|
ý
|
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
For the quarterly period ended March 31, 2019
|
¨
|
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.)
|
Title of each class
|
Trading symbol
|
Name of each exchange on which registered
|
Common Stock, par value $0.01 per share
|
PDLI
|
The Nasdaq Stock Market LLC
|
|
Large accelerated filer
¨
|
Accelerated filer
ý
|
Non-accelerated filer
¨
|
Smaller reporting company
¨
|
Emerging growth 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 Months Ended March 31, 2019 and 2018
|
|
|
|
|
|
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2019 and 2018
|
|
|
|
|
|
Condensed Consolidated Balance Sheets at March 31, 2019 and December 31, 2018
|
|
|
|
|
|
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018
|
|
|
|
|
|
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
|
||||||
|
|
March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Revenues
|
|
|
|
|
||||
Product revenue, net
|
|
$
|
26,686
|
|
|
$
|
23,324
|
|
Royalty rights - change in fair value
|
|
12,257
|
|
|
11,091
|
|
||
Royalties from Queen et al. patents
|
|
3
|
|
|
2,783
|
|
||
Interest revenue
|
|
—
|
|
|
749
|
|
||
License and other
|
|
(33
|
)
|
|
571
|
|
||
Total revenues
|
|
38,913
|
|
|
38,518
|
|
||
Operating expenses
|
|
|
|
|
|
|
||
Cost of product revenue (excluding intangible asset amortization)
|
|
12,810
|
|
|
10,566
|
|
||
Amortization of intangible assets
|
|
1,572
|
|
|
6,293
|
|
||
General and administrative
|
|
10,462
|
|
|
11,661
|
|
||
Sales and marketing
|
|
2,730
|
|
|
5,513
|
|
||
Research and development
|
|
869
|
|
|
793
|
|
||
Change in fair value of contingent consideration
|
|
—
|
|
|
(600
|
)
|
||
Total operating expenses
|
|
28,443
|
|
|
34,226
|
|
||
Operating income
|
|
10,470
|
|
|
4,292
|
|
||
Non-operating expense, net
|
|
|
|
|
|
|
||
Interest and other income, net
|
|
1,874
|
|
|
1,914
|
|
||
Interest expense
|
|
(2,955
|
)
|
|
(3,585
|
)
|
||
Total non-operating expense, net
|
|
(1,081
|
)
|
|
(1,671
|
)
|
||
Income before income taxes
|
|
9,389
|
|
|
2,621
|
|
||
Income tax expense
|
|
2,772
|
|
|
1,019
|
|
||
Net income
|
|
6,617
|
|
|
1,602
|
|
||
Less: Net loss attributable to noncontrolling interests
|
|
(63
|
)
|
|
—
|
|
||
Net income attributable to PDL’s shareholders
|
|
$
|
6,680
|
|
|
$
|
1,602
|
|
|
|
|
|
|
||||
Net income per share
|
|
|
|
|
|
|
||
Basic
|
|
$
|
0.05
|
|
|
$
|
0.01
|
|
Diluted
|
|
$
|
0.05
|
|
|
$
|
0.01
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
||
Basic
|
|
128,799
|
|
|
151,473
|
|
||
Diluted
|
|
129,390
|
|
|
152,579
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
||||
Net income
|
|
$
|
6,617
|
|
|
$
|
1,602
|
|
|
|
|
|
|
||||
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
||
Change in unrealized gains (losses) 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
|
|
6,617
|
|
|
421
|
|
||
Less: Comprehensive loss attributable to noncontrolling interests
|
|
(63
|
)
|
|
—
|
|
||
Comprehensive income attributable to PDL’s shareholders
|
|
$
|
6,680
|
|
|
$
|
421
|
|
|
March 31,
|
|
December 31,
|
||||
|
2019
|
|
2018
|
||||
|
(unaudited)
|
|
(Note 1)
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
366,324
|
|
|
$
|
394,590
|
|
Accounts receivable, net
|
15,739
|
|
|
21,648
|
|
||
Notes receivable
|
63,056
|
|
|
63,042
|
|
||
Inventory
|
15,547
|
|
|
18,942
|
|
||
Prepaid and other current assets
|
16,880
|
|
|
18,995
|
|
||
Total current assets
|
477,546
|
|
|
517,217
|
|
||
Property and equipment, net
|
7,110
|
|
|
7,387
|
|
||
Royalty rights - at fair value
|
376,147
|
|
|
376,510
|
|
||
Notes receivables, long-term
|
648
|
|
|
771
|
|
||
Intangible assets, net
|
49,746
|
|
|
51,319
|
|
||
Other assets
|
12,336
|
|
|
10,532
|
|
||
Total assets
|
$
|
923,533
|
|
|
$
|
963,736
|
|
|
|
|
|
||||
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
12,430
|
|
|
$
|
13,142
|
|
Accrued liabilities
|
30,867
|
|
|
39,312
|
|
||
Accrued income taxes
|
21
|
|
|
16
|
|
||
Total current liabilities
|
43,318
|
|
|
52,470
|
|
||
Convertible notes payable
|
126,567
|
|
|
124,644
|
|
||
Other long-term liabilities
|
59,864
|
|
|
56,843
|
|
||
Total liabilities
|
229,749
|
|
|
233,957
|
|
||
|
|
|
|
||||
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; 123,817 and 136,513 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively
|
1,238
|
|
|
1,365
|
|
||
Additional paid-in capital
|
(96,869
|
)
|
|
(98,030
|
)
|
||
Treasury stock, at cost; 400 and 750 shares held at March 31, 2019 and December 31, 2018, respectively
|
(1,490
|
)
|
|
(2,103
|
)
|
||
Retained earnings
|
790,396
|
|
|
828,547
|
|
||
Total PDL’s stockholders’ equity
|
693,275
|
|
|
729,779
|
|
||
Noncontrolling interests
|
509
|
|
|
—
|
|
||
Total stockholders’ equity
|
693,784
|
|
|
729,779
|
|
||
Total liabilities and stockholders’ equity
|
$
|
923,533
|
|
|
$
|
963,736
|
|
|
PDL’s Stockholders’ Equity
|
|
|
|
|
|||||||||||||||||||||||||
|
Common Stock
|
|
Treasury Stock
|
|
Additional
Paid-In
Capital
|
|
Retained Earnings
|
|
Accumulated
Other Comprehensive
Income (Loss)
|
|
Non-controlling Interest
|
|
Total
Stockholders’ Equity |
|||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|
||||||||||||||||||||||
Balance at December 31, 2018
|
136,512,522
|
|
|
$
|
1,365
|
|
|
$
|
(2,103
|
)
|
|
$
|
(98,030
|
)
|
|
$
|
828,547
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
729,779
|
|
Issuance of common stock, net of forfeitures
|
764,785
|
|
|
8
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
—
|
|
|
1,169
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,169
|
|
|||||||
Repurchase and retirement of common stock
|
(13,460,164
|
)
|
|
(135
|
)
|
|
613
|
|
|
—
|
|
|
(44,831
|
)
|
|
—
|
|
|
—
|
|
|
(44,353
|
)
|
|||||||
Transfer of subsidiary shares to non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
572
|
|
|
572
|
|
|||||||
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,680
|
|
|
—
|
|
|
(63
|
)
|
|
6,617
|
|
|||||||
Total comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,617
|
|
|||||||
Balance at March 31, 2019
|
123,817,143
|
|
|
$
|
1,238
|
|
|
$
|
(1,490
|
)
|
|
$
|
(96,869
|
)
|
|
$
|
790,396
|
|
|
$
|
—
|
|
|
$
|
509
|
|
|
$
|
693,784
|
|
|
PDL’s Stockholders’ Equity
|
|
|
|
|
|||||||||||||||||||||||||
|
Common Stock
|
|
Treasury Stock
|
|
Additional
Paid-In
Capital
|
|
Retained Earnings
|
|
Accumulated
Other Comprehensive
Income (Loss)
|
|
Non-controlling Interest
|
|
Total
Stockholders’ Equity |
|||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|
||||||||||||||||||||||
Balance at December 31, 2017
|
153,774,756
|
|
|
$
|
1,538
|
|
|
$
|
—
|
|
|
$
|
(102,443
|
)
|
|
$
|
945,614
|
|
|
$
|
1,181
|
|
|
$
|
—
|
|
|
$
|
845,890
|
|
Issuance of common stock
|
37,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
—
|
|
|
957
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
957
|
|
|||||||
Repurchase and retirement of common stock
|
(1,000,000
|
)
|
|
(10
|
)
|
|
(1,188
|
)
|
|
—
|
|
|
(2,961
|
)
|
|
—
|
|
|
—
|
|
|
(4,159
|
)
|
|||||||
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,602
|
|
|
—
|
|
|
—
|
|
|
1,602
|
|
|||||||
Change in unrealized gains and losses on investments in available-for-sale securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,181
|
)
|
|
—
|
|
|
(1,181
|
)
|
|||||||
Total comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
421
|
|
|||||||
Balance at March 31, 2018
|
152,812,256
|
|
|
$
|
1,528
|
|
|
$
|
(1,188
|
)
|
|
$
|
(101,486
|
)
|
|
$
|
944,255
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
843,109
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net income
|
$
|
6,617
|
|
|
$
|
1,602
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
||
Amortization of convertible notes
|
1,923
|
|
|
2,132
|
|
||
Amortization of intangible assets
|
1,572
|
|
|
6,293
|
|
||
Change in fair value of royalty rights - at fair value
|
(12,257
|
)
|
|
(11,091
|
)
|
||
Change in fair value of derivative asset
|
33
|
|
|
(71
|
)
|
||
Change in fair value of contingent consideration
|
—
|
|
|
(600
|
)
|
||
Other amortization and depreciation
|
1,128
|
|
|
1,004
|
|
||
Gain on sale of available-for-sale securities
|
—
|
|
|
(764
|
)
|
||
Inventory obsolescence
|
97
|
|
|
114
|
|
||
Provision for bad debts
|
13
|
|
|
(12
|
)
|
||
Stock-based compensation expense
|
1,169
|
|
|
957
|
|
||
Deferred income taxes
|
1,770
|
|
|
794
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
|
||
Accounts receivable
|
5,931
|
|
|
8,566
|
|
||
Prepaid and other current assets
|
2,116
|
|
|
532
|
|
||
Accrued interest on notes receivable
|
—
|
|
|
(74
|
)
|
||
Inventory
|
2,900
|
|
|
(4,919
|
)
|
||
Other assets
|
182
|
|
|
(1,720
|
)
|
||
Accounts payable
|
(712
|
)
|
|
(9,940
|
)
|
||
Accrued liabilities
|
(7,944
|
)
|
|
(6,226
|
)
|
||
Accrued income taxes
|
5
|
|
|
(505
|
)
|
||
Other long-term liabilities
|
(28
|
)
|
|
407
|
|
||
Net cash provided by (used in) operating activities
|
4,515
|
|
|
(13,521
|
)
|
||
Cash flows from investing activities
|
|
|
|
|
|
||
Proceeds from sales of available-for-sale securities
|
—
|
|
|
4,115
|
|
||
Proceeds from royalty rights - at fair value
|
12,620
|
|
|
18,623
|
|
||
Purchase of property and equipment
|
(42
|
)
|
|
(1,398
|
)
|
||
Net cash provided by investing activities
|
12,578
|
|
|
21,340
|
|
||
Cash flows from financing activities
|
|
|
|
|
|
||
Repayment of convertible notes
|
—
|
|
|
(126,447
|
)
|
||
Payment of contingent consideration
|
(1,071
|
)
|
|
—
|
|
||
Repurchase of Company common stock
|
(44,288
|
)
|
|
(3,560
|
)
|
||
Net cash used in financing activities
|
(45,359
|
)
|
|
(130,007
|
)
|
||
Net decrease in cash and cash equivalents
|
(28,266
|
)
|
|
(122,188
|
)
|
||
Cash and cash equivalents at beginning of the period
|
394,590
|
|
|
527,266
|
|
||
Cash and cash equivalents at end of period
|
$
|
366,324
|
|
|
$
|
405,078
|
|
|
|
|
|
||||
Supplemental cash flow information
|
|
|
|
|
|
||
Cash (refunded) paid for income taxes
|
$
|
(2,773
|
)
|
|
$
|
644
|
|
Cash paid for interest
|
$
|
—
|
|
|
$
|
2,529
|
|
|
|
|
|
||||
Supplemental schedule of non-cash investing and financing activities
|
|
|
|
||||
Assets held for sale reclassified from other assets to intangible assets
|
$
|
—
|
|
|
$
|
1,811
|
|
•
|
The Company’s Pharmaceutical segment consists of revenue derived from branded prescription medicine products sold under the name Tekturna
®
and Tekturna HCT
®
in the United States and Rasilez
®
and Rasilez HCT
®
in the rest of the world and an authorized generic form of Tekturna sold in the United States (collectively, the “Noden Products”). The branded prescription Noden Products were acquired from Novartis in July 2016 (the “Noden Transaction”). The Company launched its authorized generic form of Tekturna in the United States in March 2019.
|
•
|
The Company’s Medical Devices segment consists of revenue derived from the LENSAR
®
Laser System sales made by the Company’s subsidiary, LENSAR, Inc. (“LENSAR”), which may include equipment, Patient Interface Devices (“PIDs” or “consumables”), procedure licenses, and training, installation, warranty and maintenance agreements.
|
•
|
The Company’s Income Generating Assets segment consists of revenue derived from (i) royalty rights - at fair value, (ii) notes and other long-term receivables, (iii) equity investments and (iv) royalties from issued patents in the United States and elsewhere covering the humanization of antibodies (“Queen et al. patents”).
|
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||
|
|
March 31, 2019
|
|
March 31, 2018
|
||||||||||||
(in thousands)
|
|
Medical Devices
|
|
Pharmaceutical
|
|
Medical Devices
|
|
Pharmaceutical
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Primary geographical markets:
|
|
|
|
|
|
|
|
|
||||||||
North America
|
|
$
|
2,084
|
|
|
$
|
12,138
|
|
|
$
|
1,704
|
|
|
$
|
10,931
|
|
Europe
|
|
1,017
|
|
|
5,582
|
|
|
615
|
|
|
5,991
|
|
||||
Asia
|
|
2,269
|
|
|
2,241
|
|
|
1,114
|
|
|
1,420
|
|
||||
Other
|
|
119
|
|
|
—
|
|
|
113
|
|
|
—
|
|
||||
Total revenue from contracts with customers
1
|
|
$
|
5,489
|
|
|
$
|
19,961
|
|
|
$
|
3,546
|
|
|
$
|
18,342
|
|
(in thousands)
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
|
|
|
|
||||
Receivables, current and noncurrent, net
|
|
$
|
15,867
|
|
|
$
|
20,655
|
|
Contract assets
|
|
$
|
5,360
|
|
|
$
|
2,595
|
|
Contract liabilities
|
|
$
|
5,452
|
|
|
$
|
8,938
|
|
(in thousands)
|
|
Medical Devices
|
|
Pharmaceutical
|
|
Total
|
||||||
|
|
|
|
|
|
|
||||||
Contract assets at December 31, 2018
|
|
$
|
—
|
|
|
$
|
2,595
|
|
|
$
|
2,595
|
|
Payments received
|
|
—
|
|
|
(26
|
)
|
|
(26
|
)
|
|||
Contract assets recognized
|
|
—
|
|
|
2,791
|
|
|
2,791
|
|
|||
Contract assets at March 31, 2019
|
|
$
|
—
|
|
|
$
|
5,360
|
|
|
$
|
5,360
|
|
(in thousands)
|
|
Medical Devices
|
|
Pharmaceutical
|
|
Total
|
||||||
|
|
|
|
|
|
|
||||||
Contract liabilities at December 31, 2018
|
|
$
|
1,167
|
|
|
$
|
7,771
|
|
|
$
|
8,938
|
|
Additions
|
|
282
|
|
|
3,347
|
|
|
3,629
|
|
|||
Amounts recognized into revenue
|
|
(344
|
)
|
|
(6,771
|
)
|
|
(7,115
|
)
|
|||
Contract liabilities at March 31, 2019
|
|
$
|
1,105
|
|
|
$
|
4,347
|
|
|
$
|
5,452
|
|
|
|
Nine Months Ended
|
|
|
|
|
||||||
(in thousands)
|
|
December 31, 2019
|
|
Thereafter
|
|
Total
|
||||||
|
|
|
|
|
|
|
||||||
Pharmaceutical product sales
|
|
$
|
2,500
|
|
|
$
|
—
|
|
|
$
|
2,500
|
|
Medical device sales
|
|
$
|
2,942
|
|
|
$
|
2,269
|
|
|
$
|
5,211
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
Net Income per Basic and Diluted Share
|
|
2019
|
|
2018
|
||||
(in thousands, except per share amounts)
|
|
|
|
|
||||
Numerator
|
|
|
|
|
||||
Income attributable to PDL’s shareholders used to compute net income per basic and diluted share
|
|
$
|
6,680
|
|
|
$
|
1,602
|
|
|
|
|
|
|
||||
Denominator
|
|
|
|
|
|
|
||
Total weighted average shares used to compute net income attributable to PDL’s shareholders, per basic share
|
|
128,799
|
|
|
151,473
|
|
||
Restricted stock outstanding
|
|
512
|
|
|
1,106
|
|
||
Stock options
|
|
79
|
|
|
—
|
|
||
Shares used to compute net income attributable to PDL’s shareholders, per diluted share
|
|
129,390
|
|
|
152,579
|
|
||
|
|
|
|
|
||||
Net income attributable to PDL’s shareholders per share - basic
|
|
$
|
0.05
|
|
|
$
|
0.01
|
|
Net income attributable to PDL’s shareholders per share - diluted
|
|
$
|
0.05
|
|
|
$
|
0.01
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||||||||||
(in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Money market funds
|
|
$
|
227,612
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
227,612
|
|
|
$
|
226,719
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
226,719
|
|
Warrants
|
|
—
|
|
|
29
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
62
|
|
|
—
|
|
|
62
|
|
||||||||
Royalty rights - at fair value
|
|
—
|
|
|
—
|
|
|
376,147
|
|
|
376,147
|
|
|
—
|
|
|
—
|
|
|
376,510
|
|
|
376,510
|
|
||||||||
Total
|
|
$
|
227,612
|
|
|
$
|
29
|
|
|
$
|
376,147
|
|
|
$
|
603,788
|
|
|
$
|
226,719
|
|
|
$
|
62
|
|
|
$
|
376,510
|
|
|
$
|
603,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Contingent consideration, current
1
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,071
|
|
|
$
|
1,071
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,071
|
|
|
$
|
1,071
|
|
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, 2018
|
|
Change in Fair Value
|
|
March 31, 2019
|
||||||
|
|
|
|
|
|
|
||||||
Assertio (formerly Depomed)
|
|
$
|
264,371
|
|
|
$
|
(552
|
)
|
|
$
|
263,819
|
|
VB
|
|
14,108
|
|
|
128
|
|
|
14,236
|
|
|||
U-M
|
|
25,595
|
|
|
(536
|
)
|
|
25,059
|
|
|||
AcelRx
|
|
70,380
|
|
|
2,088
|
|
|
72,468
|
|
|||
KYBELLA
|
|
2,056
|
|
|
(1,491
|
)
|
|
565
|
|
|||
|
|
$
|
376,510
|
|
|
$
|
(363
|
)
|
|
$
|
376,147
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) - Liabilities
|
||||||
|
|
|
||||
(in thousands)
|
|
Contingent Consideration
|
||||
Fair value as of December 31, 2018
|
|
$
|
(1,071
|
)
|
||
|
|
|
|
|
||
|
Financial instruments purchased
|
|
—
|
|
||
|
Settlement of financial instrument
1
|
|
1,071
|
|
||
|
Total net change in fair value for the period
|
|
—
|
|
||
|
|
|
|
|
||
Fair value as of March 31, 2019
|
|
$
|
—
|
|
1
|
Represents the final conversion consideration and earn out liability for the LENSAR acquisition of assets from Precision Eye Services.
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(in thousands)
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
||||
Total change in fair value for the period included in earnings for royalty right assets held at the end of the reporting period
|
|
$
|
12,257
|
|
|
$
|
11,091
|
|
|
|
|
|
|
||||
Total change in fair value for the period included in earnings for liabilities held at the end of the reporting period
|
|
$
|
—
|
|
|
$
|
600
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
(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
|
|
|
$
|
—
|
|
|
$
|
58,779
|
|
|
$
|
50,191
|
|
|
$
|
—
|
|
|
$
|
57,322
|
|
Hyperion note receivable
|
|
1,200
|
|
|
—
|
|
|
1,200
|
|
|
1,200
|
|
|
—
|
|
|
1,200
|
|
||||||
CareView note receivable
|
|
11,458
|
|
|
—
|
|
|
11,458
|
|
|
11,458
|
|
|
—
|
|
|
11,458
|
|
||||||
Total
|
|
$
|
62,849
|
|
|
$
|
—
|
|
|
$
|
71,437
|
|
|
$
|
62,849
|
|
|
$
|
—
|
|
|
$
|
69,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
February 2018 Notes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
December 2021 Notes
|
|
126,567
|
|
|
171,864
|
|
|
—
|
|
|
124,644
|
|
|
151,356
|
|
|
—
|
|
||||||
Total
|
|
$
|
126,567
|
|
|
$
|
171,864
|
|
|
$
|
—
|
|
|
$
|
124,644
|
|
|
$
|
151,356
|
|
|
$
|
—
|
|
Asset
|
|
Valuation
Technique
|
|
Unobservable
Input
|
|
March 31, 2019
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
Wellstat Diagnostics
|
|
|
|
|
|
|
|
|
Wellstat Guarantors intellectual property
|
|
Income Approach
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
12%
|
|
12%
|
|
|
|
|
Royalty amount
|
|
$21 million
|
|
$21 million
|
Settlement Amount
|
|
Income Approach
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
15%
|
|
15%
|
|
|
|
|
Settlement amount
|
|
$34 million
|
|
$34 million
|
|
|
|
|
|
|
|
|
|
Real Estate Property
|
|
Market Approach
|
|
|
|
|
|
|
|
|
|
|
Annual appreciation rate
|
|
4%
|
|
4%
|
|
|
|
|
Estimated realtor fee
|
|
6%
|
|
6%
|
|
|
|
|
Estimated disposal date
|
|
9/30/2019
|
|
9/30/2019
|
|
|
|
|
|
|
|
|
|
CareView
|
|
|
|
|
|
|
|
|
Note receivable cash flows
|
|
Income Approach
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
30%
|
|
30%
|
|
|
|
|
|
||||
(in thousands)
|
|
Amortized Cost
|
|
Estimated Fair Value
|
||||
|
|
|
|
|
||||
March 31, 2019
|
|
|
|
|
||||
Cash
|
|
$
|
138,712
|
|
|
$
|
138,712
|
|
Money market funds
|
|
227,612
|
|
|
227,612
|
|
||
Total
|
|
$
|
366,324
|
|
|
$
|
366,324
|
|
|
|
|
|
|
||||
December 31, 2018
|
|
|
|
|
||||
Cash
|
|
$
|
167,871
|
|
|
$
|
167,871
|
|
Money market funds
|
|
226,719
|
|
|
226,719
|
|
||
Total
|
|
$
|
394,590
|
|
|
$
|
394,590
|
|
|
|
Three Months Ended March 31,
|
||
Licensee
|
|
2019
|
|
2018
|
Noden
|
|
51%
|
|
48%
|
Assertio
|
|
27%
|
|
19%
|
LENSAR
|
|
17%
|
|
13%
|
|
|
March 31,
|
|
December 31,
|
||||
(in thousands)
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
||||
Raw materials
|
|
$
|
6,125
|
|
|
$
|
6,214
|
|
Work in process
|
|
1,089
|
|
|
549
|
|
||
Finished goods
|
|
8,333
|
|
|
12,179
|
|
||
Total inventory
|
|
$
|
15,547
|
|
|
$
|
18,942
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
(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
|
|
|
$
|
(3,389
|
)
|
|
$
|
32,754
|
|
|
$
|
36,143
|
|
|
$
|
(2,258
|
)
|
|
$
|
33,885
|
|
Customer relationships
(1) (2)
|
|
8,028
|
|
|
(997
|
)
|
|
7,031
|
|
|
8,028
|
|
|
(782
|
)
|
|
7,246
|
|
||||||
Acquired technology
(2) (3)
|
|
11,011
|
|
|
(1,402
|
)
|
|
9,609
|
|
|
11,011
|
|
|
(1,203
|
)
|
|
9,808
|
|
||||||
Acquired trademarks
(2)
|
|
570
|
|
|
(218
|
)
|
|
352
|
|
|
570
|
|
|
(190
|
)
|
|
380
|
|
||||||
|
|
$
|
55,752
|
|
|
$
|
(6,006
|
)
|
|
$
|
49,746
|
|
|
$
|
55,752
|
|
|
$
|
(4,433
|
)
|
|
$
|
51,319
|
|
(3)
|
The Company acquired certain intangible assets as part of the foreclosure on certain of Direct Flow Medical assets. They are being amortized on a straight-line basis over a weighted-average period of
10 years
.
|
Fiscal Year
|
|
Amount
|
||
|
|
|
||
2019 (Remaining nine months)
|
|
$
|
4,704
|
|
2020
|
|
6,240
|
|
|
2021
|
|
6,209
|
|
|
2022
|
|
6,104
|
|
|
2023
|
|
6,040
|
|
|
Thereafter
|
|
20,449
|
|
|
Total remaining amortization expense
|
|
$
|
49,746
|
|
(in thousands)
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
|
|
|
|
|
||||
Accrued rebates, chargebacks and other revenue reserves
|
|
$
|
14,836
|
|
|
$
|
20,133
|
|
Deferred revenue
|
|
5,370
|
|
|
8,811
|
|
||
Compensation
|
|
3,586
|
|
|
4,468
|
|
||
Interest
|
|
1,375
|
|
|
344
|
|
||
Legal
|
|
490
|
|
|
623
|
|
||
Dividend payable
|
|
15
|
|
|
15
|
|
||
Customer advances
|
|
4
|
|
|
1
|
|
||
Other
|
|
5,191
|
|
|
4,917
|
|
||
Total
|
|
$
|
30,867
|
|
|
$
|
39,312
|
|
(in thousands)
|
|
Discount and Distribution Fees
|
|
Government Rebates and Chargebacks
|
|
Assistance and Other Discounts
|
|
Product Returns
|
|
Total
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at December 31, 2018
|
|
$
|
3,094
|
|
|
$
|
8,901
|
|
|
$
|
3,457
|
|
|
$
|
4,681
|
|
|
$
|
20,133
|
|
Allowances for current period sales
|
|
2,173
|
|
|
4,396
|
|
|
1,974
|
|
|
554
|
|
|
9,097
|
|
|||||
Allowances for prior period sales
|
|
—
|
|
|
1,841
|
|
|
120
|
|
|
—
|
|
|
1,961
|
|
|||||
Credits/payments for current period sales
|
|
(351
|
)
|
|
(1,028
|
)
|
|
(546
|
)
|
|
(31
|
)
|
|
(1,956
|
)
|
|||||
Credits/payments for prior period sales
|
|
(2,483
|
)
|
|
(7,972
|
)
|
|
(2,887
|
)
|
|
(1,057
|
)
|
|
(14,399
|
)
|
|||||
Balance at March 31, 2019
|
|
$
|
2,433
|
|
|
$
|
6,138
|
|
|
$
|
2,118
|
|
|
$
|
4,147
|
|
|
$
|
14,836
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(in thousands)
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
||||
Operating lease cost
|
|
$
|
233
|
|
|
$
|
285
|
|
Short-term lease cost
|
|
25
|
|
|
12
|
|
||
Total lease cost
|
|
$
|
258
|
|
|
$
|
297
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(in thousands)
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
||||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
||||
Operating cash flows from operating leases
|
|
$
|
215
|
|
|
$
|
285
|
|
Right-of-use-assets obtained in exchange for lease obligations:
|
|
|
|
|
||||
Operating leases
|
|
$
|
2,111
|
|
|
N/A
|
Operating Leases
|
|
Classification
|
|
March 31, 2019
|
||
|
|
|
|
|
||
Operating lease ROU assets
|
|
Other assets
|
|
$
|
1,882
|
|
|
|
|
|
|
||
Operating lease liabilities, current
|
|
Accrued liabilities
|
|
$
|
855
|
|
Operating lease liabilities, long-term
|
|
Other long-term liabilities
|
|
1,064
|
|
|
Total operating lease liabilities
|
|
Total operating lease liabilities
|
|
$
|
1,919
|
|
|
|
|
|
|
||
Weighted average remaining lease term
|
|
|
|
2.25 years
|
|
|
Weighted average discount rate
|
|
|
|
6
|
%
|
Fiscal Year
|
|
Amount
|
||
|
|
|
||
2019 (Remaining nine months)
|
|
$
|
707
|
|
2020
|
|
837
|
|
|
2021
|
|
473
|
|
|
2022
|
|
—
|
|
|
2023
|
|
—
|
|
|
Thereafter
|
|
—
|
|
|
Total operating lease payments
|
|
2,017
|
|
|
Less: imputed interest
|
|
(98
|
)
|
|
Total operating lease liabilities
|
|
$
|
1,919
|
|
Fiscal Year
|
|
Amount
|
||
|
|
|
||
2019
|
|
$
|
1,140
|
|
2020
|
|
1,003
|
|
|
2021
|
|
559
|
|
|
2022
|
|
—
|
|
|
2023
|
|
—
|
|
|
Thereafter
|
|
—
|
|
|
Total
|
|
$
|
2,702
|
|
|
|
|
|
Three Months Ended
|
||||||
|
|
|
|
March 31,
|
||||||
(in thousands)
|
|
Classification
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
|
|
||||
Sales-type lease selling price
|
|
Product revenue, net
|
|
$
|
—
|
|
|
$
|
151
|
|
Cost of underlying asset
|
|
|
|
—
|
|
|
(58
|
)
|
||
Operating profit
|
|
|
|
$
|
—
|
|
|
$
|
93
|
|
|
|
|
|
|
|
|
||||
Interest income on the lease receivable
|
|
Interest and other income, net
|
|
$
|
12
|
|
|
$
|
12
|
|
|
|
|
|
|
|
|
||||
Initial direct costs incurred
|
|
Operating expense
|
|
$
|
—
|
|
|
$
|
(8
|
)
|
|
|
|
|
|
|
|
||||
Operating lease Income
|
|
Product revenue, net
|
|
$
|
1,237
|
|
|
$
|
1,285
|
|
(in thousands)
|
|
Classification
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
|
|
|
|
|
|
||||
Lease payment receivable, current
|
|
Accounts receivable, net and Notes receivable, current
|
|
$
|
458
|
|
|
$
|
533
|
|
Lease payment receivable, long-term
|
|
Notes receivable, long-term and Other assets
|
|
639
|
|
|
475
|
|
||
Total lease payment receivable
|
|
|
|
$
|
1,097
|
|
|
$
|
1,008
|
|
Fiscal Year
|
|
Amount
|
||
|
|
|
||
2019 (Remaining nine months)
|
|
$
|
368
|
|
2020
|
|
394
|
|
|
2021
|
|
198
|
|
|
2022
|
|
150
|
|
|
2023
|
|
52
|
|
|
Thereafter
|
|
—
|
|
|
Total undiscounted cash flows
|
|
1,162
|
|
|
Present value of lease payments (recognized as lease receivables)
|
|
1,097
|
|
|
Difference between undiscounted and discounted cash flows
|
|
$
|
65
|
|
Fiscal Year
|
|
Amount
|
||
|
|
|
||
2019 (Remaining nine months)
|
|
$
|
1,694
|
|
2020
|
|
1,123
|
|
|
2021
|
|
304
|
|
|
2022
|
|
26
|
|
|
2023
|
|
—
|
|
|
Thereafter
|
|
—
|
|
|
Total undiscounted cash flows
|
|
$
|
3,147
|
|
|
|
|
|
Principal Balance Outstanding
|
|
Carrying Value
|
||||||||
|
|
|
|
March 31,
|
|
March 31,
|
|
December 31,
|
||||||
Description
|
|
Maturity Date
|
|
2019
|
|
2019
|
|
2018
|
||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||
Convertible Senior Notes
|
|
|
|
|
|
|
|
|
||||||
December 2021 Notes
|
|
December 1, 2021
|
|
$
|
150,000
|
|
|
$
|
126,567
|
|
|
$
|
124,644
|
|
Total
|
|
|
|
|
|
|
$
|
126,567
|
|
|
$
|
124,644
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(in thousands)
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
||||
Contractual coupon interest
|
|
$
|
—
|
|
|
$
|
421
|
|
Amortization of debt issuance costs
|
|
—
|
|
|
88
|
|
||
Amortization of debt discount
|
|
—
|
|
|
293
|
|
||
Total
|
|
$
|
—
|
|
|
$
|
802
|
|
•
|
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
|
•
|
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 December 2021 Notes Indenture.
|
(in thousands)
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
|
|
|
|
||||
Principal amount of the December 2021 Notes
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Unamortized discount of liability component
|
|
(23,433
|
)
|
|
(25,356
|
)
|
||
Net carrying value of the December 2021 Notes
|
|
$
|
126,567
|
|
|
$
|
124,644
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(in thousands)
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
||||
Contractual coupon interest
|
|
$
|
1,031
|
|
|
$
|
1,031
|
|
Amortization of debt issuance costs
|
|
20
|
|
|
19
|
|
||
Amortization of debt discount
|
|
138
|
|
|
134
|
|
||
Amortization of conversion feature
|
|
1,766
|
|
|
1,598
|
|
||
Total
|
|
$
|
2,955
|
|
|
$
|
2,782
|
|
|
|
March 31,
|
|
December 31,
|
||||
(in thousands)
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
||||
Uncertain tax positions
|
|
$
|
32,047
|
|
|
$
|
31,706
|
|
Deferred tax liabilities
|
|
15,681
|
|
|
13,847
|
|
||
Accrued lease guarantee
|
|
10,700
|
|
|
10,700
|
|
||
Long-term incentive accrual
|
|
136
|
|
|
125
|
|
||
Dividend payable
|
|
4
|
|
|
4
|
|
||
Other
|
|
1,296
|
|
|
461
|
|
||
Total
|
|
$
|
59,864
|
|
|
$
|
56,843
|
|
|
|
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, 2018
|
|
7,869
|
|
|
$
|
2.82
|
|
|
883
|
|
|
$
|
2.87
|
|
Granted
|
|
4,783
|
|
|
$
|
3.72
|
|
|
783
|
|
|
$
|
3.71
|
|
Forfeited or canceled
|
|
—
|
|
|
$
|
—
|
|
|
(18
|
)
|
|
$
|
2.52
|
|
Balance at March 31, 2019
|
|
12,652
|
|
|
$
|
3.16
|
|
|
1,648
|
|
|
$
|
3.27
|
|
Revenues by segment
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(in thousands)
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
||||
Pharmaceutical
|
|
$
|
19,961
|
|
|
$
|
18,342
|
|
Medical Devices
|
|
6,726
|
|
|
4,982
|
|
||
Income Generating Assets
|
|
12,226
|
|
|
15,194
|
|
||
Total revenues
|
|
$
|
38,913
|
|
|
$
|
38,518
|
|
Income (loss) by segment
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(in thousands)
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
||||
Pharmaceutical
|
|
$
|
5,645
|
|
|
$
|
(1,716
|
)
|
Medical Devices
|
|
(1,215
|
)
|
|
(584
|
)
|
||
Income Generating Assets
|
|
2,250
|
|
|
3,902
|
|
||
Total net income
|
|
$
|
6,680
|
|
|
$
|
1,602
|
|
Long-lived assets by segment
|
|
|
|
|
||||
(in thousands)
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
|
|
|
|
|
||||
Pharmaceutical
|
|
$
|
4,113
|
|
|
$
|
3,682
|
|
Medical Devices
|
|
2,828
|
|
|
3,545
|
|
||
Income Generating Assets
|
|
169
|
|
|
160
|
|
||
Total long-lived assets
|
|
$
|
7,110
|
|
|
$
|
7,387
|
|
Investment
|
|
Investment Type
|
|
Deployed Capital
4
(in millions)
|
||
|
|
|
|
|
||
Assertio
1
|
|
Royalty
|
|
$
|
260.5
|
|
The Regents of the University of Michigan (“U-M”)
|
|
Royalty
|
|
$
|
65.6
|
|
AcelRx Pharmaceuticals, Inc. (“AcelRx”)
|
|
Royalty
|
|
$
|
65.0
|
|
Viscogliosi Brothers, LLC (“VB”)
|
|
Royalty
|
|
$
|
15.5
|
|
KYBELLA
®
|
|
Royalty
|
|
$
|
9.5
|
|
CareView Communications, Inc. (“CareView
”
)
|
|
Debt
|
|
$
|
20.0
|
|
Direct Flow Medical, Inc. (“DFM”)
2
|
|
Debt
|
|
$
|
59.0
|
|
Wellstat Diagnostics
3
|
|
Royalty/debt hybrid
|
|
$
|
44.0
|
|
1
|
Assertio Therapeutics, Inc., formerly Depomed, Inc.
|
2
|
DFM ceased operations in December 2016 and we subsequently foreclosed upon and obtained most of the assets of DFM and impaired them by $51.1 million. Since taking over the DFM assets, we have collected $8.7 million in cash and, as of March 31, 2019 an intangible asset with a carrying value of $1.6 million remains on our books. For further detail see Note 9,
Intangible Assets
.
|
3
|
Wellstat Diagnostics, LLC (also known as Defined Diagnostic, LLC) (“Wellstat Diagnostics”).
|
4
|
Excludes transaction costs.
|
|
|
Three Months Ended
|
|
Change from Prior
|
||||||
|
|
March 31,
|
|
|||||||
(dollars in thousands)
|
|
2019
|
|
2018
|
|
Year %
|
||||
|
|
|
|
|
|
|
||||
Revenues
|
|
|
|
|
|
|
||||
Product revenue, net
|
|
$
|
26,686
|
|
|
$
|
23,324
|
|
|
14%
|
Royalty rights - change in fair value
|
|
12,257
|
|
|
11,091
|
|
|
11%
|
||
Royalties from Queen et al. patents
|
|
3
|
|
|
2,783
|
|
|
(100%)
|
||
Interest revenue
|
|
—
|
|
|
749
|
|
|
(100%)
|
||
License and other
|
|
(33
|
)
|
|
571
|
|
|
(106%)
|
||
Total revenues
|
|
$
|
38,913
|
|
|
$
|
38,518
|
|
|
1%
|
•
|
higher product revenues from our Medical Devices segment sales of the LENSAR
®
Laser System and revenue from our Pharmaceutical segment related to the Noden Products, and
|
•
|
higher royalty asset revenues, primarily related to Assertio, partially offset by,
|
•
|
a decline in interest revenue from the CareView note receivable asset,
|
•
|
lower royalties from the Queen et al. patents, and
|
•
|
lower license and other revenue.
|
(in thousands)
|
|
Discount and Distribution Fees
|
|
Government Rebates and Chargebacks
|
|
Assistance and Other Discounts
|
|
Product Returns
|
|
Total
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at December 31, 2018
|
|
$
|
3,094
|
|
|
$
|
8,901
|
|
|
$
|
3,457
|
|
|
$
|
4,681
|
|
|
$
|
20,133
|
|
Allowances for current period sales
|
|
2,173
|
|
|
4,396
|
|
|
1,974
|
|
|
554
|
|
|
9,097
|
|
|||||
Allowances for prior period sales
|
|
—
|
|
|
1,841
|
|
|
120
|
|
|
—
|
|
|
1,961
|
|
|||||
Credits/payments for current period sales
|
|
(351
|
)
|
|
(1,028
|
)
|
|
(546
|
)
|
|
(31
|
)
|
|
(1,956
|
)
|
|||||
Credits/payments for prior period sales
|
|
(2,483
|
)
|
|
(7,972
|
)
|
|
(2,887
|
)
|
|
(1,057
|
)
|
|
(14,399
|
)
|
|||||
Balance at March 31, 2019
|
|
$
|
2,433
|
|
|
$
|
6,138
|
|
|
$
|
2,118
|
|
|
$
|
4,147
|
|
|
$
|
14,836
|
|
•
|
a decrease in revenue and the Queen et al. patents of $2.8 million,
|
•
|
a decrease in interest revenue of $0.7 million from our CareView note receivable, and
|
•
|
a decrease in license and other revenue of $0.6 million resulting primarily from the milestone received in the three-month period ended March 31, 2018 with no such revenue recognized in the three-month period ended March 31, 2019, partially offset by
|
•
|
an increase in revenue from our royalty assets of $1.1 million.
|
|
|
Three Months Ended March 31, 2019
|
||||||||||
|
|
|
|
|
|
|
||||||
|
|
|
|
Change in
|
|
Royalty Rights -
|
||||||
(in thousands)
|
|
Cash Royalties
|
|
Fair Value
|
|
Change in Fair Value
|
||||||
|
|
|
|
|
|
|
||||||
Assertio
|
|
$
|
10,968
|
|
|
$
|
(552
|
)
|
|
$
|
10,416
|
|
VB
|
|
267
|
|
|
128
|
|
|
395
|
|
|||
U-M
|
|
1,267
|
|
|
(536
|
)
|
|
731
|
|
|||
AcelRx
|
|
68
|
|
|
2,088
|
|
|
2,156
|
|
|||
KYBELLA
|
|
50
|
|
|
(1,491
|
)
|
|
(1,441
|
)
|
|||
|
|
$
|
12,620
|
|
|
$
|
(363
|
)
|
|
$
|
12,257
|
|
|
|
|
|
Three Months Ended
|
||
|
|
|
|
March 31,
|
||
Licensee
|
|
Product Name
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
Noden
|
|
Tekturna, Tekturna HCT, Rasilez and Rasilez HCT
|
|
51%
|
|
48%
|
|
|
|
|
|
|
|
Assertio
|
|
Glumetza, Janumet XR (2018), Jentadueto XR, Synjardy XR and Invokamet XR
|
|
27%
|
|
19%
|
|
|
|
|
|
|
|
LENSAR
|
|
LENSAR Laser System
|
|
17%
|
|
13%
|
|
|
Three Months Ended
|
|
Change from Prior
|
||||||
|
|
March 31,
|
|
|||||||
(dollars in thousands)
|
|
2019
|
|
2018
|
|
Year %
|
||||
|
|
|
|
|
|
|
||||
Cost of product revenue, (excluding intangible amortization)
|
|
$
|
12,810
|
|
|
$
|
10,566
|
|
|
21%
|
Amortization of intangible assets
|
|
1,572
|
|
|
6,293
|
|
|
(75)%
|
||
General and administrative
|
|
10,462
|
|
|
11,661
|
|
|
(10)%
|
||
Sales and marketing
|
|
2,730
|
|
|
5,513
|
|
|
(50)%
|
||
Research and development
|
|
869
|
|
|
793
|
|
|
10%
|
||
Change in fair value of acquisition-related contingent consideration
|
|
—
|
|
|
(600
|
)
|
|
(100)%
|
||
Total operating expenses
|
|
$
|
28,443
|
|
|
$
|
34,226
|
|
|
(17)%
|
Percentage of total revenues
|
|
73
|
%
|
|
89
|
%
|
|
|
•
|
a decrease in the amortization expense for the Noden intangible assets as a result of the impairment recorded for these intangible assets in the second quarter of 2018,
|
•
|
lower general and administrative expenses of
$1.2 million
, or
10%
, primarily due to lower professional fees,
|
•
|
lower sales and marketing expenses, reflecting the cost savings from the change in our marketing strategies for the Noden Products, partially offset by
|
•
|
higher Noden Products and LENSAR cost of product revenue, due to increased sales in both segments,
|
•
|
the favorable adjustment to the fair value of the contingent consideration recorded in the three-month period ended March 31, 2018 with no corresponding adjustment in the three-month period ended March 31, 2019, and
|
•
|
higher research and development in our Medical Devices segment.
|
|
|
Three Months Ended March 31, 2019
|
|
Three Months Ended March 31, 2018
|
||||||||||||||||||||||||||||
(in thousands)
|
|
Pharmaceutical
|
|
Medical Device
|
|
Income Generating Assets
|
|
Total
|
|
Pharmaceutical
|
|
Medical Device
|
|
Income Generating Assets
|
|
Total
|
||||||||||||||||
Compensation
|
|
$
|
492
|
|
|
$
|
956
|
|
|
$
|
3,448
|
|
|
$
|
4,896
|
|
|
$
|
440
|
|
|
$
|
688
|
|
|
$
|
3,324
|
|
|
$
|
4,452
|
|
Salaries and Wages (including taxes)
|
|
384
|
|
|
519
|
|
|
1,647
|
|
|
2,550
|
|
|
369
|
|
|
435
|
|
|
1,318
|
|
|
2,122
|
|
||||||||
Bonuses (including accruals)
|
|
80
|
|
|
323
|
|
|
705
|
|
|
1,108
|
|
|
61
|
|
|
54
|
|
|
1,073
|
|
|
1,188
|
|
||||||||
Equity
|
|
28
|
|
|
114
|
|
|
1,096
|
|
|
1,238
|
|
|
10
|
|
|
199
|
|
|
933
|
|
|
1,142
|
|
||||||||
Asset management
|
|
—
|
|
|
—
|
|
|
450
|
|
|
450
|
|
|
—
|
|
|
—
|
|
|
1,503
|
|
|
1,503
|
|
||||||||
Business development
|
|
—
|
|
|
—
|
|
|
129
|
|
|
129
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|
400
|
|
||||||||
Accounting and tax services
|
|
256
|
|
|
3
|
|
|
969
|
|
|
1,228
|
|
|
307
|
|
|
2
|
|
|
1,256
|
|
|
1,565
|
|
||||||||
Other professional services
|
|
509
|
|
|
274
|
|
|
341
|
|
|
1,124
|
|
|
1,731
|
|
|
123
|
|
|
217
|
|
|
2,071
|
|
||||||||
Other
|
|
892
|
|
|
583
|
|
|
1,160
|
|
|
2,635
|
|
|
87
|
|
|
318
|
|
|
1,265
|
|
|
1,670
|
|
||||||||
Total general and administrative
|
|
$
|
2,149
|
|
|
$
|
1,816
|
|
|
$
|
6,497
|
|
|
$
|
10,462
|
|
|
$
|
2,565
|
|
|
$
|
1,131
|
|
|
$
|
7,965
|
|
|
$
|
11,661
|
|
•
|
the reduction in interest expense after the February 2018 Notes were repaid, and
|
•
|
an increase in interest income from investments as compared to the prior year comparable period, partially offset by
|
•
|
the gain on available-for-sale investments recorded in the three-month period ended March 31, 2018 for which no such gain was recognized in the three-month period ended March 31, 2019.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Net income per share - basic
|
$
|
0.05
|
|
|
$
|
0.01
|
|
Net income per share - diluted
|
$
|
0.05
|
|
|
$
|
0.01
|
|
•
|
the repurchase of common stock for
$44.3 million
, partially offset by
|
•
|
proceeds from royalty right payments of
$12.6 million
and
|
•
|
cash flows from operating activities of
$4.5 million
|
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
|
|
||||||||
January 1, 2019
|
to
|
January 31, 2019
|
|
4,754
|
|
|
$
|
3.13
|
|
|
13,428
|
|
|
$
|
59,566
|
|
(1)
|
February 1, 2019
|
to
|
February 28, 2019
|
|
4,100
|
|
|
3.38
|
|
|
17,528
|
|
|
45,704
|
|
|
||
March 1, 2019
|
to
|
March 31, 2019
|
|
4,256
|
|
|
3.66
|
|
|
21,784
|
|
|
30,113
|
|
|
||
Total for the three months ended March 31, 2019
|
|
13,110
|
|
|
$
|
3.38
|
|
|
21,784
|
|
|
$
|
30,113
|
|
|
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
|
|
|
|
10.3#*
|
|
|
|
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 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.
|
Dated:
|
May 9, 2019
|
|
PDL BIOPHARMA, INC. (REGISTRANT)
|
|
|
|
|
|
|
|
|
/s/ Dominique Monnet
|
|
|
Dominique Monnet
|
|
|
President and Chief Executive Officer
(Principal Executive Officer)
|
|
/s/ Peter S. Garcia
|
|
|
Peter S. Garcia
|
|
|
Vice President and Chief Financial Officer (Principal Financial Officer and Acting
Principal Accounting Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2019
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
For the Years Ended December 31,
|
|
|||||||||||||||||||||
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
|||||||||||||
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income (loss) before income taxes
|
|
$
|
501,272
|
|
|
$
|
530,138
|
|
|
$
|
109,370
|
|
|
$
|
184,527
|
|
|
$
|
(55,922
|
)
|
|
$
|
9,389
|
|
Add: fixed charges
|
|
39,274
|
|
|
27,123
|
|
|
18,330
|
|
|
20,507
|
|
|
12,578
|
|
|
3,057
|
|
||||||
Earnings
|
|
$
|
540,546
|
|
|
$
|
557,261
|
|
|
$
|
127,700
|
|
|
$
|
205,034
|
|
|
$
|
(43,344
|
)
|
|
$
|
12,446
|
|
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
1
|
|
$
|
39,211
|
|
|
$
|
27,059
|
|
|
$
|
18,267
|
|
|
$
|
20,221
|
|
|
$
|
12,157
|
|
|
$
|
2,955
|
|
Estimated interest portion of rent expense
2
|
|
63
|
|
|
64
|
|
|
63
|
|
|
286
|
|
|
421
|
|
|
102
|
|
||||||
Fixed charges
|
|
$
|
39,274
|
|
|
$
|
27,123
|
|
|
$
|
18,330
|
|
|
$
|
20,507
|
|
|
$
|
12,578
|
|
|
$
|
3,057
|
|
Ratio of earnings to fixed charges
|
|
13.76
|
|
|
20.55
|
|
|
6.97
|
|
|
10.00
|
|
|
(3.45
|
)
|
|
4.07
|
|
Date:
|
May 9, 2019
|
|
|
|
|
/s/ Dominique Monnet
|
|
|
Dominique Monnet
President and Chief Executive Officer
(Principal Executive Officer)
|
|
Date:
|
May 9, 2019
|
|
|
|
|
/s/ Peter S. Garcia
|
|
|
Peter S. Garcia
Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
By:
|
|
|
|
/s/ DOMINIQUE MONNET
|
|
|
Dominique Monnet
|
|
|
President and 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.
|