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Variable Interest Entities
9 Months Ended
Sep. 30, 2016
Variable Interest Entity Disclosure [Abstract]  
Variable Interest Entities

6. Variable Interest Entities

As of September 30, 2016, the Company’s investments in unconsolidated variable interest entities (“VIEs”) and its estimated maximum exposure to loss were as follows (in thousands):

 

 

 

Investments in Unconsolidated VIEs

 

 

Maximum Exposure to Loss

 

NovaQuest Pharma Opportunities Fund III, L.P.

 

$

41,233

 

 

$

48,094

 

NovaQuest Pharma Opportunities Fund IV, L.P.

 

 

8,200

 

 

 

19,951

 

 

 

$

49,433

 

 

$

68,045

 

 

The Company has committed to invest up to $50 million as a limited partner in NovaQuest Pharma Opportunities Fund III, L.P. (“Fund III”). As of September 30, 2016, the Company has funded approximately $43.1 million and has approximately $6.9 million of remaining funding commitments. As of September 30, 2016 and December 31, 2015, the Company had a 10.9% ownership interest in Fund III. The Company’s maximum exposure to loss on Fund III is limited to its investment and remaining funding commitments.

The Company has committed to invest up to $20 million as a limited partner in NovaQuest Pharma Opportunities Fund IV, L.P. (“Fund IV”). As of September 30, 2016, the Company has funded approximately $8.2 million and has approximately $11.8 million of remaining funding commitments. As of September 30, 2016 and December 31, 2015, the Company had a 2.3% ownership interest in Fund IV. The Company’s maximum exposure to loss on Fund IV is limited to its investment and remaining funding commitments.

The Company has determined that Fund III and Fund IV (collectively “the Funds”) are VIEs but that the Company is not the primary beneficiary as it does not have a controlling financial interest in either of the Funds. Although the Company does not have a controlling financial interest in either of the Funds, the Company has determined that it has the ability to exercise significant influence. Accordingly, the Company accounts for its investments in the Funds under the equity method of accounting and records its pro rata share of the Funds’ earnings and losses in equity in (losses) earnings of unconsolidated affiliates on the accompanying condensed consolidated statements of income. The investment assets of unconsolidated VIEs are included in investments in and advances to unconsolidated affiliates on the accompanying condensed consolidated balance sheets.