Concluded Transactions

Ariad

This was a royalty transaction which PDL funded $100 million in exchange for a 2.5% royalty on worldwide sales on Iclusig, a cancer medicine for the treatment of adult patients with chronic myeloid leukemia, through July 2016, increasing to 5% through the end of 2018 and increasing again to 6.5% thereafter.

There was also a potential backup royalty on a development stage product to make up for any shortfall in the agreed upon annual sales projections of Iclusig.

When this agreement was entered into in July 28, 2015, it contained a number of other provisions allowing ARIAD to draw up to a total of $200 million. These provisions were amended and ARIAD was funded $50 million at signing and $50 million one year later on July 28, 2016.

In January 2017, Takeda Pharmaceutical Company Limited (“Takeda”) announced that it had entered into a definitive agreement to acquire ARIAD. The acquisition was consummated on February, 16, 2017 and PDL exercised its put option on the same day, which resulted in an obligation by Takeda to pay the Company a 1.2x multiple of the $100.0 million funded by the PDL under the ARIAD Royalty Agreement, less royalty payments already received by the Company.

On March 30, 2017, Takeda fulfilled its obligations under the put option and paid the Company the repurchase price of $108.2 million for the royalty rights under the ARIAD Royalty Agreement. In total, PDL received $120 million from its investment which resulted in a pre-tax return of 17.5%.

Iclusig is approved for the treatment of chronic myeloid leukemia and Philadelphia chromosome–positive acute lymphoblastic leukemia.

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Merus Labs

This transaction was a debt facility for $55 million entered into in July 2012 and secured by the assets of Merus Labs. Merus Labs used the funds to support the commercialization of Enablex, a treatment for overactive bladder, and Vancocin,

an intravenous antibiotic. In September 2013, Merus Labs repaid PDL in full plus certain prepayment fees resulting in a pre-tax return of 15.1%.
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AxoGen

This transaction was a hybrid royalty/debt transaction for $20.8 million entered into in October 2012 and secured by the assets of AxoGen. PDL received a combination of interest payments and royalties on sales of AxoGen products. In August 2013, PDL purchased 1,166,666 shares of AxoGen common stock at $3.00 per share.

In November 2014, AxoGen paid $30.3 million to PDL which constituted full repayment and PDL bought 643,382 shares of AxoGen common stock at $2.72 per share for a total of $1.7 million. The pre-tax return in this transaction, including gains on the sale of AxoGen common stock at various points in time, is 24%. AxoGen manufactures and commercializes products used to bridge gaps in severed nerves as well as to protect the reconnected nerves.
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Durata

This was a debt transaction for $40 million entered into on October 31, 2013 with $25 million advanced at signing and a second tranche of $15 million advanced on May 27, 2014 upon US approval of Durata’s antibiotic, dalbavancin.

The interest rate on the first tranche was 14.0% which dropped to 12.75% upon the approval of dalbavancin. On November 17, 2014, PDL was paid $42.7 million constituting full repayment of all sums owed including change in control and prepayment fees. The repayment was made in connection with the acquisition of Durata by Actavis plc. The pre-tax return in this transaction is 20.5%.
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Avinger

This was a debt transaction for $20 million entered into on April 18, 2013. Avinger used the proceeds from the debt facility to support the commercialization of its approved luminvascular catheter used to clear total blockages in vessels in the leg and to support development of its then unapproved luminvascular atherectomy device used to clear partial blockages in vessels in the leg.

The interest rate on the monies advanced was 12%. In addition, PDL received a low, single digit royalty on Avinger’s net revenues through April 2018. On September 22, 2015, Avinger prepaid the debt in whole, including prepayment fees, for $21.4 million. The effect of this prepayment was to reduce the low, single digit royalty on Avinger’s net sales by 50% effective as October 2015 and subject to certain minimum payments. The pre-tax return on this transaction, including forecasted cash flows from the on-going royalty through April 2018, is 19.3%.
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Paradigm Spine

This was a debt transaction entered into on February 14, 2014 with $50 million advanced as of signing and an additional $4 million under a modification of the original loan agreement in October 2015.

Paradigm Spine used the proceeds from the debt facility to support the commercialization of Coflex, its medical device used in the treatment of certain spinal conditions. The interest rate on the debt facility was 13.0% per annum, payable quarterly in arrears. On August 29, 2016, Paradigm Spine paid $57.4 million to PDL in full repayment of the debt, including prepayment fees. The pre-tax return in this transaction is 15.5%.
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