|
|
31,410
|
|
||||
License and other
|
|
3
|
|
|
19,536
|
|
|
574
|
|
|
19,636
|
|
||||
Total revenues
|
|
46,575
|
|
|
143,835
|
|
|
85,093
|
|
|
189,275
|
|
||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of product revenue (excluding intangible asset amortization)
|
|
14,524
|
|
|
4,515
|
|
|
25,090
|
|
|
7,067
|
|
||||
Amortization of intangible assets
|
|
6,384
|
|
|
6,148
|
|
|
12,677
|
|
|
12,163
|
|
||||
General and administrative
|
|
14,529
|
|
|
11,288
|
|
|
26,190
|
|
|
23,864
|
|
||||
Sales and marketing
|
|
5,385
|
|
|
3,616
|
|
|
10,898
|
|
|
6,200
|
|
||||
Research and development
|
|
684
|
|
|
4,281
|
|
|
1,477
|
|
|
6,047
|
|
||||
Impairment of intangible assets
|
|
152,330
|
|
|
—
|
|
|
152,330
|
|
|
—
|
|
||||
Change in fair value of anniversary payment and contingent consideration
|
|
(22,135
|
)
|
|
1,207
|
|
|
(22,735
|
)
|
|
2,649
|
|
||||
Total operating expenses
|
|
171,701
|
|
|
31,055
|
|
|
205,927
|
|
|
57,990
|
|
||||
Operating income (loss)
|
|
(125,126
|
)
|
|
112,780
|
|
|
(120,834
|
)
|
|
131,285
|
|
||||
Non-operating income (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest and other income, net
|
|
1,376
|
|
|
276
|
|
|
3,290
|
|
|
488
|
|
||||
Interest expense
|
|
(2,811
|
)
|
|
(5,015
|
)
|
|
(6,396
|
)
|
|
(9,986
|
)
|
||||
Gain on bargain purchase
|
|
—
|
|
|
6,271
|
|
|
—
|
|
|
6,271
|
|
||||
Total non-operating income (expense), net
|
|
(1,435
|
)
|
|
1,532
|
|
|
(3,106
|
)
|
|
(3,227
|
)
|
||||
Income (loss) before income taxes
|
|
(126,561
|
)
|
|
114,312
|
|
|
(123,940
|
)
|
|
128,058
|
|
||||
Income tax expense (benefit)
|
|
(14,265
|
)
|
|
53,873
|
|
|
(13,246
|
)
|
|
60,425
|
|
||||
Net income (loss)
|
|
(112,296
|
)
|
|
60,439
|
|
|
(110,694
|
)
|
|
67,633
|
|
||||
Less: Net loss attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(47
|
)
|
||||
Net income (loss) attributable to PDL’s shareholders
|
|
$
|
(112,296
|
)
|
|
$
|
60,439
|
|
|
$
|
(110,694
|
)
|
|
$
|
67,680
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
|
$
|
(0.76
|
)
|
|
$
|
0.39
|
|
|
$
|
(0.74
|
)
|
|
$
|
0.42
|
|
Diluted
|
|
$
|
(0.76
|
)
|
|
$
|
0.39
|
|
|
$
|
(0.74
|
)
|
|
$
|
0.42
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
|
146,923
|
|
|
155,654
|
|
|
149,186
|
|
|
159,677
|
|
||||
Diluted
|
|
146,923
|
|
|
156,394
|
|
|
149,186
|
|
|
160,168
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
|
$
|
(112,296
|
)
|
|
$
|
60,439
|
|
|
$
|
(110,694
|
)
|
|
$
|
67,633
|
|
|
|
|
|
|
|
|
|
|
||||||||
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
|
|
—
|
|
|
—
|
|
|
(578
|
)
|
|
—
|
|
||||
Adjustment for net gains realized and included in net income, net of tax
|
|
—
|
|
|
—
|
|
|
(603
|
)
|
|
—
|
|
||||
Total change in unrealized gains on investments in available-for-sale securities, net of tax
(a)
|
|
—
|
|
|
—
|
|
|
(1,181
|
)
|
|
—
|
|
||||
Total other comprehensive income/(loss), net of tax
|
|
—
|
|
|
—
|
|
|
(1,181
|
)
|
|
—
|
|
||||
Comprehensive income (loss)
|
|
(112,296
|
)
|
|
60,439
|
|
|
(111,875
|
)
|
|
67,633
|
|
||||
Less: Comprehensive loss attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(47
|
)
|
||||
Comprehensive income (loss) attributable to PDL’s shareholders
|
|
$
|
(112,296
|
)
|
|
$
|
60,439
|
|
|
$
|
(111,875
|
)
|
|
$
|
67,680
|
|
|
June 30,
|
|
December 31,
|
||||
|
2018
|
|
2017
|
||||
|
(unaudited)
|
|
(Note 1)
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
395,653
|
|
|
$
|
527,266
|
|
Short-term investments
|
—
|
|
|
4,848
|
|
||
Accounts receivable, net
|
19,531
|
|
|
31,183
|
|
||
Notes receivable
|
58,058
|
|
|
53,613
|
|
||
Inventories
|
14,801
|
|
|
9,147
|
|
||
Prepaid and other current assets
|
20,628
|
|
|
14,386
|
|
||
Total current assets
|
508,671
|
|
|
640,443
|
|
||
Property and equipment, net
|
9,223
|
|
|
7,222
|
|
||
Royalty rights - at fair value
|
335,163
|
|
|
349,223
|
|
||
Notes and other receivables, long-term
|
12,829
|
|
|
17,124
|
|
||
Intangible assets, net
|
54,472
|
|
|
215,823
|
|
||
Other assets
|
25,637
|
|
|
13,288
|
|
||
Total assets
|
$
|
945,995
|
|
|
$
|
1,243,123
|
|
|
|
|
|
||||
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
11,212
|
|
|
$
|
19,785
|
|
Accrued liabilities
|
34,294
|
|
|
45,881
|
|
||
Accrued income taxes
|
217
|
|
|
1,377
|
|
||
Convertible notes payable
|
—
|
|
|
126,066
|
|
||
Total current liabilities
|
45,723
|
|
|
193,109
|
|
||
Convertible notes payable
|
120,945
|
|
|
117,415
|
|
||
Contingent consideration
|
18,900
|
|
|
42,000
|
|
||
Other long-term liabilities
|
47,799
|
|
|
44,709
|
|
||
Total liabilities
|
233,367
|
|
|
397,233
|
|
||
|
|
|
|
||||
Commitments and contingencies (Note 12)
|
|
|
|
|
|
||
|
|
|
|
||||
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; 145,971 and 153,775 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively
|
1,460
|
|
|
1,538
|
|
||
Additional paid-in capital
|
(100,229
|
)
|
|
(102,443
|
)
|
||
Accumulated other comprehensive income
|
—
|
|
|
1,181
|
|
||
Retained earnings
|
811,397
|
|
|
945,614
|
|
||
Total stockholders’ equity
|
712,628
|
|
|
845,890
|
|
||
Total liabilities and stockholders’ equity
|
$
|
945,995
|
|
|
$
|
1,243,123
|
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net income (loss)
|
$
|
(110,694
|
)
|
|
$
|
67,633
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
||
Amortization of convertible notes and term loan offering costs
|
3,911
|
|
|
5,394
|
|
||
Amortization of intangible assets
|
12,677
|
|
|
12,164
|
|
||
Impairment of intangible assets
|
152,330
|
|
|
—
|
|
||
Change in fair value of royalty rights - at fair value
|
(23,933
|
)
|
|
(96,871
|
)
|
||
Change in fair value of derivative asset
|
(74
|
)
|
|
(136
|
)
|
||
Change in fair value of anniversary payment and contingent consideration
|
(22,735
|
)
|
|
2,649
|
|
||
Other amortization, depreciation and accretion of embedded derivative
|
2,028
|
|
|
591
|
|
||
Gain on sale of available-for-sale securities
|
(764
|
)
|
|
(93
|
)
|
||
Loss on disposal of property and equipment
|
66
|
|
|
—
|
|
||
Inventory obsolescence
|
(491
|
)
|
|
161
|
|
||
Bad debt allowance
|
43
|
|
|
54
|
|
||
Stock-based compensation expense
|
2,218
|
|
|
2,075
|
|
||
Deferred income taxes
|
(11,276
|
)
|
|
29,223
|
|
||
Changes in assets and liabilities, net of effects of business acquired:
|
|
|
|
|
|
||
Accounts receivable
|
10,764
|
|
|
15,058
|
|
||
Receivables from licensees and other
|
945
|
|
|
6,000
|
|
||
Prepaid and other current assets
|
(6,816
|
)
|
|
(2,700
|
)
|
||
Accrued interest on notes receivable
|
(150
|
)
|
|
15,263
|
|
||
Inventories
|
(5,343
|
)
|
|
(1,823
|
)
|
||
Other assets
|
(1,531
|
)
|
|
8
|
|
||
Accounts payable
|
(8,679
|
)
|
|
993
|
|
||
Accrued liabilities
|
(5,789
|
)
|
|
5,542
|
|
||
Deferred revenue
|
(5,970
|
)
|
|
—
|
|
||
Accrued income taxes
|
(1,159
|
)
|
|
10,278
|
|
||
Other long-term liabilities
|
666
|
|
|
(9,851
|
)
|
||
Net cash provided by (used in) operating activities
|
(19,756
|
)
|
|
61,612
|
|
||
Cash flows from investing activities
|
|
|
|
|
|
||
Purchase of investments
|
—
|
|
|
(19,860
|
)
|
||
Proceeds from sales of available-for-sale securities
|
4,116
|
|
|
29,045
|
|
||
Proceeds from royalty rights - at fair value
|
37,993
|
|
|
48,062
|
|
||
Sale of royalty rights - at fair value
|
—
|
|
|
108,169
|
|
||
Proceeds from sales of assets held for sale
|
—
|
|
|
8,142
|
|
||
Purchase of property and equipment
|
(3,915
|
)
|
|
(705
|
)
|
||
Net cash provided by investing activities
|
38,194
|
|
|
172,853
|
|
||
Cash flows from financing activities
|
|
|
|
|
|
||
Repayment of convertible notes
|
(126,447
|
)
|
|
—
|
|
||
Cash paid for purchase of noncontrolling interest
|
—
|
|
|
(2,170
|
)
|
||
Cash dividends paid
|
—
|
|
|
(21
|
)
|
||
Repurchase and retirement of common stock
|
(23,604
|
)
|
|
(30,000
|
)
|
||
Net cash used in financing activities
|
(150,051
|
)
|
|
(32,191
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
(131,613
|
)
|
|
202,274
|
|
||
Cash and cash equivalents at beginning of the period
|
527,266
|
|
|
147,154
|
|
||
Cash and cash equivalents at end of period
|
$
|
395,653
|
|
|
$
|
349,428
|
|
|
|
|
|
||||
Supplemental cash flow information
|
|
|
|
|
|
||
Cash paid for income taxes
|
$
|
3,980
|
|
|
$
|
14,205
|
|
Cash paid for interest
|
$
|
4,591
|
|
|
$
|
4,695
|
|
|
|
|
|
||||
Supplemental schedule of non-cash investing and financing activities
|
|
|
|
||||
Asset held for sale reclassified from notes receivable to other assets
|
$
|
—
|
|
|
$
|
10,000
|
|
Assets held for sale reclassified from other assets to intangibles
|
$
|
1,811
|
|
|
$
|
—
|
|
Extinguishment of notes receivable
|
$
|
—
|
|
|
$
|
43,909
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30, 2018
|
|
June 30, 2018
|
||||||||||||
(in thousands)
|
|
Medical Devices
|
|
Pharmaceutical
|
|
Medical Devices
|
|
Pharmaceutical
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Primary geographical markets:
|
|
|
|
|
|
|
|
|
||||||||
North America
|
|
$
|
615
|
|
|
$
|
10,776
|
|
|
$
|
2,319
|
|
|
$
|
21,707
|
|
Europe
|
|
679
|
|
|
6,371
|
|
|
1,294
|
|
|
12,362
|
|
||||
Asia
|
|
1,643
|
|
|
8,732
|
|
|
2,757
|
|
|
10,152
|
|
||||
Other
|
|
107
|
|
|
—
|
|
|
220
|
|
|
—
|
|
||||
Total revenue from contracts with customers
1
|
|
$
|
3,044
|
|
|
$
|
25,879
|
|
|
$
|
6,590
|
|
|
$
|
44,221
|
|
(in thousands)
|
|
June 30, 2018
|
|
January 1, 2018
|
||||
|
|
|
|
|
||||
Receivables, current and non-current, net
|
|
$
|
19,970
|
|
|
$
|
30,771
|
|
Contract assets
|
|
$
|
3,235
|
|
|
$
|
—
|
|
Contract liabilities
|
|
$
|
5,114
|
|
|
$
|
10,084
|
|
(in thousands)
|
|
Medical Devices
|
|
Pharmaceutical
|
|
Total
|
||||||
|
|
|
|
|
|
|
||||||
Contract assets at January 1, 2018
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Contract assets recognized
|
|
—
|
|
|
3,235
|
|
|
3,235
|
|
|||
Contract assets at June 30, 2018
|
|
$
|
—
|
|
|
$
|
3,235
|
|
|
$
|
3,235
|
|
(in thousands)
|
|
Medical Devices
|
|
Pharmaceutical
|
|
Total
|
||||||
|
|
|
|
|
|
|
||||||
Contract liabilities at January 1, 2018
|
|
$
|
1,391
|
|
|
$
|
8,693
|
|
|
$
|
10,084
|
|
Additions
|
|
547
|
|
|
3,880
|
|
|
4,427
|
|
|||
Amounts recognized into revenue
|
|
(704
|
)
|
|
(8,693
|
)
|
|
(9,397
|
)
|
|||
Contract liabilities at June 30, 2018
|
|
$
|
1,234
|
|
|
$
|
3,880
|
|
|
$
|
5,114
|
|
|
|
Six Months Ended
|
|
|
|
|
||||||
(in thousands)
|
|
December 31, 2018
|
|
Thereafter
|
|
Total
|
||||||
|
|
|
|
|
|
|
||||||
Pharmaceutical product sales
|
|
$
|
1,000
|
|
|
$
|
—
|
|
|
$
|
1,000
|
|
Medical device product sales
|
|
$
|
1,878
|
|
|
$
|
2,352
|
|
|
$
|
4,230
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
Net Income (Loss) per Basic and Diluted Share:
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
(in thousands except per share amounts)
|
|
|
|
|
|
|
|
|
||||||||
Numerator
|
|
|
|
|
|
|
|
|
||||||||
Income (loss) attributable to PDL’s shareholders used to compute net income per basic and diluted share
|
|
$
|
(112,296
|
)
|
|
$
|
60,439
|
|
|
$
|
(110,694
|
)
|
|
$
|
67,680
|
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator
|
|
|
|
|
|
|
|
|
|
|
||||||
Total weighted average shares used to compute net income attributable to PDL’s shareholders, per basic share
|
|
146,923
|
|
|
155,654
|
|
|
149,186
|
|
|
159,677
|
|
||||
Restricted stock outstanding
|
|
—
|
|
|
740
|
|
|
—
|
|
|
491
|
|
||||
Shares used to compute net income (loss) attributable to PDL’s shareholders, per diluted share
|
|
146,923
|
|
|
156,394
|
|
|
149,186
|
|
|
160,168
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to PDL’s shareholders per share - basic
|
|
$
|
(0.76
|
)
|
|
$
|
0.39
|
|
|
$
|
(0.74
|
)
|
|
$
|
0.42
|
|
Net income (loss) attributable to PDL’s shareholders per share - diluted
|
|
$
|
(0.76
|
)
|
|
$
|
0.39
|
|
|
$
|
(0.74
|
)
|
|
$
|
0.42
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||||||||||||||||||||||
(in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Money market funds
|
|
$
|
324,105
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
324,105
|
|
|
$
|
417,563
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
417,563
|
|
Corporate securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,848
|
|
|
—
|
|
|
—
|
|
|
4,848
|
|
||||||||
Warrants
|
|
—
|
|
|
103
|
|
|
—
|
|
|
103
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
29
|
|
||||||||
Royalty rights - at fair value
|
|
—
|
|
|
—
|
|
|
335,163
|
|
|
335,163
|
|
|
—
|
|
|
—
|
|
|
349,223
|
|
|
349,223
|
|
||||||||
Total
|
|
$
|
324,105
|
|
|
$
|
103
|
|
|
$
|
335,163
|
|
|
$
|
659,371
|
|
|
$
|
422,411
|
|
|
$
|
29
|
|
|
$
|
349,223
|
|
|
$
|
771,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Contingent consideration, current
1
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,140
|
|
|
$
|
1,140
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Contingent consideration, non-current
|
|
—
|
|
|
—
|
|
|
18,900
|
|
|
18,900
|
|
|
—
|
|
|
—
|
|
|
42,000
|
|
|
42,000
|
|
||||||||
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
20,040
|
|
|
$
|
20,040
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
42,000
|
|
|
$
|
42,000
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) - Royalty Rights Assets
|
||||||||||||
|
|
|
|
|
|
|
||||||
|
|
Fair Value as of
|
|
Royalty Rights -
|
|
Fair Value as of
|
||||||
(in thousands)
|
|
December 31, 2017
|
|
Change in Fair Value
|
|
June 30, 2018
|
||||||
|
|
|
|
|
|
|
||||||
Depomed
|
|
$
|
232,038
|
|
|
$
|
(17,967
|
)
|
|
$
|
214,071
|
|
VB
|
|
14,380
|
|
|
284
|
|
|
14,664
|
|
|||
U-M
|
|
26,769
|
|
|
(620
|
)
|
|
26,149
|
|
|||
AcelRx
|
|
72,894
|
|
|
4,539
|
|
|
77,433
|
|
|||
Avinger
|
|
396
|
|
|
(396
|
)
|
|
—
|
|
|||
KYBELLA
|
|
2,746
|
|
|
100
|
|
|
2,846
|
|
|||
|
|
$
|
349,223
|
|
|
$
|
(14,060
|
)
|
|
$
|
335,163
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) - Liabilities
|
||||||
|
|
|
||||
(in thousands)
|
|
Contingent Consideration
|
||||
Fair value as of December 31, 2017
|
|
$
|
(42,000
|
)
|
||
|
|
|
|
|
||
|
Total net change in fair value for the period
|
|
22,735
|
|
||
|
Fair value of financial instruments acquired
|
|
(1,560
|
)
|
||
|
Settlement of financial instrument
|
|
785
|
|
||
|
|
|
|
|
||
Fair value as of June 30, 2018
|
|
$
|
(20,040
|
)
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Total change in fair value for the period included in earnings for royalty right assets held at the end of the reporting period
|
|
$
|
12,842
|
|
|
$
|
83,725
|
|
|
$
|
23,933
|
|
|
$
|
96,871
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total change in fair value for the period included in earnings for liabilities held at the end of the reporting period
|
|
$
|
22,135
|
|
|
$
|
(1,207
|
)
|
|
$
|
22,735
|
|
|
$
|
(2,649
|
)
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
(in thousands)
|
|
Carrying Value
|
|
Fair Value
Level 2
|
|
Fair Value
Level 3
|
|
Carrying Value
|
|
Fair Value
Level 2
|
|
Fair Value
Level 3
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wellstat Diagnostics note receivable
|
|
$
|
50,191
|
|
|
$
|
—
|
|
|
$
|
57,224
|
|
|
$
|
50,191
|
|
|
$
|
—
|
|
|
$
|
51,308
|
|
Hyperion note receivable
|
|
1,200
|
|
|
—
|
|
|
1,200
|
|
|
1,200
|
|
|
—
|
|
|
1,200
|
|
||||||
CareView note receivable
|
|
19,496
|
|
|
—
|
|
|
19,507
|
|
|
19,346
|
|
|
—
|
|
|
18,750
|
|
||||||
Total
|
|
$
|
70,887
|
|
|
$
|
—
|
|
|
$
|
77,931
|
|
|
$
|
70,737
|
|
|
$
|
—
|
|
|
$
|
71,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
February 2018 Notes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
126,066
|
|
|
$
|
126,131
|
|
|
$
|
—
|
|
December 2021 Notes
|
|
120,945
|
|
|
139,052
|
|
|
—
|
|
|
117,415
|
|
|
148,028
|
|
|
—
|
|
||||||
Total
|
|
$
|
120,945
|
|
|
$
|
139,052
|
|
|
$
|
—
|
|
|
$
|
243,481
|
|
|
$
|
274,159
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Reported as:
|
||||||||||||
(in thousands)
|
|
Amortized Cost
|
|
Unrealized Gains
|
|
Estimated Fair Value
|
|
Cash and Cash Equivalents
|
|
Short-Term Investments
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash
|
|
$
|
71,548
|
|
|
$
|
—
|
|
|
$
|
71,548
|
|
|
$
|
71,548
|
|
|
$
|
—
|
|
Money market funds
|
|
324,105
|
|
|
—
|
|
|
324,105
|
|
|
324,105
|
|
|
—
|
|
|||||
Total
|
|
$
|
395,653
|
|
|
$
|
—
|
|
|
$
|
395,653
|
|
|
$
|
395,653
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash
|
|
$
|
109,703
|
|
|
$
|
—
|
|
|
$
|
109,703
|
|
|
$
|
109,703
|
|
|
$
|
—
|
|
Money market funds
|
|
417,563
|
|
|
—
|
|
|
417,563
|
|
|
417,563
|
|
|
—
|
|
|||||
Corporate securities
|
|
3,353
|
|
|
1,495
|
|
|
4,848
|
|
|
—
|
|
|
4,848
|
|
|||||
Total
|
|
$
|
530,619
|
|
|
$
|
1,495
|
|
|
$
|
532,114
|
|
|
$
|
527,266
|
|
|
$
|
4,848
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||
Licensee
|
|
Product Name
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Biogen
|
|
Tysabri
®
|
|
3%
|
|
11%
|
|
5%
|
|
16%
|
|
|
|
|
|
|
|
|
|
|
|
Depomed
|
|
Glumetza, Janumet XR, Jentadueto XR, Synjardy XR and Invokamet XR
|
|
20%
|
|
61%
|
|
20%
|
|
49%
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
Tekturna, Tekturna HCT, Rasilez and Rasilez HCT
|
|
56%
|
|
11%
|
|
52%
|
|
15%
|
|
|
|
|
|
|
|
|
|
|
|
LENSAR
|
|
LENSAR Laser System
|
|
13%
|
|
2%
|
|
13%
|
|
1%
|
|
|
June 30,
|
|
December 31,
|
||||
(in thousands)
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
||||
Raw materials
|
|
$
|
1,771
|
|
|
$
|
1,717
|
|
Work in process
|
|
1,677
|
|
|
1,119
|
|
||
Finished goods
|
|
11,353
|
|
|
6,311
|
|
||
Total inventory
|
|
$
|
14,801
|
|
|
$
|
9,147
|
|
Equipment and inventory
|
|
$
|
848
|
|
Fixed assets
|
|
67
|
|
|
Intangible assets (customer relationships)
|
|
1,845
|
|
|
Total identifiable assets
|
|
$
|
2,760
|
|
|
|
|
||
Consideration paid at closing, cash
|
|
$
|
1,200
|
|
Conversion consideration
|
|
920
|
|
|
Contingent consideration
|
|
640
|
|
|
Total fair value of consideration
|
|
$
|
2,760
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
(in thousands)
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Acquired products rights
(1)
|
|
$
|
36,143
|
|
|
$
|
—
|
|
|
$
|
36,143
|
|
|
$
|
216,690
|
|
|
$
|
(32,503
|
)
|
|
$
|
184,187
|
|
Customer relationships
(1) (2)
|
|
8,028
|
|
|
(341
|
)
|
|
7,687
|
|
|
26,080
|
|
|
(3,729
|
)
|
|
22,351
|
|
||||||
Acquired technology
(2) (3)
|
|
11,011
|
|
|
(806
|
)
|
|
10,205
|
|
|
9,200
|
|
|
(409
|
)
|
|
8,791
|
|
||||||
Acquired trademarks
(2)
|
|
570
|
|
|
(133
|
)
|
|
437
|
|
|
570
|
|
|
(76
|
)
|
|
494
|
|
||||||
|
|
$
|
55,752
|
|
|
$
|
(1,280
|
)
|
|
$
|
54,472
|
|
|
$
|
252,540
|
|
|
$
|
(36,717
|
)
|
|
$
|
215,823
|
|
(3)
|
The Company acquired certain intangible assets as part of the foreclosure on certain of Direct Flow Medical assets, as described further in Note 7. They are amortized over a weighted average period of 10.0 years. The intangible assets for acquired technology are being amortized over their estimated useful lives using the straight-line method of amortization.
|
Fiscal Year
|
|
Amount
|
||
|
|
|
||
2018 (Remaining six months)
|
|
$
|
3,154
|
|
2019
|
|
6,275
|
|
|
2020
|
|
6,240
|
|
|
2021
|
|
6,209
|
|
|
2022
|
|
6,104
|
|
|
2023
|
|
6,040
|
|
|
Thereafter
|
|
20,450
|
|
|
Total remaining estimated amortization expense
|
|
$
|
54,472
|
|
(in thousands)
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
|
|
|
|
||||
Compensation
|
|
$
|
7,046
|
|
|
$
|
6,043
|
|
Interest
|
|
344
|
|
|
2,451
|
|
||
Deferred revenue
|
|
4,904
|
|
|
9,741
|
|
||
Dividend payable
|
|
77
|
|
|
79
|
|
||
Legal
|
|
1,027
|
|
|
595
|
|
||
Accrued rebates, chargebacks and other revenue reserves
|
|
16,931
|
|
|
19,613
|
|
||
Refund to manufacturer
|
|
—
|
|
|
647
|
|
||
Customer advances
|
|
—
|
|
|
3,198
|
|
||
Contingent consideration, current
|
|
1,140
|
|
|
—
|
|
||
Other
|
|
2,825
|
|
|
3,514
|
|
||
Total
|
|
$
|
34,294
|
|
|
$
|
45,881
|
|
(in thousands)
|
|
Discount and Distribution Fees
|
|
Government Rebates and Chargebacks
|
|
Assistance and Other Discounts
|
|
Product Return
|
|
Total
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at December 31, 2017:
|
|
$
|
3,422
|
|
|
$
|
8,709
|
|
|
$
|
4,178
|
|
|
$
|
3,304
|
|
|
$
|
19,613
|
|
Allowances for current period sales
|
|
4,749
|
|
|
7,859
|
|
|
4,174
|
|
|
1,291
|
|
|
18,073
|
|
|||||
Allowances for prior period sales
|
|
—
|
|
|
24
|
|
|
—
|
|
|
65
|
|
|
89
|
|
|||||
Credits/payments for current period sales
|
|
(2,057
|
)
|
|
(2,847
|
)
|
|
(2,019
|
)
|
|
—
|
|
|
(6,923
|
)
|
|||||
Credits/payments for prior period sales
|
|
(3,724
|
)
|
|
(7,629
|
)
|
|
(2,178
|
)
|
|
(390
|
)
|
|
(13,921
|
)
|
|||||
Balance at June 30, 2018:
|
|
$
|
2,390
|
|
|
$
|
6,116
|
|
|
$
|
4,155
|
|
|
$
|
4,270
|
|
|
$
|
16,931
|
|
|
|
|
|
Principal Balance Outstanding
|
|
Carrying Value
|
||||||||
|
|
|
|
June 30,
|
|
June 30,
|
|
December 31,
|
||||||
Description
|
|
Maturity Date
|
|
2018
|
|
2018
|
|
2017
|
||||||
(In thousands)
|
|
|
|
|
|
|
|
|
||||||
Convertible Notes
|
|
|
|
|
|
|
|
|
||||||
February 2018 Notes
|
|
February 1, 2018
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
126,066
|
|
December 2021 Notes
|
|
December 1, 2021
|
|
$
|
150,000
|
|
|
120,945
|
|
|
117,415
|
|
||
Total
|
|
|
|
|
|
|
$
|
120,945
|
|
|
$
|
243,481
|
|
(In thousands)
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
|
|
|
|
||||
Principal amount of the February 2018 Notes
|
|
$
|
—
|
|
|
$
|
126,447
|
|
Unamortized discount of liability component
|
|
—
|
|
|
(381
|
)
|
||
Net carrying value of the February 2018 Notes
|
|
$
|
—
|
|
|
$
|
126,066
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
(In thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Contractual coupon interest
|
|
$
|
—
|
|
|
$
|
1,264
|
|
|
$
|
421
|
|
|
$
|
2,529
|
|
Amortization of debt issuance costs
|
|
—
|
|
|
250
|
|
|
88
|
|
|
499
|
|
||||
Amortization of debt discount
|
|
—
|
|
|
851
|
|
|
293
|
|
|
1,699
|
|
||||
Total
|
|
$
|
—
|
|
|
$
|
2,365
|
|
|
$
|
802
|
|
|
$
|
4,727
|
|
•
|
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)
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
|
|
|
|
||||
Principal amount of the December 2021 Notes
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Unamortized discount of liability component
|
|
(29,055
|
)
|
|
(32,585
|
)
|
||
Net carrying value of the December 2021 Notes
|
|
$
|
120,945
|
|
|
$
|
117,415
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
(In thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Contractual coupon interest
|
|
$
|
1,031
|
|
|
$
|
1,032
|
|
|
$
|
2,062
|
|
|
$
|
2,063
|
|
Amortization of debt issuance costs
|
|
19
|
|
|
18
|
|
|
38
|
|
|
36
|
|
||||
Amortization of debt discount
|
|
135
|
|
|
131
|
|
|
269
|
|
|
261
|
|
||||
Amortization of conversion feature
|
|
1,626
|
|
|
1,469
|
|
|
3,225
|
|
|
2,899
|
|
||||
Total
|
|
$
|
2,811
|
|
|
$
|
2,650
|
|
|
$
|
5,594
|
|
|
$
|
5,259
|
|
|
|
June 30,
|
|
December 31,
|
||||
(in thousands)
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
||||
Accrued lease liability
|
|
$
|
10,700
|
|
|
$
|
10,700
|
|
Long-term incentive accrual
|
|
1,978
|
|
|
1,729
|
|
||
Uncertain tax positions
|
|
31,133
|
|
|
30,682
|
|
||
Long-term deferred tax liabilities
|
|
3,538
|
|
|
1,208
|
|
||
Dividend payable
|
|
45
|
|
|
47
|
|
||
Other
|
|
405
|
|
|
343
|
|
||
Total
|
|
$
|
47,799
|
|
|
$
|
44,709
|
|
|
|
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, 2017
|
|
961
|
|
|
$
|
3.21
|
|
|
2,305
|
|
|
$
|
2.68
|
|
Granted
|
|
3,894
|
|
|
$
|
2.94
|
|
|
481
|
|
|
$
|
2.71
|
|
Vested or released
|
|
—
|
|
|
$
|
—
|
|
|
(401
|
)
|
|
$
|
2.50
|
|
Forfeited or canceled
|
|
—
|
|
|
$
|
—
|
|
|
(119
|
)
|
|
$
|
2.38
|
|
Balance at June 30, 2018
|
|
4,855
|
|
|
$
|
2.99
|
|
|
2,266
|
|
|
$
|
2.73
|
|
(in thousands)
|
|
Unrealized gains (losses) on available-for-sale securities
|
|
Total Accumulated Other Comprehensive Income (Loss)
|
||||
|
|
|
|
|
||||
Beginning Balance at December 31, 2017
|
|
$
|
1,181
|
|
|
$
|
1,181
|
|
Activity for the six months ended June 30, 2018
|
|
(1,181
|
)
|
|
(1,181
|
)
|
||
Ending Balance at June 30, 2018
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash
|
|
$
|
1,983
|
|
Tangible assets
|
|
18,647
|
|
|
Intangible assets
(1)
|
|
11,970
|
|
|
Net deferred tax assets
|
|
25,723
|
|
|
Total identifiable assets
|
|
58,323
|
|
|
Current liabilities
|
|
(6,673
|
)
|
|
Total liabilities assumed
|
|
(6,673
|
)
|
|
|
|
|
||
Net loss on derecognition of notes receivables
|
|
(10,615
|
)
|
|
Gain on bargain purchase, net of loss on extinguishment of notes receivable
|
|
(9,309
|
)
|
|
Total fair value of consideration
|
|
$
|
31,726
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Pro forma revenues
|
|
$
|
46,575
|
|
|
$
|
145,554
|
|
|
$
|
85,093
|
|
|
$
|
194,820
|
|
Pro forma net income (loss)
|
|
$
|
(112,296
|
)
|
|
$
|
59,351
|
|
|
$
|
(110,694
|
)
|
|
$
|
64,124
|
|
Pro forma net income (loss) per share - basic
|
|
$
|
(0.76
|
)
|
|
$
|
0.38
|
|
|
$
|
(0.74
|
)
|
|
$
|
0.40
|
|
Pro forma net income (loss) per share - diluted
|
|
$
|
(0.76
|
)
|
|
$
|
0.38
|
|
|
$
|
(0.74
|
)
|
|
$
|
0.40
|
|
•
|
Adjustment to recognize incremental amortization expense based on the fair value of intangibles acquired;
|
•
|
Elimination of 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 the United States, at such time (35.0%), and the income tax benefit on the interest expense at the statutory tax rate of the United States, at such time (35.0%).
|
Revenues by segment
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Pharmaceutical
|
|
$
|
25,879
|
|
|
$
|
16,212
|
|
|
44,221
|
|
|
28,794
|
|
||
Medical devices
|
|
5,882
|
|
|
2,617
|
|
|
10,864
|
|
|
2,617
|
|
||||
Income generating assets
|
|
14,814
|
|
|
125,006
|
|
|
30,008
|
|
|
157,864
|
|
||||
Total revenues
|
|
$
|
46,575
|
|
|
$
|
143,835
|
|
|
$
|
85,093
|
|
|
$
|
189,275
|
|
Income (loss) by segment
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Pharmaceutical
|
|
$
|
(111,335
|
)
|
|
$
|
(891
|
)
|
|
(113,048
|
)
|
|
(4,624
|
)
|
||
Medical devices
|
|
(1,904
|
)
|
|
(1,195
|
)
|
|
(2,491
|
)
|
|
(1,195
|
)
|
||||
Income generating assets
|
|
943
|
|
|
62,525
|
|
|
4,845
|
|
|
73,499
|
|
||||
Total net income (loss)
|
|
$
|
(112,296
|
)
|
|
$
|
60,439
|
|
|
$
|
(110,694
|
)
|
|
$
|
67,680
|
|
Long-lived assets by segment
|
|
|
|
|
||||
(in thousands)
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
|
|
|
|
||||
Pharmaceutical
|
|
$
|
3,474
|
|
|
$
|
822
|
|
Medical devices
|
|
5,606
|
|
|
6,263
|
|
||
Income generating assets
|
|
143
|
|
|
137
|
|
||
Total long-lived assets
|
|
$
|
9,223
|
|
|
$
|
7,222
|
|
|
|
Three Months Ended
|
|
Change from Prior
|
|
Six Months Ended
|
|
Change from Prior
|
||||||||||||
|
|
June 30,
|
|
|
June 30,
|
|
||||||||||||||
(dollars in thousands)
|
|
2018
|
|
2017
|
|
Year %
|
|
2018
|
|
2017
|
|
Year %
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Royalties from Queen et al. patents
|
|
$
|
1,218
|
|
|
$
|
16,285
|
|
|
(93%)
|
|
$
|
4,001
|
|
|
$
|
30,441
|
|
|
(87%)
|
Royalty rights - change in fair value
|
|
12,842
|
|
|
83,725
|
|
|
(85%)
|
|
23,933
|
|
|
96,871
|
|
|
(75%)
|
||||
Interest revenue
|
|
751
|
|
|
5,460
|
|
|
(86%)
|
|
1,500
|
|
|
10,917
|
|
|
(86%)
|
||||
Product revenue, net
|
|
31,761
|
|
|
18,829
|
|
|
69%
|
|
55,085
|
|
|
31,410
|
|
|
75%
|
||||
License and other
|
|
3
|
|
|
19,536
|
|
|
(100%)
|
|
574
|
|
|
19,636
|
|
|
(97%)
|
||||
Total revenues
|
|
$
|
46,575
|
|
|
$
|
143,835
|
|
|
(68%)
|
|
$
|
85,093
|
|
|
$
|
189,275
|
|
|
(55%)
|
(in thousands)
|
|
Discount and Distribution Fees
|
|
Government Rebates and Chargebacks
|
|
Assistance and Other Discounts
|
|
Product Return
|
|
Total
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at December 31, 2017:
|
|
$
|
3,422
|
|
|
$
|
8,709
|
|
|
$
|
4,178
|
|
|
$
|
3,304
|
|
|
$
|
19,613
|
|
Allowances for current period sales
|
|
4,749
|
|
|
7,859
|
|
|
4,174
|
|
|
1,291
|
|
|
18,073
|
|
|||||
Allowances for prior period sales
|
|
—
|
|
|
24
|
|
|
—
|
|
|
65
|
|
|
89
|
|
|||||
Credits/payments for current period sales
|
|
(2,057
|
)
|
|
(2,847
|
)
|
|
(2,019
|
)
|
|
—
|
|
|
(6,923
|
)
|
|||||
Credits/payments for prior period sales
|
|
(3,724
|
)
|
|
(7,629
|
)
|
|
(2,178
|
)
|
|
(390
|
)
|
|
(13,921
|
)
|
|||||
Balance at June 30, 2018
|
|
$
|
2,390
|
|
|
$
|
6,116
|
|
|
$
|
4,155
|
|
|
$
|
4,270
|
|
|
$
|
16,931
|
|
|
|
Three Months Ended
|
||||||||||
|
|
June 30, 2018
|
||||||||||
|
|
|
|
|
|
|
||||||
|
|
|
|
Change in
|
|
Royalty Rights -
|
||||||
(in thousands)
|
|
Cash Royalties
|
|
Fair Value
|
|
Change in Fair Value
|
||||||
|
|
|
|
|
|
|
||||||
Depomed
|
|
$
|
17,689
|
|
|
$
|
(8,535
|
)
|
|
$
|
9,154
|
|
VB
|
|
263
|
|
|
147
|
|
|
$
|
410
|
|
||
U-M
|
|
1,289
|
|
|
(434
|
)
|
|
$
|
855
|
|
||
AcelRx
|
|
68
|
|
|
2,301
|
|
|
$
|
2,369
|
|
||
Avinger
|
|
61
|
|
|
(101
|
)
|
|
$
|
(40
|
)
|
||
KYBELLA
|
|
—
|
|
|
94
|
|
|
$
|
94
|
|
||
|
|
$
|
19,370
|
|
|
$
|
(6,528
|
)
|
|
$
|
12,842
|
|
|
|
Six Months Ended
|
||||||||||
|
|
June 30, 2018
|
||||||||||
|
|
|
|
|
|
|
||||||
|
|
|
|
Change in
|
|
Royalty Rights -
|
||||||
(in thousands)
|
|
Cash Royalties
|
|
Fair Value
|
|
Change in Fair Value
|
||||||
|
|
|
|
|
|
|
||||||
Depomed
|
|
$
|
34,597
|
|
|
$
|
(17,967
|
)
|
|
$
|
16,630
|
|
VB
|
|
543
|
|
|
284
|
|
|
827
|
|
|||
U-M
|
|
2,284
|
|
|
(620
|
)
|
|
1,664
|
|
|||
AcelRx
|
|
120
|
|
|
4,539
|
|
|
4,659
|
|
|||
Avinger
|
|
366
|
|
|
(396
|
)
|
|
(30
|
)
|
|||
KYBELLA
|
|
83
|
|
|
100
|
|
|
183
|
|
|||
|
|
$
|
37,993
|
|
|
$
|
(14,060
|
)
|
|
$
|
23,933
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
|
|
|
|
June 30,
|
|
June 30,
|
||||
Licensee
|
|
Product Name
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Biogen
|
|
Tysabri
|
|
3%
|
|
11%
|
|
5%
|
|
16%
|
|
|
|
|
|
|
|
|
|
|
|
Depomed
|
|
Glumetza, Janumet XR, Jentadueto XR, Synjardy XR and Invokamet XR
|
|
20%
|
|
61%
|
|
20%
|
|
49%
|
|
|
|
|
|
|
|
|
|
|
|
N/M
|
|
Tekturna, Tekturna HCT, Rasilez and Rasilez HCT
|
|
56%
|
|
11%
|
|
52%
|
|
15%
|
|
|
|
|
|
|
|
|
|
|
|
LENSAR
|
|
LENSAR Laser System
|
|
13%
|
|
2%
|
|
13%
|
|
1%
|
|
|
Three Months Ended
|
|
Change from Prior
|
|
Six Months Ended
|
|
Change from Prior
|
||||||||||||
|
|
June 30,
|
|
|
June 30,
|
|
||||||||||||||
(In thousands)
|
|
2018
|
|
2017
|
|
Year %
|
|
2018
|
|
2017
|
|
Year %
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of product revenue, (excluding intangible amortization)
|
|
$
|
14,524
|
|
|
$
|
4,515
|
|
|
222%
|
|
$
|
25,090
|
|
|
$
|
7,067
|
|
|
255%
|
Amortization of intangible assets
|
|
6,384
|
|
|
6,148
|
|
|
4%
|
|
12,677
|
|
|
12,163
|
|
|
4%
|
||||
General and administrative
|
|
14,529
|
|
|
11,288
|
|
|
29%
|
|
26,190
|
|
|
23,864
|
|
|
10%
|
||||
Sales and marketing
|
|
5,385
|
|
|
3,616
|
|
|
49%
|
|
10,898
|
|
|
6,200
|
|
|
76%
|
||||
Research and development
|
|
684
|
|
|
4,281
|
|
|
(84)%
|
|
1,477
|
|
|
6,047
|
|
|
(76)%
|
||||
Impairment of intangible assets
|
|
152,330
|
|
|
—
|
|
|
N/M
|
|
152,330
|
|
|
—
|
|
|
N/M
|
||||
Change in fair value of acquisition-related contingent consideration
|
|
(22,135
|
)
|
|
1,207
|
|
|
N/M
|
|
(22,735
|
)
|
|
2,649
|
|
|
N/M
|
||||
Total operating expenses
|
|
$
|
171,701
|
|
|
$
|
31,055
|
|
|
453%
|
|
$
|
205,927
|
|
|
$
|
57,990
|
|
|
255%
|
Percentage of total revenues
|
|
369
|
%
|
|
22
|
%
|
|
|
|
242
|
%
|
|
31
|
%
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per share - basic
|
$
|
(0.76
|
)
|
|
$
|
0.39
|
|
|
$
|
(0.74
|
)
|
|
$
|
0.42
|
|
Net income (loss) per share - diluted
|
$
|
(0.76
|
)
|
|
$
|
0.39
|
|
|
$
|
(0.74
|
)
|
|
$
|
0.42
|
|
Fiscal Period
|
|
Total Number of Shares Repurchased
|
|
Average Price Paid Per Share
|
|
Total Number of Shares Purchased As Part of a Publicly Announced Program
|
|
Approximate Dollar Amount of Shares That May Yet be Purchased Under the Program
(1)
|
||||||||
April 1, 2018
|
to
|
April 30, 2018
|
|
1,652
|
|
|
3.03
|
|
|
1,652
|
|
|
15,841
|
|
||
May 1, 2018
|
to
|
May 31, 2018
|
|
2,861
|
|
|
2.93
|
|
|
2,861
|
|
|
7,469
|
|
||
June 1, 2018
|
to
|
June 30, 2018
|
|
2,252
|
|
|
2.70
|
|
|
2,252
|
|
|
1,392
|
|
||
Total during three months ended June 30, 2018
|
|
6,765
|
|
|
$
|
2.87
|
|
|
6,765
|
|
|
$
|
1,392
|
|
EXHIBIT INDEX
|
|
Exhibit Number
|
Exhibit Title
|
|
|
3.1
|
Restated Certificate of Incorporation effective March 23, 1993 (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K filed March 31, 1993)
|
|
|
3.2
|
|
|
|
3.3
|
|
|
|
3.4
|
|
|
|
3.5
|
|
|
|
3.6
|
|
|
|
10.1*#
|
|
|
|
10.2#
|
|
|
|
12.1#
|
|
|
|
31.1#
|
|
|
|
31.2#
|
|
|
|
32.1**#
|
|
|
|
101.INS
|
XBRL Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
#
|
Filed herewith.
|
*
|
Management contract or compensation 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.
|
Dated:
|
August 9, 2018
|
|
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 and
Principal Accounting Officer)
|
|
(i)
|
revising the first two sentences of Section 5.9(a) to read as follows: “Notwithstanding the accounting treatment thereof, for United States federal, state, local and foreign tax purposes, the Selling Parties and the Purchaser shall (i) treat the transactions contemplated by the Transaction Documents as a sale as of the Closing Date and (ii) treat the transactions contemplated by the First Amendment as a sale as of the Amendment Effective Date (as defined in the First Amendment). Accordingly, any and all Royalty Payments made pursuant to the License Agreements after the Closing Date (including any Royalty Payments in respect of the interest treated as sold to Purchaser pursuant to the transactions contemplated by the First Amendment) shall be treated as made to the Purchaser for United States federal, state, local and foreign tax purposes.”
|
(ii)
|
changing the references to Section 5.8 in Section 5.9(b) to Section 5.9.
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2018
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
|||||||||||||
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income (loss) before income taxes
|
|
$
|
401,876
|
|
|
$
|
501,272
|
|
|
$
|
530,138
|
|
|
$
|
109,370
|
|
|
$
|
184,527
|
|
|
$
|
(123,940
|
)
|
Add: fixed charges
|
|
24,931
|
|
|
39,274
|
|
|
27,123
|
|
|
18,330
|
|
|
20,507
|
|
|
6,604
|
|
||||||
Earnings
|
|
$
|
426,807
|
|
|
$
|
540,546
|
|
|
$
|
557,261
|
|
|
$
|
127,700
|
|
|
$
|
205,034
|
|
|
$
|
(117,336
|
)
|
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
1
|
|
$
|
24,871
|
|
|
$
|
39,211
|
|
|
$
|
27,059
|
|
|
$
|
18,267
|
|
|
$
|
20,221
|
|
|
$
|
6,396
|
|
Estimated interest portion of rent expense
2
|
|
60
|
|
|
63
|
|
|
64
|
|
|
63
|
|
|
286
|
|
|
208
|
|
||||||
Fixed charges
|
|
$
|
24,931
|
|
|
$
|
39,274
|
|
|
$
|
27,123
|
|
|
$
|
18,330
|
|
|
$
|
20,507
|
|
|
$
|
6,604
|
|
Ratio of earnings to fixed charges
|
|
17.12
|
|
|
13.76
|
|
|
20.55
|
|
|
6.97
|
|
|
10.00
|
|
|
(17.77
|
)
|
Date:
|
August 9, 2018
|
|
|
|
|
/s/ John P. McLaughlin
|
|
|
John P. McLaughlin
Chief Executive Officer
(Principal Executive Officer)
|
|
Date:
|
August 9, 2018
|
|
|
|
|
/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.
|