AcelRX
This is a royalty transaction for $65 million that was entered into on September 18, 2015. PDL acquired 75% of the royalty that Grünenthal pays to AcelRx for rights to commercialize Zalviso in European Union, Switzerland and Australia.
Zalviso is a combination drug (sufentanil) and device product used the for the treatment of moderate-to-severe post-operative pain in the hospital setting. Sufentanil is a synthetic opioid drug that is more potent than its parent drug, fentanyl, and much more potent than morphine. Zalviso was approved by the European Union in September 2015 and Grünenthal launched the product in the second quarter of 2016. PDL began receiving royalties on the product in the third quarter of 2016.
CareView
This is a debt transaction for $20 million that was entered into on June 26, 2015 and was funded on October 5, 2015 upon the attainment by CareVIew of a specified milestone. This tranche has a five-year maturity and pays interest at 13.5% quarterly in arrears.
The CareView system provides video and virtual bed rails to passively monitor hospital patients at risk of falling.
Depomed
This is a royalty transaction originally entered into on October 18, 2013 for $240.5 million in which PDL acquired a portion of the rights to royalties and milestones on five products for the treatment of type-2 diabetes. Another $20 million was invested in August 2018 to purchase Depomed’s remaining interest in the royalties.
The basket of five products are: Glumetza (extended-release metformin), which is approved and commercialized by Valeant; Janumet XR (DPP-IV inhibitor + extended-release metformin), which is approved and commercialized by Merck; Jentadueto XR (DPP-IV inhibitor + extended-release metformin), which is approved and commercialized by Boehringer Ingelheim and Eli Lilly; Invokamet XR (SGLT2 inhibitor + extended-release metformin), which is approved and commercialized by Janssen; Synjardy XR (SGLT2 inhibitor + extended-release metformin), which is approved and commercialized by Boehringer Ingelheim and Eli Lilly; and LG Life Sciences and Valeant for sales of extended–release metformin in Korea and Canada, respectively.
Under the terms of the original Depomed agreement, PDL was to receive all royalties and milestone payments until it had received two times the cash advanced or $481 million after which all payments would have been split between PDL and Depomed. As noted above, Depomed’s remaining interests were acquired in August of 2018, and PDL will now receive all royalties . The agreement terminates on the third anniversary following the latter of: (i) October 25, 2021; or (ii) no royalty payments are payable under any license agreement and each of the license agreements have expired based on its terms. Because the terms and termination dates vary by agreement, it is worth describing them individually:
Glumetza
Royalty on net sales of 32% in 2013 and 2014, 34.5% in 2015 until first generic entrant which occurred in February 2016, and 50% of gross profits (net sales less COGS) after first generic entrant. This split runs until the termination of the overall Depomed agreement which we estimate could be late 2029.
Janumet XR
Very low single digit royalty on net sales in the US through 2013 and 2014 which drops by 50% after 2014 and ended in the US in September 2016 and is expected to end ex-US in September 2018.
Jentadueto XR
In May 2016, the FDA approved Jentadueto XR and PDL received a $6 million milestone payment. Boehringer Ingleheim pays and PDL receives a royalty in the low to mid-single digit range which we expect to expire in 2026.
Invokamet XR
In September 2016, the FDA approved Invokamet XR and PDL received a $5 million milestone payment. Jannsen pays and PDL receives a royalty in the low to mid-single digit range which we expect to expire in 2023.
Synjardy XR
In December 2016, the FDA approved Synjardy XR and PDL received a $6 million milestone payment. Boehringer Ingleheim pays and PDL receives a royalty in the low to mid-single digit range which we expect to expire in 2026.
In August 2018, Depomed, Inc. was renamed Assertio Therapeutics, Inc.
Kybella
This is a royalty transaction for $9. 5 million that was entered into on July 8, 2016. There is the potential for additional payments of up to $1 million depending on the attainment of certain product sales targets. PDL acquired the rights of an individual to receive certain royalties on sales of Kybella by Allergan.
Kybella was approved in the United States on April 29, 2015 for the treatment of adults with moderate-to-severe submental fat, which is fat below the chin.
Lensar
This was a debt transaction that has since converted into an equity investment. LENSAR is now a subsidiary of PDL. In 2015, certain of LENSAR’s assets were acquired by a subsidiary of Alphaeon, who also assumed $42 million worth of LENSAR’s outstanding debt owed to PDL and issued 1.2 million shares of Alphaeon’s Class A stock to PDL.
University of Michigan
This is a royalty transaction for $65.6 million that was entered into on November 6, 2014. PDL acquired 75% of the royalties due to the University of Michigan under its license agreement with Genzyme, a subsidiary of Sanofi. The term of this agreement runs until patent expiration, excluding any extension of the term of the patent. PDL estimates that the patent will expire in April 2022. Sanofi manufactures and commercializes Cerdelga, the sales of which generate the royalties due to the University of Michigan, 75% of which were acquired by PDL.
Cerdelga is an oral therapy for adult patients with Gaucher disease type 1, a rare genetic disorder which results in insufficient production of an enzyme. Prior to Cerdelga’s approval, most patients with Gaucher disease type 1 required weekly infusions on an enzyme to treat this condition. Because Cerdelga is a capsule and the recommended dosage for most patient is twice a day, it affords Gaucher disease patients greater convenience than weekly infusions.
Cerdelga is approved in most major countries, although pricing and reimbursement decisions have lagged behind approvals in certain countries in the European Union in particular.
Viscogliosi Brothers
This is a royalty transaction for $15.5 million entered into on June 26, 2014. PDL acquired all of the royalties payable on sales of the spinal implant, Coflex, of Paradigm Spine accruing after April 1, 2014 until such time as PDL has received 2.3 times the cash advanced or $35.65 million, after which all of the royalty rights revert to the Viscogliosi Brothers.
For additional information on Coflex, the spinal implant of Paradigm Spine, please see that transaction.
Wellstat Diagnostics
This is a hybrid royalty/debt transaction for $44 million initially entered into on November 2, 2012. PDL acquired from the Wohlstadters, the equity owners of Wellstat Diagnostics, the right to receive quarterly interest payments at the rate of 5% per annum (payable in cash or in kind) plus a low double digit royalty rate on Wellstat Diagnostics net revenues upon commercialization of its products.
The more recent legal actions include proceedings before the Supreme Court of New York in which PDL is asserting its claims against the Wohlstadters and some of their companies who were guarantors to the loan. In addition, PDL intends to foreclose on certain real estate assets owned by the Wohlstadters in Virginia.
PDL has determined that this loan is impaired and ceased accruing interest revenue. The current carrying value of the debt is $50.2 million, while the combination of sums advanced and sums owed (in terms of interest and specified rates of return) under the modified loan agreements significantly exceed that amount.
