Notes and other receivables, long-term

280,731,000

^[1]

259,244,000

^[2]

304,910,000

^[1]

305,615,000

^[2]

Long-term deferred tax assets

35,599,000

^[1]

33,799,000

^[2]

Other assets

7,162,000

^[1]

7,733,000

^[2]

Total assets

995,541,000

^[1]

962,350,000

^[2]

Current liabilities:

Accounts payable

701,000

^[1]

318,000

^[2]

Accrued liabilities

57,951,000

^[1]

8,876,000

^[2]

Accrued Income Taxes, Current

^[1]

3,293,000

^[2]

Deferred Tax Liabilities

10,643,000

Term loan payable

74,648,000

^[1]

Convertible Notes Payable, Current

^[1]

175,496,000

^[2]

Total current liabilities

143,943,000

^[1]

187,983,000

^[2]

Convertible notes payable

279,751,000

^[1]

276,228,000

^[2]

Other long-term liabilities

44,633,000

^[1]

37,702,000

^[2]

Total liabilities

468,327,000

^[1]

501,913,000

^[2]

Commitments and contingencies (Note 8)

^[1]

^[2]

Stockholders' deficit:

Preferred stock, par value $0.01 per share, 10,000 shares authorized; no shares issued and outstanding

^[1]

^[2]

Common stock, par value $0.01 per share, 350,000 shares authorized; 163,558 and 162,186 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively

1,636,000

^[1]

1,622,000

^[2]

Additional paid-in capital

(119,161,000)

^[1]

(119,874,000)

^[2]

Accumulated other comprehensive income

4,715,000

^[1]

2,949,000

^[2]

Retained earnings

640,024,000

^[1]

575,740,000

^[2]

Total stockholders' equity

527,214,000

^[1]

460,437,000

^[2]

Total liabilities and stockholders' equity

$ 995,541,000

^[1]

$ 962,350,000

^[2]

[1]	unaudited
[2]	Note 1

CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $)
In Thousands, except Per Share data, unless otherwise specified

Jun. 30, 2015

Dec. 31, 2014

Statement of Financial Position [Abstract]

Preferred stock par value (in Dollars per Share)

$ 0.01

^[1]

$ 0.01

^[2]

Preferred stock, shares authorized (in Shares)

10,000

^[1]

10,000

^[2]

Preferred stock, shares issued (in Shares)

^[1]

^[2]

Preferred stock, shares outstanding (in Shares)

^[1]

^[2]

Common stock par value (in Dollars per Share)

$ 0.01

^[1]

$ 0.01

^[2]

Common stock, shares authorized (in Shares)

350,000

^[1]

350,000

^[2]

Common stock, shares issued (in Shares)

163,558

^[1]

162,186

^[2]

Common stock, shares outstanding (in Shares)

163,558

^[1]

162,186

^[2]

[1]	unaudited
[2]	Note 1

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)
In Thousands, unless otherwise specified

6 Months Ended

Jun. 30, 2015

Jun. 30, 2014

Cash flows from operating activities

Net income

$ 162,762

$ 164,938

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of convertible notes and term loan offering costs

9,568

Change in fair value of acquired royalty rights

(23,578)

(45,390)

Losses on Extinguishment of Debt

(6,143)

Depreciation, Amortization and Accretion, Net

7,230

(94)

Hedge ineffectiveness on foreign exchange contracts

(3)

Stock-based compensation expense

727

616

Deferred income taxes

8,358

(2,564)

Changes in assets and liabilities:

Receivables from licensees and other

(100)

(1,052)

Prepaid and other current assets

(695)

1,759

Accrued interest on notes receivable

(2,527)

(10,165)

Other assets

(29)

Accounts payable

383

Accrued liabilities

(102)

4,426

Increase (Decrease) in Income Taxes Payable

(3,293)

10,817

Other long-term liabilities

6,712

7,129

Net cash provided by operating activities

155,900

146,153

Cash flows from investing activities

Purchase of royalty rights

15,500

Payments for (Proceeds from) Productive Assets

2,091

49,451

Purchase of notes receivable

(5,226)

(215,000)

Payments to Acquire Property, Plant, and Equipment

Net cash used in investing activities

(3,135)

(181,088)

Proceeds from Short-term Debt

100,000

Cash flows from financing activities

Repurchase of Convertible Notes

177,387

29,906

Proceeds from the issuance of Convertible Notes, net

300,000

Payment of debt issuance costs

(607)

(9,824)

Purchase of purchased call options, net of tax

(30,951)

Proceeds from Issuance of Warrants

11,427

Repayments of Notes Payable

(25,000)

(37,500)

Cash dividends paid

(49,083)

(48,088)

Net cash provided by/(used in) financing activities

(152,077)

155,158

Net increase in cash and cash equivalents

688

120,223

Cash and cash equivalents at beginning of the period

291,377

^[1]

Cash and cash equivalents at end of period

292,065

^[2]

Supplemental cash flow information

Cash paid for income taxes

84,000

81,000

Cash paid for interest

9,655

8,676

Other Significant Noncash Transaction, Value of Consideration Given

9,794

157,591

Line of Credit Facility, Commitment Fee Amount

$ (1,258)

$ 0

[1]	Note 1
[2]	unaudited

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information. The financial statements include all adjustments (consisting only of normal recurring adjustments), that management of PDL believes are necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period.

The accompanying unaudited Condensed Consolidated Financial Statements and related financial information should be read in conjunction with our audited Consolidated Financial Statements and the related notes thereto for the year ended December 31, 2014, included in our Annual Report on Form 10-K, as amended, filed with the SEC. The Condensed Consolidated Balance Sheet at December 31, 2014, has been derived from the audited Consolidated Financial Statements at that date, but does not include all disclosures required by GAAP.

Principles of Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of PDL and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. Our accompanying unaudited Condensed Consolidated Financial Statements are prepared in accordance with GAAP and the rules and regulations of the SEC.

Management Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Notes Receivable and Other Long-Term Receivables

We account for our notes receivable at both amortized cost, net of unamortized origination fees, if any, and as dependent on collateral when the loan for which repayment is expected to be provided solely by the underlying collateral. For loans accounted for at their amortized cost, related fees and costs are recorded net of any amounts reimbursed. Interest is accreted or accrued to "Interest revenue" using the interest method. When and if supplemental royalties are received from certain of these notes and other long-term receivables, an adjustment to the estimated effective interest rate is affected prospectively.

We evaluate the collectability of both interest and principal for each note receivable and loan to determine whether it is impaired. A note receivable or loan is considered to be impaired when, based on current information and events, we determine it is probable that we will be unable to collect amounts due according to the existing contractual terms. When a note receivable or loan is considered to be impaired, the amount of loss is calculated by comparing the carrying value of the financial asset to the value determined by discounting the expected future cash flows at the loan's effective interest rate or to the estimated fair value of the underlying collateral, less costs to sell, if the loan is collateralized and we expect repayment to be provided solely by the collateral. Impairment assessments require significant judgments and are based on significant assumptions related to the borrower's credit risk, financial performance, expected sales, and estimated fair value of the collateral.

Convertible Notes

We issued our Series 2012 Notes, May 2015 Notes and February 2018 Notes with a net share settlement feature, meaning that upon any conversion, the principal amount will be settled in cash and the remaining amount, if any, will be settled in shares of our common stock. In accordance with accounting guidance for convertible debt instruments that may be settled in cash or other assets upon conversion, we separated the principal balance between the fair value of the liability component and the common stock conversion feature using a market interest rate for a similar nonconvertible instrument at the date of issuance.

Queen et al. Royalty Revenues

Under most of our patent license agreements, we receive royalty payments based upon our licensees’ net sales of covered products. Generally, under these agreements we receive royalty reports from our licensees approximately one quarter in arrears, that is, generally in the second month of the quarter after the licensee has sold the royalty-bearing product. We recognize royalty revenues when we can reliably estimate such amounts and collectability is reasonably assured. As such, we generally recognize royalty revenues in the quarter reported to us by our licensees, that is, royalty revenues are generally recognized one quarter following the quarter in which sales by our licensees occurred. Under this accounting policy, the royalty revenues we report are not based upon our estimates and such royalty revenues are typically reported in the same period in which we receive payment from our licensees.

We also received annual maintenance fees from licensees of our Queen et al. patents prior to patent expiry as well as periodic milestone payments. We have no performance obligations with respect to such fees. Maintenance fees were recognized as they became due and when payment was reasonably assured. Total annual maintenance and milestone payments in each of the last several years have been less than 1% of total revenue.

Royalty Rights - At Fair Value

Currently, we have elected to account for our investments in royalty rights at fair value with changes in fair value presented in earnings. The fair value of the investments in royalty rights is determined by using a discounted cash flow analysis related to the expected future cash flows to be received. These assets are classified as Level 3 assets within the fair value hierarchy as our valuation estimates utilize significant unobservable inputs, including estimates as to the probability and timing of future sales of the related products. Transaction-related fees and costs are expensed as incurred.

Realized and unrealized gains and losses from investments in royalty rights are presented together on our Condensed Consolidated Statements of Income as a component of revenue under the caption, “Royalty rights - change in fair value.”

Customer Concentration

The percentage of total revenue recognized, which individually accounted for 10% or more of our total revenues, was as follows:



		Three Months Ended June 30,				Six Months Ended June 30,
Licensee	Product Name	2015		2014		2015		2014
Genentech	Avastin	28	%	24	%	27	%	27	%
	Herceptin	29	%	24	%	27	%	25	%

Biogen	Tysabri^®	10	%	8	%	10	%	9	%

Depomed	Glumetza^®	—	%	16	%	—	%	13	%

Foreign Currency Hedging

We enter into foreign currency hedges to manage exposures arising in the normal course of business and not for speculative purposes.

We hedge certain Euro-denominated currency exposures related to royalties associated with our licensees’ product sales with Euro forward contracts. In general, these contracts are intended to offset the underlying Euro market risk in our royalty revenues. The last of these contracts expires in the first quarter of 2016. We designate foreign currency exchange contracts used to hedge royalty revenues based on underlying Euro-denominated licensee product sales as cash flow hedges.

At the inception of each hedging relationship and on a quarterly basis, we assess the hedge effectiveness. The fair value of the Euro contracts is estimated using pricing models with readily observable inputs from actively quoted markets and is disclosed on a gross basis. The aggregate unrealized gains or losses, net of tax, on the effective component of the hedge is recorded in stockholders’ equity as "Accumulated other comprehensive income." Realized gains or losses on cash flow hedges are recognized as an adjustment to royalty revenue in the same period that the hedged transaction impacts earnings as royalty revenue. Any gain or loss on the ineffective portion of our hedge contracts is reported in "Interest and other income, net" in the period the ineffectiveness occurs.

Income Taxes

The provision for income taxes is determined using the asset and liability approach. Tax laws require items to be included in tax filings at different times than the items are reflected in the financial statements. A current liability is recognized for the estimated taxes payable for the current year. Deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Deferred taxes are adjusted for enacted changes in tax rates and tax laws. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

Comprehensive Income

Comprehensive income comprises net income adjusted for other comprehensive income (loss), using the specific identification method, which includes the changes in unrealized gains and losses on cash flow hedges and changes in unrealized gains and losses on our investments in available-for-sale securities, all net of tax, which are excluded from our net income.

Recently Issued Accounting Pronouncements

In April 2015, the FASB issued ASU 2015-03 – Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU requires retrospective adoption and will be effective for the Company beginning in the first quarter of 2016. The adoption of this ASU is not expected to have a significant impact on the Company's consolidated financial position or results of operations.

Net Income per Share

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Net Income per Share

2. Net Income per Share



	Three Months Ended				Six Months Ended
	June 30,				June 30,
Net Income per Basic and Diluted Share:	2015		2014		2015		2014
(in thousands except per share amounts)
Numerator
Net income used to compute net income per basic and diluted share	$	78,264	$	92,055	$	162,762	$	164,938

Denominator
Weighted-average shares used to compute net income per basic share	163,544		160,256		163,188		155,752
Restricted stock outstanding	134		115		117		90
Effect of dilutive stock options	19		22		19		21
Assumed conversion of February 2018 Notes	—		1,872		—		1,484
Assumed conversion of Series 2012 Notes	—		4,487		266		7,570
Assumed conversion of warrants	503		—		1,551		—
Assumed conversion of May 2015 Notes	1,184		10,476		2,235		10,894
Weighted-average shares used to compute net income per diluted share	165,384		177,228		167,376		175,811

Net income per share - basic	$	0.48	$	0.57	$	1.00	$	1.06
Net income per share - diluted	$	0.47	$	0.52	$	0.97	$	0.94

We compute diluted net income per share using the sum of the weighted-average number of common and common equivalent shares outstanding. Common equivalent shares used in the computation of diluted net income per share include shares that may be issued under our stock options and restricted stock awards, our February 2018 Notes, our Series 2012 Notes and our May 2015 Notes on a weighted average basis for the period that the notes were outstanding, including the effect of adding back interest expense and the underlying shares using the if-converted method. In the first quarter of 2012, $179.0 million aggregate principal of our February 2015 Notes was exchanged for our Series 2012 Notes, in the third quarter of 2013, $1.0 million aggregate principal of our February 2015 Notes was exchanged for our Series 2012 Notes and the February 2015 Notes were retired, in the first quarter of 2014, $131.7 million aggregate principal of our Series 2012 Notes was retired in a privately negotiated exchange and purchase agreements, in the fourth quarter of 2014, the Company entered into a privately negotiated exchange agreement by which it retired approximately $26.0 million in principal of the outstanding Series 2012 Notes, and, in the first quarter of 2015, the Company completed the retirement of the remaining $22.3 million of aggregate principal of its Series 2012 Notes.

In the second quarter of 2015, the Company completed the retirement of the remaining $155.1 million of aggregate principal of its May 2015 Notes. Concurrently with the retirement of the May 2015 Notes, we exercised our purchased call options and received 5.2 million of PDL's common shares, which was the amount equal to the number of shares required to be delivered by us to the note holders for the excess conversion value (see Note 9).

In May 2011, we issued our May 2015 Notes, in January and February 2012, we issued our Series 2012 Notes, and in February 2014, we issued our February 2018 Notes. The Series 2012 Notes and May 2015 Notes were net share settled, with the principal amount settled in cash and the excess settled in our common stock. The weighted average share adjustments related to our Series 2012 Notes, May 2015 Notes and February 2018 Notes, shown in the table above, include the shares issuable in respect of such excess.

May 2015 Notes Purchased Call Option and Warrant Potential Dilution

The warrants are dilutive for three and six months ended June 30, 2015, as the exercise price of the warrants was lower than the average market price of our common stock. We excluded from our calculations of net income per diluted share zero and 21.8 million shares for the three months ended June 30, 2015 and 2014, respectively, and zero and 21.8 million shares for the six months ended June 30, 2015 and 2014, respectively, for warrants issued in 2011, because the exercise price of the warrants was higher than the average market price of our common stock and thus, for the three and six months ended June 30, 2014, no stock was issuable upon conversion. Our purchased call options, issued in 2011, will always be anti-dilutive and therefore zero and 25.7 million shares were excluded from our calculations of net income per diluted share for the three months ended June 30, 2015 and 2014 , respectively, and zero and 25.7 million shares were excluded from our calculation of diluted net income per share for the six months ended June 30, 2015 and 2014, respectively, because they have no effect on diluted net income per share. For information related to the conversion rates on our convertible debt, see Note 9.

February 2018 Notes Purchased Call Option and Warrant Potential Dilution

We excluded from our calculation of net income per diluted share 29.0 million shares for the three and six months ended June 30, 2015 and 2014, for warrants issued in February 2014, because the exercise price of the warrants exceeded the VWAP of our common stock and conversion of the underlying February 2018 Notes is not assumed, therefore no stock would be issuable upon conversion. These securities could be dilutive in future periods. Our purchased call options, issued in February 2014, will always be anti-dilutive and therefore 32.7 million shares were excluded from our calculation of net income per diluted share for the three and six months ended June 30, 2015 and 2014, because they have no effect on diluted net income per share. For information related to the conversion rates on our convertible debt, see Note 9.

Anti-Dilutive Effect of Stock Options and Restricted Stock Awards

For the three months ended June 30, 2015 and 2014, we excluded approximately 39,000 and 24,000 shares underlying outstanding stock options, respectively, and for the six months ended June 30, 2015 and 2014, we excluded approximately 38,000 and 69,000 shares underlying outstanding stock options, respectively. For the three months ended June 30, 2015, we excluded approximately 449,000 and zero shares underlying restricted stock awards, respectively, and for the six months ended June 30, 2015 and 2014, we excluded approximately 415,000 and zero underlying restricted stock awards, respectively, calculated on a weighted average basis, from our net income per diluted share calculations because their effect was anti-dilutive.

Fair Value Measurements

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The fair value of our financial instruments are estimates of the amounts that would be received if we were to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date or exit price. The assets and liabilities are categorized and disclosed in one of the following three categories:

Level 1 – based on quoted market prices in active markets for identical assets and liabilities;

Level 2 – based on quoted market prices for similar assets and liabilities, using observable market-based inputs or unobservable market-based inputs corroborated by market data; and

Level 3 – based on unobservable inputs using management’s best estimate and assumptions when inputs are unavailable.

The following tables present the fair value of our financial instruments measured at fair value on a recurring basis by level within the valuation hierarchy.



	June 30, 2015								December 31, 2014
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
(In thousands)
Financial assets:
Money market funds	$	136,454	$	—	$	—	$	136,454	$	221,792	$	—	$	—	$	221,792
Corporate securities	—		2,020		—		2,020		—		2,310		—		2,310
Foreign currency hedge contracts	—		6,985		—		6,985		—		4,069		—		4,069
Warrants	—		1,258		—		1,258		—		—		—		—
Royalty rights - at fair value	—		—		280,731		280,731		—		—		259,244		259,244
Total	$	136,454	$	10,263	$	280,731	$	427,448	$	221,792	$	6,379	$	259,244	$	487,415

There have been no transfers between levels during each of the three-month periods ended June 30, 2015, and December 31, 2014. The Company recognizes transfers between levels on the date of the event or change in circumstances that caused the transfer.

Corporate Securities

Corporate securities consist primarily of U.S. corporate equity holdings. The fair value of corporate securities is estimated using recently executed transactions or market quoted prices, where observable. Independent pricing sources are also used for valuation.

Royalty Rights - At Fair Value

Depomed Royalty Agreement

On October 18, 2013, PDL entered into the Depomed Royalty Agreement, whereby the Company acquired the rights to receive royalties and milestones payable on sales of Type 2 diabetes products licensed by Depomed in exchange for a $240.5 million cash payment. Total arrangement consideration was $241.3 million, which was comprised of the $240.5 million cash payment to Depomed and $0.8 million in transaction costs.

The rights acquired include Depomed’s royalty and milestone payments accruing from and after October 1, 2013: (a) from Santarus (which was subsequently acquired by Salix, which itself was recently acquired by Valeant Pharmaceuticals) with respect to sales of Glumetza (metformin HCL extended-release tablets) in the United States; (b) from Merck with respect to sales of Janumet^® XR (sitagliptin and metformin HCL extended-release tablets); (c) from Janssen Pharmaceutica with respect to potential future development milestones and sales of its investigational fixed-dose combination of Invokana^® (canagliflozin) and extended-release metformin tablets; (d) from Boehringer Ingelheim with respect to potential future development milestones and sales of the investigational fixed-dose combinations of drugs and extended-release metformin subject to Depomed’s license agreement with Boehringer Ingelheim; and (e) from LG Life Sciences and Valeant Pharmaceuticals for sales of extended-release metformin tablets in Korea and Canada, respectively.

Under the terms of the Depomed Royalty Agreement, the Company will receive all royalty and milestone payments due under license agreements between Depomed and its licensees until the Company has received payments equal to two times the cash payment it made to Depomed, after which all net payments received by Depomed will be shared evenly between the Company and Depomed.

The Depomed Royalty Agreement terminates on the third anniversary following the date upon which the later of the following occurs: (a) October 25, 2021, or (b) at such time as no royalty payments remain payable under any license agreement and each of the license agreements has expired by its terms.

As of June 30, 2015, and December 31, 2014, the Company determined that its royalty purchase interest in Depo DR Sub represented a variable interest in a variable interest entity. However, the Company does not have the power to direct the activities of Depo DR Sub that most significantly impact Depo DR Sub's economic performance and is not the primary beneficiary of Depo DR Sub; therefore, Depo DR Sub is not subject to consolidation by the Company.

The asset acquired represents a single unit of accounting. The fair value of the asset acquired was determined by using a discounted cash flow analysis related to the expected future cash flows to be generated by each licensed product. This asset is classified as a Level 3 asset within the fair value hierarchy, as our valuation utilized significant unobservable inputs, including estimates as to the probability and timing of future commercialization for products not yet approved by the FDA or other regulatory agencies. The discounted cash flows are based upon expected royalties from sales of licensed products over a nine-year period. The discount rates utilized range from approximately 21% to 25%. Significant judgment is required in selecting appropriate discount rates. At June 30, 2015, an evaluation was performed to assess those rates and general market conditions potentially affecting the fair market value. Should these discount rates increase or decrease by 5%, the fair value of the asset could decrease by $18.4 million or increase by $23.4 million, respectively. A third-party expert was engaged to help management develop its original estimate of the expected future cash flows. The fair value of the asset is subject to variation should those cash flows vary significantly from those estimates. Should the expected royalties increase or decrease by 10%, the fair value of the asset could increase by $15.6 million or decrease by $16.3 million, respectively.

When PDL acquired the Depomed royalties, Glumetza was marketed by Santarus. In January 2014, Salix acquired Santarus and assumed responsibility for commercializing Glumetza, which was generally perceived to be a positive development because of Salix's larger sales force and track record in the successful commercialization of therapies. In late 2014, Salix made a number of disclosures relating to an excess of supply at the distribution level of Glumetza and other drugs that it commercialized, likely attributable to the practices of its distributors in drawing down such inventory and to a review by Salix's audit committee of its accounting practices. Because of these disclosures and PDL's lack of direct access to information as to the levels of inventory of Glumetza in the distribution channels, PDL commenced a review of all public statements by Salix, publicly available historical third-party prescription data, analyst reports and other relevant data sources. PDL also engaged a third-party expert to specifically assess estimated inventory levels of Glumetza in the distribution channel and to ascertain the potential effects those inventory levels may have on expected future cash flows. Our review concluded that it would be unlikely for us to receive royalties in the first half of 2015. We have received no royalties from Glumetza sales in 2015. Salix was acquired by Valeant Pharmaceuticals in early April 2015. On June 18, 2015, Valeant Pharmaceuticals implemented a price increase on Glumetza. As of June 30, 2015, we have not revised our expectations as to any impact, if any, the acquisition or price increase will have on future cash flows from Glumetza. We will monitor whether the acquisition or price increase by Valeant Pharmaceuticals has any effect on sales of Glumetza and thus royalties on such sales paid to PDL. There can be no assurances that we will be able to fully assess the impact of the acquisition or price increase on sales of Glumetza and thus royalties on such sales paid to PDL.

As of June 30, 2015, and December 31, 2014, the carrying value of the asset acquired as reported in our Condensed Consolidated Balance Sheets was approximately $194.0 million and $176.2 million, respectively. As of June 30, 2015, the maximum loss exposure was $194.0 million.

VB Royalty Agreement

On June 26, 2014, PDL entered into the VB Royalty Agreement, whereby VB conveyed to the Company the right to receive royalties payable on sales of a spinal implant that has received pre-market approval from the FDA, in exchange for a $15.5 million cash payment, less fees.

The acquired royalties include royalty amounts accruing from and after April 1, 2014. Under the terms of the VB Royalty Agreement, the Company will receive all royalty payments due to VB pursuant to certain technology transfer agreements between VB and Paradigm Spine until the Company has received payments equal to two and three tenths times the cash payment made to VB, after which all rights to receive royalties will be returned to VB. VB may repurchase the royalty right at any time on or before June 26, 2018, for a specified amount. The acting chief executive officer of Paradigm Spine is one of the owners of VB. The Paradigm Spine Credit Agreement and the VB Royalty Agreement were negotiated separately.

The fair value of the VB Royalty Agreement royalty right at June 30, 2015, was determined by using a discounted cash flow analysis related to the expected future cash flows to be received. This asset is classified as a Level 3 asset, as our valuation utilized significant unobservable inputs, including estimates as to the probability and timing of future sales of the licensed product. The discounted cash flow was based upon expected royalties from sales of licensed product over a nine-year period. The discount rate utilized was approximately 17.5%. Significant judgment is required in selecting the appropriate discount rate. Should this discount rate increase or decrease by 2.5%, the fair value of this asset could decrease by $1.3 million or increase by $1.5 million, respectively. Should the expected royalties increase or decrease by 2.5%, the fair value of the asset could increase by $0.4 million or decrease by $0.4 million, respectively. A third-party expert is engaged to assist management with the development of its estimate of the expected future cash flows, when deemed necessary. The fair value of the asset is subject to variation should those cash flows vary significantly from our estimates. At each reporting period, an evaluation is performed to assess those estimates, discount rates utilized and general market conditions affecting fair market value.

As of June 30, 2015, and December 31, 2014, the carrying value of the asset acquired as reported in our Condensed Consolidated Balance Sheets was $16.7 million and $16.1 million, respectively. As of June 30, 2015, the maximum loss exposure was $16.7 million.

University of Michigan

On November 6, 2014, PDL acquired a portion of all royalty payments of the U-M’s worldwide royalty interest in Cerdelga (Eliglustat) for $65.6 million. Under the terms of the Michigan Royalty Agreement, PDL will receive 75% of all royalty payments due under U-M’s license agreement with Genzyme until expiration of the licensed patents, excluding any patent term extension. Cerdelga, an oral therapy for adult patients with Gaucher disease type 1, was developed by Genzyme. Cerdelga was approved in the United States on August 19, 2014, in the European Union on January 22, 2015, and in Japan on March 25, 2015. In addition, marketing applications for Cerdelga are under review by other regulatory authorities.

The fair value of the royalty right at June 30, 2015, was determined by using a discounted cash flow analysis related to the expected future cash flows to be received. This asset is classified as a Level 3 asset, as our valuation utilized significant unobservable inputs, including estimates as to the probability and timing of future sales of the licensed product. The discounted cash flow was based upon expected royalties from sales of licensed product over a seven-year period. The discount rate utilized was approximately 12.8%. Significant judgment is required in selecting the appropriate discount rate. Should this discount rate increase or decrease by 2.5%, the fair value of this asset could decrease by $6.1 million or increase by $7.0 million, respectively. Should the expected royalties increase or decrease by 5%, the fair value of the asset could increase by $3.5 million or decrease by $3.5 million, respectively. A third-party expert is engaged to assist management with the development of its estimate of the expected future cash flows, when deemed necessary. The fair value of the asset is subject to variation should those cash flows vary significantly from our estimates. An evaluation of those estimates, discount rates utilized and general market conditions affecting fair market value is performed in each reporting period.

As of June 30, 2015, and December 31, 2014, the fair value of the asset acquired as reported in our Condensed Consolidated Balance Sheets was $70.1 million and $66.9 million. As of June 30, 2015, the maximum loss exposure was $70.1 million.

The following tables summarize the changes in Level 3 assets and the gains and losses included in earnings for the six months ended June 30, 2015:



Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

(in thousands)				Royalty Rights - At Fair Value
Beginning Balance at December 31, 2014							$	259,244

	Transfer into Level 3						—
	Total net change in fair value for the period
		Change in fair value of royalty rights - at fair value		$	23,578
		Proceeds from royalty rights - at fair value		$	(2,091	)
			Total net change in fair value for the period				21,487
	Purchases, issues, sales, and settlements
		Purchases					—

Ending Balance at June 30, 2015							$	280,731

Gains and losses included in earnings for each period are presented in "Royalty rights - change in fair value" as follows:



	Three Months Ended					Six Months Ended
	June 30,					June 30,
(in thousands)	2015		2014			2015		2014

Total change in fair value for the period included in earnings for assets held at the end of the reporting period	$	12,216	$	(4,061	)	$	23,578	$	(4,061	)

Foreign Currency Hedge Contracts

The fair value of the foreign currency hedge contracts is estimated based on pricing models using readily observable inputs from actively quoted markets and are disclosed on a gross basis.

Warrants

Warrants consist primarily of purchased call options to buy U.S. corporate equity holdings and derivative assets acquired as part of loan receivable investments. The fair value of the warrants is estimated using recently quoted market prices and the Black-Scholes model.

The following tables present the fair value of assets and liabilities not subject to fair value recognition by level within the valuation hierarchy:



	June 30, 2015						December 31, 2014
	Carrying Value		Fair Value Level 2		Fair Value Level 3		Carrying Value		Fair Value Level 2		Fair Value Level 3
(In thousands)
Assets:
Wellstat Diagnostics note receivable	$	50,191	$	—	$	50,191	$	50,191	$	—	$	50,191
Hyperion note receivable	1,200		—		1,200		1,200		—		1,200
Avinger note receivable	20,694		—		21,339		20,611		—		20,760
LENSAR note receivable	46,467		—		46,467		39,668		—		40,451
Direct Flow Medical note receivable	51,307		—		52,751		50,397		—		49,940
Paradigm Spine note receivable	49,754		—		51,010		49,571		—		50,125
kaléo note receivable	151,522		—		151,471		151,574		—		151,073
Total¹	$	371,135	$	—	$	374,429	$	363,212	$	—	$	363,740

Liabilities:
Series 2012 Notes	$	—	$	—	$	—	$	22,261	$	33,506	$	—
May 2015 Notes	—		—		—		153,235		205,534		—
February 2018 Notes	279,751		285,420		—		276,228		289,665		—
March 2015 Term Loan	74,648		75,000		—		—		—		—
Total	$	354,399	$	360,420	$	—	$	451,724	$	528,705	$	—

___________________

¹ The carrying amount of notes receivable excludes the debt discount of $1.4 million arisen from the CareView transaction.

As of June 30, 2015 and December 31, 2014, the estimated fair values of our Paradigm Spine note receivable, kaléo note receivable, Hyperion note receivable, Avinger note receivable, LENSAR note receivable and Direct Flow Medical note receivable, were determined using one or more discounted cash flow models, incorporating expected payments and the interest rate extended on the notes receivable with fixed interest rates and incorporating expected payments for notes receivable with a variable rate of return. In some instances the carrying values of certain notes receivable differed from their estimated fair market values. This is generally the result of discount rates used when performing a discounted cash flow for fair value valuation purposes.

When deemed necessary we engage a third-party valuation expert to assist in evaluating our investments and the related inputs needed for us to estimate the fair value of certain investments. We determined our notes receivable assets are Level 3 assets as our valuations utilized significant unobservable inputs, including estimates of future revenues, discount rates, expectations about settlement, terminal values and required yield. To provide support for the estimated fair value measurements, we considered forward-looking performance related to the investment and current measures associated with high yield indices, and reviewed the terms and yields of notes placed by specialty finance and venture firms both across industries and in similar sectors.

The Wellstat Diagnostics Note Receivable and Credit Agreement, as amended and restated, is collateralized by all assets and equity interest in Wellstat Diagnostics. The estimated fair value of the collateral was determined by using a discounted cash flow analysis related to the underlying technology included in the collateral. On June 30, 2015, and December 31, 2014, the discounted cash flow was based upon expected income from estimated sales of planned products over a period of 15 years. The terminal value was estimated using selected market multiples based on sales and EBITDA.

On June 30, 2015, the carrying values of several of our notes receivable differed from their fair value. This is the result of discount rates used when performing a discounted cash flow for fair value valuation purposes. We determined these notes receivable to be Level 3 assets, as our valuations utilized significant unobservable inputs, estimates of future revenues, expectations about settlement and required yield. To provide support for the fair value measurements, we considered forward-looking performance, and current measures associated with high yield and published indices, and reviewed the terms and yields of notes placed by specialty finance and venture firms both across industries and in a similar sector.

The fair values of our convertible notes were determined using quoted market pricing or dealer quotes.

Cash Equivalents and Investments

6 Months Ended

Jun. 30, 2015

Cash and Cash Equivalents [Abstract]

Cash Equivalents and Investments

4. Cash Equivalents and Short-Term Investments

As of June 30, 2015, and December 31, 2014, we had invested our excess cash balances primarily in money market funds, and a corporate equity security. Our securities are classified as available-for-sale and are carried at estimated fair value, with unrealized gains and losses reported in "Accumulated other comprehensive income" in stockholders’ equity, net of estimated taxes. See Note 3 for fair value measurement information. The cost of securities sold is based on the specific identification method. To date, we have not experienced credit losses on investments in these instruments, and we do not require collateral for our investment activities.



Summary of Cash and Available-For-Sale Securities	Adjusted Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		Cash and Cash Equivalents		Short-Term Investments
(In thousands)
June 30, 2015
Cash	$	155,611	$	—	$	—	$	155,611	$	155,611	$	—
Money market funds	136,454		—		—		136,454		136,454		—
Corporate securities	1,750		270		—		2,020		—		2,020
Total	$	293,815	$	270	$	—	$	294,085	$	292,065	$	2,020

December 31, 2014
Cash	$	69,585	$	—	$	—	$	69,585	$	69,585	$	—
Money market funds	221,792		—		—		221,792		221,792		—
Corporate securities	1,750		560		—		2,310		—		2,310
Total	$	293,127	$	560	$	—	$	293,687	$	291,377	$	2,310

No gains or losses on sales of available-for-sale securities were recognized for the three and six months ended June 30, 2015 and 2014.

The unrealized gains on investments included in "Other comprehensive income (loss), net of tax" was approximately $175,000 and $364,000 as of June 30, 2015, and December 31, 2014, respectively.

Foreign Currency Hedging

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Foreign Currency Hedging

5. Foreign Currency Hedging

We designate the foreign currency exchange contracts used to hedge our royalty revenues based on underlying Euro-denominated sales as cash flow hedges. Euro forward contracts are presented on a net basis on our Condensed Consolidated Balance Sheets as we have entered into a netting arrangement with the counterparty. As of June 30, 2015, and December 31, 2014, all outstanding Euro forward contracts were classified as cash flow hedges.

In October 2014, we entered into a series of Euro forward contracts covering the quarters in which our licensees' sales occurred through December 2015.

The notional amounts, Euro exchange rates and fair values of our Euro forward contracts designated as cash flow hedges were as follows:



Euro Forward Contracts			June 30, 2015				December 31, 2014
			(In thousands)				(In thousands)
Currency	Settlement Price ($ per Euro)	Type	Notional Amount		Fair Value		Notional Amount		Fair Value
Euro	1.256	Sell Euro	$	—	$	—	$	6,000	$	241
Euro	1.257	Sell Euro	—		—		15,750		728
Euro	1.259	Sell Euro	16,125		2,300		16,125		752
Euro	1.260	Sell Euro	33,000		4,685		33,000		1,468
Euro	1.270	Sell Euro	—		—		7,000		377
Euro	1.281	Sell Euro	—		—		8,000		503
Total			$	49,125	$	6,985	$	85,875	$	4,069

The location and fair values of our Euro contracts in our Condensed Consolidated Balance Sheets were as follows:



Cash Flow Hedge	Location	June 30, 2015		December 31, 2014
(In thousands)
Euro contracts	Prepaid and other current assets	$	6,985	$	3,352
Euro contracts	Other assets	$	—	$	717

The effect of our derivative instruments in our Condensed Consolidated Statements of Income and our Condensed Consolidated Statements of Comprehensive Income was as follows:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015		2014
(In thousands)
Net gain (loss) recognized in OCI, net of tax ⁽¹⁾	$	(1,305	)	$	264		$	4,363	$	331
Gain (loss) reclassified from accumulated OCI into royalty revenue, net of tax ⁽²⁾	$	1,739		$	(2,027	)	$	2,408	$	(2,755	)
Net gain (loss) recognized in interest and other income, net - cash flow hedges ⁽³⁾	$	—		$	1		$	—	$	3

_______________________________

(1) Change in the fair value of cash flow hedges, net of tax.

(2) Effective portion classified as royalty revenue.

(3) Ineffectiveness from excess hedge was approximately $0 and ($1) for the three months ended June 30, 2015 and 2014, respectively, and $0 and ($3) for the six months ended June 30, 2015 and 2014, respectively.

Notes Receivable and Other Long-term Receivables	6 Months Ended
Notes Receivable and Other Long-term Receivables	Jun. 30, 2015
Receivables [Abstract]
Notes and Other Long-term Receivables	6. Notes Receivable and Other Long-Term Receivables Notes receivable and other long-term receivables included the following significant agreements: Wellstat Diagnostics Note Receivable and Credit Agreement In March 2012, the Company executed a $7.5 million two-year senior secured note receivable with the holders of the equity interests in Wellstat Diagnostics. In addition to bearing interest at 10% per annum, the note receivable gave PDL certain rights to negotiate for certain future financing transactions. In August 2012, PDL and Wellstat Diagnostics amended the note receivable, providing a senior secured note receivable of $10.0 million, bearing interest at 12% per annum, to replace the original $7.5 million note receivable. This $10.0 million note receivable was repaid on November 2, 2012, using the proceeds of the $40.0 million credit facility entered into with the Company on the same date. On November 2, 2012, the Company and Wellstat Diagnostics entered into a $40.0 million credit agreement pursuant to which the Company was to accrue quarterly interest payments at the rate of 5% per annum (payable in cash or in kind). In addition, PDL was to receive quarterly royalty payments based on a low double-digit royalty rate of Wellstat Diagnostics' net revenues, generated by the sale, distribution or other use of Wellstat Diagnostics' products, if any, commencing upon the commercialization of its products. In January 2013, the Company was informed that, as of December 31, 2012, Wellstat Diagnostics had used funds contrary to the terms of the credit agreement and breached Sections 2.1.2 and 7 of the credit agreement. PDL sent Wellstat Diagnostics a notice of default on January 22, 2013, and accelerated the amounts owed under the credit agreement. In connection with the notice of default, PDL exercised one of its available remedies and transferred approximately $8.1 million of available cash from a bank account of Wellstat Diagnostics to PDL and applied the funds to amounts due under the credit agreement. On February 28, 2013, the parties entered into a forbearance agreement whereby PDL agreed to refrain from exercising additional remedies for 120 days while Wellstat Diagnostics raised funds to capitalize the business and the parties attempted to negotiate a revised credit agreement. PDL agreed to provide up to $7.9 million to Wellstat Diagnostics to fund the business for the 120-day forbearance period under the terms of the forbearance agreement. Following the conclusion of the forbearance period that ended on June 28, 2013, the Company agreed to forbear its exercise of remedies for additional periods of time to allow the owners and affiliates of Wellstat Diagnostics to complete a pending financing transaction. During such forbearance period, the Company provided approximately $1.3 million to Wellstat Diagnostics to fund ongoing operations of the business. During the year ended December 31, 2013, approximately $8.7 million was advanced pursuant to the forbearance agreement. On August 15, 2013, the owners and affiliates of Wellstat Diagnostics completed a financing transaction to fulfill Wellstat Diagnostics' obligations under the forbearance agreement. On August 15, 2013, the Company entered into an amended and restated credit agreement with Wellstat Diagnostics. The Company determined that the new agreement should be accounted for as a modification of the existing agreement. Except as otherwise described here, the material terms of the amended and restated credit agreement are substantially the same as those of the original credit agreement, including quarterly interest payments at the rate of 5% per annum (payable in cash or in kind). In addition, PDL was to continue to receive quarterly royalty payments based on a low double-digit royalty rate of Wellstat Diagnostics' net revenues. However, pursuant to the amended and restated credit agreement: (i) the principal amount was reset to approximately $44.1 million, which was comprised of approximately $33.7 million original loan principal and interest, $1.3 million term loan principal and interest and $9.1 million forbearance principal and interest; (ii) the specified internal rates of return increased; (iii) the default interest rate was increased; (iv) Wellstat Diagnostics' obligation to provide certain financial information increased in frequency to monthly; (v) internal financial controls were strengthened by requiring Wellstat Diagnostics to maintain an independent, third-party financial professional with control over fund disbursements; (vi) the Company waived the existing events of default; and (vii) the owners and affiliates of Wellstat Diagnostics were required to contribute additional capital to Wellstat Diagnostics upon the sale of an affiliate entity. The amended and restated credit agreement had an ultimate maturity date of December 31, 2021 (but has subsequently been accelerated as described below). When the principal amount was reset, a $2.5 million reduction of the carrying value was recorded as a financing cost as a component of "Interest and other income, net". The new carrying value is lower as a function of the variable nature of the internal rate of return to be realized by the Company based on when the note was to be repaid. The internal rate of return calculation, although increased, was reset when the credit agreement was amended and restated. In June of 2014, the Company received information from Wellstat Diagnostics that showed that it was generally unable to pay its debts as they became due. This constituted an event of default under the amended and restated credit agreement. Wellstat Diagnostics entered into a transaction involving another lender, pursuant to which Wellstat Diagnostics obtained additional short-term funding for its operations. At the same time, the Company entered into the first amendment to amended and restated credit agreement with Wellstat Diagnostics. The material terms of the amendment included the following: (1) Wellstat Diagnostics acknowledged that an event of default had occurred; (2) the Company agreed to forbear from immediately enforcing its rights for up to 60 days, so long as the other lender provided agreed levels of interim funding to Wellstat Diagnostics; and (3) the Company obtained specified additional information rights with regard to Wellstat Diagnostics’ financial matters and investment banking activities. On August 5, 2014, the Company received notice that the short-term funding being provided pursuant to the agreement with the other lender entered into during June 2014, was being terminated. Wellstat Diagnostics remained in default because it was still unable to pay its debts as they became due. Accordingly, the Company delivered the Wellstat Diagnostics Borrower Notice. The Wellstat Diagnostics Borrower Notice accelerated all obligations under the amended and restated credit agreement and demanded immediate payment in full in an amount equal to approximately $53.9 million, (which amount, in accordance with the terms of the amended and restated credit agreement, included an amount that, together with interest and royalty payments already made to the Company, would generate a specified internal rate of return to the Company), plus accruing fees, costs and interest, and demanded that Wellstat Diagnostics protect and preserve all collateral securing its obligations. On August 7, 2014, the Company delivered the Wellstat Diagnostics Guarantor Notice. The Wellstat Diagnostics Guarantor Notice included a demand that the guarantors remit payment to the Company in the amount of the outstanding obligations. The guarantors include certain affiliates and related companies of Wellstat Diagnostics, including Wellstat Therapeutics and Wellstat Diagnostics’ stockholders. On September 24, 2014, the Company filed the Wellstat Diagnostics Petition, which was granted on the same day. The order granting the Wellstat Diagnostics Petition authorizes the receiver to take immediate possession of the physical assets of Wellstat Diagnostics, with the purpose of holding, protecting, insuring, managing and preserving the business of Wellstat Diagnostics and the value of the Company’s collateral. Wellstat Diagnostics has remained in operation during the period of the receivership with incremental additional funding from the Company. The Company continues to assess its options with respect to collecting on the loan, including determining whether and when it will foreclose on the collateral and proceed with a sale of Wellstat Diagnostics’ assets, whether providing further capital to the receiver to fund Wellstat Diagnostics’ operations for a period of time prior to sale will best position Wellstat Diagnostics’ assets for sale, and assessing the value of the guarantees obtained by the Company from Wellstat Diagnostics’ guarantors, including Wellstat Diagnostics’ stockholders and Wellstat Therapeutics. On November 4, 2014, the Company entered into the third amendment to the amended and restated credit agreement with Wellstat Diagnostics. The amendment provides that additional funding, if any, to be made by the Company is conditioned upon the agreement by Wellstat Diagnostics to make certain operational changes within Wellstat Diagnostics, which the Company believes will allow the receiver to more efficiently optimize the value of the collateral. During the second quarter of 2015, the receiver initiated a process for a public sale of the assets of Wellstat Diagnostics and retained the investment banking firm of Duff & Phelps to organize and manage the sale process. The receiver filed a "Motion For Approval of Sale Procedures" with the Circuit Court for Montgomery County, Maryland, which is the court having jurisdiction over the receivership and a hearing was held on July 22, 2015 at which time arguments were heard from interested parties regarding the sale procedures. No significant substantive disagreements between the parties regarding the sale procedures remained after the hearing and a decision approving the receiver’s sale procedures is expected shortly. The sale process is ongoing and Duff & Phelps is actively contacting and holding discussions with interested third parties who may be willing to bid on the assets. In addition, depending on the nature and value of the bids received from third parties, it is possible that PDL will credit bid for the assets at a value corresponding to some portion of the outstanding amount due under the amended and restated credit agreement. We anticipate that the sale process will be completed during the third or fourth quarter of 2015. Through the period ended June 30, 2015, PDL has advanced to Wellstat Diagnostics $10.0 million to fund the ongoing operations of the business and other associated costs. This funding has been expensed as incurred. Effective April 1, 2014, and as a result of the event of default, we determined the loan to be impaired and we ceased to accrue interest revenue. At that time and as of June 30, 2015 it has been determined that an allowance on the carrying value of the note was not necessary as the Company believes the value of the collateral securing Wellstat Diagnostics’ obligations exceeds the carrying value of the asset and is sufficient to enable the Company to recover the current carrying value of $50.2 million. There can be no assurance that this will be true in the event of the Company’s foreclosure on the collateral, nor can there be any assurance of the timing in realizing value from such collateral, whether from the sale process currently underway or a subsequent monetization event if PDL makes a successful credit bid for the assets. Hyperion Agreement On January 27, 2012, PDL and Hyperion entered into an agreement whereby Hyperion sold to PDL the royalty streams due from SDK related to a certain patent license agreement between Hyperion and SDK dated December 31, 2008. The agreement assigned the patent license agreement royalty stream accruing from January 1, 2012, through December 31, 2013, to PDL in exchange for the lump sum payment to Hyperion of $2.3 million. In exchange for the lump sum payment, PDL was to receive two equal payments of $1.2 million on both March 5, 2013 and 2014. The first payment of $1.2 million was paid on March 5, 2013, but Hyperion has not made the payment that was due on March 5, 2014. The Company completed an impairment analysis as of June 30, 2015. Effective with this date and as a result of the event of default, we ceased to accrue interest revenue. As of June 30, 2015, the estimated fair value of the collateral was determined to be in excess of the carrying value. There can be no assurance that this will be true in the event of the Company's foreclosure on the collateral, nor can there be any assurance of realizing value from such collateral. Hyperion is considering other sources of financing and strategic alternatives, including selling the company. AxoGen Note Receivable and AxoGen Royalty Agreement In October 2012, PDL entered into the AxoGen Royalty Agreement with AxoGen pursuant to which the Company would receive specified royalties on AxoGen’s net revenues (as defined in the AxoGen Royalty Agreement) generated by the sale, distribution or other use of AxoGen’s products. The AxoGen Royalty Agreement had an eight-year term and provided PDL with royalties of 9.95% based on AxoGen's net revenues, subject to agreed-upon guaranteed quarterly minimum payments of approximately $1.3 million to $2.5 million, which were to begin in the fourth quarter of 2014, and the right to require AxoGen to repurchase the royalties under the AxoGen Royalty Agreement at the end of the fourth year. AxoGen was granted certain rights to call the contract in years five through eight. The total consideration PDL paid to AxoGen for the royalty rights was $20.8 million, including an interim funding of $1.8 million in August 2012. AxoGen was required to use a portion of the proceeds from the AxoGen Royalty Agreement to pay the outstanding balance under its existing credit facility. The royalty rights were secured by the cash and accounts receivable of AxoGen. On August 14, 2013, PDL purchased 1,166,666 shares of registered common stock of AxoGen (AXGN) at $3.00 per share, totaling $3.5 million. On December 22, 2014, PDL sold these shares at $3.03 per share, totaling approximately $3.5 million. On November 13, 2014, the Company agreed to terminate the AxoGen Royalty Agreement in consideration for a payment of $30.3 million in cash, which was the sum of the outstanding principal, interest and embedded derivative. Subsequent to the pay-off, the Company acquired 643,382 shares of registered common stock of AxoGen for approximately $1.7 million at a public offering price of $2.72 per share. The shares are classified as available for sale securities and recorded as short-term investments on the Condensed Consolidated Balance Sheets. As of June 30, 2015, the shares were valued at $2.0 million, which resulted in an unrealized gain of $0.3 million and is recorded in "Other comprehensive income (loss), net of tax." Avinger Note Receivable and Royalty Agreement On April 18, 2013, PDL entered into a credit agreement with Avinger, under which we made available to Avinger up to $40.0 million to be used by Avinger in connection with the commercialization of its lumivascular catheter devices and the development of Avinger's lumivascular atherectomy device. Of the $40.0 million initially available to Avinger, we funded an initial $20.0 million, net of fees, at the close of the transaction. The additional $20.0 million in the form of a second tranche is no longer available to Avinger. Outstanding borrowings under the initial loan bear interest at a stated rate of 12% per annum. Avinger is required to make quarterly interest and principal payments. Principal repayment will commence on the eleventh interest payment date, March 31, 2016. The principal amount outstanding at commencement of repayment, after taking into account any payment-in-kind, will be repaid in equal installments until final maturity of the loan. The loan will mature in April 2018. In connection with entering into the credit agreement, the Company will receive a low, single-digit royalty on Avinger's net revenues through April 2018. Avinger may prepay the outstanding principal and accrued interest on the note receivable at any time. If Avinger repays the note receivable prior to April 2018, the royalty on Avinger's net revenues will be reduced by 50% and will be subject to certain minimum payments from the prepayment date through April 2018. The obligations under the credit agreement are secured by a pledge of substantially all of the assets of Avinger and any of its subsidiaries (other than controlled foreign corporations, if any). The credit agreement provides for a number of standard events of default, including payment, bankruptcy, covenant, representation and warranty and judgment defaults. LENSAR Credit Agreement On October 1, 2013, PDL entered into a credit agreement with LENSAR, under which PDL made available to LENSAR up to $60.0 million to be used by LENSAR in connection with the commercialization of its currently marketed LENSAR™ Laser System. Of the $60.0 million available to LENSAR, an initial $40.0 million, net of fees, was funded by the Company at the close of the transaction. The additional $20.0 million in the form of a second tranche is no longer available to LENSAR under the terms of the credit agreement. Outstanding borrowings under the loans bear interest at the rate of 15.5% per annum, payable quarterly in arrears. Principal repayment will commence on the thirteenth interest payment date or December 31, 2016. The principal amount outstanding at the commencement of repayment will be repaid in equal installments until final maturity of the loans. The loans will mature on October 1, 2018. LENSAR may elect to prepay the loans at any time, subject to a prepayment penalty that decreases over the life of the loans. The loans are secured by all of the assets of LENSAR. On May 12, 2015, PDL entered into a forbearance agreement with LENSAR under which PDL agreed to refrain from exercising certain remedies available to it resulting from the failure of LENSAR to comply with a liquidity covenant and make interest payments due under the credit agreement. Under the forbearance agreement, PDL has agreed to provide LENSAR with up to an aggregate of $8.5 million in weekly increments through the period ending September 30, 2015 in the form of additional loans subject to LENSAR meeting certain milestones related to LENSAR obtaining additional capital to fund the business or selling itself and repaying outstanding amounts under the credit agreement. As of June 30, 2015, PDL has funded an additional $5.2 million of principal under the forbearance agreement. In exchange for the forbearance, LENSAR agreed to additional reporting covenants, the engagement of a chief restructuring officer and an increase on the interest rate to 18.5%, applicable to all outstanding amounts under the credit agreement. The Company completed an impairment analysis as of June 30, 2015. Effective with this date and as result of the forbearance, we ceased to accrue interest revenue. LENSAR is evaluating its strategic alternatives which could include an equity raise, a sale of the company, a merger of the company or some combination of the preceding. Durata Credit Agreement On October 31, 2013, PDL entered into a credit agreement with Durata, under which the Company made available to Durata up to $70.0 million. Of the $70.0 million available to Durata, an initial $25.0 million (tranche one), net of fees, was funded by the Company at the close of the transaction. On May 27, 2014, the Company funded Durata an additional $15.0 million (tranche two) as a result of Durata's marketing approval of dalbavancin in the United States, which occurred on May 23, 2014, and was the milestone needed to receive the tranche two funding. Until the occurrence of the tranche two milestone, outstanding borrowings under tranche one bore interest at the rate of 14.0% per annum, payable quarterly in arrears. Upon occurrence of the tranche two milestone, the interest rate of the loans decreased to 12.75%. On November 17, 2014, the Company received a payment of approximately $42.7 million constituting repayment in full of the outstanding principal amount of loans plus accrued interest and fees under the credit agreement. The repayment was made in connection with the acquisition of Durata by Actavis plc. Direct Flow Medical Credit Agreement On November 5, 2013, PDL entered into a credit agreement with Direct Flow Medical, under which PDL agreed to provide up to $50.0 million to Direct Flow Medical. Of the $50.0 million available to Direct Flow Medical, an initial $35.0 million (tranche one), net of fees, was funded by the Company at the close of the transaction. Pursuant to the original terms of the credit agreement the Company agreed to provide Direct Flow Medical an additional $15.0 million tranche, net of fees, upon the attainment of a specified revenue milestone to be accomplished no later than December 31, 2014 (the tranche two milestone). Until the occurrence of the tranche two milestone, outstanding borrowings under tranche one bore interest at the rate of 15.5% per annum, payable quarterly in arrears. On November 10, 2014, PDL and Direct Flow Medical agreed to an amendment to the credit agreement to permit Direct Flow Medical to borrow the $15.0 million second tranche upon receipt by Direct Flow Medical of a specified minimum amount of proceeds from an equity offering prior to December 31, 2014. In exchange, the parties amended the credit agreement to provide for additional fees associated with certain liquidity events, such as a change of control or the consummation of an initial public offering, and granted PDL certain board of director observation rights. On November 19, 2014, upon Direct Flow Medical satisfying the amended tranche two milestone, the Company funded the $15.0 million second tranche to Direct Flow Medical, net of fees. Upon occurrence of the borrowing of the second tranche, the interest rate applicable to all loans under the credit agreement was decreased to 13.5% per annum, payable quarterly in arrears. Principal repayment will commence on the twelfth interest payment date, September 30, 2016. The principal amount outstanding at commencement of repayment will be repaid in equal installments until final maturity of the loans. The loans will mature on November 5, 2018. Direct Flow Medical may elect to prepay the loans at any time, subject to a prepayment penalty that decreases over the life of the loans. The obligations under the credit agreement are secured by a pledge of substantially all of the assets of Direct Flow Medical and any of its subsidiaries. Paradigm Spine Credit Agreement On February 14, 2014, the Company entered into the Paradigm Spine Credit Agreement, under which it made available to Paradigm Spine up to $75.0 million to be used by Paradigm Spine to refinance its existing credit facility and expand its domestic commercial operations. Of the $75.0 million available to Paradigm Spine, an initial $50.0 million, net of fees, was funded by the Company at the close of the transaction. The second and third tranches of up to an additional $25.0 million in the aggregate, net of fees, are no longer available under the terms of the Paradigm Spine Credit Agreement. Borrowings under the credit agreement bear interest at the rate of 13.0% per annum, payable quarterly in arrears. Principal repayment will commence on the twelfth interest payment date, December 31, 2016. The principal amount outstanding at commencement of repayment will be repaid in equal installments until final maturity of the loans. The loans will mature on February 14, 2019. Paradigm Spine may elect to prepay the loans at any time, subject to a prepayment penalty that decreases over the life of the loans. The obligations under the Paradigm Spine Credit Agreement are secured by a pledge of substantially all of the assets of Paradigm Spine and its domestic subsidiaries and, initially, certain assets of Paradigm Spine’s German subsidiaries. kaléo Note Purchase Agreement On April 1, 2014, PDL entered into a note purchase agreement with Accel 300, a wholly-owned subsidiary of kaléo, pursuant to which the Company acquired $150.0 million of secured notes due 2029. The secured notes were issued pursuant to an indenture between Accel 300 and U.S. Bank, National Association, as trustee, and are secured by the kaléo Revenue Interests, and a pledge of kaléo’s equity ownership in Accel 300. The secured notes bear interest at 13% per annum, paid quarterly in arrears on principal outstanding. The principal balance of the secured notes is repaid to the extent that the kaléo Revenue Interests exceed the quarterly interest payment, as limited by a quarterly payment cap. The final maturity of the secured notes is June 2029. kaléo may redeem the secured notes at any time, subject to a redemption premium. As of June 30, 2015, the Company determined that its royalty purchase interest in Accel 300 represented a variable interest in a variable interest entity. However, the Company does not have the power to direct the activities of Accel 300 that most significantly impact Accel 300's economic performance and is not the primary beneficiary of Accel 300; therefore, Accel 300 is not subject to consolidation by the Company. CareView Credit Agreement On June 26, 2015, PDL entered into a credit agreement with CareView, under which the Company made available to CareView up to $40.0 million in two tranches of $20.0 million each. The first tranche of $20 million will be funded by the Company upon CareView’s attainment of a specified milestone relating to the placement of CareView Systems^®, to be accomplished no later than October 31, 2015. The Company will fund CareView an additional $20.0 million upon CareView’s attainment of specified milestones relating to the placement of CareView Systems and EBITDA, to be accomplished no later than June 30, 2017. Outstanding borrowings under the credit agreement will bear interest at the rate of 13.5% per annum and are payable quarterly in arrears. As part of the transaction, the Company received a warrant to purchase approximately 4.4 million shares of common stock of CareView at the exercise price of $0.45 per share. We have accounted for the warrant as derivative asset with an offsetting credit as debt discount. At each reporting period the warrant is marked to market for changes in fair value. At June 30, 2015, we determined an estimated fair value of the warrant of $1.3 million. For carrying value and fair value measurement information related to our notes receivable and other long-term receivables, see Note 3.

Commitments and Contingencies	6 Months Ended
Commitments and Contingencies	Jun. 30, 2015
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	. Commitments and Contingencies Legal Proceedings From time to time, we are involved in lawsuits, arbitrations, claims, investigations and proceedings, consisting of intellectual property, commercial, employment and other matters, which arise in the ordinary course of business. We make provisions for liabilities when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Such provisions are reviewed at least quarterly and adjusted to reflect the impact of settlement negotiations, judicial and administrative rulings, advice of legal counsel, and other information and events pertaining to a particular case. Litigation is inherently unpredictable. If any unfavorable ruling were to occur in any specific period, there exists the possibility of a material adverse impact on the results of our operations of that period and on our cash flows and liquidity. We are not currently a party to any material legal proceedings. Lease Guarantee In connection with the Spin-Off, we entered into amendments to the leases for our former facilities in Redwood City, California, under which Facet was added as a co-tenant, and a Co-Tenancy Agreement, under which Facet agreed to indemnify us for all matters related to the leases attributable to the period after the Spin-Off date. Should Facet default under its lease obligations, we could be held liable by the landlord as a co-tenant and, thus, we have in substance guaranteed the payments under the lease agreements for the Redwood City facilities. As of June 30, 2015, the total lease payments for the duration of the guarantee, which runs through December 2021, are approximately $73.3 million. In April 2010, Abbott Laboratories acquired Facet and later renamed the entity AbbVie. If AbbVie were to default, we could also be responsible for lease-related costs including utilities, property taxes and common area maintenance, which may be as much as the actual lease payments. We have recorded a liability of $10.7 million on our Condensed Consolidated Balance Sheets as of June 30, 2015, and December 31, 2014, related to this guarantee. In future periods, we may adjust this liability for any changes in the ultimate outcome of this matter that are both probable and estimable.

Convertible Notes

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Convertible and Non-Recourse Notes

. Convertible Notes and Term Loans



		Principal Balance Outstanding		Carrying Value
		June 30,		June 30,		December 31,
Description	Maturity Date	2015		2015		2014
(In thousands)
Convertible Notes
Series 2012 Notes	February 15, 2015	$	—	$	—	$	22,261
May 2015 Notes	May 1, 2015	$	—	—		153,235
February 2018 Notes	February 1, 2018	$	300,000	279,751		276,228
March 2015 Term Loan	February 15, 2016	$	75,000	74,648		—
Total				$	354,399	$	451,724

As of June 30, 2015, PDL was in compliance with all applicable debt covenants, and embedded features of all debt agreements were evaluated and did not need to be accounted for separately.

Series 2012 Notes

In January 2012, we exchanged $169.0 million aggregate principal of Series 2012 Notes for an identical principal amount of our then existing February 2015 Notes, plus a cash payment of $5.00 for each $1,000 principal amount tendered, totaling approximately $845,000. The cash incentive payment was allocated to deferred issue costs of $765,000, additional paid-in capital of $52,000 and deferred tax assets of $28,000. The deferred issue costs will be recognized over the life of the Series 2012 Notes as interest expense. In February 2012, we entered into separate privately negotiated exchange agreements under which we exchanged an additional $10.0 million aggregate principal amount of the Series 2012 Notes for an identical principal amount of our then existing February 2015 Notes. In August 2013, the Company entered into a separate privately negotiated exchange agreement under which it retired the final $1.0 million aggregate principal amount of the Company's outstanding February 2015 Notes. Pursuant to the exchange agreement, the holder of the February 2015 Notes received $1.0 million aggregate principal amount of the Company's Series 2012 Notes. Immediately following the exchange, no principal amount of the February 2015 Notes remained outstanding and $180.0 million principal amount of the Series 2012 Notes was outstanding.

On February 6, 2014, the Company entered into exchange and purchase agreements with certain holders of approximately $131.7 million aggregate principal amount of outstanding Series 2012 Notes. The exchange agreement provided for the issuance by the Company of shares of common stock and a cash payment for the Series 2012 Notes being exchanged, and the purchase agreement provided for a cash payment for the Series 2012 Notes being repurchased. The total consideration given was approximately $191.8 million. The Company issued to the participating holders of the February 2015 Notes a total of approximately 20.3 million shares of its common stock with a fair value of approximately $157.6 million and made an aggregate cash payment of approximately $34.2 million pursuant to the exchange and purchase agreements. Of the $34.2 million cash payment, $2.5 million is attributable to an inducement fee, $1.8 million is attributable to interest accrued through the date of settlement and $29.9 million is attributable to the repurchase of the Series 2012 Notes. It was determined that the exchange and purchase agreement represented an extinguishment of the related notes. As a result, a loss on extinguishment of $6.1 million was recorded. The $6.1 million loss on extinguishment included the derecognition of the original issuance discount of $5.8 million and a $0.3 million charge resulting from the difference of the face value of the notes and the fair value of the notes. Immediately following the exchange, $48.3 million principal amount of the Series 2012 Notes was outstanding with approximately $2.1 million of remaining original issuance discount to be amortized over the remaining life of the Series 2012 Notes.

On October 20, 2014, the Company entered into a privately negotiated exchange agreement under which it retired approximately $26.0 million in principal of the outstanding Series 2012 Notes. The exchange agreement provided for the issuance, by the Company, of shares of common stock and a cash payment for the Series 2012 Notes being exchanged. The Company issued approximately 1.8 million shares of its common stock and made a cash payment of approximately $26.2 million. Immediately following the exchange, $22.3 million principal amount of the Series 2012 Notes was outstanding with approximately $0.1 million of remaining original issuance discount to be amortized over the remaining life of the Series 2012 Notes.

The Series 2012 Notes were due February 15, 2015, and bore interest at a rate of 2.875% per annum, payable semi-annually in arrears on February 15 and August 15 of each year. On February 17, 2015, the Company completed the retirement of the remaining $22.3 million of aggregate principal of its Series 2012 notes at their stated maturity for $22.3 million, plus approximately 1.34 million shares of its common stock.

The principal amount, carrying value and unamortized discount of our Series 2012 Notes were as follows:



(In thousands)	June 30, 2015		December 31, 2014
Principal amount of the Series 2012 Notes	$	—	$	22,337
Unamortized discount of liability component	—		(76		)
Total	$	—	$	22,261

Interest expense for our Series 2012 Notes on our Condensed Consolidated Statements of Income was as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2015		2014		2015		2014
Contractual coupon interest	$	—	$	347	$	80	$	1,108
Amortization of debt issuance costs	—		62		13		932
Amortization of debt discount	—		399		76		1,379
Total	$	—	$	808	$	169	$	3,419

May 2015 Notes

On May 16, 2011, we issued $155.3 million in aggregate principal amount, at par, of our May 2015 Notes in an underwritten public offering, for net proceeds of $149.7 million. Our May 2015 Notes were due May 1, 2015, and we paid interest at 3.75% on our May 2015 Notes semiannually in arrears on May 1 and November 1 of each year, beginning November 1, 2011. Proceeds from our May 2015 Notes, net of amounts used for purchased call option transactions and provided by the warrant transactions described below, were used to redeem a portion of our Series 2012 Notes. Upon the occurrence of a fundamental change, as defined in the indenture, holders had the option to require PDL to redeem the May 2015 Notes at a purchase price equal to 100% of the principal, plus accrued interest.

On May 1, 2015, the Company completed the retirement of the remaining $155.1 million of aggregate principal of its May 2015 Notes at their stated maturity for $155.1 million, plus approximately 5.2 million shares of its common stock for the excess conversion value.

The carrying value and unamortized discount of our May 2015 Notes were as follows:



(In thousands)	June 30, 2015		December 31, 2014
Principal amount of the May 2015 Notes	$	—	$	155,050
Unamortized discount of liability component	—		(1,815		)
Total	$	—	$	153,235

Interest expense for our May 2015 Notes on our Condensed Consolidated Statements of Income was as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2015		2014		2015		2014
Contractual coupon interest	$	484	$	1,456	$	1,938	$	2,911
Amortization of debt issuance costs	109		317		435		632
Amortization of debt discount	458		1,283		1,815		2,544
Total	$	1,051	$	3,056	$	4,188	$	6,087

Purchased Call Options and Warrants

In connection with the issuance of our May 2015 Notes, we entered into purchased call option transactions with two hedge counterparties. We paid an aggregate amount of $20.8 million, plus legal fees, for the purchased call options with terms substantially similar to the embedded conversion options in our May 2015 Notes. We exercised the purchased call options upon conversion of our May 2015 Notes on May 1, 2015, which required the hedge counterparties to deliver shares to the Company. The hedge counterparties delivered to us approximately 5.2 million of PDL common shares, which was the amount equal to the shares required to be delivered by us to the note holders for the excess conversion value.

In addition, we sold to the hedge counterparties warrants exercisable, on a cashless basis, for the sale of rights to receive up to 27.5 million shares of common stock underlying our May 2015 Notes. We received an aggregate amount of $10.9 million for the sale from the two counterparties. The warrant counterparties may exercise the warrants on their specified expiration dates through the 120 scheduled trading days beginning on July 30, 2015 and ending on January 20, 2016. If the VWAP of our common stock, as defined in the warrant agreement, exceeds the strike price of the warrants on the date of conversion, we will deliver to the warrant counterparties shares of our common stock equal to the spread between the VWAP on the date of exercise or expiration and the strike price. If the VWAP is less than the strike price, neither party is obligated to deliver anything to the other.

The purchased call option transactions and warrant sales effectively serve to reduce the potential dilution associated with conversion of our May 2015 Notes. The strike price is approximately $6.58, subject to further adjustment upon certain events including dividend payments, for the warrants.

Because the share price was above $5.59, but below $6.58, upon conversion of our May 2015 Notes, the purchased call options offset the share dilution, and the Company received shares on exercise of the purchased call options equal to the shares that the Company delivered to the note holders. If the share price is above $6.58, upon exercise of the warrants, the Company will deliver shares to the counterparties in an amount equal to the excess of the share price over $6.58. For example, a 10% increase in the share price above $6.58 would result in the issuance of 2.1 million incremental shares upon exercise of the warrants. If our share price continues to increase, additional dilution would occur.

While the purchased call options reduced the potential equity dilution upon conversion of our May 2015 Notes, prior to the conversion or exercise, our May 2015 Notes and the warrants had a dilutive effect on the Company’s earnings per share to the extent that the price of the Company’s common stock during a given measurement period exceeds the respective exercise prices of those instruments. As of June 30, 2015, and December 31, 2014, there were no related warrants exercised.

The warrants are considered indexed to PDL stock, require net-share settlement and met all criteria for equity classification at inception and at June 30, 2015, and December 31, 2014. The purchased call options cost, including legal fees, of $20.8 million, less deferred taxes of $7.2 million, and the $10.9 million received for the warrant issuance, was recorded as adjustments to additional paid-in capital. Subsequent changes in fair value will not be recognized as long as the warrants continue to meet all criteria for equity classification.

February 2018 Notes

On February 12, 2014, we issued $300.0 million in aggregate principal amount, at par, of our February 2018 Notes in an underwritten public offering, for net proceeds of $290.2 million. Our February 2018 Notes are due February 1, 2018, and we pay interest at 4.0% on our February 2018 Notes semiannually in arrears on February 1 and August 1 of each year, beginning August 1, 2014. A portion of the proceeds from our February 2018 Notes, net of amounts used for purchased call option transactions and provided by the warrant transactions described below, were used to redeem $131.7 million of our Series 2012 Notes. Upon the occurrence of a fundamental change, as defined in the indenture, holders have the option to require PDL to redeem the February 2018 Notes at a purchase price equal to 100% of the principal, plus accrued interest.

Our February 2018 Notes are convertible under any of the following circumstances:


•	During any fiscal quarter ending after the quarter ended June 30, 2014, if the last reported sale price of our common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter exceeds 130% of the conversion price for the notes on the last day of such preceding fiscal quarter;


•	During the five business-day period immediately after any five consecutive trading-day period, which we refer to as the measurement period, in which the trading price per $1,000 principal amount of notes for each trading day of that measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate for the notes for each such day;


•	Upon the occurrence of specified corporate events as described further in the indenture; or


•	At any time on or after August 1, 2017.

The initial conversion rate for the February 2018 Notes is 109.1048 shares of the Company's common stock per $1,000 principal amount of February 2018 Notes, which is equivalent to an initial conversion price of approximately $9.17 per share of common stock, subject to adjustments upon the occurrence of certain specified events as set forth in the indenture. Upon conversion, the Company will be required to pay cash and, if applicable, deliver shares of the Company's common stock as described in the indenture.

In accordance with the accounting guidance for convertible debt instruments that may be settled in cash or other assets on conversion, we were required to separately account for the liability component of the instrument in a manner that reflects the market interest rate for a similar nonconvertible instrument at the date of issuance. As a result, we separated the principal balance of our February 2018 Notes between the fair value of the debt component and the fair value of the common stock conversion feature. Using an assumed borrowing rate of 7.0%, which represents the estimated market interest rate for a similar nonconvertible instrument available to us on the date of issuance, we recorded a total debt discount of $29.7 million, allocated $19.3 million to additional paid-in capital and allocated $10.4 million to deferred tax liability. The discount is being amortized to interest expense over the term of our February 2018 Notes and increases interest expense during the term of our February 2018 Notes from the 4.0% cash coupon interest rate to an effective interest rate of 6.9%. As of June 30, 2015, the remaining discount amortization period is 2.6 years.

The carrying value and unamortized discount of our February 2018 Notes were as follows:



(In thousands)	June 30, 2015			December 31, 2014
Principal amount of the February 2018 Notes	$	300,000		$	300,000
Unamortized discount of liability component	(20,249		)	(23,772		)
Total	$	279,751		$	276,228

Interest expense for our February 2018 Notes on our Condensed Consolidated Statements of Income was as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2015		2014		2015		2014
Contractual coupon interest	$	3,000	$	3,062	$	6,000	$	4,633
Amortization of debt issuance costs	546		600		1,089		822
Amortization of debt discount	1,776		1,879		3,523		2,550
Total	$	5,322	$	5,541	$	10,612	$	8,005

As of June 30, 2015, our February 2018 Notes are not convertible. At June 30, 2015, the if-converted value of our February 2018 Notes did not exceed the principal amount.

Purchased Call Options and Warrants

In connection with the issuance of our February 2018 Notes, we entered into purchased call option transactions with two hedge counterparties. We paid an aggregate amount of $31.0 million for the purchased call options with terms substantially similar to the embedded conversion options in our February 2018 Notes. The purchased call options cover, subject to anti-dilution and certain other customary adjustments substantially similar to those in our February 2018 Notes, approximately 32.7 million shares of our common stock. We may exercise the purchased call options upon conversion of our February 2018 Notes and require the hedge counterparty to deliver shares to the Company in an amount equal to the shares required to be delivered by the Company to the note holder for the excess conversion value. The purchased call options expire on February 1, 2018, or the last day any of our February 2018 Notes remain outstanding.

In addition, we sold to the hedge counterparties warrants exercisable, on a cashless basis, for the sale of rights to receive shares of common stock that will initially underlie our February 2018 Notes at a strike price of $10.3610 per share, which represents a premium of approximately 30% over the last reported sale price of the Company's common stock of $7.97 on February 6, 2014. The warrant transactions could have a dilutive effect to the extent that the market price of the Company's common stock exceeds the applicable strike price of the warrants on the date of conversion. We received an aggregate amount of $11.4 million for the sale from the two counterparties. The warrant counterparties may exercise the warrants on their specified expiration dates that occur over a period of time. If the VWAP of our common stock, as defined in the warrant agreement, exceeds the strike price of the warrants, we will deliver to the warrant counterparties shares equal to the spread between the VWAP on the date of exercise or expiration and the strike price. If the VWAP is less than the strike price, neither party is obligated to deliver anything to the other.

The purchased call option transactions and warrant sales effectively serve to reduce the potential dilution associated with conversion of our February 2018 Notes. The strike price is subject to further adjustment in the event that future quarterly dividends exceed $0.15 per share.

The purchased call options and warrants are considered indexed to PDL stock, require net-share settlement, and met all criteria for equity classification at inception and at June 30, 2015. The purchased call options cost of $31.0 million, less deferred taxes of $10.8 million, and the $11.4 million received for the warrants, was recorded as adjustments to additional paid-in capital. Subsequent changes in fair value will not be recognized as long as the purchased call options and warrants continue to meet all criteria for equity classification.

March 2015 Term Loan

On March 30, 2015, PDL entered into a credit agreement among the Company, the lenders party thereto and the Royal Bank of Canada, as administrative agent. The credit agreement consists of a term loan of $100.0 million.

The interest rates per annum applicable to amounts outstanding under the term loan are, at the Company’s option, either (a) the alternate base rate (as defined in the credit agreement) plus 0.75%, or (b) the adjusted Eurodollar rate (as defined in the credit agreement) plus 1.75% per annum. As of June 30, 2015, the interest rate, based upon the adjusted Eurodollar rate, was 2.04%. Interest payments under the credit agreement are due on the interest payment dates specified in the credit agreement.

The term loan requires amortization in the form of scheduled principal payments on June 15, September 15 and December 15 of 2015, with the remaining outstanding balance due on February 15, 2016.

Any future material domestic subsidiaries of the Company are required to guarantee the obligations of the Company under the credit agreement, except as otherwise provided by the credit agreement. The Company’s obligations under the credit agreement are secured by a lien on a substantial portion of its assets.

The credit agreement contains affirmative and negative covenants that the Company believes are usual and customary for a senior secured credit agreement. The credit agreement also requires compliance with certain financial covenants, including a maximum total leverage ratio, a debt service coverage ratio and a minimum liquidity covenant, in each case calculated as set forth in the credit agreement and compliance with which may be necessary to take certain corporate actions.

The credit agreement contains events of default that the Company believes are usual and customary for a senior secured credit agreement.

October 2013 Term Loan

On October 28, 2013, PDL entered into a credit agreement among the Company, the lenders party thereto and the Royal Bank of Canada, as administrative agent. The October 2013 Term Loan amount was for $75 million, with a term of one year.

The interest rates per annum applicable to amounts outstanding under the October 2013 Term Loan were, at the Company’s option, either (a) the base rate plus 1.00%, or (b) the Eurodollar rate plus 2.00% per annum. As of the final payment date, the interest rate was 2.22%. This principal balance and outstanding interest was paid in full on October 28, 2014.

Other Long-Term Liabilities

6 Months Ended

Jun. 30, 2015

Other Liabilities Disclosure [Abstract]

Other Long-Term Liabilities

10. Other Long-Term Liabilities



	June 30,		December 31,
	2015		2014
(In thousands)
Accrued lease liability	$	10,700	$	10,700
Long term incentive accrual	1,675		578
Uncertain tax positions	31,969		26,356
Dividend payable	289		68
Total	$	44,633	$	37,702

In connection with the Spin-Off, we entered into amendments to the leases for our former facilities in Redwood City, California, under which Facet was added as a co-tenant, and a Co-Tenancy Agreement, under which Facet agreed to indemnify us for all matters related to the leases attributable to the period after the Spin-Off date. Should Facet default under its lease obligations, we could be held liable by the landlord as a co-tenant and, thus, we have in substance guaranteed the payments under the lease agreements for the Redwood City facilities. As of June 30, 2015, the total lease payments for the duration of the guarantee, which runs through December 2021, are approximately $73.3 million. If Facet were to default, we could also be responsible for lease-related costs including utilities, property taxes and common area maintenance that may be as much as the actual lease payments. We have recorded a liability of $10.7 million on our Condensed Consolidated Balance Sheets as of June 30, 2015, and December 31, 2014, related to this guarantee.

Stock-Based Compensation

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

11. Stock-Based Compensation

The Company grants stock options and restricted stock awards pursuant to a stockholder approved stock-based incentive plan. This incentive plan is described in further detail in Note 13, Stock-Based Compensation, of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as amended.

The following table summarizes the Company’s stock option and restricted stock award activity during the six months ended June 30, 2015:



			Stock Options			Restricted Stock Awards
(In thousands except per share amounts)	Shares Available for Grant		Number of Shares Outstanding	Weighted Average Exercise Price		Number of Shares Outstanding		Weighted Average Grant-date Fair Value Per Share
Balance at December 31, 2014	4,166		58	$	5.41	277		$	8.39
Granted	(398	)	—			398		7.29
Shares released	—		—			(30	)	9.02
Forfeited or canceled	40		—			(40	)	7.15
Balance at June 30, 2015	3,808		58	$	5.41	605		$	7.72

Income Taxes	6 Months Ended
Income Taxes	Jun. 30, 2015
Income Tax Disclosure [Abstract]
Income Taxes	13. Income Taxes Income tax expense for the three months ended June 30, 2015 and 2014, was $45.3 million and $54.0 million, respectively, and for the six months ended June 30, 2015 and 2014, was $94.3 million and $96.7 million, respectively, which resulted primarily from applying the federal statutory income tax rate to income before income taxes. The uncertain tax positions increased during the three and six months ended June 30, 2015, by $2.2 million and $4.6 million, respectively, resulting from an increase in tax uncertainties and estimated tax liabilities. In general, our income tax returns are subject to examination by U.S. federal, state and local tax authorities for tax years 1996 forward. In May 2012, PDL received a “no-change” letter from the IRS upon completion of an examination of the Company's 2008 federal tax return. We are currently under income tax examination in the state of California for tax years 2009 and 2010. Although the timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year, we do not anticipate any material change to the amount of our unrecognized tax benefit over the next 12 months.

Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2015

Accumulated Other Comprehensive Income (Loss) [Abstract]

Accumulated Other Comprehensive Income (Loss)

14. Accumulated Other Comprehensive Income

Comprehensive income is comprised of net income and other comprehensive income (loss). We include unrealized net gains (losses) on investments held in our available-for-sale securities and unrealized gains (losses) on our cash flow hedges in other comprehensive income (loss), and present the amounts net of tax. Our other comprehensive income (loss) is included in our Condensed Consolidated Statements of Comprehensive Income.

The balance of accumulated other comprehensive income, net of tax, was as follows:



	Unrealized gains (losses) on available-for-sale securities			Unrealized gains on cash flow hedges		Total Accumulated Other Comprehensive Income
(In thousands)
Beginning Balance at December 31, 2014	$	364		$	2,585	$	2,949
Activity for the six months ended June 30, 2015	(189		)	1,955		1,766
Ending Balance at June 30, 2015	$	175		$	4,540	$	4,715

Subsequent Events	6 Months Ended
Subsequent Events	Jun. 30, 2015
Subsequent Events [Abstract]
Subsequent Events [Text Block]	15. Subsequent Event ARIAD Revenue Interest Assignment On July 28, 2015, PDL entered into a revenue interests assignment agreement with ARIAD pursuant to which ARIAD sold to the Company the right to receive specified royalties on ARIAD’s Net Revenues (as defined in the ARIAD Royalty Agreement) generated by the sale, distribution or other use of ARIAD’s product Iclusig^® (ponatinib). In exchange for the ARIAD Royalty Rights, the ARIAD Royalty Agreement provides for the funding of up to $200 million in cash to ARIAD. Funding of the first $100 million will be made in two tranches of $50 million each, with the initial amount funded on the closing date of the ARIAD Royalty Agreement and an additional $50 million to be funded on the 12-month anniversary of the closing date. In addition, ARIAD has an option to draw up to an additional $100 million in up to two draws at any time between the six- and twelve-month anniversaries of the closing date. Under the ARIAD Royalty Agreement, initially the Company is to receive a royalty payment of 2.5% of the worldwide Net Revenues from Iclusig until the one year anniversary of the closing date, at which time the royalty rate increases to 5.0% (subject to agreed-upon annual maximum payments through 2018). The royalty rate is then subject to additional increases to (i)6.5% beginning January 1, 2019 and (ii) to 7.5% beginning January 1, 2019 in the event the Company funds in excess of $150 million to ARIAD under the ARIAD Royalty Agreement. In addition, if the Net Revenues from Iclusig do not meet certain agreed-upon projections on an annual basis, ARIAD has agreed to provide PDL the same royalty percentage with respect to the worldwide Net Revenues of brigatinib, up to the amount of the shortfall from the projections for the applicable year. The term of the ARIAD Royalty Agreement runs until December 31, 2033; however, this term is subject to a put option of the Company and call option of ARIAD.

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Basis of Presentation, Policy

Basis of Presentation

Principles of Consolidation, Policy

Principles of Consolidation

Use of Estimates, Policy [Policy Text Block]

Management Estimates

Notes Receivable and Other Long-Term Receivables, Policy

Notes Receivable and Other Long-Term Receivables

Debt, Policy [Policy Text Block]

Convertible Notes

Revenue Recognition, Policy [Policy Text Block]

Queen et al. Royalty Revenues

Acquired Royalty Rights [Policy Text Block]

Royalty Rights - At Fair Value

Customer Concentration, Policy

Customer Concentration

The percentage of total revenue recognized, which individually accounted for 10% or more of our total revenues, was as follows:



		Three Months Ended June 30,				Six Months Ended June 30,
Licensee	Product Name	2015		2014		2015		2014
Genentech	Avastin	28	%	24	%	27	%	27	%
	Herceptin	29	%	24	%	27	%	25	%

Biogen	Tysabri^®	10	%	8	%	10	%	9	%

Depomed	Glumetza^®	—	%	16	%	—	%	13	%

Foreign Currency Hedging, Policy

Foreign Currency Hedging

We enter into foreign currency hedges to manage exposures arising in the normal course of business and not for speculative purposes.

Income Tax, Policy [Policy Text Block]

Income Taxes

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Pronouncements

Net Income per Share (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Schedule of calculation of numerator and denominator in earnings per share



	Three Months Ended				Six Months Ended
	June 30,				June 30,
Net Income per Basic and Diluted Share:	2015		2014		2015		2014
(in thousands except per share amounts)
Numerator
Net income used to compute net income per basic and diluted share	$	78,264	$	92,055	$	162,762	$	164,938

Denominator
Weighted-average shares used to compute net income per basic share	163,544		160,256		163,188		155,752
Restricted stock outstanding	134		115		117		90
Effect of dilutive stock options	19		22		19		21
Assumed conversion of February 2018 Notes	—		1,872		—		1,484
Assumed conversion of Series 2012 Notes	—		4,487		266		7,570
Assumed conversion of warrants	503		—		1,551		—
Assumed conversion of May 2015 Notes	1,184		10,476		2,235		10,894
Weighted-average shares used to compute net income per diluted share	165,384		177,228		167,376		175,811

Net income per share - basic	$	0.48	$	0.57	$	1.00	$	1.06
Net income per share - diluted	$	0.47	$	0.52	$	0.97	$	0.94

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The following tables summarize the changes in Level 3 assets and the gains and losses included in earnings for the six months ended June 30, 2015:



Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

(in thousands)				Royalty Rights - At Fair Value
Beginning Balance at December 31, 2014							$	259,244

	Transfer into Level 3						—
	Total net change in fair value for the period
		Change in fair value of royalty rights - at fair value		$	23,578
		Proceeds from royalty rights - at fair value		$	(2,091	)
			Total net change in fair value for the period				21,487
	Purchases, issues, sales, and settlements
		Purchases					—

Ending Balance at June 30, 2015							$	280,731

Schedule of fair value of financial instruments measured on recurring basis



	June 30, 2015								December 31, 2014
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
(In thousands)
Financial assets:
Money market funds	$	136,454	$	—	$	—	$	136,454	$	221,792	$	—	$	—	$	221,792
Corporate securities	—		2,020		—		2,020		—		2,310		—		2,310
Foreign currency hedge contracts	—		6,985		—		6,985		—		4,069		—		4,069
Warrants	—		1,258		—		1,258		—		—		—		—
Royalty rights - at fair value	—		—		280,731		280,731		—		—		259,244		259,244
Total	$	136,454	$	10,263	$	280,731	$	427,448	$	221,792	$	6,379	$	259,244	$	487,415

Schedule of fair value of assets and liabilities not subject to fair value recognition by level within the valuation hierarchy

The following tables present the fair value of assets and liabilities not subject to fair value recognition by level within the valuation hierarchy:



	June 30, 2015						December 31, 2014
	Carrying Value		Fair Value Level 2		Fair Value Level 3		Carrying Value		Fair Value Level 2		Fair Value Level 3
(In thousands)
Assets:
Wellstat Diagnostics note receivable	$	50,191	$	—	$	50,191	$	50,191	$	—	$	50,191
Hyperion note receivable	1,200		—		1,200		1,200		—		1,200
Avinger note receivable	20,694		—		21,339		20,611		—		20,760
LENSAR note receivable	46,467		—		46,467		39,668		—		40,451
Direct Flow Medical note receivable	51,307		—		52,751		50,397		—		49,940
Paradigm Spine note receivable	49,754		—		51,010		49,571		—		50,125
kaléo note receivable	151,522		—		151,471		151,574		—		151,073
Total¹	$	371,135	$	—	$	374,429	$	363,212	$	—	$	363,740

Liabilities:
Series 2012 Notes	$	—	$	—	$	—	$	22,261	$	33,506	$	—
May 2015 Notes	—		—		—		153,235		205,534		—
February 2018 Notes	279,751		285,420		—		276,228		289,665		—
March 2015 Term Loan	74,648		75,000		—		—		—		—
Total	$	354,399	$	360,420	$	—	$	451,724	$	528,705	$	—

Foreign Currency Hedging (Tables)

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Euro forward contracts

The notional amounts, Euro exchange rates and fair values of our Euro forward contracts designated as cash flow hedges were as follows:



Euro Forward Contracts			June 30, 2015				December 31, 2014
			(In thousands)				(In thousands)
Currency	Settlement Price ($ per Euro)	Type	Notional Amount		Fair Value		Notional Amount		Fair Value
Euro	1.256	Sell Euro	$	—	$	—	$	6,000	$	241
Euro	1.257	Sell Euro	—		—		15,750		728
Euro	1.259	Sell Euro	16,125		2,300		16,125		752
Euro	1.260	Sell Euro	33,000		4,685		33,000		1,468
Euro	1.270	Sell Euro	—		—		7,000		377
Euro	1.281	Sell Euro	—		—		8,000		503
Total			$	49,125	$	6,985	$	85,875	$	4,069

Schedule of location and fair values of Euro contracts in Consolidated Balance Sheets

The location and fair values of our Euro contracts in our Condensed Consolidated Balance Sheets were as follows:



Cash Flow Hedge	Location	June 30, 2015		December 31, 2014
(In thousands)
Euro contracts	Prepaid and other current assets	$	6,985	$	3,352
Euro contracts	Other assets	$	—	$	717

Schedule of the effect of derivative instruments in the Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

The effect of our derivative instruments in our Condensed Consolidated Statements of Income and our Condensed Consolidated Statements of Comprehensive Income was as follows:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015		2014
(In thousands)
Net gain (loss) recognized in OCI, net of tax ⁽¹⁾	$	(1,305	)	$	264		$	4,363	$	331
Gain (loss) reclassified from accumulated OCI into royalty revenue, net of tax ⁽²⁾	$	1,739		$	(2,027	)	$	2,408	$	(2,755	)
Net gain (loss) recognized in interest and other income, net - cash flow hedges ⁽³⁾	$	—		$	1		$	—	$	3

Convertible Notes (Tables)

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Schedule of convertible and non-recourse notes activity



		Principal Balance Outstanding		Carrying Value
		June 30,		June 30,		December 31,
Description	Maturity Date	2015		2015		2014
(In thousands)
Convertible Notes
Series 2012 Notes	February 15, 2015	$	—	$	—	$	22,261
May 2015 Notes	May 1, 2015	$	—	—		153,235
February 2018 Notes	February 1, 2018	$	300,000	279,751		276,228
March 2015 Term Loan	February 15, 2016	$	75,000	74,648		—
Total				$	354,399	$	451,724

Schedule of carrying value and unamortized discount on Series 2012 Notes

The principal amount, carrying value and unamortized discount of our Series 2012 Notes were as follows:



(In thousands)	June 30, 2015		December 31, 2014
Principal amount of the Series 2012 Notes	$	—	$	22,337
Unamortized discount of liability component	—		(76		)
Total	$	—	$	22,261

Schedule of interest expense on Series 2012 Notes

Interest expense for our Series 2012 Notes on our Condensed Consolidated Statements of Income was as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2015		2014		2015		2014
Contractual coupon interest	$	—	$	347	$	80	$	1,108
Amortization of debt issuance costs	—		62		13		932
Amortization of debt discount	—		399		76		1,379
Total	$	—	$	808	$	169	$	3,419

Schedule of carrying value and unamortized discount on May 2015 Notes

The carrying value and unamortized discount of our May 2015 Notes were as follows:



(In thousands)	June 30, 2015		December 31, 2014
Principal amount of the May 2015 Notes	$	—	$	155,050
Unamortized discount of liability component	—		(1,815		)
Total	$	—	$	153,235

Schedule of interest expense for May 2015 Notes

Interest expense for our May 2015 Notes on our Condensed Consolidated Statements of Income was as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2015		2014		2015		2014
Contractual coupon interest	$	484	$	1,456	$	1,938	$	2,911
Amortization of debt issuance costs	109		317		435		632
Amortization of debt discount	458		1,283		1,815		2,544
Total	$	1,051	$	3,056	$	4,188	$	6,087

Schedule of carrying value and unamortized discount on February 2018 Notes [Table Text Block]

The carrying value and unamortized discount of our February 2018 Notes were as follows:



(In thousands)	June 30, 2015			December 31, 2014
Principal amount of the February 2018 Notes	$	300,000		$	300,000
Unamortized discount of liability component	(20,249		)	(23,772		)
Total	$	279,751		$	276,228

Schedule of interest expense for February 2018 Notes [Table Text Block]

Interest expense for our February 2018 Notes on our Condensed Consolidated Statements of Income was as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2015		2014		2015		2014
Contractual coupon interest	$	3,000	$	3,062	$	6,000	$	4,633
Amortization of debt issuance costs	546		600		1,089		822
Amortization of debt discount	1,776		1,879		3,523		2,550
Total	$	5,322	$	5,541	$	10,612	$	8,005

Net Income per Share (Narrative) (Detail) (USD $)	3 Months Ended			6 Months Ended		3 Months Ended		6 Months Ended					0 Months Ended									3 Months Ended	6 Months Ended		3 Months Ended		6 Months Ended				3 Months Ended		0 Months Ended
Net Income per Share (Narrative) (Detail) (USD $)	Jun. 30, 2014 Warrants [Member]	Jun. 30, 2015 Stock Options [Member]	Jun. 30, 2014 Stock Options [Member]	Jun. 30, 2015 Stock Options [Member]	Jun. 30, 2014 Stock Options [Member]	Jun. 30, 2015 Restricted Stock [Member]	Jun. 30, 2014 Restricted Stock [Member]	Jun. 30, 2015 Restricted Stock [Member]	Jun. 30, 2014 Restricted Stock [Member]	Aug. 01, 2013 February 2015 Notes [Member]	Mar. 31, 2012 February 2015 Notes [Member]	Jan. 31, 2012 February 2015 Notes [Member]	Feb. 18, 2015 Series 2012 Notes [Member]	Oct. 20, 2014 Series 2012 Notes [Member]	Feb. 05, 2014 Series 2012 Notes [Member]	Feb. 17, 2015 Series 2012 Notes [Member]	Nov. 24, 2014 Series 2012 Notes [Member]	Feb. 07, 2014 Series 2012 Notes [Member]	Feb. 06, 2014 Series 2012 Notes [Member]	Feb. 29, 2012 Series 2012 Notes [Member]	May 01, 2015 May 2015 Notes [Member] [Member]	Jun. 30, 2015 May 2015 Notes [Member] [Member] Warrants [Member]	Jun. 30, 2015 May 2015 Notes [Member] [Member] Warrants [Member]	Jun. 30, 2014 May 2015 Notes [Member] [Member] Warrants [Member]	Jun. 30, 2015 May 2015 Notes [Member] [Member] Purchased Call Options [Member]	Jun. 30, 2014 May 2015 Notes [Member] [Member] Purchased Call Options [Member]	Jun. 30, 2015 May 2015 Notes [Member] [Member] Purchased Call Options [Member]	Jun. 30, 2014 May 2015 Notes [Member] [Member] Purchased Call Options [Member]	Jun. 30, 2015 February 2018 Notes [Member]	Feb. 12, 2014 February 2018 Notes [Member]	Jun. 30, 2015 February 2018 Notes [Member] Warrants [Member]	Jun. 30, 2015 February 2018 Notes [Member] Purchased Call Options [Member]	May 02, 2015 Series 2012 Notes [Member]
Debt Instrument [Line Items]
Amount of convertible notes payable											$ 179,000,000
Convertible notes										$ 1,000,000		$ 169,000,000				$ 22,300,000	$ 26,000,000	$ 131,700,000	$ 131,700,000	$ 10,000,000	$ 155,100,000								$ 279,751,000	$ 300,000,000
Debt Conversion, Converted Instrument, Shares Issued													1,300,000	1,800,000	20,300,000																		5,200,000
Antidilutive securities excluded from computation of earnings per share (in Shares)	21,800,000	39,000	24,000	38,000	69,000	449,000	0	415,000	0													0	0	21,800,000	0	25,700,000	0	25,700,000			29,000,000	32,700,000

Net Income per Share (Net Income Per Basic and Diluted Share) (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Earnings Per Share [Abstract]
Income used to compute net income per diluted share	$ 78,264	$ 92,055	$ 162,762	$ 164,938
Total weighted-average shares used to compute net income per basic share (in Shares)	163,544	160,256	163,188	155,752
Diluted (in Shares)	165,384	177,228	167,376	175,811
Basic (in Dollars per Share)	$ 0.48	$ 0.57	$ 1.00	$ 1.06
Net income per diluted share (in Dollars per Share)	$ 0.47	$ 0.52	$ 0.97	$ 0.94
Debt Instrument [Line Items]
Incremental Common Shares Attributable to Dilutive Effect of Call Options and Warrants	503	0	1,551	0
February 2018 Notes [Member]
Debt Instrument [Line Items]
Assumed conversion of debt notes (in Shares)	0	1,872	0	1,484
Series 2012 Notes [Member]
Debt Instrument [Line Items]
Assumed conversion of debt notes (in Shares)	0	4,487	266	7,570
May 2015 Notes [Member]
Debt Instrument [Line Items]
Assumed conversion of debt notes (in Shares)	1,184	10,476	2,235	10,894
Stock Options [Member]
Debt Instrument [Line Items]
Additional shares included in the calculation of diluted EPS (in Shares)	19	22	19	21
Restricted Stock [Member]
Debt Instrument [Line Items]
Additional shares included in the calculation of diluted EPS (in Shares)	134	115	117	90

Fair Value Measurements (Narrative) (Detail) (USD $)

6 Months Ended

3 Months Ended

6 Months Ended

3 Months Ended

Jun. 30, 2015

Dec. 31, 2014

Nov. 06, 2014

Jun. 30, 2015

Depomed [Member]

Dec. 31, 2014

Depomed [Member]

Oct. 18, 2013

Depomed [Member]

Jun. 30, 2015

VB [Member]

Jun. 30, 2015

VB [Member]

Dec. 31, 2014

VB [Member]

Jun. 26, 2014

VB [Member]

Jun. 30, 2015

University of Michigan [Member]

Dec. 31, 2014

University of Michigan [Member]

Cash payment for purchase of royalty right

$ 65,600,000

$ 240,500,000

Purchase of royalty rights

241,300,000

15,500,000

Fair value inputs, discount rate (in Percent)

17.50%

Royalty right purchase transaction costs

800,000

Long-Duration Contracts, Assumptions by Product and Guarantee, Discount Rate

21.00%

12.80%

Fair Value Measurements, Sensitivity Analysis, Description

Should these discount rates increase or decrease by 5%, the fair value of the asset could decrease by $18.4 million or increase by $23.4 million, respectively. A third-party expert was engaged to help management develop its original estimate of the expected future cash flows. The fair value of the asset is subject to variation should those cash flows vary significantly from those estimates. Should the expected royalties increase or decrease by 10%, the fair value of the asset could increase by $15.6 million or decrease by $16.3 million, respectively.

Should this discount rate increase or decrease by 2.5%, the fair value of this asset could decrease by $1.3 million or increase by $1.5 million, respectively. Should the expected royalties increase or decrease by 2.5%, the fair value of the asset could increase by $0.4 million or decrease by $0.4 million, respectively.

Should this discount rate increase or decrease by 2.5%, the fair value of this asset could decrease by $6.1 million or increase by $7.0 million, respectively. Should the expected royalties increase or decrease by 5%, the fair value of the asset could increase by $3.5 million or decrease by $3.5 million, respectively.

Variable Interest Entity, Reporting Entity Involvement, Maximum Loss Exposure, Amount

280,731,000

^[1]

259,244,000

^[2]

194,000,000

176,200,000

16,700,000

16,100,000

70,100,000

66,900,000

194,000,000

16,700,000

70,100,000

Period over which revenue is expected for valuation (in years)

15 years

Transfers from level 1 to level 2, amount

Transfers from level 2 to level 1, amount

$ 0

Percentage of royalty acquired

75.00%

[1]	unaudited
[2]	Note 1

Fair Value Measurements (Financial Instruments Measured at Fair Value on a Recurring Basis) (Detail) (USD $)
In Thousands, unless otherwise specified

Jun. 30, 2015

Dec. 31, 2014

Fair Value Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

$ 280,731

^[1]

$ 259,244

^[2]

Foreign Currency Contract, Asset, Fair Value Disclosure

427,448

487,415

6,985

4,069

Warrants and Rights Outstanding

1,258

Money Market Funds [Member]

Cash and Cash Equivalents, Fair Value

136,454

221,792

Equity Securities [Member]

Available for Sale Securities, Fair Value

2,020

2,310

Fair Value Level 1 [Member]

Foreign Currency Contract, Asset, Fair Value Disclosure

136,454

221,792

Fair Value Level 1 [Member] | Money Market Funds [Member]

Cash and Cash Equivalents, Fair Value

136,454

221,792

Fair Value Level 1 [Member] | Equity Securities [Member]

Available for Sale Securities, Fair Value

Fair Value Level 2 [Member]

Foreign Currency Contract, Asset, Fair Value Disclosure

10,263

6,379

6,985

4,069

Warrants and Rights Outstanding

1,258

Fair Value Level 2 [Member] | Money Market Funds [Member]

Cash and Cash Equivalents, Fair Value

Fair Value Level 2 [Member] | Equity Securities [Member]

Available for Sale Securities, Fair Value

2,020

2,310

Fair Value Level 3 [Member]

Fair Value Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

280,731

259,244

Schedule of Available-For-Sale Securities [Line Items]

$ 280,731

$ 259,244

[1]	unaudited
[2]	Note 1

Fair Value Measurements (Schedule of Fair Value of Assets and Liabilities not Subject to Fair Value Recognition) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2015	Dec. 31, 2014	Oct. 20, 2014	Feb. 12, 2014
Fair Value by Balance Sheet Grouping [Line Items]
Debt Instrument, Unamortized Discount	$ 1,400
Assets
Notes receivable, Carrying Value	371,135	363,212
Liabilities:
Convertible Notes Payable, Carrying Value	354,399	451,724
Series 2012 Notes [Member]
Fair Value by Balance Sheet Grouping [Line Items]
Debt Instrument, Unamortized Discount	0	76	100	2,100
Liabilities:
Convertible Notes Payable, Carrying Value	0	22,261
May 2015 Notes [Member]
Fair Value by Balance Sheet Grouping [Line Items]
Debt Instrument, Unamortized Discount	0	1,815
Liabilities:
Convertible Notes Payable, Carrying Value	0	153,235
February 2018 Notes [Member]
Fair Value by Balance Sheet Grouping [Line Items]
Debt Instrument, Unamortized Discount	20,249			29,700
Liabilities:
Convertible Notes Payable, Carrying Value	279,751	276,228
Term Loan. [Member]
Liabilities:
Convertible Notes Payable, Carrying Value	74,648
Wellstat Note Receivable [Member]
Assets
Notes receivable, Carrying Value	50,191	50,191
Hyperion [Member]
Assets
Notes receivable, Carrying Value	1,200	1,200
Avinger Note Receivable [Member]
Assets
Notes receivable, Carrying Value	20,694	20,611
LENSAR Note Receivable [Member]
Assets
Notes receivable, Carrying Value	46,467	39,668
Direct Flow Medical Note Receivable [Member]
Assets
Notes receivable, Carrying Value	51,307	50,397
Paradigm Spine [Member]
Assets
Notes receivable, Carrying Value	49,754	49,571
kaleo Note Receivable [Member]
Assets
Notes receivable, Carrying Value	151,522	151,574
Fair Value Level 2 [Member]
Liabilities:
Notes payable, Fair Value	360,420	528,705
Fair Value Level 2 [Member] \| Series 2012 Notes [Member]
Liabilities:
Notes payable, Fair Value		33,506
Fair Value Level 2 [Member] \| May 2015 Notes [Member]
Liabilities:
Notes payable, Fair Value		205,534
Fair Value Level 2 [Member] \| February 2018 Notes [Member]
Liabilities:
Notes payable, Fair Value	285,420	289,665
Fair Value Level 2 [Member] \| Term Loan. [Member]
Liabilities:
Notes payable, Fair Value	75,000
Fair Value Level 2 [Member] \| Hyperion [Member]
Assets
Notes receivable, Fair Value	0	0
Fair Value Level 2 [Member] \| LENSAR Note Receivable [Member]
Assets
Notes receivable, Fair Value	0	0
Fair Value Level 2 [Member] \| Direct Flow Medical Note Receivable [Member]
Assets
Notes receivable, Fair Value	0	0
Fair Value Level 2 [Member] \| Paradigm Spine [Member]
Assets
Notes receivable, Fair Value	0	0
Fair Value Level 2 [Member] \| kaleo Note Receivable [Member]
Assets
Notes receivable, Fair Value	0	0
Fair Value Level 3 [Member]
Assets
Notes receivable, Fair Value	374,429	363,740
Fair Value Level 3 [Member] \| Wellstat Note Receivable [Member]
Assets
Notes receivable, Fair Value	50,191	50,191
Fair Value Level 3 [Member] \| Hyperion [Member]
Assets
Notes receivable, Fair Value	1,200	1,200
Fair Value Level 3 [Member] \| Avinger Note Receivable [Member]
Assets
Notes receivable, Fair Value	21,339	20,760
Fair Value Level 3 [Member] \| LENSAR Note Receivable [Member]
Assets
Notes receivable, Fair Value	46,467	40,451
Fair Value Level 3 [Member] \| Direct Flow Medical Note Receivable [Member]
Assets
Notes receivable, Fair Value	52,751	49,940
Fair Value Level 3 [Member] \| Paradigm Spine [Member]
Assets
Notes receivable, Fair Value	51,010	50,125
Fair Value Level 3 [Member] \| kaleo Note Receivable [Member]
Assets
Notes receivable, Fair Value	$ 151,471	$ 151,073

Fair Value Measurements Level 3 Unobservable Input Reconciliation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Change in fair value of acquired royalty rights			$ 23,578
Beginning balance			259,244
Transfer into Level 3			0
Gains (losses) included in earnings			21,487
Purchases			0
Ending balance	280,731		280,731
Payments for (Proceeds from) Productive Assets			(2,091)	(49,451)
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share, Unobservable Input, Unrealized Gains (Losses), Changes in Assets and Liabilities, Continued to be Held, Amount	$ 12,216	$ (4,061)	$ 23,578	$ (4,061)

Cash Equivalents and Investments (Summary of Cash and Available-For-Sale Securities) (Detail) (USD $)
In Thousands, unless otherwise specified

Jun. 30, 2015

Dec. 31, 2014

Mar. 31, 2013

Dec. 31, 2012

Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax

$ 293,815

$ 293,127

270

560

Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax

Cash, Cash Equivalents and Available-for-Sale Securities, Fair Value

294,085

293,687

292,065

^[1]

291,377

^[2]

214,525

94,302

Schedule of Available-For-Sale Securities [Line Items]

2,020

^[1]

2,310

^[2]

Cash [Member]

Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax

155,611

69,585

Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax

Cash, Cash Equivalents and Available-for-Sale Securities, Fair Value

155,611

69,585

155,611

69,585

Schedule of Available-For-Sale Securities [Line Items]

Money Market Funds [Member]

Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax

136,454

221,792

Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax

Cash, Cash Equivalents and Available-for-Sale Securities, Fair Value

136,454

221,792

136,454

221,792

Schedule of Available-For-Sale Securities [Line Items]

Equity Securities [Member]

Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax

1,750

270

560

Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax

Cash, Cash Equivalents and Available-for-Sale Securities, Fair Value

2,020

2,310