Liabilities Related to Sales of Future Royalties

6 Months Ended

Jun. 30, 2022

Other Liabilities Disclosure [Abstract]

Liabilities Related to Sales of Future Royalties

Liabilities Related to Sales of Future Royalties

In 2012 and 2020, we sold to RPI Finance Trust (RPI) and entities managed by Healthcare Royalty Management, LLC (collectively, HCR), respectively, our rights to receive royalties under our license and manufacturing agreements with certain pharmaceutical partners as summarized below under the 2012 Purchase and Sale Agreement and the 2020 Purchase and Sale Agreement, respectively:

Drug	Manufacturer	Counterparty under Purchase and Sale Agreement	Date Sold
ADYNOVATE® and ADYNOVI® (brand name for ADYNOVATE® in Europe)	Takeda Pharmaceutical Company Limited	Healthcare Royalty Management, LLC	December 16, 2020
MOVANTIK® (naloxegol tablets) and MOVENTIG® (brand name for MOVANTIK® in Europe)	AstraZeneca AB	Healthcare Royalty Management, LLC	December 16, 2020
REBINYN®	Novo Nordisk Inc., Novo Nordisk A/S and Novo Nordisk A/G	Healthcare Royalty Management, LLC	December 16, 2020
CIMZIA® (certolizumab pegol)	UCB Pharma	RPI Finance Trust	February 24, 2012
MIRCERA® (Continuous Erythropoietin Receptor Activator)	F. Hoffmann-La Roche Ltd	RPI Finance Trust	February 24, 2012

Due to our ongoing manufacturing obligations in both arrangements, we account for the proceeds as imputed debt (Royalty Obligations) and therefore continue to recognize these non-cash royalties as revenue. As royalties are remitted to RPI and HCR by our licensees, the balances of the respective Royalty Obligations will be effectively repaid over the lives of the agreements. To determine the amortization of the Royalty Obligations, we are required to estimate the total amount of future royalty payments to be received by RPI and HCR, respectively. The sum of these amounts less the net proceeds we received will be recorded as non-cash interest expense over the lives of the respective Royalty Obligations. Additionally, to the extent that the amount or timing of the royalty payments is materially different from our original estimates, we will prospectively adjust the imputed interest rate and the related amortization of the applicable Royalty Obligation. As of June 30, 2022, our imputed interest rates for the arrangements with RPI and HCR were 16% and 15%, respectively.

The following table shows the activity within the liability account of each arrangement (in thousands):

	Period from inception to June 30, 2022
	2012 Purchase and Sale Agreement		2020 Purchase and Sale Agreement		Total
Royalty monetization proceeds	$	124,000	$	150,000	$	274,000
Non-cash royalty revenue	(297,507)		(69,770)		(367,277)
Non-cash interest expense	229,474		29,556		259,030
Payments to RPI	(10,000)		—		(10,000)
Loss on revaluation of liability related to the sale of future royalties (1)	23,522		—		23,522
Liabilities related to the sales of future royalties – ending balance	69,489		109,786		179,275
Less: unamortized transaction costs	—		(2,500)		(2,500)
Liabilities related to the sales of future royalties, net	$	69,489	$	107,286	$	176,775
(1) Loss recognized from Settlement Agreement to resolve UCB’s challenges to our patents, as agreed to by UCB, RPI and us, on October 13, 2021.