Washington, D.C. 20549

Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2020
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period From ______ to ______ .
Commission File Number: 001-33093
(Exact name of registrant as specified in its charter)

(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3911 Sorrento Valley Boulevard, Suite 110
San Diego
(Address of principal executive offices)(Zip Code)
(858) 550-7500
(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Trading symbol:
Name of each exchange on which registered:
Common Stock , par value $0.001 per share
The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one)

Large Accelerated Filer
Accelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of May 5, 2020, the registrant had 16,049,703 shares of common stock outstanding.





2019 Annual ReportAnnual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 27, 2020
2019 Notes$245.0 million aggregate principal amount of convertible senior unsecured notes due 2019
2023 Notes$750.0 million aggregate principal amount of convertible senior unsecured notes due 2023
Ab InitioAb Initio Biotherapeutics, Inc.
AbvivoAbvivo, LLC
Acrotech BiopharmaAcrotech Biopharma, LLC
AmgenAmgen, Inc.
ANDAAbbreviated New Drug Application
ASCAccounting Standards Codification
ASUAccounting Standards Update
AziyoAziyo Med, LLC
CEOChief Executive Officer
cGMPcurrent Good Manufacturing Practices
CompanyLigand Pharmaceuticals Incorporated, including subsidiaries
COPDChronic obstructive pulmonary disease
CorMatrixCorMatrix Cardiovascular, Inc.
CVRContingent value right
CrystalCrystal Bioscience, Inc.
CStone PharmaceuticalsCStone Pharmaceuticals (Suzhou) Co., Ltd.
CyDexCyDex Pharmaceuticals, Inc.
Dianomi TherapeuticsDianomi Therapeutics, Inc.
ESPPEmployee Stock Purchase Plan, as amended and restated
EUAEmergency Use Authorization
FASBFinancial Accounting Standards Board
FDAFood and Drug Administration
GAAPGenerally accepted accounting principles in the United States
Glucagon CVRThe contingent value right issued pursuant to the Glucagan CVR Agreement, dated January 10, 2010 by and between the Company, Meatabasis and the other parties named therein
GileadGilead Sciences, Inc.
G-protein coupled receptor
GRAGlucagon receptor antagonist
IcagenIcagen, Inc.
IPR&DIn-process Research and Development
LigandLigand Pharmaceuticals Incorporated, including subsidiaries
MetabasisMetabasis Therapeutics, Inc.
NDANew Drug Application
Nucorion PharmaceuticalsNucorion Pharmaceuticals, Inc.
OptheaOpthea Limited
OTTIOther-than-temporary impairment
PFSProgression-free Survival
PfizerPfizer Inc.
Q1 2019The Company's fiscal quarter ended March 31, 2019
Q1 2020The Company's fiscal quarter ended March 31, 2020
RoivantRoivant Sciences GmbH
Roivant License AgreementLicense Agreement, dated March 5, 2018, between Ligand and Roivant
RetrophinRetrophin, Inc.
SECSecurities and Exchange Commission
SelexisSelexis, SA
sNDASupplemental New Drug Application
TevaTeva Pharmaceuticals USA, Inc., Teva Pharmaceutical Industries Ltd. and Actavis, LLC, collectively
VernalisVernalis plc
VikingViking Therapeutics, Inc.


Item 1. Condensed Consolidated Financial Statements

(Unaudited, in thousands, except par value)
March 31, 2020December 31, 2019
Current assets:
   Cash and cash equivalents$117,527  $71,543  
   Short-term investments621,284  939,989  
   Investment in Viking32,879  58,335  
   Accounts receivable, net39,506  30,387  
   Inventory7,320  7,296  
   Income taxes receivable7,271  11,361  
   Other current assets4,940  4,734  
      Total current assets830,727  1,123,645  
Deferred income taxes, net26,358  25,608  
Intangible assets, net206,520  210,448  
Goodwill94,341  95,229  
Commercial license and other economic rights, net10,381  20,090  
Property and equipment, net6,690  7,185  
Operating lease right-of-use assets9,630  10,353  
Other assets1,270  2,357  
      Total assets$1,185,917  $1,494,915  
Current liabilities:
   Accounts payable $3,365  $2,420  
   Accrued liabilities11,848  9,836  
   Current contingent liabilities871  2,607  
   Deferred revenue4,354  2,139  
      Total current liabilities20,438  17,002  
2023 convertible senior notes, net444,432  638,959  
Long-term contingent liabilities5,811  6,335  
Deferred income taxes, net21,769  32,937  
Long-term operating lease liabilities9,231  9,970  
Other long-term liabilities22,340  22,480  
      Total liabilities524,021  727,683  
Commitments and contingencies
Stockholders' equity:
   Preferred stock, $0.001 par value; 5,000 shares authorized; zero issued and outstanding at March 31, 2020 and December 31, 2019
   Common stock, $0.001 par value; 60,000 shares authorized; 16,050 and 16,823 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
16  17  
   Additional paid-in capital295,940  367,326  
   Accumulated other comprehensive loss(4,867) (216) 
   Retained earnings 370,807  400,105  
      Total stockholders' equity661,896  767,232  
      Total liabilities and stockholders' equity$1,185,917  $1,494,915  

See accompanying notes to unaudited condensed consolidated financial statements.


(in thousands, except per share amounts)
Three months ended
March 31,
   Royalties$6,565  $19,538  
   Captisol21,109  8,959  
   Service revenue3,357  3,883  
   Contract revenue2,130  11,104  
Total revenues33,161  43,484  
Operating costs and expenses:
   Cost of Captisol4,683  3,858  
   Amortization of intangibles3,535  3,503  
   Research and development11,891  11,289  
   General and administrative9,264  11,088  
Total operating costs and expenses29,373  29,738  
Gain from sale of Promacta license  812,797  
Income from operations3,788  826,543  
Other income (expense):
   Gain (loss) from Viking(25,457) 17,293  
   Interest income4,730  5,909  
   Interest expense(8,548) (8,906) 
   Other expense, net(4,928) 1,874  
Total other income (loss), net(34,203) 16,170  
Income (loss) before income taxes(30,415) 842,713  
Income tax benefit (expense)6,284  (176,376) 
Net income (loss)$(24,131) $666,337  
     Basic net income (loss) per share$(1.46) $32.59  
     Shares used in basic per share calculations16,529  20,447  
     Diluted net income (loss) per share$(1.46) $31.32  
     Shares used in diluted per share calculations16,529  21,277  

See accompanying notes to unaudited condensed consolidated financial statements.

(in thousands)

Three months ended
March 31,
Net income (loss):$(24,131) $666,337  
Unrealized net gain (loss) on available-for-sale securities, net of tax(2,772) 230  
Foreign currency translation(1,879) 291  
Comprehensive income (loss)$(28,782) $666,858  

See accompanying notes to unaudited condensed consolidated financial statements.


(in thousands)

Common StockAdditional paid in capitalAccumulated other comprehensive income (loss)Retained earningsTotal stockholders' equity
Balance at January 1, 202016,823  $17  $367,326  $(216) $400,105  $767,232  
Issuance of common stock under employee stock compensation plans, net105  —  (1,008) —  —  (1,008) 
Share-based compensation—  —  5,653  —  —  5,653  
Repurchase of common stock(878) (1) (73,286) —  —  (73,287) 
Unrealized net loss on available-for-sale securities, net of deferred tax—  —  —  (2,772) —  (2,772) 
Foreign currency translation adjustment—  —  —  (1,879) —  (1,879) 
Reacquisition of equity due to 2023 debt extinguishment, net of tax
—  —  (2,745) —  —  (2,745) 
Cumulative-effect adjustment from adoption of ASU 2016-13, net of tax—  —  —  —  (5,167) (5,167) 
Net loss—  —  —  —  (24,131) (24,131) 
Balance at March 31, 202016,050  $16  $295,940  $(4,867) $370,807  $661,896  

Common StockAdditional paid in capitalAccumulated other comprehensive income (loss)Retained earnings (Accumulated deficit)Total stockholders' equity
Balance at January 1, 201920,765  $21  $791,114  $(1,024) $(229,197) $560,914  
Issuance of common stock under employee stock compensation plans, net135  —  (991) —  —  (991) 
Share-based compensation—  —  5,347  —  —  5,347  
Repurchase of common stock(1,236) (1) (151,584) —  —  (151,585) 
Unrealized net gain on available-for-sale securities, net of deferred tax—  —  —  230  —  230  
Foreign currency translation adjustment—  —  —  291  —  291  
Other tax adjustments—  —  (569) —  —  (569) 
Net income—  —  —  —  666,337  666,337  
Balance at March 31, 201919,664  $20  $643,317  $(503) $437,140  $1,079,974  

See accompanying notes to unaudited condensed consolidated financial statements.

(Unaudited, in thousands)
Three months ended
March 31,
Cash flows from operating activities:
Net income (loss)$(24,131) $666,337  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Gain from sale of Promacta license  (812,797) 
Change in estimated fair value of contingent liabilities(372) 1,403  
Depreciation and amortization of intangible assets3,422  3,841  
Amortization of premium (discount) on investments, net830  (1,818) 
Amortization of debt discount and issuance fees7,203  7,446  
Amortization of commercial license and other economic rights2,958  2,437  
Gain on debt extinguishment(659)   
Share-based compensation5,653  5,347  
Deferred income taxes(10,419) 62,263  
Loss (gain) from investment in Viking25,456  (17,293) 
Other5,668  (6,160) 
Changes in operating assets and liabilities:
     Accounts receivable, net(8,398) 29,235  
     Inventory1,251  (2,823) 
     Accounts payable and accrued liabilities 2,114  (5,873) 
     Income tax receivable4,081  113,997  
     Other2,265  (284) 
                Net cash provided by operating activities16,922  45,258  
Cash flows from investing activities:
Proceeds from sale of Promacta license  812,797  
Purchase of short-term investments(167,374) (1,047,767) 
Proceeds from sale of short-term investments179,431  341  
Proceeds from maturity of short-term investments297,005  332,647  
Other(526) (3,241) 
               Net cash provided by investing activities308,536  94,777  
Cash flows from financing activities:
Repurchase of 2023 Notes(203,210)   
Net proceeds from stock option exercises and ESPP421  1,904  
Taxes paid related to net share settlement of equity awards(1,429) (2,895) 
Share repurchase(73,287) (151,585) 
Payments to CVR Holders(1,800)   
               Net cash used in financing activities(279,305) (152,576) 
Effect of exchange rate changes on cash(169) 130  
Net increase (decrease) in cash, cash equivalents and restricted cash45,984  (12,411) 
Cash, cash equivalents and restricted cash at beginning of period72,273  119,780  
Cash, cash equivalents and restricted cash at end of period$118,257  $107,369  

Supplemental disclosure of cash flow information:
Interest paid$597  $102  
Taxes paid$  $60  
Restricted cash in other current assets$730  $2,256  
Supplemental schedule of non-cash activity:
Accrued fixed asset purchases$63  $301  
Accrued inventory purchases$1,445  $1,959  
Unrealized gain (loss) on AFS investments$(3,541) $294  
See accompanying notes to unaudited condensed consolidated financial statements.

Notes to Condensed Consolidated Financial Statements

Unless the context requires otherwise, references in this report to “Ligand,” “we,” “us,” the “Company,” and “our” refer to Ligand Pharmaceuticals Incorporated and its consolidated subsidiaries.

1. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

Our condensed consolidated financial statements include the financial statements of Ligand and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. We have included all adjustments, consisting only of normal recurring adjustments, which we considered necessary for a fair presentation of our financial results. These unaudited condensed consolidated financial statements and accompanying notes should be read together with the audited consolidated financial statements included in our 2019 Annual Report. Interim financial results are not necessarily indicative of the results that may be expected for the full year.


Certain amounts in the prior period condensed consolidated financial statements have been reclassified to conform with the current period presentation. Specifically, effective the first quarter of 2020, we began to present service revenue and contract revenue separately, which were combined in license fees, milestones and other revenues in prior years. As a result, service revenue and contract revenue in the condensed consolidated statement of operations for first quarter 2019 have been reclassified to conform to the current period presentation.

Significant Accounting Policies

We have described our significant accounting policies in Note 1, Basis of Presentation and Summary of Significant Accounting Policies, of Notes to Consolidated Financial Statements in our 2019 Annual Report.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. Actual results may differ from those estimates.

Impact of COVID-19 Pandemic

The current COVID-19 worldwide pandemic has presented substantial public health and economic challenges and is affecting our employees and partners, patients, communities and business operations, as well as the U.S. and global economy and financial markets. International and U.S. governmental authorities in impacted regions are taking actions in an effort to slow the spread of COVID-19, including issuing varying forms of “stay-at-home” orders, and restricting business functions outside of one’s home. In response, we have closed our executive offices with our administrative employees continuing their work remotely and limited the number of staff in our research and development laboratories and other facilities. The continued spread of the COVID-19 pandemic and the measures taken by the governments of countries have affected, and could continue to affect, our business and the business of our partners, including future disruptions to our supply chain and the manufacture or shipment of drug substance and finished drug product for Captisol, delays by us or our partners in the initiation or enrollment of patients in clinical trials, discontinuations by patients enrolled in clinical trials, difficulties launching or commercializing products and other related activities, which could delay ongoing clinical trials, increase development costs, reduce royalty revenues and have a material adverse effect on our business, financial condition and results of operations. Several of our partners have reported that their operations have been impacted including delays in research and development programs and deprioritizing clinical trials in favor of treating patients who have contracted the virus or to prevent the spread of the virus. This may lead to clinical trial protocol deviations or to discontinuation of treatment for patients who are currently enrolled in the clinical trials being conducted by us or our partners. In addition, certain of our partners have reported negative impacts on product sales which will impact our royalty revenues.


While some of our partners have reported delays or reduced sales due to COVID-19, some of our other partners are working to develop drugs to treat COVID-19. For example, we are supplying Captisol to partners, including Gilead Sciences for Veklury® (remdesivir), a first new treatment for COVID-19 available under an EUA and is also being evaluated in multiple ongoing clinical trials and, as a result, we have worked to increase our manufacturing of Captisol to meet this increased demand. We believe we have adequate supply of Captisol and do not expect any significant risk or disruption to our supply chain for the foreseeable future. In addition, certain of our OmniAb partners have initiated antibody discovery programs for the potential treatment of COVID-19, which may lead to future milestone or royalty revenues if these programs are successful.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, the businesses of our partners, our results of operations and our financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact, including the timing and extent of governments reopening activities, and the economic impact on local, regional, national and international markets.

Accounting Standards Recently Adopted

Credit Losses - In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available for sale debt securities. This standard includes our financial instruments, such as accounts receivable, investments that are generally of high credit quality, and commercial license rights. Previously, when credit losses were measured under GAAP, an entity generally only considered past events and current conditions in measuring the incurred loss. The new guidance requires us to identify, analyze, document and support new methodologies for quantifying expected credit loss estimates for our financial instruments, using information such as historical experience and current economic conditions, plus the use of reasonable supportable forecast information. We adopted ASU 2016-13 on January 1, 2020, using a modified retrospective transition method, which requires a cumulative-effect adjustment, if any, to the opening balance sheet of retained earnings to be recognized on the date of adoption with prior periods not restated. The cumulative-effect adjustment, net of tax, recorded on January 1, 2020, is approximately $5.2 million on our unaudited condensed consolidated balance sheet as of January 1, 2020. Results for periods after January 1, 2020 are presented under ASU 2016-13 while prior period amounts continue to be reported under previously applicable accounting standards. See additional disclosure on credit losses under “Short-term Investments”, “Accounts Receivable and Allowance for Credit Losses” and “Commercial License and Other Economic Rights” discussed below.

Goodwill Impairment Testing - In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under the new standard the goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value, although it cannot exceed the total amount of goodwill allocated to that reporting unit. We adopted this standard on January 1, 2020, and the adoption did not have a material impact on our condensed consolidated financial statements.

Fair Value Measurement - In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820), which modifies the disclosure requirements on fair value measurements. We adopted this standard on January 1, 2020, and the adoption did not have a material impact on our condensed consolidated financial statements.

Collaborative Arrangements - In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606 (Topic 808). The new standard clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under Topic 606, Revenue from Contracts with Customers, when the counterparty is a customer for a good or service that is a distinct unit of account. The amendments also preclude entities from presenting consideration from transactions with a collaborator that is not a customer together with revenue recognized from contracts with customers. We adopted this standard on January 1, 2020, and the adoption did not have a material impact on our condensed consolidated financial statements.


Income Taxes - In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The standard is expected to reduce cost and complexity related to accounting for income taxes. The new guidance eliminates certain exceptions and clarifies and amends existing guidance to promote consistent application among reporting entities. This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective or prospective basis. We adopted this standard on a prospective basis on January 1, 2020, and the adoption did not have a material impact on our condensed consolidated financial statements.

Accounting Standards Not Yet Adopted

We do not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on our condensed consolidated financial statements or disclosures.


Our revenue is generated primarily from royalties on sales of products commercialized by our partners, Captisol material sales, service revenue, and contract revenue for license fees and development, regulatory and sales based milestone payments.

Royalties, Service Revenue, and Contract Revenue

We receive royalty revenue on sales by our partners of products covered by patents that we own. We do not have future performance obligations under these license arrangements. We generally satisfy our obligation to grant intellectual property rights on the effective date of the contract. However, we apply the royalty recognition constraint required under the guidance for sales-based royalties which requires a sales-based royalty to be recorded no sooner than the underlying sale. Therefore, royalties on sales of products commercialized by our partners are recognized in the quarter the product is sold. Our partners generally report sales information to us on a one quarter lag. Thus, we estimate the expected royalty proceeds based on an analysis of historical experience and interim data provided by our partners including their publicly announced sales. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known, typically the following quarter.

We recognize service revenue for contracted R&D services performed for our customers over time. We measure our progress using an input method based on the effort we expend or costs we incur toward the satisfaction of our performance obligation. We estimate the amount of effort we expend, including the time we estimate it will take us to complete the activities, or costs we incur in a given period, relative to the estimated total effort or costs to satisfy the performance obligation. This results in a percentage that we multiply by the transaction price to determine the amount of revenue we recognize each period. This approach requires us to make estimates and use judgement. If our estimates or judgements change over the course of the collaboration, they may affect the timing and amount of revenue that we recognize in the current and future periods.

Our contract revenue includes license fees and future contingent milestone based payments. We include contingent milestone based payments in the estimated transaction price when there is a basis to reasonably estimate the amount of the payment. These estimates are based on historical experience, anticipated results and our best judgment at the time. If the contingent milestone based payment is sales-based, we apply the royalty recognition constraint and record revenue when the underlying sale has taken place. Significant judgments must be made in determining the transaction price for our sales of intellectual property. Because of the risk that products in development with our partners will not reach development based milestones or receive regulatory approval, we generally recognize any contingent payments that would be due to us upon or after the development milestone or regulatory approval.

Captisol Sales

We recognize revenue when control of Captisol material is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of the product, meaning the customer has the ability to use and obtain the benefit of the Captisol material or intellectual property license right. We recognize revenue for satisfied performance obligations only when we determine there are no uncertainties regarding payment terms or transfer of control. Sales tax and other taxes we collect concurrent with revenue-producing

activities are excluded from revenue. We expense incremental costs of obtaining a contract when incurred if the expected amortization period of the asset that we would have recognized is one year or less or the amount is immaterial. We did not incur any incremental costs of obtaining a contract during the periods reported.

Deferred Revenue

Depending on the terms of the arrangement, we may also defer a portion of the consideration received because we have to satisfy a future obligation. We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. We have elected to recognize the cost for freight and shipping when control over Captisol material has transferred to the customer as an expense in cost of Captisol.

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the condensed consolidated balance sheet. Except for royalty revenue and certain service revenue, we generally receive payment at the point we satisfy our obligation or soon after. Therefore, we do not generally carry a contract asset balance. Any fees billed in advance of being earned are recorded as deferred revenue. During the three months ended March 31, 2020 and 2019, the amount recognized as revenue that was previously deferred was $0.4 million and $1.3 million, respectively.

Disaggregation of Revenue

The following table represents disaggregation of royalties, Captisol, service revenue and contract revenue (in thousands):

Three months ended
March 31,
Kyprolis$4,405  $3,833  
Evomela1,576  911  
Other584  601  
Promacta  14,193  
$6,565  $19,538  
Captisol$21,109  $8,959  
Service Revenue$3,357  $3,883  
Contract Revenue
License Fees$975  $850  
Milestone334  10,254  
$2,130  $11,104  
Total$33,161  $43,484  


Short-term Investments
Our investments consist of the following at March 31, 2020 and December 31, 2019 (in thousands):
March 31, 2020December 31, 2019
Amortized costGross unrealized gainsGross unrealized lossesEstimated fair valueAmortized costGross unrealized gainsGross unrealized lossesEstimated fair value
Short-term investments
     Bank deposits$284,855  $157  $(1,398) $283,614  $411,690  $188  $(3) $411,875  
     Corporate bonds62,191  21  (1,666) 60,546  63,818  161    63,979  
     Commercial paper127,928  5  (273) 127,660  210,525  43  (16) 210,552  
     Corporate equity securities4,506  430  (3,483) 1,453  4,506  416  (1,850) 3,072  
     Mutual fund150,747    (2,794) 147,953  250,635    (249) 250,386  
     Warrants  58    58    125    125  
$630,227  $671  $(9,614) $621,284  $941,174  $933  $(2,118) $939,989  

For available-for-sale debt securities with unrealized losses, the new credit losses standard (Topic 326) now requires allowances to be recorded instead of reducing the amortized cost of the investment. This standard limits the amount of credit losses to be recognized for available-for-sale debt securities to be the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. The adoption of the new credit losses standard did not have a material impact on our available-for-sale debt securities during the three months ended March 31, 2020.

The following table summarizes our available-for-sale debt securities by contractual maturity (in thousands):

March 31, 2020
Amortized CostFair Value
Within one year$401,338  $400,627  
After one year through five years73,636  71,193  
After five years    
Total$474,974  $471,820  

The following table summarizes our available-for-sale debt securities in an unrealized loss position (in thousands):

Less than 12 months12 months or greaterTotal
Fair Value
Fair Value
Fair Value
March 31, 2020
Bank deposits$(1,398) $214,597  $  $  $(1,398) $214,597  
Corporate bonds(1,666) 40,460      (1,666) 40,460  
Commercial paper(273) 110,666      (273) 110,666  
Total$(3,337) $365,723  $  $  $(3,337) $365,723  
December 31, 2019
Bank deposits$(3) $58,584  $  $  $(3) $58,584  
Commercial paper(16) 79,363      (16) 79,363  
Total$(19) $137,947  $  $  $(19) $137,947  


Our investment policy is capital preservation and we only invested in U.S.-dollar denominated investments. We held a total of 40 positions which were in an unrealized loss position as of March 31, 2020. We believe that we will collect the principal and interest due on our debt securities that have an amortized cost in excess of fair value. The unrealized losses are largely due to changes in interest rates and not to unfavorable changes in the credit quality associated with these securities that impacted our assessment on collectability of principal and interest. We do not intend to sell these securities nor do we believe that we will be required to sell these securities before the recovery of the amortized cost basis. Accordingly, no credit losses were recognized for the three months ended March 31, 2020.

Accounts Receivable and Allowance for Credit Losses

Our accounts receivable arise primarily from sales on credit to customers. We establish an allowance for credit losses to present the net amount of accounts receivable expected to be collected. The allowance is determined by using the loss-rate method, which requires an estimation of loss rates based upon historical loss experience adjusted for factors that are relevant to determining the expected collectability of accounts receivable. Some of these factors include macroeconomic conditions that correlate with historical loss experience, delinquency trends, aging behavior of receivables and credit and liquidity quality indicators for industry groups, customer classes or individual customers. During the three months ended March 31, 2020, we considered the current and expected future economic and market conditions surrounding novel coronavirus (COVID-19) pandemic and recorded an additional $0.2 million of allowance for credit losses as of March 31, 2020.


Inventory, which consists of finished goods, is stated at the lower of cost or net realizable value. We determine cost using the first-in, first-out method or the specific identification method.

Goodwill and Other Identifiable Intangible Assets

Goodwill and other identifiable intangible assets consist of the following (in thousands):
March 31,December 31,
     Goodwill$94,341  $95,229  
Definite lived intangible assets
     Complete technology242,813  242,813  
          Less: accumulated amortization(1)
(53,728) (50,203) 
     Trade name2,642  2,642  
          Less: accumulated amortization(1,213) (1,180) 
     Customer relationships29,600  29,600  
          Less: accumulated amortization(13,594) (13,224) 
Total goodwill and other identifiable intangible assets, net$300,861  $305,677  
(1) accumulated amortization for complete technology includes immaterial amount of foreign currency translation adjustments for the complete technology acquired from the Vernalis acquisition.

Commercial License and Other Economic Rights

Commercial license and other economic rights consist of the following (in thousands):

March 31,December 31,
Aziyo and CorMatrix$17,696  $17,696  
Palvella10,000  10,000  
Selexis8,602  8,602  
Dianomi2,000  2,000  
38,298  38,298  
Less: accumulated amortization attributed to principal or research and development(21,939) (18,208) 
Less: credit loss adjustments(5,978)   
   Total commercial license and other economic rights, net$10,381  $20,090  

Commercial license and other economics rights represent a portfolio of future milestone and royalty payment rights acquired from Selexis in April 2013 and April 2015, CorMatrix in May 2016, Palvella in December 2018 and Dianomi in January 2019. Commercial license rights acquired are accounted for as financial assets and other economic rights are accounted for as funded research and developments as further discussed below.

In May 2017, we entered into a Royalty Agreement with Aziyo pursuant to which we will receive royalties from certain marketed products that Aziyo acquired from CorMatrix. We account for the Aziyo commercial license right as a financial asset, and in accordance with ASC 310, Receivables, we amortize the commercial license right using the effective interest method whereby we forecast expected cash flows over the term of the arrangement to arrive at an annualized effective interest. The annual effective interest associated with the forecasted cash flows from the Royalty Agreement with Aziyo as of March 31, 2020 is 23%. Revenue is calculated by multiplying the carrying value of the commercial license right by the effective interest.

In December 2018, we entered into a development funding and royalties agreement with Palvella. Pursuant to the agreement, we may receive up to $8.0 million of milestone payments upon the achievement by Palvella of certain corporate, financing and regulatory milestones for PTX-022, a product candidate being developed to treat pachyonychia congentia. In addition to the milestone payments, Palvella will pay us tiered royalties from 5.0% to 9.8% based on any aggregate annual worldwide net sales of any PTX-022 products, subject to Palvella’s right to reduce the royalty rates by making payments in certain circumstances. We paid Palvella an upfront payment of $10.0 million, which Palvella is required to use to fund the development of PTX-022. We are not obligated to provide additional funding to Palvella for the development or commercialization of PTX-022. We determined the economic rights related to Palvella should be characterized as a funded research and development arrangement, thus we account for it in accordance with ASC 730-20, Research and Development Arrangements, and reduce our asset as the funds are expended by Palvella. As of March 31, 2020, the fund has been fully expended by Palvella and our cost basis for the asset has been reduced to zero, we will recognize milestones and royalties as revenue when earned.

We recorded a $5.5 million pre-tax reserve for credit losses upon adoption of the new credit losses on January 1, 2020. We estimated the credit losses at the individual asset level by considering the performance against the programs, the company operating performance and the macroeconomic forecast. In addition, we have judgmentally applied credit loss risk factors to the future expected payments with consideration given to the timing of the payment. Given the higher inherent credit risk associated with longer term receivables, we applied a lower risk factor to the earlier years and progressively higher risk factors to the later years. During the three months ended March 31, 2020, we further considered the current and expected future economic and market conditions surrounding novel coronavirus (COVID-19) pandemic and recorded an additional $0.5 million reserve for credit losses in other expense, net, in our condensed consolidated statement of operations for the three months ended March 31, 2020 .

See further detail described in Note 1, Basis of Presentation and Summary of Significant Accounting Policies, of Notes to Consolidated Financial Statements in our 2019 Annual Report.


As of March 31, 2020 and December 31, 2019, we recorded our common stock of Viking at fair value of $28.3 million and $48.4 million, respectively, in “investment in Viking” in our consolidated balance sheets. We also have outstanding warrants to purchase 1.5 million shares of Viking's common stock at an exercise price of $1.50 per share. We also recorded the warrants in

“investment in Viking” in our consolidated balance sheet at fair value of $4.6 million and $9.9 million at March 31, 2020 and December 31, 2019, respectively.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):
March 31,December 31,
Compensation$2,321  $1,986  
Professional fees690  1,135  
Amounts owed to former licensees383  381  
Royalties owed to third parties1,062    
Return reserve2,899  3,027  
Current operating lease liabilities1,483  1,242  
Accrued interest