•	the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

•	staff comments or potential changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

•	the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

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•	Provide to us the rationale for recording the rights as intangible assets and cite for us the authoritative literature on which you relied. In this regard, also tell us:

◦	A complete description of the assets you acquired and their legal terms;

◦	Why the assets acquired do not meet the definition of financial assets; and

◦	The circumstances in which Depomed would be required to repay the $240.5 million cash payment you made.

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PDL’s business model is to acquire royalty assets from other companies, academic institutions, and inventors and to also provide secured debt financing to companies. The agreement with Depomed was structured as an acquisition of royalty rights with no securitization or recourse. This transaction is materially different from our debt transactions in substance, form, guaranteed payment and intent, among other things. We account for those transactions under ASC 470 guidance. For the reasons below, we believe this transaction is most appropriately accounted for under ASC 350 guidance.

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Under the terms of the Purchase and Sales Agreement (“the Agreement”), PDL acquired all of Depomed’s rights, title and interest to the defined assets, for which it paid an advance payment of $240.5 million. These rights include, among other things, all of Depomed’s royalty and milestone payments due under certain of its license agreements until the Company has received payments equal to two times the cash payment made to Depomed ($481 million), after which all net payments received will be shared evenly (50/50) between PDL and Depomed. The Agreement terminates on the third anniversary following the date upon which the later of the following occurs: (a) October 25, 2021 (i.e. October 26, 2024), and (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. The related rights to receive such payments were assigned to a special purpose vehicle (“SPV”). PDL purchased the royalty and milestone rights to five different drugs (assets), along with information, audit, enforcement and other intangible rights. Two of the five drugs for which the Company is to receive royalties are already approved and royalty revenue is being generated on these two drugs while the other drugs are not yet approved.

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◦	We believe that the acquired assets meet the definition of an intangible asset and not a financial asset.

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PDL purchased the right to the above mentioned revenue streams of both approved and non-approved drugs. In the event that already approved drugs are pulled from the market or the related licenses with third parties are cancelled there is no obligation from Depomed to repay the $240.5 million. The acquired rights to future royalty and milestone payments for drugs that have not yet gained approval or commercialization may never yield such royalty and milestone payments. Depomed has no obligation to recompense PDL in any form should either scenario occur.

◦	In addition, we believe the transaction would not represent a financial liability for Depomed; therefore, by inference, it would not represent a financial asset to PDL since PDL paid $240.5 million for Depomed’s royalty rights, Depomed has no obligation to pay PDL if no royalties exist.

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Question: With respect to the intangible assets related to the other licensed products with a carrying value of $76.8 million, you state that you will commence amortization of the intangible assets when you receive royalty revenues related to the sales of the related products. Tell us the events that must occur and their timing before you will receive royalties, and how your policy of not recording amortization until you receive royalties complies with ASC 350-30-35-6, which indicates that a recognized intangible asset shall be amortized over its useful life to the reporting entity.

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•	Question: Regarding your conclusion that you are not the primary beneficiary of Depo DR Sub, LLC, provide us your analysis of ASC 810-10-25 supporting this conclusion. Indicate for us the activities of Depo DR Sub, LLC that most significantly impact its economic performance and why you concluded that you do not have the power to direct these activities.

(1)	The power to direct matters that most significantly impact the activities of the VIE, and

(2)	The obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.

1.	Determining date of the analysis;

2.	Determining significant VIs;

3.	Evaluating the business scope exception (or other scope exceptions as applicable), note that if an investment is scoped out under the business scope exception the steps 4 and 5 are not required;

4.	Applying VIE criteria to evaluate whether an entity is a VIE;

5.	Primary beneficiary analysis if the entity is determined to be a VIE.

1.	Determination Date

2.	Variable Interest and Variable Interest Holders

3.	Scope Exception

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4.	Applying VIE criteria to evaluate whether an entity is a VIE

•	The entity does not have enough equity to finance its activities without additional subordinated financial support.

◦	Depo DR Sub, LLC represents a VIE of PDL. ASC 805 indicates that an entity that is “financed” with no equity is automatically a VIE. Due to the nature of the SPV, the only GAAP defined equity in the SPV is held by Depomed. As Depomed is the holder of 100% of the related equity and there were no material capital contributions to the entity, Depo DR Sub, LLC represents a VIE of PDL.

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In the future, Depomed is required to “maintain” the SPV and expected costs to do so are minimal. There is minimal attention/resource required to receive license payments and have them remitted (swept) to PDL accounts. Should unanticipated funds become required to maintain the SPV, Depomed is contractually required and has the ability to fund such maintenance as of the date of this evaluation. As Depomed is publicly traded we refer you to Depomed’s (DEPO) recent SEC filings to assess this ability. The SPV cannot suffer losses as it only passes on revenue and does not pass along any liabilities should they arise.

•	The equity holders, as a group, lack the characteristics of a controlling financial interest.

◦	As stated above the only equity in the SPV is that held by Depomed. Depomed owns the underlying assets and the related revenues are contributed to the SPV to the benefit of PDL. Contractually Depomed cannot assign or terminate the related license agreements. Should the licensee terminate its license with Depomed, Depomed has the obligation to pursue entering into a replacement contract.

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Due to the nature of this transaction PDL will not absorb any potential losses. A loss would occur in the event that the underlying assets (owned by Depomed) and related license revenue (owned by PDL) ceased prior to PDL receiving a positive return on its initial investment ($240.5MM). Depomed has no obligation to make PDL whole in such a circumstance. However all upside in the related licenses is wholly owned or payable to PDL until 2x the initial investment is received, at which point PDL will still share in half of the continuing royalties.

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•	The legal entity is structured with non-substantive voting rights (i.e., an anti-abuse clause).

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As previously stated, there are no specific voting rights and the only equity outstanding is owned by Depomed. The revenue generating assets (patents and related licenses) are managed and owned by Depomed. PDL does not have the ability to direct these patents or licenses. The patents and licenses are contractually “locked up”. Depomed is not permitted to make changes, assign, sell, etc., without PDL’s express permission. Due to the nature of these assets, and as is industry standard with these types of patents and licenses, it is not anticipated that any changes will occur.

•	A reporting entity shall be deemed to have a controlling financial interest in a VIE if it has both of the following characteristics:

◦	The power to direct the activities of a VIE that most significantly impact the VIE’s economic performance.

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The obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The quantitative approach described in the definitions of the terms expected losses, expected residual returns, and expected variability is not required and shall not be the sole determinant as to whether a reporting entity has these obligations or rights.

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