Discontinued Operations

12 Months Ended

Dec. 31, 2021

Discontinued Operations

Discontinued Operations

Note 3—Discontinued Operations

On December 23, 2021, we closed an Asset and Purchase Agreement for the sale of OMIDRIA and certain related assets including inventory and prepaid expenses. We retained the outstanding accounts receivable and all outstanding liabilities related to OMIDRIA as of the closing date.

Upon closing, we received an up-front cash payment of $126.0 million. We will also receive a 50% royalty on OMIDRIA net sales in the U.S. between December 23, 2021 and the earlier of January 1, 2025 or the payment of the $200.0 million milestone described below. After such date, we will receive a 30% royalty on OMIDRIA net sales in the U.S. (the “U.S. base royalty rate”) until the expiration or termination of the last issued and unexpired U.S. patent. The U.S. base royalty rate is reduced to 10% upon the occurrence of certain events described in the Asset Purchase Agreement, including during any specific period in which OMIDRIA is no longer eligible for separate payment. We will also receive a royalty of 15% on OMIDRIA net sales outside the U.S. on a country-by-country basis between the closing date and the expiration or termination of the last issued and unexpired OMIDRIA patent in such country. We will receive a $200.0 million milestone payment if, prior to January 1, 2025, separate payment for OMIDRIA is secured in the U.S. for a continuous period of at least four years.

The sale of OMIDRIA was recorded as an asset sale and all comparative periods presented are required to be reclassified in the consolidated balance sheets. Additionally, the results of operations for OMIDRIA are reclassified to income from discontinued operations for all periods presented in the consolidated statements of operations and comprehensive loss.

Net income from discontinued operations, net of tax is as follows:

	Year Ended December 31,
	2021		2020		2019
	(In thousands)
Product sales, net	$	110,735	$	73,813	$	111,805
Royalty income		1,035		—		—
OMIDRIA income		111,770		73,813		111,805
Costs and expenses:
Cost of product sales		1,364		902		865
Research and development		3,839		3,205		3,372
Selling, general and administrative		25,428		23,389		24,912
Total costs and expenses		30,631		27,496		29,149
Income before income tax expense		81,139		46,317		82,656
Income tax expense		(1,006)		(11,245)		(19,774)
Net income from discontinued operations, net of tax		80,133		35,072		62,882
Gain on sale of OMIDRIA, net		305,648		—		—
Net income from discontinued operations, net of tax	$	385,781	$	35,072	$	62,882

The gain on the sale of OMIDRIA included in discontinued operations for the year ended December 31, 2021 is as follows:

	(In thousands)
Cash proceeds	$	125,993
OMIDRIA contract royalty asset		184,570
Gain on sale of OMIDRIA, gross		310,563
Transaction and closing costs		(1,972)
Restricted Stock Units ("RSUs") granted to transferred employees		(1,419)
Prepaid assets and inventory at cost		(1,524)
Gain on sale of OMIDRIA, net	$	305,648

Cash flow from discontinued operations is as follows:

	Year Ended December 31,
	2021		2020		2019
	(In thousands)
Total operating cash flows from discontinued operations	$	56,344	$	25,888	$	(11,886)
Total investing cash flows from discontinued operations	$	125,993	$	—	$	—