Derivative Instruments

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

We have historically managed the impact of foreign currency exchange rate and interest rate risk through various financial instruments, including derivative instruments such as treasury rate lock contracts, interest rate swap contracts and foreign currency forward contracts. Our policy is to use derivatives strategically to hedge existing and future interest rate exposure and to minimize volatility in cash flow arising from our exposure to interest rate risk and foreign currency risk. We may also acquire other financial instruments that are classified as derivatives. We do not enter into derivative instruments for trading or speculative purposes.

Milestone Acceleration Option

On August 7, 2020, we entered into an expanded funding agreement with Biohaven, which included the Series B Biohaven Preferred Share Agreement, to fund the development of zavegepant and the commercialization of Nurtec ODT in exchange for royalties and success-based milestones payable over time. Upon a change of control event, we have the option to cause Biohaven to accelerate the payment of zavegepant milestone payments, if triggered, in a lump sum amount (“Milestone Acceleration Option”). The Milestone Acceleration Option is an embedded derivative instrument for which the associated fair value was not material prior to the second quarter of 2022, when Pfizer announced its intended acquisition of Biohaven. On October 3, 2022, Pfizer acquired Biohaven and we elected to accelerate the zavegepant success-based milestone payments, if triggered, in a lump sum amount. As of December 31, 2022, the fair value of the Milestone Acceleration Option was $96.6 million, of which $86.2 million was recorded within Other current assets and $10.5 million was recorded within Other assets on the consolidated balance sheets.

Treasury rate lock contracts

In June 2021, we entered into treasury rate lock contracts with notional amounts totaling $600.0 million to manage the impact of fluctuations in the underlying benchmark interest rate associated with the 2021 Notes (as further discussed and defined in Note 11–Borrowings). The treasury rate lock contracts had collateral requirements and were not designated as hedge instruments. We paid $16.1 million in July 2021 to terminate our treasury rate lock contracts in connection with the issuance of the 2021 Notes.

Interest rate swaps

In February 2020, RPIFT terminated all outstanding interest rate swaps in connection with the Exchange Offer Transactions. We paid $35.4 million to terminate these swaps and reclaimed $45.3 million of collateral that was held by the respective counterparties. We did not enter into any interest rate swaps subsequent to the February 2020 termination discussed above.

Epizyme put option and warrant

In November 2019, RPIFT made an equity investment in Epizyme, Inc. (“Epizyme”) of $100.0 million. Under the terms of the agreement with Epizyme, we made an upfront payment of $100.0 million in exchange for (1) shares of Epizyme common stock, (2) a warrant to purchase an additional 2.5 million shares of Epizyme common stock at $20 per share over a three-year term and (3) Epizyme’s royalty on sales of Tazverik in Japan payable by Eisai Co., Ltd (“Eisai”). In addition, Epizyme had an 18 month put option to sell an additional $50.0 million of its common stock to RPIFT at then prevailing prices, not to exceed $20 per share. We recorded the put option as a forward purchase contract as of December 31, 2019. The exercise of the put option was settled in February 2020. As of December 31, 2021, the fair value of the warrant was immaterial. The warrant remained unexercised and was terminated upon Ipsen’s acquisition of Epizyme in 2022.

Summary of derivatives and reclassifications

The tables below summarize the changes in fair value of the derivatives for 2022, 2021 and 2020 and the line items within the consolidated statements of operations where the gains or losses on these derivatives were recorded (in thousands):


	Years Ended December 31,						Location on Consolidated Statements of Operations
	2022		2021		2020
Derivatives in hedging relationships (1)
Interest rate swaps:
Amount of loss reclassified from accumulated other comprehensive income into net income	$	—	$	—	$	4,066	(Gains)/losses on derivative financial instruments
Change in fair value of interest rate swaps	—		—		(73)		(Gains)/losses on derivative financial instruments
Interest expense	—		—		114		Interest expense

Derivatives not designated as hedging instruments
Interest rate swaps:
Change in fair value of interest rate swaps	—		—		6,908		(Gains)/losses on derivative financial instruments
Interest expense	—		—		408		Interest expense

Changes in fair value of other instruments:
Warrant	—		5,439		25,375		(Gains)/losses on derivative financial instruments


Forward purchase contract	—		—		5,800		(Gains)/losses on derivative financial instruments

Treasury rate lock contracts	—		16,093		—		(Gains)/losses on derivative financial instruments

Milestone Acceleration Option	(96,610)		—		—		(Gains)/losses on derivative financial instruments

(1)Certain interest rate swaps were previously designated as cash flow hedges. These swaps became ineffective as debt refinancings occurred between 2013 and 2016. As a result of the termination of interest rate swaps in February 2020, all amounts associated with interest rate swaps previously designated as cash flow hedges and recorded in Accumulated other comprehensive income were released into earnings.