Condensed Consolidated Financial Statement Details

3 Months Ended

Mar. 31, 2023

Condensed Consolidated Financial Statement Details

Inventory

Inventory consists of the following (in thousands):


	March 31, 2023		December 31, 2022
Raw materials	$	2,234	$	2,575
Work-in-process	13,167		10,749
Finished goods	4,834		5,878
Total inventory	$	20,235	$	19,202

We manufacture finished goods inventory upon receipt of firm purchase orders, and we may manufacture certain intermediate work-in-process materials and purchase raw materials based on purchase forecasts from our collaboration partners. We include direct materials, direct labor, and manufacturing overhead in inventory and determine cost on a first-in, first-out basis for raw materials and on a specific identification basis for work-in-process and finished goods. We value inventory at the lower of cost or net realizable value, and we write down defective or excess inventory to net realizable value based on historical experience or projected usage. We expense inventory related to our research and development activities as manufactured by us or when purchased.

Property, Plant and Equipment

Property, plant and equipment consists of the following (in thousands):


	March 31, 2023		December 31, 2022
Building and leasehold improvements	$	69,137	$	74,889
Computer equipment and computer software	24,894		26,205
Manufacturing equipment	25,339		25,052
Laboratory equipment	13,566		24,243
Furniture, fixtures and other	3,990		4,263
Depreciable property, plant and equipment at cost	136,926		154,652
Less: accumulated depreciation	(110,653)		(124,731)
Depreciable property, plant and equipment, net	26,273		29,921
Construction in process	811		2,530
Property, plant and equipment, net	$	27,084	$	32,451

As a result of the decrease in the fair value of our single reporting unit during the three months ended March 31, 2023, we recorded a non-cash impairment charge of $3.5 million for property, plant and equipment, which we report in restructuring, impairment and costs of terminated program in our Condensed Consolidated Statement of Operations. See Note 6 for additional information.

Goodwill

The following is a reconciliation of the changes in our goodwill for the three months ended March 31, 2023 (in thousands):


	Three months ended March 31, 2023
Goodwill – beginning balance	$	76,501
Impairment of goodwill	(76,501)
Goodwill – ending balance	$	—

As a result of the decrease in the fair value of our single reporting unit during the three months ended March 31, 2023, we recorded a non-cash goodwill impairment charge of $76.5 million, which we report as impairment of goodwill in our Condensed Consolidated Statement of Operations. We had previously recognized goodwill primarily from our acquisitions of Shearwater Corp. and Aerogen, Inc. in 2001 and 2005, respectively. See Note 6 for additional information.

Accrued Expenses

Accrued expenses consist of the following (in thousands):


	March 31, 2023		December 31, 2022
Accrued compensation	$	14,888	$	9,582
Accrued clinical trial expenses	7,739		12,262
Liability to collaboration partners	3,495		3,808
Accrued contract termination costs	3,461		3,902
Other accrued expenses	7,827		7,003
Total accrued expenses	$	37,410	$	36,557

Liabilities Related to the 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 under the 2012 Purchase and Sale Agreement and the 2020 Purchase and Sale Agreement, respectively. We account for these transactions as debt and recognize non-cash royalty revenue and non-cash interest expense to amortize the proceeds over the lives of the respective arrangements. We periodically update our prospective non-cash interest rate based on our estimates of future royalties. As of March 31, 2023, our imputed interest rates for the arrangements with RPI and HCR were 10% and 20%, respectively.

The following is a reconciliation of the changes in our liabilities related to the sales of future royalties for the three months ended March 31, 2023 (in thousands):


	Three Months Ended March 31, 2023
	2012 Purchase and Sale Agreement		2020 Purchase and Sale Agreement		Total
Liabilities related to the sales of future royalties, net – beginning balance	$	55,167	$	100,211	$	155,378
Non-cash royalty revenue	(9,303)		(7,558)		(16,861)
Non-cash interest expense	1,360		5,045		6,405
Amortization of transaction costs	—		209		209
Liabilities related to the sales of future royalties, net – ending balance	$	47,224	$	97,907	$	145,131