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Available for Sale Debt Securities
 6 Months Ended
Jun. 30, 2022
Investments, Debt and Equity Securities [Abstract]  
Available for Sale Debt Securities Available for Sale Debt Securities
Cytokinetics Commercial Launch Funding

On January 7, 2022, we entered into a long-term funding agreement with Cytokinetics, Incorporated (“Cytokinetics”) to support further development of aficamten and potential commercialization of omecamtiv mecarbil. As part of the funding agreement, we agreed to provide capital (“Cytokinetics Commercial Launch Funding”) of up to $300 million, which is comprised of five tranches, including an initial tranche of $50 million that was funded upon closing. In the three months ended June 30, 2022, we amended the long-term funding agreement with Cytokinetics to increase the required draw amount. Cytokinetics is required to draw $50 million if a certain contingency is met and has the option to draw the remaining $200 million upon the occurrence of certain regulatory and clinical development milestones (“Cytokinetics Funding Commitments”). As of June 30, 2022, we expect $125 million of the $200 million to remain available under the Cytokinetics Commercial Launch Funding due to the likelihood that certain regulatory milestones will not be met by December 31, 2022. Each tranche has an interest-free and payment-free period of six calendar quarters, followed by 34 calendar quarters of installment re-payments totaling 1.9 times the amount drawn.

We elected the fair value option to account for the Cytokinetics Commercial Launch Funding, recorded within Available for sale debt securities on the condensed consolidated balance sheets, as it most accurately reflects the nature of the funding arrangement. The Cytokinetics Funding Commitments, which include options and forwards over the subsequent tranches, are recognized at fair value within Other liabilities as of June 30, 2022 and within Available for sale debt securities as of December 31, 2021 on the condensed consolidated balance sheets. The unrealized change in fair value of the funded Cytokinetics Commercial Launch Funding and the Cytokinetics Funding Commitments are recorded within Unrealized gains on available for sale debt securities in the condensed 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 its acquisition of Constellation Pharmaceuticals, Inc. that closed on July 15, 2021. As part of the funding agreement, which was amended in the three months ended June 30, 2022 to extend the initial funding date, we agreed to provide MorphoSys up to $350 million of capital (the “Development Funding Bonds”) to be drawn by September 12, 2022. MorphoSys is required to draw a minimum of $150 million. 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 is drawn. As of June 30, 2022, MorphoSys had not drawn any amount under the Development Funding Bonds. In July 2022, MorphoSys notified us of its intention to draw $300 million under the Development Funding Bonds to be funded in September 2022.

We 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 Other liabilities as of June 30, 2022 and within Available for sale debt securities as of December 31, 2021 on our condensed consolidated balance sheets. The unrealized change in fair value of the Development Funding Bond Forward is recorded within Unrealized gains on available for sale debt securities in the condensed consolidated statements of operations.
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 per preferred share for a total of $125 million. The approval of Nurtec ODT by the U.S. Food and Drug Administration (“FDA”) in February 2020 resulted 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.

The Series A Biohaven Preferred Shares are classified as Available for sale debt securities on our condensed 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 in the condensed consolidated statements of comprehensive income. In the three and six months ended June 30, 2022, $8.0 million and $16.9 million, respectively, of the unrealized gains were reclassified from other comprehensive income to Interest income in the condensed consolidated statements of operations. In the three and six months ended June 30, 2021, $13.3 million and $28.8 million, respectively, of the unrealized gains were reclassified from other comprehensive income to Interest income in the condensed consolidated statements of operations.

Series B Biohaven Preferred Shares

On August 7, 2020, we entered into the 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 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. Biohaven will be required to redeem the Series B Biohaven Preferred Shares in a series of equal fixed quarterly payments between the three months ended March 31, 2025 and the three months ended 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 original issue price of the Series B Biohaven Preferred Shares. 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.

As of June 30, 2022, we have acquired 1,988 shares of Series B Biohaven Preferred Shares. We elected the fair value option to account for the Series B Biohaven Preferred Shares and the Series B Forwards, which are recorded in aggregate as Available for sale debt securities on the condensed consolidated balance sheets. 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 in the condensed consolidated statements of operations.
The table below summarizes our available for sale debt securities recorded at fair value as of June 30, 2022 and December 31, 2021 (in thousands):

CostUnrealized GainsFair Value Current AssetsNon-Current AssetsCurrent LiabilitiesNon-Current Liabilities (3)Total
As of June 30, 2022
Debt securities (1)$278,759 $84,241 $363,000 $300,000 $63,000 $— $— $363,000 
Forwards (2)— 28,100 28,100 63,700 — — (35,600)28,100 
Funding commitments (2)(9,400)1,300 (8,100)— — — (8,100)(8,100)
Total available for sale debt securities$269,359 $113,641 $383,000 $363,700 $63,000 $— $(43,700)$383,000 
As of December 31, 2021
Debt securities (1)$204,509 $49,191 $253,700 $66,000 $187,700 $— $— $253,700 
Forwards (2)— 16,700 16,700 — 16,700 — — 16,700 
Total available for sale debt securities$204,509 $65,891 $270,400 $66,000 $204,400 $— $— $270,400 
(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. The cost associated with the funded Cytokinetics Commercial Launch Funding reflects the fair value on the purchase date.
(2)There are no costs associated with the forwards. The cost associated with the funding commitments represents the fair value on the purchase date.
(3)Reflected within Other liabilities on the condensed consolidated balance sheet.