Net Assets in Liquidation (Tables)

12 Months Ended

Dec. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Net Assets in Liquidation

Upon adoption of the Liquidation Basis on September 1, 2020, the Company estimated the net assets in liquidation, which represents the expected future cash flows related to its remaining assets, liabilities and operating costs through dissolution. The actual cash inflows and outflows may differ materially from the estimated amounts.

(in thousands)
Consolidated Net Equity, as of August 31, 2020	$	425,214
Effect of adopting the liquidation basis of accounting:
Change in the estimated value of royalty rights (1)	13,770
Change in the receivable from the sale of Noden (2)	9,056
Increase in intangible assets (3)	28,702
Change in the estimated value of other assets (4)	(4,813)
Estimated liquidation and future operating costs (5)	(25,376)
Total effect of adopting the liquidation basis of accounting	21,339
Net assets in liquidation, as of September 1, 2020	$	446,553

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(1) The royalty rights consist of Assertio and University of Michigan (“U-M”). The Assertio royalties are valued using undiscounted estimated cash receipts until the estimated date of sale of June 30, 2021, plus a discounted value of the remaining estimated cash flows as an estimate of the expected cash consideration from the sale of these royalty rights at this time. The Company expects it will retain the royalty rights for the U-M royalty asset until its expiration in September 2022. As such, it is valued as the sum of its undiscounted cash receipts until the end of the agreement. Previously, under the Going Concern Basis, royalty rights were valued using discounted cash flow models, see Note 8, Fair Value Measurements.

(in thousands)	August 31, 2020		September 1, 2020		Change
	(Going Concern Basis)		(Liquidation Basis)
Assertio	$	200,463	$	211,626	$	11,163
U-M	17,450		20,057		2,607
Total	$	217,913	$	231,683	$	13,770

(2) Adjustments reflect Liquidation Basis which does not discount future estimated cash receipts. Previously, under the Going Concern Basis we had estimated the fair value of Noden, as an asset held for sale, using a discounted cash flow model, see Note 8, Fair Value Measurements.

(3) The increase in intangible assets represents the difference between the existing assets and liabilities of LENSAR upon adoption of Liquidation Basis and its enterprise value that was distributed to PDL shareholders in the spin-off of LENSAR on October 1, 2020. The enterprise value was determined through an analysis of comparable public companies combined with cash flow forecasts.

(4) Adjustments to other assets include a liquidity discount for the Evofem warrants and the write-off of certain assets that will not be converted to cash such as prepaid expenses, fixed assets and right of use assets.

(5) Represents estimated future expenses related to operating the business through dissolution and settlement of future liabilities. Amounts include estimated compensation, legal and other professional fees, insurance, taxes, estimated costs to dispose of our assets and other miscellaneous expenses. Certain of the estimated costs to dispose of our assets had already been accrued under the Going Concern Basis and were presented net within our assets held for sale.