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Investment in Viking Therapeutics, Inc. | 9 Months Ended
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Sep. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Investment in Viking Therapeutics, Inc. | Investment in Viking Therapeutics, Inc. Transaction History In May 2014, the Company entered into a Master License Agreement ("MLA") to license rights to five programs to Viking, an unrelated clinical-stage biopharmaceutical company. Upon the consummation of Viking's initial public offering (the "Viking IPO"), Viking agreed to issue to the Company shares of Viking common stock having an aggregate value of approximately $29.2 million. In addition, Viking agreed to pay the Company royalties and milestone payments based on the progression and eventual sale of any products developed under the rights and licenses granted under the MLA. As part of this transaction, the Company extended a $2.5 million loan to Viking under a Loan and Security Agreement ("LSA"). The loan accrues interest at a fixed rate equal to 5%. In April 2015, the Company entered into an amendment to the MLA with Viking (the "MLA Amendment") which among other things, capped the Company’s aggregate ownership of Viking common stock to 49.9% of the Viking capital stock outstanding following the closing of the Viking IPO. Additionally, the Company and Viking entered into an amendment to the LSA (the "LSA Amendment"), pursuant to which, the loans were no longer due and payable upon completion of the Viking IPO, but were extended to become due upon the earlier of: (i) a certain private qualified financing transaction with aggregate net proceeds to Viking of at least $20.0 million or (ii) a public offering subsequent to the Viking IPO with aggregate net proceeds to Viking of at least $20.0 million or (iii) one year after the closing of the Viking IPO. The Company may elect to receive equity of Viking common stock or cash equal to 200% of the principal amount plus accrued and unpaid interest. As of September 30, 2015, the aggregate fair market value of the note receivable was $5.5 million. In May 2015, Viking completed the Viking IPO selling 3.5 million shares of its common stock at an initial offering price of $8.00 per share for an aggregate offering price of $27.6 million before underwriting discounts and commissions. In connection with the Viking IPO, the Company purchased 1.1 million shares of Viking common stock for an aggregate price of $9.0 million at the initial public offering price. In addition, pursuant to the amended MLA Amendment, the Company received approximately 3.7 million shares of Viking common stock having an aggregate value of approximately $29.2 million based on the initial public offering price of $8.00 per share. As a result, the Company including its related parties owned an aggregate of 48.8% of the outstanding common stock of Viking, based on the shares of outstanding Viking common stock at September 30, 2015. As of September 30, 2015, the carrying value of the Company's investment in Viking was $31.8 million. Accounting Consideration In May 2014, the Company determined it held a variable interest in Viking. The Company's variable interests in Viking included the convertible note issued pursuant to the LSA and the Company’s potential upfront payment of equity pursuant to the MLA. The Company considered certain criteria, including risk and reward sharing, experience and financial condition of its partner, voting rights, involvement in day-to-day operating decisions, the Company’s representation on Viking's executive committee, and level of economics between the Company and Viking. Based on these criteria, and using its judgment, the Company determined that it was the primary beneficiary of Viking and, as a result, the Company consolidated Viking on its financial statements. From May 21, 2014 through May 4, 2015, the date of Viking’s initial public offering (the “Viking IPO”), the Company recorded 100% of the losses incurred as net loss attributable to noncontrolling interest because it was a primary beneficiary with no equity interest in the VIE. The loans issued pursuant to the LSA were included as notes payable by Viking and were eliminated as long as the Company consolidated Viking on its financial statements. Upon completion of the Viking IPO in May 2015, the Company determined that Viking was no longer a VIE. The Company also determined that it does not have voting control or other elements of control that would require consolidation of Viking. As a result of this assessment, the Company deconsolidated Viking on May 4, 2015 by derecognizing its assets, liabilities, and noncontrolling interest from the Company's consolidated financial statements. Applying deconsolidation accounting guidance, the Company determined, based on an independent valuation, the fair value of its equity investment in Viking upon deconsolidation was approximately $34.9 million after applying a discount on the Viking IPO price due to applicable transfer restrictions applicable to the Company as an affiliate of Viking pursuant to Rule 144 under the Securities Act of 1933. Based on a separate independent valuation, the Company determined that the fair value of the convertible notes receivable was approximately $5.5 million upon deconsolidation. The Company recorded a $28.2 million gain on deconsolidation of Viking in its consolidated statement of operations for the nine month period ending September 30, 2015. Following the deconsolidation, the Company accounts for its equity investment in Viking under the equity method. For each of the three and nine months ended September 30, 2015, the Company reported approximately $2.2 million and $3.0 million, respectively, as equity in net losses from Viking. The Company has opted to account for the Viking convertible notes receivable at fair value. For each of the three and nine months ended September 30, 2015, the Company recorded no change in the fair value of the Viking convertible notes since the deconsolidation date. See Note 2, Fair Value Measurements for additional details. Viking's Assets and Liabilities As of September 30, 2015, Viking's total assets were $19.0 million, total liabilities were $5.7 million and net losses for the three and nine months ended September 30, 2015 were $4.7 million and $18.3 million, respectively. As of December 31, 2014 Viking's assets and liabilities which were consolidated for the period shown were as follows (in thousands):
| December 31, 2014
Cash and cash equivalents | $ | 756 |
Other current assets | 18 |
Capitalized IPO expenses | 2,268 |
Total current assets | $ | 3,042 |
Other assets | $ | 1 |
Total assets | $ | 3,043 |
Accounts payable | $ | 2,211 |
Accrued liabilities | 77 |
Current portion of notes payable | 334 |
Total current liabilities | $ | 2,622 |
Long-term portion of notes payable | 2,331 |
Total liabilities | $ | 4,953 |
Metabasis CVR payouts In connection with the shares of Viking common stock received pursuant to the MLA, the Company will make a cash payment to the holders of certain Metabasis CVRs. The Company made a cash payment to certain holders of Metabasis CVRs of $0.5 million and $0.8 million during the three and nine months ended September 30, 2015, respectively. The Company estimates that the remaining cash payment, expected to be made in January 2016, will be approximately $2.6 million. See Note 1. Basis of Presentation-Contingent Liabilities for additional information on the Metabasis CVRs.

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