Available for Sale Debt Securities

12 Months Ended

Dec. 31, 2021

Investments, Debt and Equity Securities [Abstract]

Series A Biohaven Preferred Shares

On April 5, 2019, RPIFT funded the purchase of 2,495 Series A Biohaven Preferred Shares from Biohaven Pharmaceutical Holding Company Ltd. (“Biohaven”) at a price of $50,100.00 per preferred share, for a total of $125.0 million (the “First Tranche”). The approval of Nurtec ODT by the U.S. Food and Drug Administration (“FDA”) in February 2020 results in a payment due to us of two times the original purchase price of the Series A Biohaven Preferred Shares payable in equal quarterly installments beginning in the three months ended March 31, 2021 through the three months ended December 31, 2024. In the three months ended March 31, 2021, we began receiving payments from the quarterly redemption of the Series A Biohaven Preferred Shares. If Biohaven effects any change of control event, then we will have the option to cause Biohaven to redeem, in a single payment, any outstanding Series A Biohaven Preferred Shares at a price equal to two times the original purchase price of the Series A Biohaven Preferred Shares. Biohaven may redeem at their election, any outstanding Series A Biohaven Preferred Shares, in a single payment, at a price equal to two times the original purchase price. In the event that Biohaven defaults on any obligation to redeem Series A Biohaven Preferred Shares when required, the redemption amount shall accrue interest at the rate of 18% annually until the redemption price for such unredeemed Series A Biohaven Preferred Shares is paid in full, subject to applicable law. If any such default continues for at least one year, we will be entitled to convert all unredeemed Series A Biohaven Preferred Shares into common shares equal to the redemption price, plus accrued interest, divided by the five-day volume-weighted trading price immediately preceding the conversion date.

The Series A Biohaven Preferred Shares are classified as Available for sale debt securities in our consolidated balance sheets. The unrealized change in the fair value of the Series A Biohaven Preferred Shares is recorded within Unrealized gains on available for sale debt securities on the consolidated statements of comprehensive income.

Series B Biohaven Preferred Shares

On August 7, 2020 we entered into a Series B Biohaven Preferred Share Purchase Agreement (“Series B Biohaven Preferred Share Agreement”) with Biohaven where we committed to acquire 3,992 shares of Series B Biohaven Preferred Shares at a price of $50,100 per preferred share (the “Commercial Launch Preferred Equity”), for a total of $200.0 million payable on a quarterly basis between the three months ended March 31, 2021 and the three months ended December 31, 2024. Our commitment to purchase the Series B Biohaven Preferred Shares is recognized as the Series B Forwards. In return, Biohaven will be required to redeem the Series B Biohaven Preferred Shares in a series of equal fixed quarterly payments between March 31, 2025 and December 31, 2030 at a price equal to approximately 1.8 times the original purchase price of the Series B Biohaven Preferred Shares. If Biohaven effects any change of control event, then we will have the option to cause Biohaven to issue to us all unissued Series B Biohaven Preferred Shares and to redeem, in a single payment, any outstanding Series B Biohaven Preferred Shares at a price equal to approximately 1.8 times the Series B original issue price per share. Biohaven may redeem at their election, any outstanding Series B Biohaven Preferred Shares, in a single payment, at a price equal to approximately 1.8 times the original issue price for the Series B Biohaven Preferred Shares. In the event that Biohaven defaults on any obligation to redeem Series B Biohaven Preferred Shares, the redemption amount shall accrue interest on the applicable original issue price at the rate of 18% annually until the redemption price for such unredeemed Series B Biohaven Preferred Shares is paid in full, subject to applicable law. If any such default continues for at least one year, we will be entitled to convert any or all unredeemed Series B Biohaven Preferred Shares into common shares equal to the redemption price, plus accrued interest, divided by the five-day volume-weighted trading price immediately preceding the conversion date.

In the three months ended March 31, 2021, we began purchasing the Series B Biohaven Preferred Shares. As of December 31, 2021, we have acquired 1,406 shares of Series B Biohaven Preferred Shares. We have elected the fair value option to account for the Series B Forwards and the Series B Biohaven Preferred Shares, which are recorded in aggregate on the consolidated balance sheets as Available for sale debt securities. We believe the fair value option most accurately reflects the nature of these instruments. The unrealized change in fair value of the Series B Biohaven Preferred Shares and Series B Forwards is recorded within Unrealized gains on available for sale debt securities on the consolidated statements of operations.

MorphoSys Development Funding Bonds

On June 2, 2021, we announced a long-term strategic funding partnership with MorphoSys AG (“MorphoSys”) to support MorphoSys’ acquisition of Constellation Pharmaceuticals, Inc. (“Constellation”), which closed on July 15, 2021. As part of the funding agreement, we agreed to provide MorphoSys up to $350 million of capital (the “Development Funding Bonds”), which MorphoSys may draw over a one-year period from the close of its acquisition of Constellation. MorphoSys is required to draw a minimum of $150 million. As of December 31, 2021, MorphoSys has not drawn any amount under the Development Funding Bonds. Our commitment to fund at least $150 million of the Development Funding Bonds is recognized as the Development Funding Bond Forward. Once drawn, we expect to receive a return of 2.2 times the amount funded on the Development Funding Bonds payable on a quarterly basis over nine years, with the first payment beginning two years after the funding.

We have elected the fair value option to account for the Development Funding Bond Forward as it most accurately reflects the nature of the instrument. The Development Funding Bond Forward is recorded within Available for sale debt securities in our consolidated balance sheet. The unrealized change in fair value of the Development Funding Bond Forward is recorded within Unrealized gains on available for sale debt securities on the consolidated statements of operations.

The table below summarizes our available for sale debt securities recorded at fair value as of December 31, 2021 and 2020 (in thousands):


	Cost (1)		Unrealized Gains		Fair Value		Current Assets		Non-Current Assets		Total
As of December 31, 2021
Series A Biohaven Preferred Shares	$	134,068	$	29,432	$	163,500	$	66,000	$	97,500	$	163,500
Series B Biohaven Preferred Shares	70,441		19,759		90,200		—		90,200		90,200
Series B Forwards	—		12,300		12,300		—		12,300		12,300
Development Funding Bond Forward	—		4,400		4,400		—		4,400		4,400
Total available for sale debt securities	$	204,509	$	65,891	$	270,400	$	66,000	$	204,400	$	270,400

As of December 31, 2020
Series A Biohaven Preferred Shares	$	145,647	$	68,753	$	214,400	$	69,984	$	144,416	$	214,400
Series B Forwards	—		18,600		18,600		—		18,600		18,600
Total available for sale debt securities	$	145,647	$	87,353	$	233,000	$	69,984	$	163,016	$	233,000

(1)Cost for Series A Biohaven Preferred Shares represents amortized cost. Cost for Series B Biohaven Preferred Shares represents the amounts paid to purchase the instruments. There were no costs associated with the Series B Forwards and Development Funding Bond Forward.