Net Income (Loss), Including Portion Attributable to Noncontrolling Interest

$ 63,659

$ 332,795

$ 322,244

Other comprehensive income (loss), net of tax

Change in unrealized gains on investments in available-for-sale securities

122

783

(745)

Adjustment for net (gains) losses realized and included in net income, net of tax

(557)

(712)

(20)

Total change in unrealized gains on investments in available-for-sale securities, net of tax

^[1]

(435)

(765)

Unrealized gains (losses) on cash flow hedges

4,626

4,834

Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Net of Tax

(1,821)

(5,390)

3,768

Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax

^[2]

(1,821)

(764)

8,602

Total other comprehensive income (loss), net of tax

(2,256)

(693)

7,837

Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest

61,403

332,102

330,081

Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Noncontrolling Interest

Comprehensive income

$ 61,350

$ 332,102

$ 330,081

[1]	Net of tax of ($234), $38 and ($412) for the years ended December 31, 2016, 2015 and 2014, respectively.
[2]	Net of tax of ($981), ($411) and $4,632 for the years ended December 31, 2016, 2015 and 2014, respectively.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parentheticals) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Statement of Comprehensive Income [Abstract]
Unrealized gains (losses) on available-for-sale securities, tax	$ (234)	$ 38	$ (412)
Unrealized gains (losses) on cash flow hedges, tax	$ (981)	$ (411)	$ 4,632

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Accrued Income Taxes, Current	$ 4,723	$ 3,372
Current assets:
Cash and cash equivalents	147,154	218,883
Short-term investments	19,987	1,469
Receivables from licensees	40,120	0
Deferred tax assets	0	981
Notes receivable	111,182	58,398
Investments-other	75,000	0
Inventory, net	2,884	0
Prepaid and other current assets	1,704	2,979
Total current assets	398,031	282,710
Property and equipment, net	38	31
Royalty rights - at fair value	402,318	399,204
Notes and other receivables, long-term	159,768	306,507
Long-term deferred tax assets	19,257	16,172
Intangible assets, net	228,542	0
Other assets	7,433	7,581
Total assets	1,215,387	1,012,205
Current liabilities:
Accounts payable	7,016	394
Accrued liabilities	30,575	8,009
Term loan payable	0	24,966
Anniversary payment	88,001	0
Total current liabilities	130,315	36,741
Convertible notes payable	232,443	228,862
Contingent consideration	42,650	0
Other long-term liabilities	54,556	50,650
Total liabilities	459,964	316,253
Commitments and Contingencies
Stockholders' equity (deficit):
Preferred stock, par value $0.01 per share, 10,000 shares authorized; no shares issued and outstanding	0	0
Common stock, par value $0.01 per share, 350,000 shares authorized; 165,538 and 164,287 shares issued and outstanding at December 31, 2016 and 2015, respectively	1,655	1,643
Additional paid-in capital	(107,628)	(117,983)
Accumulated other comprehensive income	0	2,256
Retained earnings	857,116	810,036
Total stockholders' equity	751,143	695,952
Noncontrolling Interest in Variable Interest Entity	4,280	0
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	755,423	695,952
Total liabilities and stockholders' equity	$ 1,215,387	$ 1,012,205

CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares shares in Thousands	Dec. 31, 2016	Dec. 31, 2015
Preferred stock par value (in Dollars per Share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in Shares)	10,000	10,000
Preferred stock, shares issued (in Shares)	0	0
Preferred stock, shares outstanding (in Shares)		0
Common stock par value (in Dollars per Share)	$ 0.01	$ 0.01
Common stock, shares authorized (in Shares)	350,000	350,000
Common stock, shares issued (in Shares)	165,538	164,287
Common stock, shares outstanding (in Shares)	165,538	164,287

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$ 63,659	$ 332,795	$ 322,244
Noncash or Part Noncash Acquisition, Value of Liabilities Assumed	47,360
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of convertible notes and term loan offering costs	10,009	12,963	18,696
Amortization of Intangible Assets	12,028	0	0
Goodwill, Impairment Loss	3,735	0	0
Change in fair value of acquired royalty rights	(16,196)	(68,367)	(44,927)
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Change in Unrealized Gain (Loss)	906	(985)	0
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability	(3,716)	0	0
Other amortization, depreciation and accretion of embedded derivative	18	40	(134)
Inventory Write-down	342	0	0
Loss on extinguishment of notes receivable	51,075	3,979	0
Gains (Losses) on Extinguishment of Debt	2,353	(6,450)	6,143
Hedge ineffectiveness on foreign exchange contracts	0	0	(5)
Gain (Loss) on Sale of Investments	(882)	(997)	(30)
Stock-based compensation expense	3,742	2,045	1,501
Deferred taxes	(10,676)	17,251	(19,842)
Changes in assets and liabilities:
Receivables from licensees	(34,120)	0	0
Increase (Decrease) in Accounts and Other Receivables	6,000	(300)	0
Prepaid and other current assets	(1,526)	(42)	2,126
Accrued interest on notes receivable	(2,764)	(2,246)	(6,800)
Increase (Decrease) in Inventories	(3,227)	0	0
Other assets	(757)	(865)	(63)
Accounts payable	6,621	76	31
Accrued liabilities	22,729	(1,048)	4,343
Increase (Decrease) in Income Taxes Payable	1,352	79	3,293
Increase (Decrease) in Other Deferred Liability	(787)	0	0
Other long-term liabilities	3,800	12,937	5,705
Net cash provided by operating activities	101,718	301,465	292,281
Cash flows from investing activities
Purchase consideration paid in advance	(109,938)	0	0
Purchases of investments	(22,952)	0	(1,750)
Payments to Acquire Other Investments	(75,000)	0	0
Maturities of investments	4,680	1,947	3,530
Purchase of royalty rights	(59,500)	(115,000)	(81,100)
Payments for (Proceeds from) Productive Assets	72,582	43,407	102,460
Issuance of notes receivable	(9,010)	(35,235)	(230,000)
Repayment of notes receivable	54,653	25,242	68,800
Acquisition of property and equipment	(25)	(9)	(49)
Net cash provided by/(used in) investing activities	(144,510)	(79,648)	(138,109)
Cash flows from financing activities
Proceeds from term loan	0	100,000	0
Repayments of Notes Payable	(25,000)	(75,000)	(75,000)
Payments for Repurchase of Convertible Preferred Stock	(120,000)	(220,397)	(56,191)
Payment of debt issuance costs	(3,204)	(607)	(9,825)
Net proceeds from the issuance of convertible notes	150,000	0	300,000
Purchased call options cost	(14,400)	0	(30,951)
Proceeds from Noncontrolling Interests	250	0	0
Proceeds from issuance of warrants	0	0	11,427
Cash dividends paid	(16,583)	(98,307)	(96,557)
Net cash used in financing activities	(28,937)	(294,311)	42,903
Net increase/(decrease) in cash and cash equivalents	(71,729)	(72,494)	197,075
Cash and cash equivalents at beginning of the period	218,883	291,377	94,302
Cash and cash equivalents at end of period	147,154	218,883	291,377
Supplemental cash flow information
Cash paid for income taxes	50,000	168,000	189,000
Interest Paid	11,410	16,987	18,439
Supplemental disclosures of non-cash financing activities
Other Significant Noncash Transaction, Value of Consideration Given	0	9,794	$ 171,879
Other Significant Noncash Transaction, Value of Consideration Received	0	$ 6,567
Noncash or Part Noncash Acquisition, Value of Assets Acquired	2,342
Noncash or Part Noncash Acquisition, Other Liabilities Assumed	$ 87,007

Consolidated Statements of Stockholders' Equity (Deficit) Statement - USD ($)
$ in Thousands

Total

Common Stock [Member]

Additional Paid-in Capital [Member]

Retained Earnings (Accumulated Deficit) [Member]

Accumulated Other Comprehensive Income (Loss) [Member]

Series 2012 Notes [Member]

Additional Paid-in Capital [Member]

February 2018 Notes [Member]

Additional Paid-in Capital [Member]

Noncontrolling Interest in Variable Interest Entity

$ 0

Beginning Balance (in shares) at Dec. 31, 2013

139,934,569

Beginning Balance at Dec. 31, 2013

113,489

$ 1,399

$ (233,173)

$ 350,151

$ (4,888)

Issuance of common stock under employee benefit plans (in Shares)

148,882

Issuance of common stock under employee benefit plans

$ 0

$ (2)

(2)

Stock Issued During Period, Shares, Conversion of Convertible Securities

22,103,031

Stock Issued During Period, Value, Conversion of Convertible Securities

$ 221

Adjustments to Additional Paid in Capital, Convertible Debt with Conversion Feature

(221)

Issuance of convertible debt

102,134

$ 102,134

$ 18,689

Purchase of purchased call options, net of tax

20,118

Proceeds from the sale of warrants

11,427

Stock-based compensation expense

1,501

Adjustments to Additional Paid in Capital, Income Tax Deficiency from Share-based Compensation

(111)

Dividends declared, Retained Earnings adjustment

(96,655)

Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Noncontrolling Interest

Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest

330,081

Net Income (Loss) Attributable to Parent

322,244

Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, before Tax

(765)

^[1]

(765)

Changes in unrealized gains and losses on cash flow hedges, net of tax

4,834

Total comprehensive income

330,081

Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax

8,602

^[2]

8,602

Ending Balance (in shares) at Dec. 31, 2014

162,186,482

Ending Balance at Dec. 31, 2014

460,437

$ 1,622

(119,874)

575,740

2,949

Noncontrolling Interest in Variable Interest Entity

$ 0

Issuance of common stock under employee benefit plans (in Shares)

758,533

Issuance of common stock under employee benefit plans

$ 0

$ (8)

(8)

Stock Issued During Period, Shares, Conversion of Convertible Securities

1,341,600

Stock Issued During Period, Value, Conversion of Convertible Securities

$ 13

Adjustments to Additional Paid in Capital, Convertible Debt with Conversion Feature

100

Stock-based compensation expense

2,045

Adjustments to Additional Paid in Capital, Income Tax Deficiency from Share-based Compensation

(233)

Dividends declared, Retained Earnings adjustment

(98,499)

Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Noncontrolling Interest

Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest

332,102

Net Income (Loss) Attributable to Parent

332,795

Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, before Tax

^[1]

Changes in unrealized gains and losses on cash flow hedges, net of tax

4,626

Total comprehensive income

332,102

Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax

(764)

^[2]

(764)

Ending Balance (in shares) at Dec. 31, 2015

164,286,615

Ending Balance at Dec. 31, 2015

695,952

$ 1,643

(117,983)

810,036

2,256

Noncontrolling Interest in Variable Interest Entity

Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest

$ 695,952

Issuance of common stock under employee benefit plans (in Shares)

1,251,832

Issuance of common stock under employee benefit plans

$ 0

(12)

Adjustments to Additional Paid in Capital, Convertible Debt with Conversion Feature

620

Issuance of convertible debt

$ 25,465

Purchase of purchased call options, net of tax

14,400

Adjustments to Additional Paid in Capital, Other

(3,977)

Stock-based compensation expense

3,741

Dividends declared, Retained Earnings adjustment

(16,526)

Proceeds from Divestiture of Interest in Subsidiaries and Affiliates

250

Noncontrolling Interest, Increase from Subsidiary Equity Issuance

4,227

Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Noncontrolling Interest

Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest

61,403

Net Income (Loss) Attributable to Parent

63,606

Net Income (Loss) Attributable to Nonredeemable Noncontrolling Interest

Net Income (Loss), Including Portion Attributable to Nonredeemable Noncontrolling Interest

63,659

Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, before Tax

(435)

^[1]

(435)

Changes in unrealized gains and losses on cash flow hedges, net of tax

Total comprehensive income

61,350

Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax

$ (1,821)

^[2]

(1,821)

Ending Balance (in shares) at Dec. 31, 2016

165,538,447

Ending Balance at Dec. 31, 2016

$ 751,143

$ 1,655

$ (107,628)

$ 857,116

$ 0

Noncontrolling Interest in Variable Interest Entity

4,280

Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest

$ 755,423

[1]	Net of tax of ($234), $38 and ($412) for the years ended December 31, 2016, 2015 and 2014, respectively.
[2]	Net of tax of ($981), ($411) and $4,632 for the years ended December 31, 2016, 2015 and 2014, respectively.

Organization and Business	12 Months Ended
Organization and Business	Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]	1. Organization and Business PDL BioPharma, Inc. and its subsidiaries (collectively, the “Company”) seek to provide a significant return for its shareholders by acquiring and managing a portfolio of companies, products, royalty agreements and debt facilities in the biotech, pharmaceutical and medical device industries. In 2012, the Company began providing alternative sources of capital through royalty monetizations and debt facilities, and in 2016, the Company began acquiring commercial-stage products and launching specialized companies dedicated to the commercialization of these products. To date, the Company has consummated 16 of such transactions. Of these transactions, five have concluded with an average annual internal rate of return of 18.4%: Merus Labs International, Inc., Durata Therapeutics, Inc., AxoGen, Inc., Avinger, Inc. and Paradigm Spine, LLC. The Company has four debt transactions outstanding, representing deployed and committed capital of $269.0 million and $309.0 million, respectively: CareView Communications, Inc., kaléo, Inc., Direct Flow Medical, Inc., and LENSAR, Inc.; it has one hybrid royalty/debt transaction outstanding, representing deployed and committed capital of $44.0 million: Wellstat Diagnostics, LLC; and it has six royalty transactions outstanding representing deployed and committed capital of $496.1 million and $537.1 million, respectively: KYBELLA^®, AcelRx Pharmaceuticals, Inc., ARIAD Pharmaceuticals, Inc., The Regents of the University of Michigan, Viscogliosi Brothers, LLC and Depomed, Inc.. The Company’s equity and loan investments in Noden Pharma DAC and Noden Pharma USA, Inc. (together, “Noden”) represent deployed and committed capital of $110.0 million and $202.0 million, respectively. In connection with the Company’s acquisition of Tekturna through Noden, the Company began operating in two reportable segments: income generating assets and product sales. The Company’s income generating assets segment consists of royalties from issued patents in the United States and elsewhere, covering the humanization of antibodies (the “Queen et al. patents”), notes and other long-term receivables, royalty rights - at fair value and equity investments. The Company’s product sales segment consists of revenue derived from Tekturna^®, Tekturna HCT^®, Rasilez^® and Rasilez HCT^® (collectively, the “Noden Products” or “Tekturna”) sales. Prospectively, the Company expects to focus on the acquisition of additional products and expect to transact fewer royalty transactions and still fewer debt transactions. The Company anticipates that over time more of its revenues will come from its product sales segment and less of its revenues will come from its income generating assets segment.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Consolidated Financial Statements of the Company have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation.

A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or remove the majority of the members of the board of directors; to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.

The Company applies the guidance codified in Accounting Standard Codification (“ASC”) 810, Consolidations, which requires certain variable interest entities to be consolidated by the primary beneficiary of the entity in which it has a controlling financial interest. The Company identifies an entity as a variable interest entity if either: (1) the entity does not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) the entity’s equity investors lack the essential characteristics of a controlling financial interest. The Company performs ongoing qualitative assessments of its variable interest entities to determine whether the Company has a controlling financial interest in any variable interest entity and therefore is the primary beneficiary, and if it has the power to direct activities that impact the activities of the entity.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes to the Consolidated Financial Statements. The accounting estimates that require management’s most significant, difficult and subjective judgments include the valuation of royalty rights - at fair value, the valuation of the revenue and allowance for customer credits, the valuation of inventory, the assessment of recoverability of goodwill and intangible assets and their estimated useful lives, revenue recognition, the valuation and recognition of share-based compensation, the recognition and measurement of current and deferred income tax assets and liabilities, and contingent consideration estimates. Actual results could differ from those estimates.

Segment Reporting

Under ASC 280, Segment Reporting, operating segments are defined as components of an enterprise about which separate financial information is available that is regularly evaluated by the entity’s chief operating decision maker, in deciding how to allocate resources and in assessing performance. The Company has evaluated its operating segments in accordance with ASC 280, and has identified two reportable segments: income generating assets and product sales at December 31, 2016.

Cash Equivalents

The Company considers all highly liquid investments with initial maturities of three months or less at the date of purchase to be cash equivalents. The Company places its cash and cash equivalents with high credit quality financial institutions and, by policy, limit the amount of credit exposure in any one financial instrument.

Accounts Receivable

As of December 31, 2016 and 2015, the Company had no allowance for doubtful accounts. The Company provides an allowance for doubtful accounts based on experience and specifically identified risks. Accounts receivable are carried at fair value and charged off against the allowance for doubtful accounts when the Company determines that recovery is unlikely and the Company cease collection efforts.

Investments

The Company’s investments include available-for-sale investments, equity method investments and cost method investments in certain publicly traded companies and privately-held companies.

All marketable securities are classified as available-for-sale. Available-for-sale securities are carried at fair value, based on quoted market prices and observable inputs, with unrealized gains and losses, net of tax, reported as a separate component of stockholders’ equity. The Company classify marketable securities that are available for use in current operations as current assets in the Consolidated Balance Sheets. Realized gains and losses and declines in value judged to be other than temporary for available-for-sale securities are included in “Interest and other income, net.” The cost of securities sold is based on the specific identification method.

On July 1, 2016, Noden Pharma DAC entered into an asset purchase agreement (“Noden Purchase Agreement”) where by it purchased from Novartis Pharma AG (“Novartis”) the exclusive worldwide rights to manufacture, market, and sell the branded prescription medicine product sold under the name Tekturna^® and Tekturna HCT^® in the United States and Rasilez^® and Rasilez HCT^® in the rest of the world (collectively, the “Noden Products”) and certain related assets and assumed certain related liabilities (the “Noden Transaction”). Upon the consummation of the Noden Transaction, a noncontrolling interest holder acquired a 6% equity interest in Noden. The equity interest of the noncontrolling interest holder is subject to vesting and repurchase rights over a four-year period. At December 31, 2016, 80% of the noncontrolling interest was subject to repurchase. The Company determined that Noden shall be consolidated under the voting interest model as of December 31, 2016 (See Note 19).

Fair Value Measurements

The fair value of the Company’s financial instruments are estimates of the amounts that would be received if the Company were to sell an asset or we paid 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.

Notes Receivable and Other Long-Term Receivables

The Company accounts for its notes receivable at both amortized cost, net of unamortized origination fees, if any, and as dependent on collateral repayment of the loan 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 effective interest method. When and if supplemental payments are received from certain of these notes and other long-term receivables, an adjustment to the estimated effective interest rate is affected prospectively.

The Company evaluates 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, the Company determines it is probable that it 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 the Company expects 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.

The Company records interest on an accrual basis and recognizes it as earned in accordance with the contractual terms of the credit agreement, to the extent that such amounts are expected to be collected. When a note receivable or loan becomes past due, or if management otherwise does not expect that principal, interest, and other obligations due will be collected in full, the Company will generally place the note receivable or loan on non-accrual status and cease recognizing interest income on that note receivable or loan until all principal and interest due has been paid or until such time that the Company believes the borrower has demonstrated the ability to repay its current and future contractual obligations. Any uncollected interest related to prior periods is reversed from income in the period that collection of the interest receivable is determined to be doubtful. However, the Company may make exceptions to this policy if the investment has sufficient collateral value and is in the process of collection.

At December 31, 2016, the Company had four notes receivable investments on non-accrual status with a cumulative investment cost and fair value of approximately $105.3 million and $107.4 million, respectively, compared to three note receivable investments on non-accrual at December 31, 2015 with a cumulative investment cost and fair value of approximately $103.2 million and $109.2 million, respectively. During the years ended December 31, 2016, 2015 and 2014, the Company recognized losses of $51.1 million, $4.0 million and zero, respectively, on extinguishment of notes receivable. For the years ended December 31, 2016, 2015 and 2014, the Company did not recognize any interest for note receivable investments on non-accrual status.

Inventory

Inventory, which consists of work-in-process and finished goods, is stated at the lower of cost or market value. The Company determines cost using the first-in, first-out method. Inventory levels are analyzed periodically and written down to their net realizable value if they have become obsolete, have a cost basis in excess of its expected net realizable value or are in excess of expected requirements. The Company evaluates for potential excess inventory by analyzing current and future product demand relative to the remaining product shelf life. The Company builds demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance and patient usage. The Company classifies inventory as current on the Consolidated Balance Sheets when the Company expects inventory to be consumed for commercial use within the next twelve months.

During the fourth quarter of 2016, we recognized an inventory write-down of $0.3 million for the Noden Products that we would not be able to sell prior to their expiration. There were no inventory write-downs related to excess and obsolete inventory recorded in the years ended December 31, 2015 and 2014.

Intangible Assets

Intangible assets with finite useful lives consist primarily of acquired product rights and are amortized on a straight-line basis over their estimated useful lives, over 10 years. The estimated useful lives associated with finite-lived intangible assets are consistent with the estimated lives of the associated products and may be modified when circumstances warrant. Such assets are reviewed for impairment when events or circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset and its eventual disposition are less than its carrying amount. The amount of any impairment is measured as the difference between the carrying amount and the fair value of the impaired asset.

Goodwill

Goodwill represents the excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed. We have determined that we have a single reporting unit associated with the commercialization of pharmaceutical products. The annual test for goodwill impairment is a two-step process. The first step is a comparison of the fair value of the reporting unit with its carrying amount, including goodwill. If this step indicates impairment, then, in the second step, the loss is measured as the excess of recorded goodwill over its implied fair value. Implied fair value is the excess of the fair value of the reporting unit over the fair value of all identified assets and liabilities. We test goodwill for impairment annually in December and when events or changes in circumstances indicate that the carrying value may not be recoverable. After completing the Company’s impairment review for the reporting unit during the fourth quarter of 2016, the Company concluded that goodwill was impaired. The Company recognized a goodwill impairment loss of $3.7 million as of December 31, 2016. For further information on the Company’s goodwill impairment analysis, refer to Note 10 of the Notes to Consolidated Financial Statements included within Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization were computed using the straight-line method over the following estimated useful lives:



Leasehold improvements		Shorter of asset life or term of lease
Computer and office equipment		3 years
Furniture and fixtures		7 years

Convertible Notes

The Company issued the 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 the Company’s common stock. The Company issued the December 2021 Notes with a settlement feature that allows the Company to settle the notes by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at the Company’s election, although it is the current intention that they will be net-share settled. In accordance with accounting guidance for convertible debt instruments that may be settled in cash or other assets on conversion, the Company 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.

Financing Costs Related to Long-term Debt

Costs associated with obtaining long-term debt are deferred and amortized over the term of the related debt using the effective interest method. Such costs are presented as a direct deduction from the carrying amount of the long-term debt liability, consistent with debt discounts, on the Company’s Consolidated Balance Sheets.

Product Revenue

General

The Company recognizes revenue from the sale of its products when (i) delivery has occurred, (ii) title has transferred, (iii) the selling price is fixed or determinable, (iv) collectability is reasonably assured and the Company has no further performance obligations. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We exercise judgment in determining that collectability is reasonably assured or that services have been delivered in accordance with the arrangement. We assess collectability based primarily on the customer’s payment history and on the creditworthiness of the customer. Revenues from Noden Products sales are recorded net of allowances for customer credits, including estimated chargebacks, rebates, discounts, returns, distribution service fees, patient assistance programs, and government rebates, such as Medicare Part D coverage gap reimbursements in the United States and other deductions and returns in the same period the related sales are recorded. Product shipping and handling costs are included in cost of product revenues.

For the period from July 1, 2016 through October 4, 2016, all of the Noden Products were distributed by Novartis under the terms of the Noden Purchase Agreement while transfer of the marketing right authorizations were pending. The Company recorded revenue under the Novartis transition arrangement on a “net” basis and established a reserve for retroactive adjustment to the profit split with Novartis.

Beginning on October 5, 2016, Noden Pharma USA, Inc. began distributing the Noden Products in the United States while Novartis continues to distribute the Noden Products outside of the United States. We recorded revenue for all fourth quarter of 2016 sales in the United States on a “gross” basis and established a reserve for allowances.

Provisions

Customer Credits: Our customers are offered various forms of consideration, including allowances, service fees and prompt payment discounts. We expect our customers will earn prompt payment discounts and, therefore, we deduct the full amount of these discounts from total product sales when revenues are recognized. Service fees are also deducted from total product sales as they are earned.

Rebates and Discounts: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program in the United States and mandated discounts in the European Union in markets where government-sponsored healthcare systems are the primary payers for healthcare. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements or legal requirements with public sector benefit providers. The accrual for rebates is based on statutory discount rates and expected utilization as well as historical data we have obtained from Novartis. Our estimates for expected utilization of rebates are based on data received from our customers. Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters’ unpaid rebates. If actual future rebates vary from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment.

Chargebacks: Chargebacks are discounts that occur when certain contracted customers, which currently consist primarily of group purchasing organizations, Public Health Service institutions, non-profit clinics, and Federal government entities purchasing via the Federal Supply Schedule, purchase directly from our wholesalers. Contracted customers generally purchase the product at a discounted price. The wholesalers, in turn, charges back to us the difference between the price initially paid by the wholesalers and the discounted price paid by the contracted customers. In addition to actual chargebacks received, we maintain an accrual for chargebacks based on the estimated contractual discounts on the inventory levels on hand in our distribution channel. If actual future chargebacks vary from these estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment.

Medicare Part D Coverage Gap: Medicare Part D prescription drug benefit mandates manufacturers to fund 50% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Our estimates for the expected Medicare Part D coverage gap are based on historical invoices received and in part from data received from our customers. Funding of the coverage gap is generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters. If actual future funding varies from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment.

Co-payment Assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. We accrue a liability for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party administrators.

Returns: Returns are generally estimated and recorded based on historical sales and returns information. Products that exhibit unusual sales or return patterns due to dating, competition or other marketing matters are specifically investigated and analyzed as part of the accounting for sales returns accruals.

Queen et al. Royalty Revenues

Under the Company’s license agreements related to patents covering the humanization of antibodies, which it refers to as the Queen et al. patents, the Company receives royalty payments based upon its licensees’ net sales of covered products. Generally, under these agreements, the Company receives royalty reports from its 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. The Company recognizes royalty revenues when it can reliably estimate such amounts and collectability is reasonably assured. Under this accounting policy, the royalty revenues the Company reports are not based upon estimates, and such royalty revenues are typically reported in the same period in which the Company receives payment from its licensees.

Although the last of the Queen et al. patents expired in December 2014, the Company has received royalties beyond expiration based on the terms of its licenses and its legal settlement. Under the terms of the legal settlement between Genentech, Inc. (“Genentech”) and the Company, the first quarter of 2016 was the last period for which Genentech paid royalties to the Company for Avastin, Herceptin, Xolair, Kadcyla and Perjeta. Other products from the Queen et al. patent licenses, such as Tysabri, entitle the Company to royalties following the expiration of its patents with respect to sales of licensed product manufactured prior to patent expiry in jurisdictions providing patent protection licenses. The amount of royalties the Company is due for products manufactured prior to but sold after patent expiry is uncertain; however, the Company’s revenues from payments made from these Queen et al. patent licenses and settlements materially decreased in the second quarter of 2016.

Royalty Rights - At Fair Value

Currently, the Company accounts for its 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 the Company’s 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.

The changes in the estimated fair value from investments in royalty rights along with cash receipts in each reporting period are presented together on the Company’s Consolidated Statements of Income as a component of revenue under the caption, “Royalty rights - change in fair value.”

Realized gains and losses on Royalty Rights are recognized as they are earned and when collection is reasonably assured. Royalty Rights revenue is recognized over the respective contractual arrangement period. Critical estimates may include product demand and market growth assumptions, inventory target levels, product approval and pricing assumptions. Factors that could cause a change in estimates of future cash flows include a change in estimated market size, a change in pricing strategy or reimbursement coverage, a delay in obtaining regulatory approval, a change in dosage of the product, and a change in the number of treatments. For each arrangement, the Company is entitled to royalty payments based on revenue generated by the net sales of the product.

Foreign Currency Hedging

From time to time, the Company may enter into foreign currency hedges to manage exposures arising in the normal course of business and not for speculative purposes.

The Company hedged certain Euro-denominated currency exposures related to royalties associated with its licensees’ product sales with Euro forward contracts. In general, those contracts are intended to offset the underlying Euro market risk in the Company’s royalty revenues. The last of those contracts expired in the fourth quarter of 2015 and was settled in the first quarter of 2016. The Company designated foreign currency exchange contracts used to hedge royalty revenues based on underlying Euro-denominated licensee product sales as cash flow hedges.

The fair value of the Euro forward contracts was estimated using pricing models with readily observable inputs from actively quoted markets and was disclosed on a gross basis. The aggregate unrealized gains or losses, net of tax, on the effective component of the hedge was 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 these hedge contracts is reported in “Interest and other income, net” in the period the ineffectiveness occurs.

Foreign Currency Translation

The Company uses the U.S. dollar predominately as the functional currency of its foreign subsidiaries. For foreign subsidiaries where the U.S. dollar is the functional currency, gains and losses from remeasurement of foreign currency balances into U.S. dollars are included in the Consolidated Statements of Income. The aggregate net gains (losses) resulting from foreign currency transactions and remeasurement of foreign currency balances into U.S. dollars that were included in the Consolidated Statements of Income was insignificant for the years ended December 31, 2016, 2015 and 2014.

Comprehensive Income (Loss)

Comprehensive income (loss) 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 the Company’s investments in available-for-sale securities, all net of tax, which are excluded from the Company’s net income.

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. We adjust the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. Any interest and penalties on uncertain tax positions are included within the tax provision.

Business Combination

The Company applies ASC 805, Business combinations, pursuant to which the cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of the (i) the total of cost of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of an acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the Consolidated Statements of Income and Comprehensive income.

Lease Accounting and Lease Guarantee

The Company accounts for operating leases by recording rent expense on a straight-line basis over the expected life of the lease, commencing on the date we gain possession of leased property. The Company includes tenant improvement allowances and rent holidays received from landlords and the effect of any rent escalation clauses as adjustments to straight-line rent expense over the expected life of the lease.

Capital leases are reflected as a liability at the inception of the lease based on the present value of the minimum lease payments or, if lower, the fair value of the property. Assets under capital leases are recorded in property and equipment, net on the Company’s Consolidated Balance Sheets and depreciated in a manner similar to other property and equipment.

Upon the Spin-Off, the Company’s facility leases in Redwood City, California were assigned to Facet. In April 2010, Abbott Laboratories acquired Facet and later renamed the entity AbbVie Biotherapeutics, Inc. However, if AbbVie Biotherapeutics, Inc were to default on its lease obligations, the Company has in substance guaranteed the lease payments for this facility. The Company would also be responsible for lease-related payments including utilities, property taxes, and common area maintenance, which may be as much as the actual lease payments. As of December 31, 2016, the total remaining lease payments, which run through December 2021, were $56.4 million. The carrying value of this lease guarantee was $10.7 million as of December 31, 2016 and is reflected in other long-term liabilities in the Company’s Consolidated Balance Sheet (Note 14).

Adopted Accounting Pronouncements

In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-17, Balance Sheet Classification of Deferred Taxes, which amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as non-current on the balance sheet. ASU No. 2015-17 was adopted on a prospective basis by the Company in the first quarter of 2016, thus resulting in the reclassification of $1.0 million of current deferred tax liabilities to non-current on the accompanying consolidated balance sheet. The prior reporting period was not retrospectively adjusted. The adoption of this guidance had no impact on the Company’s results of operations, financial positions or cash flows.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The new standard can be applied either retrospectively to each prior reporting period presented (i.e., full retrospective adoption) or with the cumulative effect of initially applying the update recognized at the date of the initial application (i.e., modified retrospective adoption) along with additional disclosures. This new standard will replace most of the existing revenue recognition guidance in GAAP when it becomes effective. The new standard, as amended, becomes effective for the Company in the first quarter of fiscal year 2018, but allows the Company to adopt the standard one year earlier if it so chooses. The Company currently anticipates adopting this standard using the full retrospective method to restate each prior period presented. The Company is evaluating the timing and the impact of adopting this standard to its Consolidated Financial Statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which seeks to increase transparency and comparability among organizations by, among other things, recognizing lease assets and lease liabilities on the balance sheet for leases classified as operating leases under previous GAAP and disclosing key information about leasing arrangements. ASU No. 2016-02 becomes effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the provisions of ASU No. 2016-02 and assessing the impact, if any, it may have on the Company’s Consolidated Financial Statements.

In March 2016, the FASB issued ASU No. 2016-06, Contingent Put and Call Options in Debt Instruments, which clarifies what steps are required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. ASU 2016-06 is effective for fiscal years beginning after December 15, 2016, including interim periods within those years. The Company do not expect the adoption of this guidance to have a material impact on our financial position, cash flows or results of operations.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, intended to improve the accounting for share-based payment transactions as part of its simplification initiative. The new guidance mainly requires entities to record all excess tax benefits and tax deficiencies as an income tax benefit or expense in the statement of income. The recognition of excess tax benefits and deficiencies and changes to diluted earnings per share are to be applied prospectively while a cumulative-effective adjustment in retained earnings would be made for tax benefits that had not previously been recognized and potential changes to forfeiture recognition. Cash flow presentation changes can be applied prospectively or retrospectively. The ASU is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. Upon adoption, the ASU may result in approximately $7.5 million cumulative-effect adjustment in retained earnings associated with tax benefits that were not previously recognized. The Company is continuing to evaluate the impact of the updated standard on its consolidated results of operations, financial position and cash flows.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The new guidance amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. ASU No. 2016-13 has an effective date of the fiscal years beginning December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating ASU 2016-13 and assessing the impact, if any, it may have to the Company’s consolidated results of operations, financial position and cash flows.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. The new standard provides for specific guidance how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years, and interim periods with those years, beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating ASU 2016-15 and assessing the impact, if any, it may have to the Company’s Consolidated Statement of Cash Flows.

In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which requires companies to account for the income tax effects of intercompany sales and transfers of assets other than inventory in the period in which the transfer occurs. The new standard is effective for public business entities for annual periods beginning after December 15, 2017 (i.e. 2018 for a calendar-year entity). Early adoption is permitted for all entities as of the beginning of an annual period. The guidance is to be applied using a modified retrospective approach with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. We are currently analyzing the impact of ASU No. 2016-16 on the Company’s Consolidated Financial Statements.

In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash, which requires entities to show the changes in total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related captions on the balance sheet. The reconciliation can either be presented either on the face of the statement of cash flows or in the notes to the financial statements. The new standard is effective for public business entities for fiscal years beginning after December 15, 2017 and interim periods therein and is to be applied retrospectively. Early adoption is permitted. The Company is currently analyzing the impact of ASU No. 2016-18 on the Company’s Consolidated Financial Statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations, which requires entities to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The new standard is to be applied prospectively to any transactions occurring within the period of adoption and is effective for public business entities for fiscal years beginning after December 15, 2017. Early adoption is permitted, including annual periods in which the financial statements have not been issued. We elected to early adopt ASU No. 2017-01 for the annual period ending December 31, 2016. The adoption had no impact on the Company’s Consolidated Financial Statements.

Net Income per Share

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Net Income per Share

3. Net Income per Share



	Year Ended December 31,
(In thousands, except per share amounts)	2016		2015		2014
Numerator
Income attributable to the Company’s shareholders used to compute net income per diluted share	$	63,606	$	332,795	$	322,244

Denominator
Total weighted-average shares used to compute net income per basic share	163,805		163,386		158,224
Effect of dilutive stock options	—		16		21
Restricted stock awards	387		152		126
Assumed conversion of Series 2012 Notes	—		—		3,532
Assumed conversion of warrants	—		—		5,510
Assumed conversion of May 2015 Notes	—		—		5,697
Shares used to compute net income per diluted share	164,192		163,554		173,110

Net income per basic share	$	0.39	$	2.04	$	2.04
Net income per diluted share	$	0.39	$	2.03	$	1.86

The Company computes net income per diluted share using the sum of the weighted-average number of common and common equivalent shares outstanding. Common equivalent shares used in the computation of net income per diluted share include shares that may be issued pursuant to outstanding stock options and restricted stock awards, the Series 2012 Notes and the May 2015 Notes, in each case, 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 the 2.875% Convertible Senior Notes due February 15, 2015 (“February 2015 Notes”) was exchanged for the Series 2012 Notes, and in the third quarter of 2013, $1.0 million aggregate principal of the February 2015 Notes was exchanged for the Series 2012 Notes and the February 2015 Notes were retired. In the first quarter of 2014, $131.7 million aggregate principal of the Series 2012 Notes was retired in a privately negotiated exchange and purchase agreement, and in the fourth quarter of 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. In the first quarter of 2015, the Company retired the remaining $22.3 million of aggregate principal of its Series 2012 Notes.

In May 2011, the Company issued the May 2015 Notes, and in January and February 2012, the Company issued the Series 2012 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 shares of the Company’s common stock. The weighted-average share adjustments related to the Series 2012 Notes and May 2015 Notes, as shown in the table above, include the shares issuable in respect of such excess.

In the second quarter of 2015, the Company retired the remaining $155.1 million of aggregate principal of its May 2015 Notes. Concurrently with the retirement of the May 2015 Notes, the Company exercised its purchased call options and received 5.2 million shares of the Company’s common stock from the hedge counterparties, which was the number of shares required to be delivered by the Company to the note holders for the excess conversion value.

May 2015 Notes Purchase Call Option and Warrant Potential Dilution

The Company excluded from its calculation of net income per diluted share zero, three million and 0.0 million shares for the years ended December 31, 2016, 2015 and 2014, for warrants issued in 2011, because the exercise price of the warrants exceeded the volume-weighted average share price (“VWAP”) of the Company’s common stock and conversion of the underlying May 2015 Notes is not assumed, therefore no stock would be issuable upon conversion. The Company’s purchased call options, issued in 2011, will always be anti-dilutive and therefore zero, zero and 26.6 million shares were excluded from the Company’s calculations of net income per diluted share for the years ended December 31, 2016, 2015 and 2014, respectively, because they have no effect on diluted net income per share. For information related to the conversion rates on the Company’s convertible debt, see Note 13.

February 2018 Notes Purchase Call Option and Warrant Potential Dilution

The Company excluded from its calculation of net income per diluted share 12.2 million, 23.8 million and 29.0 million shares for the years ended December 31, 2016, 2015 and 2014, for warrants issued in February 2014, because the exercise price of the warrants exceeded the VWAP of the Company’s common stock and conversion of the underlying February 2018 Notes is not assumed, therefore no stock would be issuable upon conversion; however, these securities could be dilutive in future periods. The purchased call options, issued in February 2014, will always be anti-dilutive; therefore 13.8 million, 26.9 million and 32.7 million shares were excluded from the Company’s calculation of net income per diluted share for the years ended December 31, 2016, 2015 and 2014. For information related to the conversion rates on the Company’s convertible debt, see Note 13.

December 2021 Notes Capped Call Potential Dilution

In November 2016, the Company issued $150.0 million in aggregate principal of 2.75% Convertible Senior Notes due December 1, 2021 (the “December 2021 Notes”), which provide in certain situations for the conversion of the outstanding principal amount of the December 2021 Notes into shares of the Company’s common stock at a predefined conversion rate. See Note 13, “Convertible Notes and Term Loans”, for additional information. In conjunction with the issuance of the December 2021 Notes, the Company entered into capped call transaction, with certain counterparties. The capped call transaction is expected generally to reduce the potential dilution, and/or offset, to an extent, the cash payments the Company may choose to make in excess of the principal amount, upon conversion of the December 2021 Notes. We have excluded the capped call transaction from the diluted EPS computation as such securities would have an antidilutive effect and those securities should be considered separately rather than in the aggregate in determining whether their effect on diluted EPS would be dilutive or antidilutive, see Note 13.

Anti-Dilutive Effect of Stock Options and Restricted Stock Awards

For the years ended December 31, 2016, 2015 and 2014, the Company excluded approximately zero, 41,000 and 35,000 shares underlying outstanding stock options, respectively, calculated on a weighted-average basis, from the Company’s net income per diluted share calculations because their effect was anti-dilutive. For the years ended December 31, 2016, 2015 and 2014, the Company excluded approximately 1,107,000, 450,000, and zero shares, respectively, underlying restricted stock awards, calculated on a weighted-average basis, from the Company’s net income per diluted share calculations because their effect was anti-dilutive.

Fair Value Measurements

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

4. Fair Value Measurements

The fair value of the Company’s financial instruments are estimates of the amounts that would be received if the Company 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 following table presents the fair value of the Company’s financial instruments measured at fair value on a recurring basis by level within the valuation hierarchy:



	December 31, 2016								December 31, 2015
(In thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds	$	4	$	—	$	—	$	4	$	94,801	$	—	$	—	$	94,801
Certificates of deposit	—		75,000		—		75,000		—		—		—		—
Corporate securities	—		—		—		—		—		1,469		—		1,469
Commercial paper	—		19,987		—		19,987		—		—		—		—
Foreign currency hedge contracts	—		—		—		—		—		2,802		—		2,802
Warrants	—		78		—		78		—		984		—		984
Royalty rights - at fair value	—		—		402,318		402,318		—		—		399,204		399,204
Total	$	4	$	95,065	$	402,318	$	497,387	$	94,801	$	5,255	$	399,204	$	499,260

Financial liabilities:
Anniversary payment	$	—	$	—	$	88,001	$	88,001	$	—	$	—	$	—	$	—
Contingent consideration	—		—		42,650		42,650		—		—		—		—
Total	$	—	$	—	$	130,651	$	130,651	$	—	$	—	$	—	$	—

As of December 31, 2016, the Company held $75.0 million in a long-term certificate of deposit, which is designated as cash collateral for the letter of credit issued with respect to the first anniversary payment under the Noden Purchase Agreement described below. There have been no transfers between levels during the years ended December 31, 2016 and 2015. The Company recognizes transfers between levels on the date of the event or change in circumstances that caused the transfer.

Certificates of Deposit

The fair value of the certificates of deposit is determined using quoted market prices for similar instruments and non-binding market prices that are corroborated by observable market data.

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.

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 note receivable investments. The fair value of the warrants is estimated using recently quoted market prices or estimated fair value of the underlying equity security and the Black-Scholes option pricing model.

Royalty Rights - At Fair Value

Depomed Royalty Agreement

On October 18, 2013, the Company entered into the Royalty Purchase and Sale Agreement (the “Depomed Royalty Agreement”) with Depomed, Inc. and Depo DR Sub, LLC (together, “Depomed”), 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 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, Inc. (“Santarus”) (which was subsequently acquired by Salix Pharmaceuticals, Inc. (“Salix”), which itself was acquired by Valeant Pharmaceuticals International, Inc. (“Valeant”) with respect to sales of Glumetza (metformin HCL extended-release tablets) in the United States; (b) from Merck & Co., Inc. with respect to sales of Janumet^® XR (sitagliptin and metformin HCL extended-release tablets); (c) from Janssen Pharmaceutica N.V. with respect to milestones and sales of its recently approved fixed-dose combination of Invokana^® (canagliflozin) and extended-release metformin tablets, marketed as Invokamet XR^®; (d) from Boehringer Ingelheim GmbH 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 GmbH, including its recently approved products, Jentadueto XR^® and Synjardy XR^®; and (e) from LG Life Sciences and Valeant for sales of extended-release metformin tablets in Korea and Canada, respectively.

Under the terms of the Depomed Royalty Agreement, the Company receives 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 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 December 31, 2016 and 2015, 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 financial asset acquired represents a single unit of accounting. The fair value of the financial 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 financial asset is classified as a Level 3 asset within the fair value hierarchy, as the Company’s valuation utilized significant unobservable inputs, including estimates as to the probability and timing of future commercialization for products not yet approved by the U.S. Food and Drug Administration (“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 15% to 25%. Significant judgment is required in selecting appropriate discount rates. At December 31, 2016, 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 2.5%, the fair value of the asset could decrease by $12.5 million or increase by $14.2 million, respectively. A third-party expert was engaged to help management develop its original estimate of the expected future cash flows. The estimated fair value of the asset is subject to variation should those cash flows vary significantly from those estimates. The Company periodically assesses the expected future cash flows and to the extent such payments are greater or less than its initial estimates, or the timing of such payments is materially different than the original estimates, the Company will adjust the estimated fair value of the asset. Should the expected royalties increase or decrease by 2.5%, the fair value of the asset could increase by $4.0 million or decrease by $4.0 million, respectively.

When the Company acquired the Depomed royalty rights, 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 and the practices leading to this excess of supply which were under review by Salix’s audit committee in relation to the related accounting practices. Because of these disclosures and the Company’s lack of direct access to information as to the levels of inventory of Glumetza in the distribution channels, the Company commenced a review of all public statements by Salix, publicly available historical third-party prescription data, analyst reports and other relevant data sources. The Company 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. Salix was acquired by Valeant in early April 2015. In mid-2015, Valeant implemented two price increases on Glumetza. At year-end 2015, a third-party expert was engaged by the Company to assess the impact of the Glumetza price adjustments and near-term market entrance of manufacturer of generic equivalents to Glumetza to the expected future cash flows. Based on the analysis performed, management revised the underlying assumptions used in the discounted cash flow analysis at year-end 2015. In February and August of 2016, a total of three manufacturer of generic equivalents to Glumetza entered the market. At December 31, 2016, management re-evaluated, with assistance of a third-party expert, the erosion of market share data, the gross-to-net revenue adjustment assumptions and Glumetza demand data. These data and assumptions are based on available but limited information. The Company’s expected future cash flows at year-end 2016 have been adjusted based on the demand and supply data of Glumetza.

As of December 31, 2016, the Company’s discounted cash flow analysis reflects its expectations as to the amount and timing of future cash flows up to the valuation date. The Company continues to monitor whether the generic competition further affects sales of Glumetza and thus royalties on such sales paid to the Company. Due to the uncertainty around Valeant’s marketing and pricing strategy, as well as the recent generic competition and limited historical demand data after generic market entrance, the Company may need to further reduce future cash flows in the event of more rapid reduction in market share of Glumetza or a further erosion in net pricing. In January 2016, the Company exercised its audit right under the Depomed Royalty Agreement with respect to the Glumetza royalties. The information initially provided by Valeant to the independent auditors engaged to perform the royalty audit was substantially incomplete, and the Company has since identified the information necessary to complete the audit to Valeant and is awaiting the provision of the necessary and missing information.

On May 31, 2016, the Company obtained a notification indicating that the FDA approved Jentadueto XR for use in patients with Type 2 diabetes. In June 2016, the Company received a $6.0 million FDA approval milestone. The product approval was earlier than initially expected. Based on the FDA approval and expected product launch, the Company adjusted the timing of future cash flows and discount rate used in the discounted cash flow model at June 30, 2016. At December 31, 2016, management re-evaluated, with assistance of a third-party expert, the cash flow assumptions for Jentadueto XR and revised the discounted cash flow model.

On September 21, 2016, the Company obtained a notification indicating that the FDA approved Invokamet XR for use in patients with Type 2 diabetes. The product approval triggered a $5.0 million approval milestone payment to the Company. Based on the FDA approval and expected product launch, the Company adjusted the timing of future cash flows and discount rate used in the discounted cash flow model at December 31, 2016.

On December 13, 2016, the Company obtained a notification indicating that the FDA approved Synjardy XR for use in patients with Type 2 diabetes. The product approval triggered a $6.0 million approval milestone payment to the Company. Based on the FDA approval and expected product launch, the Company adjusted the timing of future cash flows and discount rate used in the discounted cash flow model at December 31, 2016.

As of December 31, 2016, the fair value of the asset acquired as reported in the Company’s Consolidated Balance Sheet was $164.1 million and the maximum loss exposure was $164.1 million.

VB Royalty Agreement

On June 26, 2014, the Company entered into a Royalty Purchase and Sale Agreement (the “VB Royalty Agreement”) with Viscogliosi Brothers, LLC (“VB”), whereby VB conveyed to the Company the right to receive royalties payable on net sales of a spinal implant that has received pre-market approval from the FDA held by VB and commercialized by Paradigm Spine, in exchange for a $15.5 million cash payment, less fees.

The royalty rights acquired includes royalties accruing from and after April 1, 2014. Under the terms of the VB Royalty Agreement, the Company receives 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 2.3 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 chief executive officer of Paradigm Spine is one of the owners of VB. The Paradigm Spine Credit Agreement (as defined in Note 8) and the VB Royalty Agreement were negotiated separately.

The fair value of the royalty right at December 31, 2016, 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 the Company’s 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 was 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 the Company’s 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 December 31, 2016, the fair value of the asset acquired as reported in the Company’s Consolidated Balance Sheet was $15.0 million and the maximum loss exposure was $15.0 million.

U-M Royalty Agreement

On November 6, 2014, the Company acquired a portion of all royalty payments of the Regents of the University of Michigan’s (“U-M”) worldwide royalty interest in Cerdelga (eliglustat) for $65.6 million pursuant to the Royalty Purchase and Sale Agreement with U-M (the “U-M Royalty Agreement”). Under the terms of the U-M Royalty Agreement, the Company will receive 75% of all royalty payments due under U-M’s license agreement with Genzyme Corporation, a Sanofi company (“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 in March 2015. In addition, marketing applications for Cerdelga are under review by other regulatory authorities. While marketing applications have been approved in the European Union and Japan, national pricing and reimbursement decisions are delayed in some countries. At December 31, 2016, a third party expert was engaged by the Company to assess the impact of the delayed pricing and reimbursement decisions to Cerdelga’s expected future cash flows. Based on the analysis performed, management revised the underlying assumptions used in the discounted cash flow analysis at December 31, 2016.

The fair value of the royalty right at December 31, 2016, 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 the Company’s 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 six-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 $2.4 million or increase by $2.6 million, respectively. Should the expected royalties increase or decrease by 2.5%, the fair value of the asset could increase by $0.9 million or decrease by $0.9 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 the Company’s 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 December 31, 2016, the fair value of the asset acquired as reported in the Company’s Consolidated Balance Sheet was $35.4 million and the maximum loss exposure was $35.4 million.

ARIAD Royalty Agreement

On July 28, 2015, the Company entered into the revenue interest assignment agreement (the “ARIAD Royalty Agreement”) with ARIAD Pharmaceuticals, Inc. (“ARIAD”), whereby the Company acquired the rights to receive royalties payable from ARIAD’s net revenues generated by the sale, distribution or other use of Iclusig^® (ponatinib), a cancer medicine for the treatment of adult patients with chronic myeloid leukemia, in exchange for up to $200.0 million in cash payments. The purchase price of $100.0 million was payable in two tranches of $50.0 million each, with the first tranche having been funded on July 28, 2015 and the second tranche having been funded on July 28, 2016. Prior to an amendment as discussed below, the ARIAD Royalty Agreement provided ARIAD with an option to draw up to an additional $100.0 million in up to two draws at any time between the six and 12 months after the closing date. ARIAD may repurchase the royalty rights at any time for a specified amount. Upon the occurrence of certain events, the Company has the right to require ARIAD to repurchase the royalty rights for a specified amount. Under the ARIAD Royalty Agreement, the Company has the right to a make-whole payment from ARIAD if the Company does not receive payments equal to or greater than the amounts funded on or prior to the fifth anniversary of each of the respective fundings. In such case, ARIAD will pay to the Company the difference between the amounts paid to such date by ARIAD (excluding any delinquent fee payments) and the amounts funded by the Company. The Company has elected the fair value option to account for the hybrid instrument in its entirety. Any embedded derivative shall not be separated from the host contract.

Under the terms of the ARIAD Royalty Agreement, the Company receives royalty payments at a royalty rate ranging from 2.5% to 7.5% of Iclusig revenue until the first to occur of (i) repurchase of the royalty rights by ARIAD or (ii) December 31, 2033. The annual royalty payments shall not exceed $20.0 million in any fiscal year for the years ended December 31, 2015 through December 31, 2018. If Iclusig revenue does not meet certain agreed-upon projections on an annual basis, the Company is entitled to certain royalty payments from net revenue of another ARIAD product, brigatinib, up to the amount of the shortfall from the projections for the applicable year.

On May 9, 2016, ARIAD entered into a share purchase agreement with Incyte Corporation (“Incyte”), pursuant to which ARIAD sold to Incyte all of the outstanding shares of ARIAD Pharmaceuticals (Luxembourg) S.a.r.l., which was the parent company of ARIAD’s European subsidiaries responsible for the commercialization of Iclusig in the European Union and certain other countries.

Also on May 9, 2016, the Company and ARIAD amended the ARIAD Royalty Agreement to, among other things, include net sales of Iclusig made by Incyte Corporation (“Incyte”) in the amount payable to the Company after Incyte’s acquisition of ARIAD’s commercialization operations with respect to Iclusig in the European Union and certain other countries. In addition, the Company agreed to restructure future funding under the ARIAD Royalty Agreement such that ARIAD’s option to draw up to an additional $100.0 million between January and July of 2016 was reduced to a maximum amount of up to an additional $40.0 million, which would be funded at ARIAD’s option in July of 2017. The amendment to the ARIAD Royalty Agreement did not affect the Company’s obligation to fund the second tranche of $50.0 million on the first anniversary of the ARIAD Royalty Agreement, which was funded in July 2016.

The Company has a put option based upon certain events, including a change of control at ARIAD, and ARIAD has a call option to repurchase the revenue interest at any time. Both the put and call prices have been pre-determined. In January 2017, Takeda Pharmaceutical Company Limited (“Takeda”) announced that it had entered into a definitive agreement to acquire ARIAD. The acquisition was consummated on February, 16, 2017 and the Company exercised its put option on the same day, which will result in a payment to the Company of a 1.2x multiple of the $100.0 million funded by the Company under the Royalty Agreement, less royalty payments already received by the Company. The Company received $9.3 million of royalty payments through December 31, 2016.

The asset acquired pursuant to the ARIAD Royalty Agreement represents a single unit of accounting. The fair value of the royalty right at December 31, 2016, 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 the Company’s 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 six-year period. The discount rate utilized was approximately 10.0%. 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 $7.3 million or increase by $8.2 million, respectively. Should the expected royalties increase or decrease by 2.5%, the fair value of the asset could increase by $2.5 million or decrease by $2.5 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 the Company’s 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 December 31, 2016, the fair value of the asset acquired as reported in the Company’s Consolidated Balance Sheet was $108.6 million and the maximum loss exposure was $108.6 million.

AcelRx Royalty Agreement

On September 18, 2015, the Company entered into a royalty interest assignment agreement (the “AcelRx Royalty Agreement”) with ARPI LLC, a wholly owned subsidiary of AcelRx Pharmaceuticals, Inc. (“AcelRx”), whereby the Company acquired the rights to receive a portion of the royalties and certain milestone payments on sales of Zalviso^® (sufentanil sublingual tablet system) in the European Union, Switzerland and Australia by AcelRx’s commercial partner, Grünenthal, in exchange for a $65.0 million cash payment. Under the terms of the AcelRx Royalty Agreement, the Company will receive 75% of all royalty payments and 80% of the first four commercial milestone payments due under AcelRx’s license agreement with Grünenthal until the earlier to occur of (i) receipt by the Company of payments equal to three times the cash payments made to AcelRx and (ii) the expiration of the licensed patents. We believe that the applicable patents run through January 2032. Zalviso received marketing approval by the European Commission in September 2015. Grünenthal launched Zalviso in the second quarter of 2016 and the Company started to receive royalties in the third quarter of 2016.

As of December 31, 2016 and 2015, the Company determined that its royalty rights under the AcelRx Royalty Agreement represented a variable interest in a variable interest entity. However, the Company does not have the power to direct the activities of ARPI LLC that most significantly impact ARPI LLC’s economic performance and is not the primary beneficiary of ARPI LLC; therefore, ARPI LLC is not subject to consolidation by the Company.

The fair value of the royalty right at December 31, 2016, 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 the Company’s 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 fourteen-year period. The discount rate utilized was approximately 13.4%. 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 $10.2 million or increase by $12.8 million, respectively. Should the expected royalties increase or decrease by 2.5%, the fair value of the asset could increase by $1.7 million or decrease by $1.7 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 the Company’s estimates. At each reporting period, an evaluation of those estimates, discount rates utilized and general market conditions affecting fair market value is performed in each reporting period.

As of December 31, 2016, the fair value of the asset acquired as reported in the Company’s Consolidated Balance Sheet was $67.5 million and the maximum loss exposure was $67.5 million.

Dr. Stephen Hoffman is the President of 10x Capital, Inc., a third-party consultant to the Company, and is also a member of the board of directors of AcelRx. Dr. Hoffman recused himself from the AcelRx board of directors with respect to the entirety of its discussions and considerations of the transaction. Dr. Hoffman was compensated for his contribution to consummate this transaction by the Company as part of his consulting agreement with the Company. The Company concluded Dr. Hoffman is not considered a related party in accordance with FASB ASC 850, Related Party Disclosures and SEC Regulation S-X, Related Party Transactions Which Affect the Financial Statements.

Avinger Credit and Royalty Agreement

On April 18, 2013, the Company entered into the Credit Agreement (the “Avinger Credit and Royalty Agreement”) with Avinger, Inc. (“Avinger”), under which the Company made available to Avinger up to $40.0 million (of which only $20.0 million was funded) to be used by Avinger in connection with the commercialization of its lumivascular catheter devices and the development of Avinger’s lumivascular atherectomy device. On September 22, 2015, Avinger elected to prepay the note receivable in whole (including interest and a prepayment fee) for a payment of $21.4 million in cash.

Under the terms of the Avinger Credit and Royalty Agreement, the Company was entitled to receive royalties at a rate of 1.8% on Avinger’s net revenues until the note receivable was repaid by Avinger. Upon the repayment of the note receivable by Avinger, which occurred on September 22, 2015, the royalty rate was reduced to 0.9% subject to certain minimum payments from the prepayment date until April 2018. The Company has accounted for the royalty rights in accordance with the fair value option.

The fair value of the royalty right at December 31, 2016, 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 the Company’s 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 one-year period. The discount rate utilized was approximately 15.0%. Significant judgment is required in selecting the appropriate discount rate. Should this discount rate increase or decrease by 5%, the fair value of this asset could decrease by $56,000 or increase by $61,000, respectively. Should the expected royalties increase or decrease by 5%, the fair value of the asset could increase by $82,000 or decrease by $82,000, respectively. Management considered the contractual minimum payments when developing its estimate of the expected future cash flows. The fair value of the asset is subject to variation should those cash flows vary significantly from the Company’s 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 December 31, 2016, the fair value of the royalty asset as reported in the Company’s Consolidated Balance Sheet was $1.6 million and the maximum loss exposure was $1.6 million.

Kybella Royalty Agreement

On July 8, 2016, the Company entered into a royalty purchase and sales agreement with an individual, whereby the Company acquired that individual’s rights to receive certain royalties on sales of KYBELLA^® by Allergan, in exchange for a $9.5 million cash payment and up to $1.0 million in future milestone payments based upon product sales targets. The Company started to receive royalty payments during the third quarter of 2016.

The fair value of the royalty right at December 31, 2016, 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 the Company’s 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 a licensed product over a nine-year period. The discount rate utilized was approximately 14.4%. 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 $1.1 million or increase by $1.2 million, respectively. Should the expected royalties increase or decrease by 2.5%, the fair value of the asset could increase by $253,000 or decrease by $253,000, 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 the Company’s estimates. At each reporting period, an evaluation of those estimates, discount rates utilized and general market conditions affecting fair market value is performed in each reporting period.

As of December 31, 2016, the fair value of the asset acquired as reported in the Company’s Consolidated Balance Sheets was $10.1 million and the maximum loss exposure was $10.1 million.

The following tables summarize the changes in Level 3 assets and the gains and losses included in earnings for the year ended December 31, 2016:



Fair Value Measurements Using Significant Unobservable Inputs (Level 3) - Royalty Right Assets

(in thousands)				Royalty Rights - At Fair Value
Fair value as of December 31, 2015							$	399,204

	Fair value of financial instruments purchased						59,500
	Total net change in fair value for the period
		Change in fair value of royalty rights - at fair value		$	16,196
		Proceeds from royalty rights - at fair value		$	(72,582	)
			Total net change in fair value for the period				(56,386		)

Fair value as of December 31, 2016							$	402,318



Fair Value Measurements Using Significant Unobservable Inputs (Level 3) - Royalty Rights Assets

	Fair Value as of		New Royalty		Royalty Rights -			Fair Value as of
(in thousands)	December 31, 2015		Assets		Change in Fair Value			December 31, 2016
Depomed	$	191,865	$	—	$	(27,795	)	$	164,070
VB	17,133		—		(2,136		)	14,997
U-M	70,186		—		(34,800		)	35,386
ARIAD	50,041		50,000		8,590			108,631
AcelRx	67,437		—		46			67,483
Avinger	2,542		—		(904		)	1,638
KYBELLA	—		9,500		613			10,113
	$	399,204	$	59,500	$	(56,386	)	$	402,318



Fair Value Measurements Using Significant Unobservable Inputs (Level 3) - Other Assets

(in thousands)		Preferred Stock Warrants
Fair value as of December 31, 2015		$	—

	Fair value of financial instruments purchased	2,327
	Total net change in fair value for the period	(102		)
	Write off of financial instruments	(2,225		)

Fair value as of December 31, 2016		$	—



Fair Value Measurements Using Significant Unobservable Inputs (Level 3) - Liabilities

(in thousands)		Anniversary Payment			Contingent Consideration
Fair value as of December 31, 2015		$	—		$	—

	Fair value of financial instruments purchased	(87,007		)	(47,360		)
	Total net change in fair value for the period	(994		)	4,710

Fair value as of December 31, 2016		$	(88,001	)	$	(42,650	)

The fair value of the contingent consideration was determined using an income approach derived from the Noden Products revenue estimates and a probability assessment with respect to the likelihood of achieving (a) the level of net sales or (b) generic product launch that would trigger the milestone payments. The key assumptions in determining the fair value are the discount rate and the probability assigned to the potential milestones being achieved. The fair value of the contingent consideration is remeasured each reporting period, with changes in fair value recorded in the Consolidated Statements of Income. The change in fair value of the contingent consideration during the year ending December 31, 2016 is due to (i) the reduction in cash flow projections and (ii) the passage of time. There have been no other significant changes to date in the key assumptions used in the fair value calculation at the date of acquisition.

Gains and losses from changes in Level 3 assets included in earnings for each period are presented in “Royalty rights - change in fair value” and gains and losses from changes in Level 3 liabilities included in earnings for each period are presented in “Change in fair value of anniversary payment and contingent consideration” as follows:



	Year Ended December 31,
(in thousands)	2016		2015

Total change in fair value for the period included in earnings for royalty right assets held at the end of the reporting period	$	16,196	$	68,367

Total change in fair value for the period included in earnings for liabilities held at the end of the reporting period	$	3,716	$	—

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



	December 31, 2016						December 31, 2015
	Carrying Value		Level 2		Level 3		Carrying Value		Level 2		Level 3
(In thousands)
Assets:
Wellstat Diagnostics note receivable	$	50,191	$	—	$	52,260	$	50,191	$	—	$	55,970
Hyperion note receivable	1,200		—		1,200		1,200		—		1,200
LENSAR note receivable	43,909		—		43,900		42,271		—		42,618
Direct Flow Medical note receivable	10,000		—		10,000		51,852		—		51,992
Paradigm Spine note receivable	—		—		—		53,973		—		54,250
kaléo note receivable	146,685		—		142,539		146,778		—		146,789
CareView note receivable	18,965		—		19,200		18,640		—		19,495
Total	$	270,950	$	—	$	269,099	$	364,905	$	—	$	372,314
Liabilities:
February 2018 Notes	$	121,595	$	123,918	$	—	$	228,862	$	197,946	$	—
December 2021 Notes	110,848		122,063		—		—		—		—
Term loan	—		—		—		24,966		—		25,000
Total	$	232,443	$	245,981	$	—	$	253,828	$	197,946	$	25,000

As of December 31, 2016 and 2015, the estimated fair values of the Paradigm Spine note receivable, kaléo note receivable, Hyperion note receivable, Avinger note receivable, LENSAR note receivable, CareView 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 the Company engages a third-party valuation expert to assist in evaluating its investments and the related inputs needed to estimate the fair value of certain investments. The Company determined its notes receivable assets are Level 3 assets as the Company’s 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, the Company 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 Senior Secured Note receivable among the Company and the holders of the equity interests in Wellstat Diagnostics, as amended, and Credit Agreement between Wellstat Diagnostics and the Company, dated November 2, 2012, as amended and restated (the “Wellstat Diagnostics Note Receivable and Credit Agreement”), is secured by substantially all assets and equity interests in Wellstat Diagnostics. In addition, the note is subject to a guaranty from the Wellstat Diagnostics Guarantors. The estimated fair value of the collateral assets was determined by using an asset approach and discounted cash flow model related to the underlying collateral and was adjusted to consider estimated costs to sell the assets.

On December 31, 2015, the carrying values of several of the Company’s notes receivable differed from their estimated fair value. This is the result of discount rates used when performing a discounted cash flow for fair value valuation purposes. The Company determined these notes receivable to be Level 3 assets, as its valuations utilized significant unobservable inputs, estimates of future revenues, expectations about settlement and required yield. To provide support for the fair value measurements, the Company 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 the Company’s convertible notes were determined using quoted market pricing or dealer quotes.

The following table represents significant unobservable inputs used in determining the estimated fair value of impaired notes receivable investments:



Asset	Valuation Technique	Unobservable Input	December 31, 2016	December 31, 2015

Wellstat Diagnostics
Intellectual Property	Income Approach
		Discount rate	13%	13%
		Royalty amount	$55-74 million	$54-74 million
Real Estate Property	Market Approach
		Annual appreciation rate	4%	4%
		Estimated realtor fee	6%	6%
		Estimated disposal date	12/31/2017	12/31/2017
Direct Flow Medical
All Assets	Income Approach Market Approach
		Discount rate	27%	27%
		Implied revenue multiple	6.9	6.9
		Estimated disposal date	12/31/2017	-
LENSAR
All Assets	Income Approach
		Discount rate	25%	15.75%
		Implied revenue multiple	2.5	-

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

Cash and Cash Equivalents [Abstract]

Cash Equivalents and Investments

12 Months Ended

Dec. 31, 2016

Cash Equivalents and Investments

5. Cash, Cash Equivalents and Investments

As of December 31, 2016 and 2015, the Company had invested its excess cash balances primarily in money market funds, and a corporate equity security. The Company’s 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, the Company has not experienced credit losses on investments in these instruments, and it does not require collateral for its investment activities.

The following tables summarize the Company’s cash and available-for-sale securities’ amortized cost, gross unrealized

gains, gross unrealized losses, and fair value by significant investment category reported as cash and cash equivalents,

or short-term investments as of December 31, 2016 and 2015:



Summary of Cash and Available-For-Sale Securities	Adjusted Cost		Unrealized Gains		Fair Value		Cash and Cash Equivalents		Short-Term Investments
(In thousands)
December 31, 2016
Cash	$	147,150	$	—	$	147,150	$	147,150	$	—
Money market funds	4		—		4		4		—
Commercial paper	19,987		—		19,987		—		19,987
Total	$	167,141	$	—	$	167,141	$	147,154	$	19,987

December 31, 2015
Cash	$	124,082	$	—	$	124,082	$	124,082	$	—
Money market funds	94,801		—		94,801		94,801		—
Corporate securities	799		670		1,469		—		1,469
Total	$	219,682	$	670	$	220,352	$	218,883	$	1,469

We recognized approximately $882,000 and $997,000, respectively, of gains on sales of available-for-sale securities in the years ended December 31, 2016 and 2015.

The unrealized gain on investments included in “Other comprehensive income (loss), net of tax,” was approximately zero and $435,000 as of December 31, 2016 and 2015, respectively.

Foreign Currency Hedging

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Foreign Currency Hedging

6. Foreign Currency Hedging

The Company designates the foreign currency exchange contracts used to hedge its royalty revenues based on underlying Euro-denominated sales as cash flow hedges. Euro forward contracts are presented on a net basis on the Company’s Consolidated Balance Sheets as it has entered into a netting arrangement with the counterparty. As of December 31, 2015, all outstanding Euro forward contracts were classified as cash flow hedges. There were no Euro forward contracts outstanding as of December 31, 2016.

The notional amounts, Euro exchange rates, fair values of the Company’s Euro forward contracts designated as cash flow hedges were as follows:

Euro Forward Contracts

December 31, 2016

December 31, 2015

(In thousands)

Currency

Settlement Price

($ per Euro)

Type

Notional Amount

Fair Value

Notional Amount

Fair Value

Euro

1.260

Sell Euro

—

16,500

2,802

The location and fair values of the Company’s Euro forward contracts in the Company’s Consolidated Balance Sheets were as follows:



		December 31,
Cash Flow Hedge	Location	2016		2015
(In thousands)
Euro forward contracts	Prepaid and other current assets	$	—	$	2,802

The effect of the Company’s derivative instruments in its Consolidated Statements of Income and its Consolidated Statements of Comprehensive Income were as follows:



	Year Ended December 31,
	2016		2015		2014
(In thousands)
Net gain (loss) recognized in OCI, net of tax ⁽¹⁾	$	—	$	4,626	$	4,834
Gain (loss) reclassified from accumulated OCI into “Queen et al. royalty revenue,” net of tax ⁽²⁾	$	1,821	$	5,390	$	(3,768	)
Net gain (loss) recognized in “Interest and other income, net” -- cash flow hedges ⁽³⁾	$	—	$	—	$	5

_________________________

(1) Net change in the fair value of the effective portion of cash flow hedges classified in OCI

(2) Effective portion classified as royalty revenue

(3) Ineffectiveness from excess hedge was approximately zero, zero and ($5) for the years ended December 31, 2016, 2015 and 2014, respectively.

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

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Notes Receivable and Other Long-term Receivables	12 Months Ended
Notes Receivable and Other Long-term Receivables	Dec. 31, 2016
Receivables [Abstract]
Notes and Other Long-term Receivables	Notes and Other Long-Term Receivables Notes 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, LLC a/k/a Defined Diagnostics, LLC (“Wellstat Diagnostics”). In addition to bearing interest at 10% per annum, the note receivable gave the Company certain rights to negotiate for certain future financing transactions. In August 2012, the Company 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 agreement entered into with the Company on the same date, as described below. 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, the Company 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. The Company 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, the Company exercised one of its available remedies and transferred approximately $8.1 million of available cash from a bank account of Wellstat Diagnostics to the Company and applied the funds to amounts due under the credit agreement. On February 28, 2013, the parties entered into a forbearance agreement whereby the Company 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. The Company 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 herein, 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, the Company 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 2014, the Company received information from Wellstat Diagnostics showing that it was generally unable to pay its debts as they became due, constituting 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 a notice of default (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 a notice (the “Wellstat Diagnostics Guarantor Notice”) to each of Samuel J. Wohlstadter, Nadine H. Wohlstadter, Duck Farm, Inc., Hebron Valley Farms, Inc., HVF, Inc., Hyperion Catalysis EU Limited, Hyperion, NHW, LLC, Wellstat AVT Investment, LLC, Wellstat Biocatalysis, LLC, Wellstat Biologics Corporation, Wellstat Diagnostics, Wellstat Immunotherapeutics, LLC, Wellstat Management Company, LLC, Wellstat Opthalmics Corporation, Wellstat Therapeutics Corporation, Wellstat Therapeutics EU Limited, Wellstat Vaccines, LLC and SJW Properties, Inc., the guarantors of Wellstat Diagnostics’ obligations to the Company (collectively, the “Wellstat Diagnostics Guarantors”) under the credit agreement. 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 August 21, 2014, the Company entered into the second amendment to the amended and restated credit agreement with Wellstat Diagnostics, which amendment provided for the Company to make a discretionary advance to Wellstat Diagnostics. On September 24, 2014, the Company filed an ex-parte petition for appointment of receiver with the Circuit Court of Montgomery County, Maryland (“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. 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 was made in the third quarter of 2015. The Company submitted a credit bid for the Wellstat Diagnostic assets at a value corresponding to some portion of the outstanding amount due under the amended and restated credit agreement which is subject to court approval. A hearing was scheduled in the Maryland Circuit Court for April 13, 2016 to hear the Receiver’s motion to approve the credit bid sale to the Company. However, on April 12, 2016, Wellstat Diagnostics changed its name to Defined Diagnostics, LLC and filed for bankruptcy under Chapter 11 in the United States Bankruptcy Court in the Southern District of New York. The filing of the bankruptcy case stays the proceedings in the Maryland Circuit Court pursuant to the automatic stay provisions of the Bankruptcy Code. On June 15, 2016, in response to a Motion to Dismiss filed by the Company alleging, among other things, that the New York Bankruptcy Court is not a proper venue for Defined Diagnostics to file for bankruptcy under Chapter 11, the New York Bankruptcy Court dismissed and transferred the action to the United States Bankruptcy Court in Delaware. On August 2, 2016 the Delaware Bankruptcy Court announced its decision to grant the Company’s motion to dismiss the chapter 11 petition with prejudice as a bad faith filing, which resulted in a lifting of the stay on the receivership sale in the Maryland Circuit Court. A hearing has been scheduled for December 22, 2016, in front of the Maryland Circuit Court related to the Company’s credit bid for Wellstat Diagnostics’ assets. On September 4, 2015, the Company filed in the Supreme Court of New York a motion for summary judgment in lieu of complaint which requested that the court enter judgment against certain of the Wellstat Diagnostics Guarantors for the total amount due on the Wellstat Diagnostics debt, plus all costs and expenses including lawyers’ fees incurred by the Company in enforcement of the related guarantees. On September 23, 2015, the Company filed in the same court an ex parte application for a temporary restraining order and order of attachment of the Wellstat Diagnostics Guarantor defendants’ assets. At a hearing on September 24, 2015, regarding the Company’s request for a temporary restraining order, the court ordered that the Company’s request for attachment and for summary judgment would be heard at a hearing on November 5, 2015. Although the court denied the Company’s request for a temporary restraining order at the hearing on September 24, 2015, it ordered that assets of the Wellstat Diagnostics Guarantor defendants should be held in status quo ante and only used in the normal course of business pending the outcome of the matters under consideration at the hearing. On July 29, 2016, the Supreme Court of New York issued its Memorandum of Decision granting the Company’s motion for summary judgment and denying the Wellstat Diagnostics Guarantors’ cross-motion for summary judgment. The Supreme Court of New York held that the Wellstat Diagnostics Guarantor defendants are liable for all “Obligations” owed by Wellstat Diagnostics to the Company. It did not set a specific dollar amount due, but ordered that a judicial hearing officer or special referee be designated to determine the amount of the Obligations owing, and awarded the Company its attorneys’ fees and costs in an amount to be determined. On July 29, 2016, the Wellstat Diagnostics Guarantor defendants filed a notice of appeal from the Memorandum of Decision to the Appellate Division of the Supreme Court of New York. On February 14, 2017, the Appellate Division of the Supreme Court of New York reversed on procedural grounds the portion of the Memorandum of Decision granting the Company summary judgment in lieu of complaint, but affirmed the portion of the Memorandum of Decision denying the Wellstat Diagnostics Guarantor defendants’ motion for summary judgment in which they sought a determination that the guarantees had been released. As a result, the litigation has been remanded to the Supreme Court of New York to proceed on the Company’s claims as a plenary action. On September 1, 2016, the Company filed a motion for relief pursuant to New York law (i) restraining the Wellstat Diagnostics Guarantor defendants from making any sale, assignment, transfer or interference in any of their property, or from paying over or otherwise disposing of any debt and (ii) authorizing the Company to examine the assets of each of the Wellstat Diagnostics Guarantor defendants. On October 5, 2016, the Wellstat Diagnostics Guarantor defendants filed a motion for leave of the court to assert counterclaims against the Company, and certain officers and consultants of the Company, for (i) breach of fiduciary duty, (ii) intentional interference with prospective economic advantage, (iii) breach of the duty of good faith and fair dealing and negligent misrepresentation. A hearing date on the motion to assert counterclaims has yet to be set. On October 14, 2016, the Company sent a notice of default and reference to foreclosure proceedings to certain of the Wellstat Diagnostics Guarantors which are not defendants in the New York action, but which are owners of real estate assets over which a deed of trust in favor of the Company securing the guarantee of the loan to Wellstat Diagnostics had been executed. On October 22, 2015, certain of the Wellstat Diagnostics Guarantors filed a complaint against the Company in the Supreme Court of New York seeking a declaratory judgment that certain contractual arrangements entered into between the parties subsequent to Wellstat Diagnostics’ default, and which relate to a split of proceeds in the event that the Wellstat Diagnostics Guarantors voluntarily monetize any assets that are the Company’s collateral, is of no force or effect. Through the period ended December 31, 2016, the Company has advanced to Wellstat Diagnostics $18.4 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, the Company determined the loan to be impaired and it ceased to accrue interest revenue. At that time and as of December 31, 2016, 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. The Company continues to closely monitor the timing and expected recovery of amounts due, including litigation and other matters related to Wellstat Diagnostics Guarantors’ assets. There can be no assurance that an allowance on the carrying value of the notes receivable investment will not be necessary in a future period depending on future developments. Hyperion Agreement On January 27, 2012, the Company and Hyperion Catalysis International, Inc. (“Hyperion”) (which is also a Wellstat Diagnostics Guarantor) entered into an agreement whereby Hyperion sold to the Company 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 the Company in exchange for the lump sum payment to Hyperion of $2.3 million. In exchange for the lump sum payment, the Company were to receive two equal payments of $1.2 million on each of March 5, 2013 and 2014. The first payment of $1.2 million was paid on March 5, 2013, but Hyperion has not made the second payment that was due on March 5, 2014. The Company completed an impairment analysis as of September 30, 2016. Effective with this date and as a result of the event of default, the Company ceased to accrue interest revenue. As of December 31, 2016, 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. AxoGen Note Receivable and AxoGen Royalty Agreement In October 2012, the Company entered into the Revenue Interests Purchase Agreement (the “AxoGen Royalty Agreement”) with AxoGen, Inc. (“AxoGen”), providing for the payment of specified royalties to the Company 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 the Company 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 began in the fourth quarter of 2014, and gave the Company the right to require AxoGen to repurchase the royalties under the AxoGen Royalty Agreement at the end of the fourth anniversary of the agreement. AxoGen was granted certain rights to call the contract in years five through eight. The total consideration the Company 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, the Company 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, the Company 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. At the same time, 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 were classified as available-for-sale securities and recorded as short-term investments on the Consolidated Balance Sheets. In the third and fourth quarters of 2015, the Company sold 200,000 and 149,650 shares, respectively, at a price range between $5.46 and $5.69 per share, resulting in a gain totaling approximately $1.9 million. In the first and second quarters of 2016, the Company sold 50,000 and 243,732 shares, respectively, at a price range between $5.44 and $6.10 per share, resulting in a gain totaling approximately $882,000. As of December 31, 2016, the Company no longer owns shares of AxoGen. Avinger Credit and Royalty Agreement Under the terms of the Avinger Credit and Royalty Agreement, the Company receives a low, single-digit royalty on Avinger’s net revenues until April 2018. Commencing in October 2015, after Avinger repaid $21.4 million pursuant to its note receivable prior to its maturity date, the royalty on Avinger’s net revenues reduced by 50%, subject to certain minimum payments from the prepayment date until April 2018. The Company has accounted for the royalty rights in accordance with the fair value option. For a further discussion of the Avinger Credit and Royalty Agreement, see Note 4. LENSAR Credit Agreement On October 1, 2013, the Company entered into a credit agreement with LENSAR, Inc. (“LENSAR”), pursuant to which the Company 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 remaining $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 bore interest at the rate of 15.5% per annum, payable quarterly in arrears. On May 12, 2015, the Company entered into a forbearance agreement with LENSAR, pursuant to which the Company 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, the Company agreed to provide LENSAR with up to an aggregate of $8.5 million in weekly increments through the period ended September 30, 2015 plus employee retention amounts of approximately $0.5 million in the form of additional loans, subject to LENSAR meeting certain milestones related to LENSAR obtaining additional capital to fund the business or sell the business and repay outstanding amounts under the credit 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. On September 30, 2015, the Company agreed to extend the forbearance agreement until October 9, 2015 and provide for up to an additional $0.8 million in funding while LENSAR negotiated a potential sale of its assets. On October 9, 2015, the forbearance agreement expired, but the Company agreed to fund LENSAR’s operations while LENSAR continued to negotiate a potential sale of its assets. On November 15, 2015, LENSAR, LLC (“LENSAR/Alphaeon”), a wholly owned subsidiary of Alphaeon Corporation (“Alphaeon”), and LENSAR entered into the Asset Purchase Agreement whereby LENSAR/Alphaeon agreed to acquire certain assets of LENSAR and assumed certain liabilities of LENSAR. The acquisition was consummated on December 15, 2015. In connection with the closing of the acquisition, LENSAR/Alphaeon entered into an amended and restated credit agreement with the Company, assuming $42.0 million in loans as part of the borrowings under the Company’s prior credit agreement with LENSAR. In addition, Alphaeon issued 1.7 million shares of its Class A common stock to the Company. The Company has estimated a fair value of $3.84 per share for the 1.7 million shares of Alphaeon Class A common stock received in connection with the transactions and recognized this investment as a cost-method investment of $6.6 million included in other long-term asset. The Alphaeon Class A common stock is subject to other-than-temporary impairment assessments in future periods. There is no other-than-temporary impairment charge incurred as of December 31, 2016. In December 2016, LENSAR, re-acquired the assets from LENSAR/Alphaeon and the Company entered into an amended and restated credit agreement with LENSAR whereby LENSAR assumed all obligations outstanding under the credit agreement with LENSAR/Alphaeon. Also in December, LENSAR filed for a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code (“Chapter 11 case”) with the support of the Company. In January 2017, the Company agreed to provide debtor-in-possession financing of up to $2.8 million to LENSAR so that it can continue to operate its business during the remainder of the bankruptcy proceeding. LENSAR has filed a Chapter 11 plan of reorganization with the Company’s support under which, subject to bankruptcy court approval, it is expected that LENSAR will issue equity securities to the Company in exchange for a portion of the Company’s claims in the Chapter 11 case and will become an operating subsidiary of the Company. The Company completed an impairment analysis as of December 31, 2016. Effective with this date and as a result of the event of default, we determined the loan to be impaired and we ceased to accrue interest revenue. As of December 31, 2016, the estimated fair value of the collateral would be sufficient to recover the carrying value. There can be no assurance that this will be true, nor can there be any assurance of realizing value from such collateral. Direct Flow Medical Credit Agreement On November 5, 2013, the Company entered into a credit agreement with Direct Flow Medical, Inc. (“Direct Flow Medical”) under which the Company 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 with 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, the Company 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 the Company 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 this second tranche, the interest rate applicable to all loans under the credit agreement was decreased to 13.5% per annum, payable quarterly in arrears. Under the terms of the credit agreement, Direct Flow Medical’s obligation to repay loan principal commenced on the twelfth interest payment date, September 30, 2016. The principal amount outstanding at commencement of repayment is required to be repaid in equal installments until final maturity of the loans. The loans 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. On December 21, 2015, Direct Flow Medical and the Company entered into a waiver to the credit agreement in anticipation of Direct Flow Medical being unable to comply with the liquidity covenant and make interest payments due under the credit agreement. On January 14, 2016, both parties agreed to provide Direct Flow Medical with an extension to waive the liquidity covenant and delay the timing of the interest payments through the period ending September 30, 2016 while Direct Flow Medical sought additional financing to operate its business. On January 28, 2016, the Company funded an additional $5.0 million to Direct Flow Medical in the form of a short-term secured promissory note. On February 26, 2016, the Company and Direct Flow Medical entered into the fourth amendment to the credit agreement that, among other things, (i) converted the $5.0 million short-term secured promissory note into a loan under the credit agreement with substantially the same interest and payment terms as the existing loans, (ii) added a conversion feature whereby the $5.0 million loan would convert into equity of Direct Flow Medical upon the occurrence of certain events and (iii) provided for a second $5.0 million convertible loan tranche commitment, to be funded at the option of the Company. The commitment for the second tranche was not funded and has since expired. In addition, (i) the Company agreed to waive the liquidity covenant and delay the timing of the unpaid interest payments until September 30, 2016 and (ii) Direct Flow Medical agreed to issue to the Company a specified amount of warrants to purchase shares of convertible preferred stock on the first day of each month for the duration of the waiver period at an exercise price of $0.01 per share. On July 15, 2016, the Company and Direct Flow Medical entered into the fifth amendment and limited waiver to the credit agreement. The Company funded an additional $1.5 million to Direct Flow Medical in the form of a note with substantially the same interest and payment terms as the existing loans and a conversion feature whereby the $1.5 million loan would convert into equity of Direct Flow Medical upon the occurrence of certain events. In addition, Direct Flow Medical agreed to issue to the Company warrants to purchase shares of convertible preferred stock at an exercise price of $0.01 per share. On September 12, 2016, the Company and Direct Flow Medical entered into the sixth amendment and limited waiver to the credit agreement under which the Company funded an additional $1.5 million to Direct Flow Medical in the form of a note with substantially the same interest and payment terms as the existing loans. In addition, Direct Flow Medical agreed to issue to the Company a specified amount of warrants to purchase shares of convertible preferred stock at an exercise price of $0.01 per share. On September 30, 2016, the Company and Direct Flow Medical entered into the tenth limited waiver to the credit agreement where the parties agreed, among other things, to (i) delay payment on all overdue interest payments until October 31, 2016, (ii) waive the initial principal repayment until October 31, 2016 and (iii) continue to waive the liquidity requirements until October 31, 2016. Further, Direct Flow Medical agreed to issue to the Company a specified amount of warrants to purchase shares of convertible preferred stock at an exercise price of $0.01 per share. On October 31, 2016 the Company agreed to extend the waivers described above until November 30, 2016 and on November 14, 2016, the Company advanced an additional $1.0 million loan while Direct Flow Medical continued to seek additional financing. On November 16, 2016, Direct Flow Medical advised the Company that its potential financing source had modified its proposal from an equity investment to a loan with a substantially smaller amount and under less favorable terms. Direct Flow Medical shut down its operations in December 2016 and in January 2017 made an assignment for the benefit of creditors. The Company then initiated foreclosure proceedings, which have since concluded, resulting in the Company obtaining ownership of most of the Direct Flow Medical assets through its wholly-owned subsidiary, DFM, LLC. In January 2017, the Company and DFM, LLC entered into an Intellectual Property Assignment Agreement with Hong Kong Haisco Pharmaceutical Co., Limited (“Haisco”), a Chinese pharmaceutical company, whereby Haisco acquired former Direct Flow Medical clinical, regulatory and commercial information and intellectual property rights exclusively in China for $7.0 million. The Company expects to further monetize the remaining assets of Direct Flow Medical that it obtained in the foreclosure and has ascribed a carrying value of $3.0 million at December 31, 2016. At December 31, 2016, the Company completed an impairment analysis and concluded that the situation qualified as a troubled debt restructuring. As of December 31, 2016, the Company recognized an impairment loss of $51.1 million. Paradigm Spine Credit Agreement On February 14, 2014, the Company entered into the Credit Agreement (the “Paradigm Spine Credit Agreement”) with Paradigm Spine, LLC (“Paradigm Spine”), 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. On October 27, 2015, the Company and Paradigm Spine entered into an amendment to the Paradigm Spine Credit Agreement to provide additional term loan commitments of up to $7.0 million payable in two tranches, of which the first tranche of $4.0 million was drawn on the closing date of the amendment, net of fees. Paradigm Spine chose not to draw down the second tranche of $3.0 million and such tranche is no longer available. Borrowings under the credit agreement bore interest at the rate of 13.0% per annum, payable quarterly in arrears. On August 26, 2016, the Company received $57.5 million in connection with the prepayment of the loans under the Paradigm Spine Credit Agreement, which included a repayment of the full principal amount outstanding of $54.7 million, plus accrued interest and a prepayment fee. kaléo Note Purchase Agreement On April 1, 2014, the Company entered into a note purchase agreement with Accel 300, LLC (“Accel 300”), a wholly-owned subsidiary of kaléo, Inc. (“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 20% of net sales of its first approved product, Auvi-Q^® (epinephrine auto-injection, USP) (known as Allerject^®in Canada) and 10% of net sales of kaléo’s second proprietary auto-injector based product, EVZIO (naloxone hydrochloride injection ) (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 December 31, 2016, 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. On October 28, 2015, Sanofi US initiated a voluntary nationwide recall of all Auvi-Q units effectively immediately because in rare cases the syringe would not deliver the proper amount of epinephrine, the drug used to treat severe allergic reactions. Sanofi was the exclusive licensee of kaléo for the manufacturing and commercialization of Auvi-Q. In March 2016, Sanofi and kaléo terminated their license and development agreement and all U.S. and Canadian commercial and manufacturing rights to Auvi-Q^® and Allerject^®, and manufacturing equipment, were returned to kaléo. As part of the financing transaction, kaléo was required to establish an interest reserve account of $20.0 million from the $150.0 million provided by the Company. The purpose of this interest reserve account is to cover any possible shortfalls in interest payments owed to the Company. While the interest reserve account was depleted in the second quarter of 2016, kaléo continues to make interest payments due to the Company under the note purchase agreement and the Company expects that kaléo will fund future interest payments with existing cash until Auvi-Q is returned to the market. kaléo reintroduced Auvi-Q to the U.S. market on February 14, 2017. At December 31, 2016, it has been determined that there is no impairment. CareView Credit Agreement On June 26, 2015, the Company entered into a credit agreement with CareView Communications Inc. (“Careview”), under which the Company made available to CareView up to $40.0 million in two tranches of $20.0 million each. Under the terms of the credit agreement, the first tranche of $20.0 million, net of fees, was funded by the Company upon CareView’s attainment of a specified milestone relating to the placement of CareView Systems^®, on October 7, 2015. The second $20.0 million tranche would be funded upon CareView’s attainment of specified milestones relating to the placement of CareView Systems and consolidated earnings before interest, taxes, depreciation and amortization, 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 an exercise price of $0.45 per share. The Company has 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. On October 7, 2015, the Company and CareView entered into an amendment of the credit agreement to modify certain definitions related to the first and second tranche milestones. In connection with the amendment of the credit agreement, the Company and CareView also agreed to amend the warrant to purchase common stock agreement by reducing the warrant’s exercise price from $0.45 to $0.40 per share. At December 31, 2016, the Company determined an estimated fair value of the warrant of $0.1 million. For carrying value and fair value information related to the Company’s Fair Value Measurements, see Note 4.

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

Property, Plant and Equipment [Abstract]

Property and Equipment

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment Disclosure [Text Block]

9. Property and Equipment



	December 31,
(In thousands)	2016			2015
Leasehold improvements	$	153		$	153
Computer and office equipment	8,995			8,984
Furniture and fixtures	60			45
Total	9,208			9,182
Less accumulated depreciation and amortization	(9,170		)	(9,151		)
Property and equipment, net	$	38		$	31

Accrued Liabilities

12 Months Ended

Dec. 31, 2016

Payables and Accruals [Abstract]

Accrued Liabilities



	December 31,
(In thousands)	2016		2015
Compensation	$	3,131	$	1,979
Interest	2,554		4,107
Refund to manufacturer	8,909		—
Accrued rebates, chargebacks and other revenue reserves	12,338		87
Dividend payable	21		184
Legal	1,594		730
Other	2,028		922
Total	$	30,575	$	8,009

The following table provides a summary of activity with respect to our sales allowances and accruals for the year ended December 31, 2016:



(in thousands)	Discount and Distribution Fees			Government Rebates and Chargebacks		Assistance and Other Discounts		Product Return		Total
Balance at October 1, 2016:	$	—		$	—	$	—	$	—	$	—
Allowances for current period sales	2,754			5,514		2,580		1,769		12,617
Allowances for prior period sales	—			—		—		—		—
Credits/payments for current period sales	(279		)	—		—		—		(279		)
Credits/payments for prior period sales	—			—		—		—		—
Balance at December 31, 2016	$	2,475		$	5,514	$	2,580	$	1,769	$	12,338

Commitments and Contingencies

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Operating Leases

We currently occupy a leased facility in Incline Village, Nevada, with a lease term through May 2017, and a leased facility in Dublin, Ireland, with a lease term through September 2025 with the option to terminate the lease in September 2021. We also lease certain office equipment under operating leases. Rental expense under these arrangements totaled $0.3 million, $0.2 million and $0.2 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Future minimum operating lease payments for the years ended December 31, were as follows:



(In thousands)
2017	$	184
2018	96
2019	87
2020	79
2021	59
Thereafter	—
Total	$	505

Lease Guarantee

In connection with the spin-off by the Company of Facet Biotech Corporation (“Facet”) (the “Spin-Off”) the Company entered into amendments to the leases for the Company’s 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. As of December 31, 2016, the total lease payments for the duration of the guarantee, which runs through December 2021, are approximately $56.4 million. In April 2010, Abbott Laboratories acquired Facet and later renamed the entity AbbVie Biotherapeutics, Inc. (“AbbVie”). If AbbVie were to default under its lease obligations, the Company could be held liable by the landlord as a co-tenant and, thus, the Company has in substance guaranteed the payments under the lease agreements for the Redwood City facilities.

The Company prepared a discounted, probability weighted cash flow analysis to calculate the estimated fair value of the lease guarantee as of the Spin-Off. The Company was required to make assumptions regarding the probability of Facet’s default on the lease payment, the likelihood of a sublease being executed and the times at which these events could occur. These assumptions are based on information that we received from real estate brokers and the then-current economic conditions, as well as expectations of future economic conditions. The fair value of this lease guarantee was charged to additional paid-in capital upon the Spin-Off and any future adjustments to the carrying value of the obligation will also be recorded in additional paid-in capital.

The Company has recorded a liability of $10.7 million on its Consolidated Balance Sheets as of December 31, 2016 and 2015, related to this guarantee. In future periods, the Company may adjust this liability for any changes in the ultimate outcome of this matter that are both probable and estimable.

Irrevocable Letters of Credit

On June 30, 2016, the Company purchased a $75.0 million certificate of deposit, which is designated as cash collateral for the $75.0 million letter of credit issued on July 1, 2016 with respect to the first anniversary payment under the Noden Purchase Agreement. In addition, we provided an irrevocable and unconditional guarantee to Novartis, to pay up to $14.0 million of the remaining amount of the first anniversary payment not covered by the letter of credit. The Company concluded that both guarantees are contingent obligations and shall be accounted for in accordance with ASC 450, Contingencies. Further, it was concluded that both guarantees do not meet the conditions to be accrued at December 31, 2016.

Purchase Commitments

In connection with the Noden Transaction, Noden entered into an unconditional purchase obligation with Novartis to acquire all local finished goods inventory in certain countries upon transfer of the applicable marketing authorization rights in such country. The purchase is payable within 60 days after the transfer of the marketing authorization rights. The agreement does not specify minimum quantities but details pricing terms.

In addition, Noden and Novartis entered into a supply agreement pursuant to which Novartis will manufacture and supply to Noden a finished form of the Noden Products and bulk drug form of the Noden Products for specified periods of time prior to the transfer of manufacturing responsibilities for the Noden Products to another manufacturer. The supply agreement commits the Company to a minimum purchase obligation of approximately $10.6 million and $50.0 million over the next twelve and twenty-four months, respectively. The Company expects to meet this requirement

Convertible Notes

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Convertible and Non-Recourse Notes

Convertible Notes and Term Loans

Convertible Notes and Term Loan activity for the years ended December 31, 2016 and 2015:



(In thousands)	Series 2012 Notes			May 2015 Notes			February 2018 Notes			December 2021 Notes			Term Loan			Total
Balance at December 31, 2014	$	22,261		$	153,235		$	269,275		$	—		$	—		$	444,771
Issuance and exchange	—			—			—			—			100,000			100,000
Payment	(22,337		)	(155,050		)	—			—			(75,000		)	(252,387		)
Repurchase	—			—			(53,553		)	—			—			(53,553		)
Non-cash Discount	—			—			—			—			(607		)	(607		)
Amortization	76			1,815			13,140			—			573			15,604
Balance at December 31, 2015	—			—			228,862			—			24,966			253,828
Issuance and exchange	—			—			—			150,000			—			150,000
Payment	—			—			—			—			(25,000		)	(25,000		)
Repurchase	—			—			(120,000		)	—			—			(120,000		)
Non-cash Discount	—			—			—			(3,204		)	—			(3,204		)
Non-cash conversion feature	—			—			—			(36,653		)	—			(36,653		)
Amortization	—			—			12,733			705			34			13,472
Balance at December 31, 2016	$	—		$	—		$	121,595		$	110,848		$	—		$	232,443

Series 2012 Notes

In January 2012, the Company issued and exchanged $169.0 million aggregate principal of new Series 2012 Notes for an identical principal amount of the February 2015 Notes, plus a cash payment of $5.00 for each $1,000 principal amount tendered, totaling approximately $845,000. The cash 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 were recognized over the life of the Series 2012 Notes as interest expense. In February 2012, the Company entered into separate privately negotiated exchange agreements under which the Company issued and exchanged an additional $10.0 million aggregate principal amount of the Series 2012 Notes for an identical principal amount of the 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 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 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 is 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 Series 2012 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 de-recognition 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 that was 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 paid 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 17, 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 retired 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.

Interest expense for the Series 2012 Notes on the Company’s Consolidated Statements of Income was as follows:



	Year ended December 31,
(In thousands)	2016		2015		2014
Contractual coupon interest	$	—	$	80	$	1,726
Amortization of debt issuance costs	—		13		1,089
Amortization of debt discount	—		76		2,415
Total	$	—	$	169	$	5,230

May 2015 Notes

On May 16, 2011, the Company issued $155.3 million in aggregate principal amount, at par, of the May 2015 Notes in an underwritten public offering, for net proceeds of $149.7 million. The May 2015 Notes were due May 1, 2015, and the Company paid interest at 3.75% on the May 2015 Notes semiannually in arrears on May 1 and November 1 of each year, beginning November 1, 2011. Proceeds from the May 2015 Notes, net of amounts used for purchased call option transactions and provided by the warrant transactions described below, were used to redeem the Series 2012 Notes.

On May 1, 2015, the Company retired 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.

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



	Year Ended December 31,
(In thousands)	2016		2015		2014
Contractual coupon interest	$	—	$	1,938	$	5,817
Amortization of debt issuance costs	—		435		1,274
Amortization of debt discount	—		1,815		5,182
Total	$	—	$	4,188	$	12,273

Purchased Call Options and Warrants

In connection with the issuance of the May 2015 Notes, the Company entered into purchased call option transactions with two hedge counterparties. The Company 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 the May 2015 Notes. The Company exercised the purchased call options upon conversion of the May 2015 Notes on May 1, 2015, which required the hedge counterparties to deliver shares to the Company. The hedge counterparties delivered approximately 5.2 million shares of the Company’s common stock to the Company, which was the amount equal to the shares required to be delivered by the Company to the note holders for the excess conversion value.

In addition, the Company 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 the May 2015 Notes. The Company received an aggregate amount of $10.9 million for the sale from the two counterparties. Under the terms of the warrant agreement, the warrant counterparties had the option to exercise the warrants on their specified expiration dates through the 120 scheduled trading days beginning on July 30, 2015 and ended on January 20, 2016. Because the VWAP of the Company’s common stock never exceeded the strike price of the warrants, the Company did not deliver any common stock to the warrant counterparties.

The purchased call option transactions and warrant sales effectively served to reduce the potential dilution associated with conversion of the May 2015 Notes.

Because the share price was above $5.72 but below $6.73, upon conversion of the Company’s 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.

While the purchased call options reduced the potential equity dilution upon conversion of the May 2015 Notes, prior to the conversion or exercise, the 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.

February 2018 Notes

On February 12, 2014, the Company issued $300.0 million in aggregate principal amount, at par, of the February 2018 Notes in an underwritten public offering, for net proceeds of $290.2 million. The February 2018 Notes are due February 1, 2018, and the Company pays interest at 4.0% on the 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 the 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 the Series 2012 Notes. Upon the occurrence of a fundamental change, as defined in the indenture, holders have the option to require the Company to repurchase their February 2018 Notes at a purchase price equal to 100% of the principal, plus accrued interest.

On November 20, 2015, the Company’s agent initiated the repurchase of $53.6 million in aggregate principal amount of its February 2018 Notes for $43.7 million in cash in four open market transactions. The closing of these transactions occurred on November 30, 2015. It was determined that the repurchase of the principal amount shall be accounted for as a partial extinguishment of the February 2018 Notes. As a result, a gain on extinguishment of $6.5 million was recorded at closing of the transaction. The $6.5 million gain on extinguishment included the de-recognition of the original issuance discount of $3.1 million, outstanding deferred issuance costs of $0.9 million and agent fees of $0.1 million. Immediately following the repurchase, $246.4 million principal amount of the February 2018 Notes was outstanding with $14.1 million of remaining original issuance discount and $4.1 million of debt issuance costs to be amortized over the remaining life of the February 2018 Notes.

In connection with the repurchase of the February 2018 Notes, the Company and the counterparties agreed to unwind a portion of the purchased call options. As a result of the unwind transaction of the purchased call option, the Company received $270,000 in cash. The payments received have been recorded as an increase to APIC. In addition, the Company and the counterparties agreed to unwind a portion of the warrants for $170,000 in cash, payable by the Company. The payments have been recorded as a decrease to APIC. At December 31, 2015, the Company concluded that the remaining purchased call options and warrants continue to meet all criteria for equity classification.

On November 22, 2016, the Company repurchased $120.0 million in aggregate principal amount of its February 2018 Notes for approximately $121.5 million in cash (including $1.5 million of accrued interest) in open market transactions. It was determined that the repurchase of the principal amount shall be accounted for as an extinguishment. The extinguishment included the de-recognition of the original issuance discount of $4.3 million and outstanding deferred issuance costs of $1.3 million. Immediately following the repurchase, $126.4 million principal amount of the February 2018 Notes was outstanding with $4.6 million of remaining original issuance discount and $1.4 million of debt issuance costs to be amortized over the remaining life of the February 2018 Notes. As of December 31, 2016, our February 2018 Notes are not convertible. At December 31, 2016, the if-converted value of our February 2018 Notes did not exceed the principal amount.

In connection with the repurchase of the February 2018 Notes, the Company and the counterparties agreed to unwind a portion of the purchased call options. The unwind transaction of the purchased call option did not result in any cash payments between the parties. In addition, the Company and the counterparties agreed to unwind a portion of the warrants, which also did not result in any cash payments between the parties. At December 31, 2016, the Company concluded that the remaining purchased call options and warrants continue to meet all criteria for equity classification.

As of December 31, 2016, the February 2018 Notes are not convertible. At December 31, 2016, the if-converted value of the February 2018 Notes did not exceed the principal amount.

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


•	During any fiscal quarter ending after the quarter ending June 30, 2014, if the last reported sale price of the Company’s 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 the Company refers 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 the Company’s 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, the Company 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, the Company separated the principal balance of the 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, the Company 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 the February 2018 Notes and increases interest expense during the term of the February 2018 Notes from the 4.0% cash coupon interest rate to an effective interest rate of 6.9%. As of December 31, 2016, the remaining discount amortization period is 1.1 years.

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



(In thousands)	December 31, 2016			December 31, 2015
Principal amount of the February 2018 Notes	$	126,447		$	246,447
Unamortized discount of liability component	(4,852		)	(17,585		)
Net carrying value of the February 2018 Notes	$	121,595		$	228,862

Interest expense for the February 2018 Notes on the Company’s Consolidated Statements of Income was as follows:



	Year Ended December 31,
(In thousands)	2016		2015		2014
Contractual coupon interest	$	9,338	$	11,786	$	10,633
Amortization of debt issuance costs	2,863		2,980		1,898
Amortization of debt discount	9,870		10,160		5,954
Total	$	22,071	$	24,926	$	18,485

As of December 31, 2016, 2015 and 2014, the February 2018 Notes are not convertible. At December 31, 2016, 2015 and 2014, the if-converted value of the February 2018 Notes did not exceed the principal amount.

Purchased Call Options and Warrants

In connection with the issuance of the February 2018 Notes, the Company entered into purchased call option transactions with two hedge counterparties. The Company paid an aggregate amount of $31.0 million for the purchased call options with terms substantially similar to the embedded conversion options in the February 2018 Notes. The purchased call options cover, subject to anti-dilution and certain other customary adjustments substantially similar to those in the February 2018 Notes, approximately 13.8 million shares of the Company common stock. The Company may exercise the purchased call options upon conversion of the 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 the February 2018 Notes remain outstanding.

In addition, the Company 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 the 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. The Company 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 the Company’s common stock, as defined in the warrants, exceeds the strike price of the warrants, the Company 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 the 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 the Company stock, require net-share settlement and met all criteria for equity classification at inception and at December 31, 2016 and 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 the criteria for equity classification.

December 2021 Notes

On November 22, 2016, the Company issued $150.0 million in aggregate principal amount, at par, of the December 2021 Notes in an underwritten public offering, for net proceeds of $145.7 million. The December 2021 Notes are due December 1, 2021, and the Company pays interest at 2.75% on the December 2021 Notes semiannually in arrears on June 1 and December 1 of each year, beginning June 1, 2017. A portion of the proceeds from the December 2021 Notes, net of amounts used for capped call transaction described below, were used to extinguish $120.0 million of the February 2018 Notes. Upon the occurrence of a fundamental change, as defined in the indenture, holders have the option to require the Company to repurchase their December 2021 Notes at a purchase price equal to 100% of the principal, plus accrued interest.

The December 2021 Notes are convertible under any of the following circumstances:

•

During any fiscal quarter (and only during such fiscal quarter) commencing after the fiscal quarter ending March 31, 2017, if the last reported sale price of Company common stock for at least 20 trading days (whether or not consecutive), in the period of 30 consecutive trading days, ending on, and including, the last trading day of the immediately preceding fiscal quarter, exceeds 130% of the conversion price for the notes on each applicable trading day;

•

During the five business-day period immediately after any five consecutive trading-day period, which the Company refers 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 Company common stock and the conversion rate for the notes for each such trading day; or


•	Upon the occurrence of specified corporate events as described in the indenture.

The initial conversion rate for the December 2021 Notes is 262.2951 shares of the Company’s common stock per $1,000 principal amount of December 2021 Notes, which is equivalent to an initial conversion price of approximately $3.81 per share of common stock, subject to adjustments upon the occurrence of certain specified events as set forth in the indenture.

In accordance with the accounting guidance for convertible debt instruments that may be settled in cash or other assets on conversion, the Company was 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, the Company separated the principal balance of the December 2021 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 9.5%, which represents the estimated market interest rate for a similar nonconvertible instrument available to us on the date of issuance, the Company recorded a total debt discount of $4.3 million, allocated $23.8 million to additional paid-in capital and allocated $12.8 million to deferred tax liability. The discount is being amortized to interest expense over the term of the December 2021 Notes and increases interest expense during the term of the December 2021 Notes from the 2.75% cash coupon interest rate to an effective interest rate of 3.4%. As of December 31, 2016, the remaining discount amortization period is 4.9 years.

The carrying value and unamortized discount of the December 2021 Notes were as follows:



(In thousands)	December 31, 2016
Principal amount of the December 2021 Notes	$	150,000
Unamortized discount of liability component	(39,152		)
Net carrying value of the December 2021 Notes	$	110,848

Interest expense for the December 2021 Notes on the Company’s Consolidated Statements of Income was as follows:



	Year Ended December 31,
(In thousands)	2016
Contractual coupon interest	$	447
Amortization of debt issuance costs	10
Amortization of debt discount	75
Amortization of conversion feature	620
Total	$	1,152

As of December 31, 2016, the December 2021 Notes are not convertible. At December 31, 2016, the if-converted value of the December 2021 Notes did not exceed the principal amount.

Capped Call Transaction

In conjunction with the offering of the December 2021 Notes, the Company entered into a privately-negotiated capped call transaction with an affiliate of the underwriter of such issuance. The aggregate cost of the capped call transaction was $14.4 million. The capped call transaction is generally expected to reduce the potential dilution upon conversion of the December 2021 Notes and/or partially offset any cash payments the Company is required to make in excess of the principal amount of converted December 2021 Notes in the event that the market price per share of the Company’s common stock, as measured under the terms of the capped call transaction, is greater than the strike price of the capped call transaction, which initially corresponds to the approximate $3.81 per share conversion price of the December 2021 Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the December 2021 Notes. The cap price of the capped call transaction was initially $4.88 per share, and is subject to certain adjustments under the terms of the capped call transaction. The Company will not be required to make any cash payments to the option counterparty upon the exercise of the options that are a part of the capped call transaction, but the Company will be entitled to receive from it an aggregate amount of cash and/or number of shares of the Company’s common stock, based on the settlement method election chosen for the related convertible notes, with a value equal to the amount by which the market price per share of the Company’s common stock, as measured under the terms of the capped call transaction, is greater than the strike price of the capped call transaction during the relevant valuation period under the capped call transaction, with such number of shares of the Company’s common stock and/or amount of cash subject to the cap price.

The Company evaluated the capped call transaction under authoritative accounting guidance and determined that they should be accounted for as separate transactions and classified as a net reduction to additional paid-in capital within stockholders’ equity with no recurring fair value measurement recorded.

March 2015 Term Loan

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

The interest rates per annum applicable to amounts outstanding under the term loan were, 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 December 31, 2015, the interest rate, based upon the adjusted Eurodollar rate, was 2.17%. Interest payments under the credit agreement were due on the interest payment dates specified in the credit agreement.

The credit agreement required amortization of the term loan 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. This principal balance and outstanding interest was paid in full on February 12, 2016.

October 2013 Term Loan

On October 28, 2013, the Company 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 $75.0 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.

As of December 31, 2016 and 2015, the Company was in compliance with all applicable debt covenants.

As of December 31, 2016, the future minimum principal payments under the February 2018 Notes and December 2021 Notes were:



(In thousands)	February 2018 Notes		December 2021 Notes		Total
2017	$	—	$	—	$	—
2018	126,447		—		126,447
2019	—		—		—
2020	—		—		—
2021	—		150,000		150,000
Thereafter	—		—		—
Total	$	126,447	$	150,000	$	276,447

Other Long-Term Liabilities

12 Months Ended

Dec. 31, 2016

Other Liabilities Disclosure [Abstract]

Other Long-Term Liabilities

14. Other Long-Term Liabilities



	December 31,
(In thousands)	2016		2015
Accrued lease liability	$	10,700	$	10,700
Long-term incentive	1,995		1,318
Uncertain tax position	41,591		38,467
Dividend payable	270		165
Total	$	54,556	$	50,650

In connection with the Spin-Off, the Company entered into amendments to the leases for the Company’s 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, the Company could be held liable by the landlord as a co-tenant and, thus, the Company has in substance guaranteed the payments under the lease agreements for the Redwood City facilities. As of December 31, 2016, the total lease payments for the duration of the guarantee, which runs through December 2021, are approximately $56.4 million. If Facet were to default, the Company 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. The Company recorded a liability of $10.7 million on the Company’s Consolidated Balance Sheets as of December 31, 2016 and 2015, related to this guarantee.

Stock-Based Compensation

12 Months Ended

Dec. 31, 2016

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

Stock-Based Compensation

The Company recognizes compensation expense using a fair-value based method for costs associated with all share-based awards issued to the Company’s directors, employees and outside consultants under its stock plan. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service periods in the Company’s Consolidated Statements of Income.

The Company has adopted the simplified method to calculate the beginning balance of the additional paid-in capital pool of the excess tax benefit and to determine the subsequent effect on the APIC pool and Consolidated Statements of Cash Flows of the tax effects of employee stock-based compensation awards that were outstanding upon adoption.

The Company calculates stock-based compensation expense based on the number of awards ultimately expected to vest, net of estimated forfeitures. The Company estimates forfeiture rates at the time of grant and revise such rates, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The stock-based compensation expense was determined using the Black-Scholes option pricing model.

Stock-based compensation expense for employees and directors and non-employees for the years ended December 31, 2016, 2015 and 2014, is presented below:



	Year Ended December 31,
Stock-based Compensation	2016		2015		2014
(In thousands)
Employees and directors	$	3,679	$	1,952	$	1,157
Non-employees	63		93		344
Total	$	3,742	$	2,045	$	1,501

Stock-Based Incentive Plans

The Company currently has one active stock-based incentive plan under which it may grant stock-based awards to the Company’s employees, directors and non-employees.

The total number of shares of common stock authorized for issuance, shares of common stock issued upon exercise of options or grant of restricted stock, shares of common stock subject to outstanding awards and available for grant under this plan as of December 31, 2016, is as follows:



Title of Plan	Total Shares of Common Stock Authorized	Total Shares of Common Stock Issued	Total Shares of Common Stock Subject to Outstanding Awards	Total Shares of Common Stock Available for Grant
2005 Equity Incentive Plan⁽¹⁾	6,200,000	2,767,700	—	3,432,300
2002 Outside Directors Stock Option Plan⁽²⁾	157,000	157,000	—	—
1999 Non-statutory Stock Option Plan⁽²⁾	4,966,183	4,966,183	—	—
1999 Stock Option Plan⁽²⁾	3,694,485	3,694,485	—	—

_________________________


(1)	As of December 31, 2016, there were 1,471,910 shares of unvested restricted stock awards outstanding.


(2)	Plan terminated in 2009, subject to options outstanding under the plan.

Under the Company’s Amended and Restated 2005 Equity Incentive Plan effective May 28, 2015 (the “2005 Equity Incentive Plan”), the Company is authorized to issue a variety of incentive awards, including stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance share and performance unit awards, deferred compensation awards and other stock-based or cash-based awards.

In 2009, the compensation committee of the Company’s board of directors (the “Compensation Committee”) terminated the 1999 Outside Director Stock Option Plan, the 1999 Nonstatutory Stock Option Plan and the 2002 Outside Directors Stock Option Plan, subject to any outstanding options.

Stock Option Activity

A summary of the Company’s stock option activity is presented below:



	2016			2015				2014
	Number of shares (in thousands)	Weighted-Average Exercise Price		Number of shares (in thousands)		Weighted-Average Exercise Price		Number of shares (in thousands)		Weighted-Average Exercise Price
Outstanding at beginning of year	—	$	—	58		$	5.41	172		$	16.52
Expired	—	$	—	(58	)	$	5.41	(114	)	$	22.08
Outstanding at end of year	—	$	—	—		$	—	58		$	5.41
Exercisable at end of year	—	$	—	58		$	—	58		$	5.41

As of December 31, 2016, there are no stock options outstanding.

Restricted Stock

Restricted stock has the same rights as other issued and outstanding shares of the Company’s common stock, including, in some cases, the right to accrue dividends, which are held in escrow until the award vests. The compensation expense related to these awards is determined using the fair market value of the Company’s common stock on the date of the grant, and the compensation expense is recognized ratably over the vesting period. Under the Company’s restricted stock plans, restricted stock awards typically vest over one to five years. In addition to service requirements, vesting of restricted stock awards may be subject to the achievement of specified performance goals set by the Compensation Committee. If the performance goals are not met, no compensation expense is recognized and any previously recognized compensation expense is reversed.

A summary of the Company’s restricted stock activity is presented below:



	2016				2015				2014
	Number of shares (in thousands)		Weighted-average grant-date fair value per share		Number of shares (in thousands)		Weighted-average grant-date fair value per share		Number of shares (in thousands)		Weighted- average grant-date fair value per share
Nonvested at beginning of year	586		$	7.13	277		$	8.39	114		$	7.45
Awards granted	1,264		$	3.31	522		$	6.40	312		$	8.39
Awards vested	(366	)	$	6.65	(173	)	$	8.38	(149	)	$	7.67
Forfeited	(12	)	$	7.10	(40	)	$	7.79	—		$	—
Nonvested at end of year	1,472		$	3.96	586		$	7.13	277		$	8.39

Stock-based compensation expense associated with the Company’s restricted stock for the years ended December 31, 2016, 2015 and 2014, was $3.5 million, $2.0 million and $1.5 million, respectively. As of December 31, 2016, the aggregate intrinsic value of non-vested restricted stock was $3.1 million. Total unrecognized compensation costs associated with non-vested restricted stock as of December 31, 2016, was $3.2 million, excluding forfeitures, which the Company expects to recognize over a weighted-average period of 1.8 years.

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

Cash Dividends	12 Months Ended
Cash Dividends	Dec. 31, 2016
Stockholders' Equity Note [Abstract]
Cash Dividends	Cash Dividends On August 3, 2016, the Company’s board of directors decided to eliminate the quarterly cash dividend payment. On May 2, 2016, the Company’s board of directors declared a quarterly dividend of $0.05 per share of common stock to stockholders of record on June 6, 2016. On June 13, 2016, the Company paid $8.2 million in connection with such dividend payment. Unvested restricted stock awards (“RSAs”) as of the record date are also entitled to dividends, which will only be paid when the RSAs vest and are released. On January 26, 2016, the Company’s board of directors declared a quarterly dividend of $0.05 per share of common stock to stockholders of record on March 4, 2016. On March 11, 2016, the Company paid $8.2 million in connection with such dividend payment. Unvested RSAs as of the record date are also entitled to dividends, which will only be paid when the RSAs vest and are released. On January 27, 2015, the Company’s board of directors declared a regular quarterly dividend of $0.15 per share of common stock, which were paid on March 12, June 12, September 11 and December 11 of 2015 to stockholders of record on March 5, June 5, September 4 and December 4 of 2015, the record dates for each of the dividend payments, respectively. The Company paid $98.3 million in dividends in 2015. On January 29, 2014, the Company’s board of directors declared a regular quarterly dividend of $0.15 per share of common stock, which were paid on March 12, June 12, September 12 and December 12 of 2014 to stockholders of record on March 5, June 5, September 5 and December 5 of 2014, the record dates for each of the dividend payments, respectively. The Company paid $96.6 million in dividends in 2014.

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

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-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Preferred Stock
-URI http://asc.fasb.org/extlink&oid=6521494

Reference 15: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21463-112644

Reference 16: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 11
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21564-112644

Concentration Risk Disclosure [Text Block]

Customer Concentration

12 Months Ended

Dec. 31, 2016

Risks and Uncertainties [Abstract]

Customer Concentration

The percentage of total revenue earned from net sales, which individually accounted for 10% or more of the Company’s total revenues:



	Year Ended December 31,
	2016		2015		2014
Income Generating Assets:
Genentech	43	%	70	%	71	%
Biogen	24	%	9	%	10	%
Depomed	13	%	9	%	7	%

Total revenues by geographic area are based on the country of domicile of the counterparty to the agreement:



	Year Ended December 31,
(In thousands)	2016		2015		2014
United States	$	157,327	$	339,596	$	334,325
Europe	82,534		250,852		246,825
Other	4,440		—		75
Total revenues	$	244,301	$	590,448	$	581,225

The following tables presents total receivables from licensee and other, which individually account for 10% or more of the Company’s total receivables from licensee and other asset balance:



	December 31,
(In thousands)	2016		2015
Depomed	$	6,000	$	—
Cardinal Health	7,663		—
McKesson	9,135		—
AmerisourceBergen	8,039		—
Other	9,283		—
Total receivables from licensee and other	$	40,120	$	—

The following table presents total long-lived assets by location:



	December 31,
(In thousands)	2016		2015
United States	$	13	$	31
Ireland	25		—
Total long-lived assets⁽¹⁾	$	38	$	31

_____________________

⁽¹⁾Long-lived assets consist of property and equipment.

Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

The provision for income taxes for the years ended December 31, 2016, 2015 and 2014 consisted of the following:



	Year Ended December 31,
(In thousands)	2016			2015		2014
Current income tax expense
Federal	$	49,582		$	168,164	$	187,056
State	3,103			12,112		22,631
Foreign	2,455			—		—
Total current	55,140			180,276		209,687
Deferred income tax expense (benefit)
Federal	(8,476		)	16,910		(29,095		)
State	147			157		(1,564		)
Foreign	(1,100		)	—		—
Total deferred	(9,429		)	17,067		(30,659		)
Total provision	$	45,711		$	197,343	$	179,028

A reconciliation of the income tax provision computed using the U.S. statutory federal income tax rate compared to the income tax provision for income included in the Consolidated Statements of Income is as follows:



	Year Ended December 31,
(In thousands)	2016			2015		2014
Tax at U.S. statutory rate on income before income taxes	$	38,279		$	185,548	$	175,445
Change in valuation allowance	(744		)	2,286		(5,390		)
State taxes	74			1		1
Change in uncertain tax positions	2,184			8,717		7,395
Foreign income	5,668			—		—
Foreign rate differential	(1,445		)	—		—
Other	1,695			791		1,577
Total	$	45,711		$	197,343	$	179,028

Deferred tax assets and liabilities are determined based on the differences between financial reporting and income tax bases of assets and liabilities, as well as net operating loss carryforwards and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse. The significant components of the Company’s net deferred tax assets and liabilities are as follows:



	December 31,
(In thousands)	2016			2015
Deferred tax assets:
Net operating loss carryforwards	$	4,197		$	4,819
Research and other tax credits	1,833			1,990
Intangible assets	494			—
Stock-based compensation	835			465
Accruals	1,966			1,146
Debt modifications	—			5,526
Capital loss carryforward	1,543			2,286
Other	13,020			12,023
Total deferred tax assets	23,888			28,255
Valuation allowance	(1,543		)	(2,286		)
Total deferred tax assets, net of valuation allowance	22,345			25,969
Deferred tax liabilities:
Deferred gain on repurchase of convertible notes	(382		)	(572		)
Debt modifications	(122		)	—
Intangible assets	(2,584		)	(7,029		)
Unrealized gain on foreign currency hedge contracts	—			(1,215		)
Total deferred tax liabilities	(3,088		)	(8,816		)
Net deferred tax assets	$	19,257		$	17,153

As of December 31, 2016 and 2015, the Company had federal net operating loss carryforwards of $34.0 million and $35.8 million, respectively. The Company also had California net operating loss carryforwards of $215.5 million as of December 31, 2016 and 2015. The federal net operating loss carryforwards will expire in the year 2023 and the California net operating loss carryforwards will expire in 2019, if not utilized. As of December 31, 2016 and 2015, the Company had $19.3 million and $19.3 million, respectively, of state tax credit carryforwards that will expire in 2028, if not utilized. The net operating loss carryforwards and tax credit carryforwards which resulted from exercises of stock options were not recorded on the Consolidated Balance Sheet.

Utilization of the federal and state net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986. The annual limitation may result in the expiration of net operating losses and credits before utilization. The Company has an annual limitation on the utilization of our federal operating losses of $1.8 million for each of the years ending December 31, 2016 to 2022, and $1.3 million for the year ending December 31, 2023. As of December 31, 2016, the Company estimates that at least $22.0 million of federal net operating loss carryforwards and zero of the $18.7 million state net operating losses will expire unutilized.

During 2016, the Company determined that is was more likely than not that certain deferred tax carryforward assets would not be realized in the near future. As a result, $1.5 million valuation allowance against deferred tax assets was established during 2016. The net change in total valuation allowance for each of the years ending December 31, 2016 and 2015, was a decrease of $0.7 million and an increase of $2.3 million, respectively. The valuation allowance at December 31, 2016, is related to capital losses recognized during 2016 that have limited carryback and carryforward utilization. The Company does not have an expectation of future capital gains against which such losses could be utilized and as such determined that it was more likely than not that such deferred tax assets would not be realized.

A reconciliation of the Company’s unrecognized tax benefits, excluding accrued interest and penalties, for 2016, 2015 and 2014 is as follows:



	December 31,
(In thousands)	2016		2015		2014
Balance at the beginning of the year	$	57,125	$	47,146	$	32,419
Increases related to tax positions from prior fiscal years	436		—		10,216
Increases related to tax positions taken during current fiscal year	1,868		9,979		11,006
Expiration of statute of limitations for the assessment of taxes from prior fiscal years	—		—		(6,495		)
Balance at the end of the year	$	59,429	$	57,125	$	47,146

The future impact of the unrecognized tax benefit of $59.4 million, if recognized, is as follows: $35.4 million would affect the effective tax rate and $23.9 million would result in adjustments to deferred tax assets. The Company periodically evaluate our exposures associated with our tax filing positions. During 2016, as a result of the evaluation of our uncertain tax positions, the Company increased the unrecognized tax benefits by $2.1 million primarily related to state items. As noted below, the Company is currently under audit by the California Franchise Tax Board. The timing of the audit resolution and the amount to be ultimately paid (if any) is uncertain. At this time, the Company does not anticipate a material change in the unrecognized tax benefits related to the California audit that would affect the effective tax rate or deferred tax assets over the next 12 months.

Estimated interest and penalties associated with unrecognized tax benefits increased income tax expense in the Consolidated Statements of Income by $1.0 million, $2.3 million and $1.3 million during the years ended December 31, 2016, 2015 and 2014, respectively. In general, our income tax returns are subject to examination by U.S. federal, state and local tax authorities for tax years 1996 forward. Interest and penalties associated with unrecognized tax benefits accrued on the balance sheet were $6.0 million and $5.1 million as of December 31, 2016 and 2015, respectively. In May 2012, the Company received a “no-change” letter from the IRS upon completion of an examination of the Company’s 2008 federal tax return. The Company is currently under income tax examination in the state of California for the tax years 2009, 2010, 2011 and 2012.

Accumulated Other Comprehensive Income (Loss)

12 Months Ended

Dec. 31, 2016

Accumulated Other Comprehensive Income (Loss) [Abstract]

Accumulated Other Comprehensive Income (Loss)

17. Accumulated Other Comprehensive Income (Loss)

Comprehensive income is comprised of net income and other comprehensive income (loss). The Company includes unrealized net gains on investments held in its available-for-sale securities and unrealized gains (losses) on its cash flow hedges in other comprehensive income (loss), and present the amounts net of tax. The Company’s other comprehensive income (loss) is included in the Company’s Consolidated Statements of Comprehensive Income.

The balance of “Accumulated other comprehensive income (loss),” net of tax, was as follows:



(In thousands)	Unrealized gain (loss) on available-for- sale securities			Unrealized gain (loss) on cash flow hedges			Total Accumulated Other Comprehensive Income (Loss)

Beginning Balance at December 31, 2013	$	1,129		$	(6,017	)	$	(4,888	)
Activity for the year ended December 31, 2014	(765		)	8,602			7,837
Balance at December 31, 2014	364			2,585			2,949

Activity for the year ended December 31, 2015	71			(764		)	(693		)
Balance at December 31, 2015	435			1,821			2,256

Activity for the year ended December 31, 2016	(435		)	(1,821		)	(2,256		)
Ending Balance at December 31, 2016	$	—		$	—		$	—

The entire disclosure for comprehensive income, which includes, but is not limited to, 1) the amount of income tax expense or benefit allocated to each component of other comprehensive income, including reclassification adjustments, 2) the reclassification adjustments for each classification of other comprehensive income and 3) the ending accumulated balances for each component of comprehensive income.

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=66004124&loc=d3e689-108580

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
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-Section 45
-Paragraph 1A
-URI http://asc.fasb.org/extlink&oid=66004124&loc=SL7669619-108580

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
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-Paragraph 12
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Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
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Reference 5: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 220
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-URI http://asc.fasb.org/extlink&oid=66004124&loc=d3e709-108580

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 8: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Reclassification Adjustments
-URI http://asc.fasb.org/extlink&oid=6522872

Quarterly Financial Information [Text Block]

Legal Proceedings	12 Months Ended
Legal Proceedings	Dec. 31, 2016
Legal Proceedings [Abstract]
Legal Matters and Contingencies [Text Block]	22. Legal Proceedings PDL BioPharma, Inc. v Merck Sharp & Dohme, Corp. On October 28, 2015, the Company filed a Complaint against Merck Sharp & Dohme, Corp (“Merck”) for patent infringement in the United States District Court for the District of Nevada. In the Complaint, the Company alleges that manufacture and sales of certain of Merck’s Keytruda product infringes one or more claims of the Company’s U.S. Patent No. 5,693,761 (the “761 Patent”). The Company has requested judgment that Merck has infringed the 761 Patent, an award of damages due to the infringement, a finding that such infringement was willful and deliberate and trebling of damages therefore, and a declaration that the case is exceptional and warrants an award of attorney’s fees and costs. Although the 761 Patent expired on December 2, 2014, the Company believes that Merck infringed the patent through, e.g., manufacture and/or sale of Keytruda prior to the expiration of the 761 Patent. On December 21, 2015, Merck filed a Motion to Dismiss for Lack of Personal Jurisdiction. In response to Merck’s motion, on January 22, 2016, rather than dispute Merck’s contentions regarding jurisdiction, the Company elected to dismiss the action in Nevada and refile the Complaint in its entirety in the District of New Jersey. On May 25, 2016, Merck filed a Motion to Bifurcate Discovery and Trial into Liability and Damages Phases, which motion was granted by the court. Wellstat Litigation On September 4, 2015, the Company filed in the Supreme Court of New York a motion for summary judgment in lieu of complaint which requested that the court enter judgment against Wellstat Diagnostics Guarantors for the total amount due on the Wellstat Diagnostics debt, plus all costs and expenses including lawyers’ fees incurred by the Company in enforcement of the related guarantees. On July 29, 2016, the court issued its Memorandum of Decision granting the Company’s motion for summary judgment and denying the Wellstat Diagnostics Guarantors’ cross-motion for summary judgment. The Supreme Court of New York held that the Wellstat Diagnostics Guarantors are liable for all “Obligations” owed by Wellstat Diagnostics to the Company. It did not set a specific dollar amount due, but ordered that a judicial hearing officer or special referee be designated to determine the amount of the Obligations owing, and awarded the Company its attorneys’ fees and costs in an amount to be determined. On July 29, 2016, the Wellstat Diagnostics Guarantors filed a notice of appeal from the Memorandum of Decision to the Appellate Division of the Supreme Court of New York. The Appellate Division of the Supreme Court of New York has adjourned the Wellstat Diagnostics Guarantors’ appeal to the January 2017 term. On February 14, 2017, the Appellate Division reversed the summary judgment decision of the Supreme Court in the Company’s favor. The Appellate Division determined that the action was inappropriate for summary judgment under NY CPLR 3213 on procedural grounds, but specifically made no determination regarding the merits of the action. Pursuant to this decision, the action will be remanded to the Supreme Court for further proceedings on the merits. The proceeding will be calendared for trial, with both parties having the opportunity to take discovery and file dispositive motions in accordance with New York civil procedure. Other Legal Proceedings From time to time, the Company is 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. The Company makes 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 the Company’s operations of that period and on its cash flows and liquidity.

Subsequent Events	12 Months Ended
Subsequent Events	Dec. 31, 2016
Subsequent Events [Abstract]
Subsequent Events [Text Block]	Subsequent Event On January 10, 2017, the bankruptcy court approved a debtor-in-possession credit agreement whereby the Company has agreed to provide up to $2.8 million to LENSAR so that it can continue to operate its business during the remainder of the Chapter 11 case. On January 23, 2017, the Company and its wholly-owned subsidiary, DFM, LLC entered into an Intellectual Property Assignment Agreement with Hong Kong Haisco Pharmaceutical Co., Limited (“Haisco”), a Chinese pharmaceutical company, whereby Haisco acquired former Direct Flow Medical clinical, regulatory and commercial information and intellectual property rights exclusively in China for $7.0 million. On March 1, 2017, the Company announced that its board of directors has authorized the repurchase of up to $30.0 million of the Company's common stock through March 2018.

Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2016

Quarterly Financial Data [Abstract]

Quarterly Financial Data (Unaudited, In Thousands, Except Per Share Data)



	Three Months Ended
	December 31, 2016			September 30, 2016		June 30, 2016		March 31, 2016
Total revenues	$	66,492		$	53,638	$	21,047	$	103,124
Net income attributable to noncontrolling interests	$	(10,336	)	$	13,907	$	4,148	$	55,887
Net income per basic share	$	(0.06	)	$	0.08	$	0.03	$	0.34
Net income per diluted share	$	(0.06	)	$	0.08	$	0.03	$	0.34



	Three Months Ended
	December 31, 2015		September 30, 2015		June 30, 2015		March 31, 2015
Total revenues	$	178,058	$	124,618	$	138,066	$	149,706
Net income attributable to noncontrolling interests	$	100,574	$	69,459	$	78,264	$	84,498
Net income per basic share	$	0.61	$	0.42	$	0.48	$	0.52
Net income per diluted share	$	0.61	$	0.42	$	0.47	$	0.50

Inventories (Notes)

12 Months Ended

Dec. 31, 2016

Inventory [Line Items]

Inventory Disclosure [Text Block]

7. Inventories

Inventories consisted of the following (in thousands):



	December 31,
	2016
Work in process	1,625
Finished goods	1,259
Total inventories	$	2,884

In addition, as of December 31, 2016, the Company deferred approximately $0.1 million of costs associated with inventory transfer made under the Company’s third party logistic provider (“3PL”) service arrangement. These costs have been recorded as other assets on the Company’s Consolidated Balance Sheet as of December 31, 2016. The Company will recognize the cost of product sold as inventory is transferred from 3PL to the Company’s customers.

During the fourth quarter of 2016, we recognized an inventory write-down of $0.3 million related to Noden Products that we would not be able to sell prior to its expiration. There were no inventory write-downs related to obsolete inventory recorded in the years ended December 31, 2015 and 2014.

Intangible Assets and Goodwill (Notes)

12 Months Ended

Dec. 31, 2016

Intangible Assets and Goodwill [Abstract]

Intangible Assets Disclosure [Text Block]

10. Intangible Assets and Goodwill

Intangible Assets, Net

The components of intangible assets as of December 31, 2016 were as follows (in thousands, except for useful life):



(in thousands)	Weighted Average Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Finite-lived intangible assets:
Acquired products rights ¹	10	$	216,690	$	(10,834	)	$	205,856
Customer relationships ¹	10	23,880		(1,194		)	22,686
		$	240,570	$	(12,028	)	$	228,542

¹ We acquired certain intangible assets as part of the Noden Transaction, as described further in Note 19.

Amortization expense for the year ended December 31, 2016 was $12.0 million, respectively.

Based on the intangible assets recorded at December 31, 2016, and assuming no subsequent additions to or impairment of the underlying assets, the remaining estimated amortization expense is expected to be as follows (in thousands):



Fiscal Year	Amount
2017	$	24,057
2018	24,057
2019	24,057
2020	24,057
2021	24,057
Thereafter	108,257
Total remaining estimated amortization expense	$	228,542

Goodwill

Goodwill is the excess of the cost of an acquired entity over the net amounts assigned to tangible and intangible assets acquired and liabilities assumed. The Company applies ASC 350 “Goodwill and Other Intangible Assets,” which requires testing goodwill for impairment on an annual basis. The Company assesses goodwill for impairment as part of its annual reporting process in the fourth quarter. The Company evaluates goodwill on a reporting unit basis as the Company is organized as a multiple reporting unit.

The carrying amount of goodwill for the period ended September 30, 2016 was $3.7 million and consists solely of goodwill acquired in the Noden Transaction.

The Company’s projected cash flows for the Noden Products decreased significantly during the fourth quarter of 2016 as the Company obtained new information relating to the Noden Products in December 2016. The Company concluded that, given this significant and sustained decrease in projected cash flows, a triggering event requiring an assessment of goodwill impairment had occurred during the fourth quarter of 2016. The Company performed the goodwill impairment assessment using an income approach, which is forward-looking, and relies primarily on internal forecasts. Within the income approach, the Company used the discounted cash flow method. The Company starts with a forecast of all the expected net cash flows associated with the reporting unit, which includes the application of a terminal value, and then applies a reporting unit-specific discount rate to arrive at a net present value. Some of the more significant estimates and assumptions inherent in this approach include (i) the amount and timing of the projected net cash flows, (ii) the selection of a long-term growth rate, (iii) the discount rate, which seeks to reflect the various risks inherent in the projected cash flows and (iv) the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.

The initial assessment indicated that it was likely the Company’s goodwill was impaired, and the Company proceeded to perform a full goodwill impairment assessment. As a result of that assessment, the Company concluded that a goodwill impairment loss of $3.7 million was necessary. Following the recording of the goodwill impairment loss, the Company’s goodwill as of December 31, 2016 was zero.

Business Combinations (Notes)

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

19. Business Combinations

Description of the Noden Transaction

On July 1, 2016, the Noden Transaction was consummated for a cash consideration of $110.0 million that was paid to Novartis on July 1, 2016, the closing date of the acquisition. In addition, pursuant the terms of the Noden Purchase Agreement, Noden Pharma DAC is committed to pay Novartis the following amounts in cash: $89.0 million payable on the first anniversary of the closing date, and up to an additional $95.0 million contingent on achievement of sales targets and the date of the launch of a generic drug containing the pharmaceutical ingredient aliskiren.

On July 1, 2016, upon the consummation of the Noden Transaction, a noncontrolling interest holder acquired a 6% equity interest in Noden. The equity interest of the noncontrolling interest holder is subject to vesting and repurchase rights over a four-year period. At December 31, 2016, 80% of the noncontrolling interest was subject to repurchase. The Company determined that Noden shall be consolidated under the voting interest model as of December 31, 2016.

Pursuant to agreements between us and Elie Farah, chief executive officer of Noden Pharma DAC (the “ Noden Stockholders’ Agreement”), the Company expects to make the following additional equity contributions to Noden: $32.0 million (and up to $89.0 million if Noden is unable to obtain debt financing) on July 1, 2017 to fund the anniversary payment under the Noden Purchase Agreement and at least $38.0 million to fund a portion of certain milestone payments under the Noden Purchase Agreement, subject to the occurrence of such milestones.

In connection with the Noden Transaction, Noden Pharma DAC and Novartis also entered into a supply agreement pursuant to which Novartis will manufacture and supply to Noden a finished form of the Noden Products and bulk drug form of the Noden Products for specified periods of time prior to the transfer of manufacturing responsibilities for the Noden Products to another manufacturer. Under the supply agreement, Novartis is also obligated to sell the Noden Products on a country-by-country basis during a specified time period prior to Noden Pharma DAC’s assumption of responsibility for sales of Noden Product in such country, and to share profits from such sales with Noden Pharma DAC on a specified basis. The supply agreement may be terminated by either party for material breach that remains uncured for a specified time period. The supply agreement and Noden Purchase Agreement include other transitional activities to be performed by Novartis, the purpose of which is to effect a smooth transfer of the marketing authorizations necessary to complete the ownership transfer to Noden Pharma DAC.

Fair Value of Consideration Transferred

The preliminary fair value of consideration transferred under the Noden Transaction totals $244.3 million, which consists of $216.7 million in acquired product rights, $23.9 million in customer relationships, $47.4 million in contingent consideration and $87.0 million in anniversary payments. Contingent consideration includes the future payments that the Company may pay to Novartis based on achieving certain milestones.

The contingent consideration was measured at fair value and will be recognized as of the acquisition date. The Company determined the acquisition date fair value of the contingent consideration obligation based on an income approach derived from the Noden Products revenue estimates and a probability assessment with respect to the likelihood of (a) achieving the level of net sales or (b) there being no generic product launch that would trigger the milestone payments. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in fair value measurement accounting. The key assumptions in determining the fair value are the discount rate and the probability assigned to the potential milestones being achieved. At each reporting date, the Company will re-measure the contingent consideration obligation to estimated fair value. Any changes in the fair value of contingent consideration will be recognized in operating expenses until the contingent consideration arrangement is settled.

As of the effective time of the acquisition, the identifiable intangible assets are required to be measured at fair value and these assets could include assets that are not intended to be used or sold or that are intended to be used in a manner other than their highest and best use. For purposes of the valuation, it is assumed that all assets will be used in the manner that represents the highest and best use of those assets, but it is not assumed that any market synergies will be achieved. The consideration of synergies has been excluded because they are not considered to be factually supportable.

The fair value of identifiable assets is determined primarily using the “income method,” which starts with a forecast of all expected future cash flows. Some of the more significant assumptions inherent in the development of intangible asset values, from the perspective of a market participant, include, among other factors: the amount and timing of projected future cash flows (including net revenue, cost of product sales, research and development costs, sales and marketing expenses, income tax expense, capital expenditures and working capital requirements) and estimated contributory asset charges; the discount rate selected to measure the risks inherent in the future cash flows; and the assessment of the asset’s life cycle and the competitive trends impacting the asset.

Goodwill represents expected synergies resulting from other intangible assets that do not qualify for separate recognition. Goodwill is calculated as the difference between the acquisition date fair value of the consideration expected to be transferred and the values assigned to the assets acquired. Goodwill is not amortized but tested for impairment on an annual basis or when indications for impairment exist.

The following table presents a summary of the total fair value of consideration transferred for the Noden Products acquisition (in thousands):



Consideration paid in cash at closing	$	109,938
Discounted anniversary payment	87,007
Fair value of contingent consideration	47,360
Total fair value of consideration transferred	$	244,305

Assets Acquired and Liabilities Assumed

In accordance with the authoritative guidance for business combinations, the Noden Transaction was determined to be a business combination and is expected to be accounted for using the acquisition method of accounting. Due to the timing of the Noden Transaction, certain amounts are provisional and subject to change. The provisional amounts consist primarily of the estimates of the fair value of intangible assets acquired, and contingent consideration. The Company will finalize these amounts as it obtains the information necessary to complete the measurement process. Any changes resulting from facts and circumstances that existed as of the acquisition date may result in adjustments to the provisional amounts recognized at the acquisition date. These changes could be significant. The Company will finalize these amounts no later than one-year from the closing date.

The following table summarizes the fair values of the identifiable intangible assets acquired and liabilities assumed at the acquisition date (in thousands):



Acquired product rights	$	216,690
Customer relationships	23,880
Goodwill	3,735
Net intangible assets	$	244,305

The acquired product rights represent developed technology of products approved for sales in the market, which the Company refers to as marketed products, and have finite useful lives. They are amortized on a straight line basis over a weighted average of 10.0 years. These estimates will be adjusted accordingly if the final identifiable intangible asset valuation generates results, including corresponding useful lives and related amortization methods, which differ from the preliminary estimates, or if the above scope of intangible assets is modified.

Acquisition-Related Costs

During the year ended December 31, 2016, the Company recorded $3.6 million in acquisition-related costs, which were expenses as incurred.

Pro Forma Impact of Business Combination

The following table represents the unaudited consolidated financial information for the Company on a pro forma basis for the years ended December 31, 2016 and 2015, assuming that the Noden Transaction had closed on January 1, 2015. The historical financial information has been adjusted to give effect to pro forma items that are directly attributable to the acquisition and are expected to have a continuing impact on the consolidated results. Additionally, the following table sets forth unaudited financial information and has been compiled from historical financial statements and other information, but is not necessarily indicative of the results that actually would have been achieved had the transactions occurred on the dates indicated or that may be achieved in the future.



	Year Ended
	December 31,
(in thousands)	2016		2015
Pro forma revenues	$	317,095	$	744,029
Pro forma net income	$	62,817	$	363,148
Pro forma net income per share - basic	$	0.38	$	2.22
Pro forma net income per share - diluted	$	0.38	$	2.22

The unaudited pro forma consolidated results include historical revenues and expenses of assets acquired in the Noden Transaction with the following adjustments:


•	Adjustment to recognize incremental amortization expense based on the fair value of intangibles acquired;


•	Eliminate transaction costs and non-recurring charges directly related to the acquisition that were included in the historical results of operations for the Company; and


•	Adjustment to recognize pro forma income tax based on income tax benefit on the amortization of intangible asset at the statutory tax rate of Ireland (12.5%), and the income tax benefit on the interest expense at the statutory tax rate of the United States (35.0%).

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

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Segment Reporting Disclosure [Text Block]

Segment Information (Notes)

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

20. Segment Information

Information regarding the Company’s segments for the year ended December 31, 2016 and 2015 is as follows:



Revenues by segment	Year Ended
	December 31,
(in thousands)	2016		2015
Income generating assets	$	212,632	$	590,448
Product sales	31,669		—
Total revenues	$	244,301	$	590,448



Income (loss) by segment	Year Ended
	December 31,
(in thousands)	2016		2015
Income generating assets	$	59,085	$	332,795
Product sales	4,521		—
Total net income	$	63,606	$	332,795

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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-Name Accounting Standards Codification
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Receivables, Trade and Other Accounts Receivable, Allowance for Doubtful Accounts, Policy [Policy Text Block]

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Accounts Receivable

Basis of Presentation, Policy

Basis of Presentation

The accompanying Consolidated Financial Statements of the Company have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).

Principles of Consolidation, Policy

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation.

Management Estimates, Policy

Use of Estimates

Segment Disclosures, Policy

Segment Reporting

Cash Equivalents and Investments, Policy

Cash Equivalents

Investment, Policy [Policy Text Block]

Investments

The Company’s investments include available-for-sale investments, equity method investments and cost method investments in certain publicly traded companies and privately-held companies.

Fair Value Measurements, Policy

Fair Value Measurements

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.

Notes Receivable and Other Long-Term Receivables, Policy

Notes Receivable and Other Long-Term Receivables

Inventory, Policy [Policy Text Block]

Inventory

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Intangible Assets

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill

Property and Equipment, Policy

Property and Equipment



Leasehold improvements		Shorter of asset life or term of lease
Computer and office equipment		3 years
Furniture and fixtures		7 years

Debt, Policy [Policy Text Block]

Convertible Notes

Financing Costs Related to Long-term Debt [Policy Text Block]

Financing Costs Related to Long-term Debt

Product Revenue, Policy

Product Revenue

General

Provisions

Queen et al. Royalty Revenues [Policy Text Block]

Queen et al. Royalty Revenues

Acquired Royalty Rights, Policy

Royalty Rights - At Fair Value

Derivatives, Methods of Accounting, Hedge Documentation [Policy Text Block]

Foreign Currency Hedging

From time to time, the Company may enter into foreign currency hedges to manage exposures arising in the normal course of business and not for speculative purposes.

Foreign Currency Hedging, Policy

Foreign Currency Translation

Comprehensive Income, Policy

Comprehensive Income (Loss)

Income Tax, Policy [Policy Text Block]

Income Taxes

Business Combinations Policy [Policy Text Block]

Business Combination

Lease, Policy [Policy Text Block]

Lease Accounting and Lease Guarantee

New Accounting Pronouncements, Policy [Policy Text Block]

Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements

Net Income per Share (Tables)

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Schedule of calculation of numerator and denominator in earnings per share



	Year Ended December 31,
(In thousands, except per share amounts)	2016		2015		2014
Numerator
Income attributable to the Company’s shareholders used to compute net income per diluted share	$	63,606	$	332,795	$	322,244

Denominator
Total weighted-average shares used to compute net income per basic share	163,805		163,386		158,224
Effect of dilutive stock options	—		16		21
Restricted stock awards	387		152		126
Assumed conversion of Series 2012 Notes	—		—		3,532
Assumed conversion of warrants	—		—		5,510
Assumed conversion of May 2015 Notes	—		—		5,697
Shares used to compute net income per diluted share	164,192		163,554		173,110

Net income per basic share	$	0.39	$	2.04	$	2.04
Net income per diluted share	$	0.39	$	2.03	$	1.86

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2016

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]

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 year ended December 31, 2016:



Fair Value Measurements Using Significant Unobservable Inputs (Level 3) - Royalty Right Assets

(in thousands)				Royalty Rights - At Fair Value
Fair value as of December 31, 2015							$	399,204

	Fair value of financial instruments purchased						59,500
	Total net change in fair value for the period
		Change in fair value of royalty rights - at fair value		$	16,196
		Proceeds from royalty rights - at fair value		$	(72,582	)
			Total net change in fair value for the period				(56,386		)

Fair value as of December 31, 2016							$	402,318

Schedule of fair value of financial instruments measured on recurring basis



	December 31, 2016								December 31, 2015
(In thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds	$	4	$	—	$	—	$	4	$	94,801	$	—	$	—	$	94,801
Certificates of deposit	—		75,000		—		75,000		—		—		—		—
Corporate securities	—		—		—		—		—		1,469		—		1,469
Commercial paper	—		19,987		—		19,987		—		—		—		—
Foreign currency hedge contracts	—		—		—		—		—		2,802		—		2,802
Warrants	—		78		—		78		—		984		—		984
Royalty rights - at fair value	—		—		402,318		402,318		—		—		399,204		399,204
Total	$	4	$	95,065	$	402,318	$	497,387	$	94,801	$	5,255	$	399,204	$	499,260

Financial liabilities:
Anniversary payment	$	—	$	—	$	88,001	$	88,001	$	—	$	—	$	—	$	—
Contingent consideration	—		—		42,650		42,650		—		—		—		—
Total	$	—	$	—	$	130,651	$	130,651	$	—	$	—	$	—	$	—

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



	December 31, 2016						December 31, 2015
	Carrying Value		Level 2		Level 3		Carrying Value		Level 2		Level 3
(In thousands)
Assets:
Wellstat Diagnostics note receivable	$	50,191	$	—	$	52,260	$	50,191	$	—	$	55,970
Hyperion note receivable	1,200		—		1,200		1,200		—		1,200
LENSAR note receivable	43,909		—		43,900		42,271		—		42,618
Direct Flow Medical note receivable	10,000		—		10,000		51,852		—		51,992
Paradigm Spine note receivable	—		—		—		53,973		—		54,250
kaléo note receivable	146,685		—		142,539		146,778		—		146,789
CareView note receivable	18,965		—		19,200		18,640		—		19,495
Total	$	270,950	$	—	$	269,099	$	364,905	$	—	$	372,314
Liabilities:
February 2018 Notes	$	121,595	$	123,918	$	—	$	228,862	$	197,946	$	—
December 2021 Notes	110,848		122,063		—		—		—		—
Term loan	—		—		—		24,966		—		25,000
Total	$	232,443	$	245,981	$	—	$	253,828	$	197,946	$	25,000

Foreign Currency Hedging (Tables)

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Euro forward contracts

Euro Forward Contracts

December 31, 2016

December 31, 2015

(In thousands)

Currency

Settlement Price

($ per Euro)

Type

Notional Amount

Fair Value

Notional Amount

Fair Value

Euro

1.260

Sell Euro

—

16,500

2,802

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



		December 31,
Cash Flow Hedge	Location	2016		2015
(In thousands)
Euro forward contracts	Prepaid and other current assets	$	—	$	2,802

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



	Year Ended December 31,
	2016		2015		2014
(In thousands)
Net gain (loss) recognized in OCI, net of tax ⁽¹⁾	$	—	$	4,626	$	4,834
Gain (loss) reclassified from accumulated OCI into “Queen et al. royalty revenue,” net of tax ⁽²⁾	$	1,821	$	5,390	$	(3,768	)
Net gain (loss) recognized in “Interest and other income, net” -- cash flow hedges ⁽³⁾	$	—	$	—	$	5

Tabular disclosure of pertinent information about a derivative or group of derivatives on a disaggregated basis, such as for individual instruments, or small groups of similar instruments. May include a combination of the type of instrument, risks being hedged, notional amount, hedge designation, related hedged item, inception date, maturity date, or other relevant item.

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Schedule of carrying value and unamortized discount on December 2021 Notes [Table Text Block]

Commitments and Contingencies (Tables) $ in Thousands	Dec. 31, 2016 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Operating Leases, Future Minimum Payments Due	$ 184
Operating Leases, Future Minimum Payments, Due in Two Years	96
Operating Leases, Future Minimum Payments, Due in Three Years	87
Operating Leases, Future Minimum Payments, Due in Four Years	79
Operating Leases, Future Minimum Payments, Due in Five Years	59
Operating Leases, Future Minimum Payments, Due Thereafter	0
Operating Leases, Future Minimum Payments Due	$ 505

Convertible Notes (Tables)

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

The carrying value and unamortized discount of the December 2021 Notes were as follows:



(In thousands)	December 31, 2016
Principal amount of the December 2021 Notes	$	150,000
Unamortized discount of liability component	(39,152		)
Net carrying value of the December 2021 Notes	$	110,848

Schedule of convertible and non-recourse notes activity



(In thousands)	Series 2012 Notes			May 2015 Notes			February 2018 Notes			December 2021 Notes			Term Loan			Total
Balance at December 31, 2014	$	22,261		$	153,235		$	269,275		$	—		$	—		$	444,771
Issuance and exchange	—			—			—			—			100,000			100,000
Payment	(22,337		)	(155,050		)	—			—			(75,000		)	(252,387		)
Repurchase	—			—			(53,553		)	—			—			(53,553		)
Non-cash Discount	—			—			—			—			(607		)	(607		)
Amortization	76			1,815			13,140			—			573			15,604
Balance at December 31, 2015	—			—			228,862			—			24,966			253,828
Issuance and exchange	—			—			—			150,000			—			150,000
Payment	—			—			—			—			(25,000		)	(25,000		)
Repurchase	—			—			(120,000		)	—			—			(120,000		)
Non-cash Discount	—			—			—			(3,204		)	—			(3,204		)
Non-cash conversion feature	—			—			—			(36,653		)	—			(36,653		)
Amortization	—			—			12,733			705			34			13,472
Balance at December 31, 2016	$	—		$	—		$	121,595		$	110,848		$	—		$	232,443

Schedule of carrying value and unamortized discount on Series 2012 Notes

Schedule of interest expense on Series 2012 Notes



	Year ended December 31,
(In thousands)	2016		2015		2014
Contractual coupon interest	$	—	$	80	$	1,726
Amortization of debt issuance costs	—		13		1,089
Amortization of debt discount	—		76		2,415
Total	$	—	$	169	$	5,230

Schedule of carrying value and unamortized discount on May 2015 Notes

Schedule of interest expense for May 2015 Notes



	Year Ended December 31,
(In thousands)	2016		2015		2014
Contractual coupon interest	$	—	$	1,938	$	5,817
Amortization of debt issuance costs	—		435		1,274
Amortization of debt discount	—		1,815		5,182
Total	$	—	$	4,188	$	12,273

Schedule of Maturities of Long-term Debt [Table Text Block]



(In thousands)	February 2018 Notes		December 2021 Notes		Total
2017	$	—	$	—	$	—
2018	126,447		—		126,447
2019	—		—		—
2020	—		—		—
2021	—		150,000		150,000
Thereafter	—		—		—
Total	$	126,447	$	150,000	$	276,447

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

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



(In thousands)	December 31, 2016			December 31, 2015
Principal amount of the February 2018 Notes	$	126,447		$	246,447
Unamortized discount of liability component	(4,852		)	(17,585		)
Net carrying value of the February 2018 Notes	$	121,595		$	228,862

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

Interest expense for the February 2018 Notes on the Company’s Consolidated Statements of Income was as follows:



	Year Ended December 31,
(In thousands)	2016		2015		2014
Contractual coupon interest	$	9,338	$	11,786	$	10,633
Amortization of debt issuance costs	2,863		2,980		1,898
Amortization of debt discount	9,870		10,160		5,954
Total	$	22,071	$	24,926	$	18,485

Schedule of interest expense for December 2021 Notes [Table Text Block]

Interest expense for the December 2021 Notes on the Company’s Consolidated Statements of Income was as follows:



	Year Ended December 31,
(In thousands)	2016
Contractual coupon interest	$	447
Amortization of debt issuance costs	10
Amortization of debt discount	75
Amortization of conversion feature	620
Total	$	1,152

Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2016

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

Schedule of Deferred Compensation Arrangement with Individual, Share-based Payments [Table Text Block]



	Year Ended December 31,
Stock-based Compensation	2016		2015		2014
(In thousands)
Employees and directors	$	3,679	$	1,952	$	1,157
Non-employees	63		93		344
Total	$	3,742	$	2,045	$	1,501

Schedule of common stock activity available under share-based compensation plans



Title of Plan	Total Shares of Common Stock Authorized	Total Shares of Common Stock Issued	Total Shares of Common Stock Subject to Outstanding Awards	Total Shares of Common Stock Available for Grant
2005 Equity Incentive Plan⁽¹⁾	6,200,000	2,767,700	—	3,432,300
2002 Outside Directors Stock Option Plan⁽²⁾	157,000	157,000	—	—
1999 Non-statutory Stock Option Plan⁽²⁾	4,966,183	4,966,183	—	—
1999 Stock Option Plan⁽²⁾	3,694,485	3,694,485	—	—

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]



	2016			2015				2014
	Number of shares (in thousands)	Weighted-Average Exercise Price		Number of shares (in thousands)		Weighted-Average Exercise Price		Number of shares (in thousands)		Weighted-Average Exercise Price
Outstanding at beginning of year	—	$	—	58		$	5.41	172		$	16.52
Expired	—	$	—	(58	)	$	5.41	(114	)	$	22.08
Outstanding at end of year	—	$	—	—		$	—	58		$	5.41
Exercisable at end of year	—	$	—	58		$	—	58		$	5.41

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]



	2016				2015				2014
	Number of shares (in thousands)		Weighted-average grant-date fair value per share		Number of shares (in thousands)		Weighted-average grant-date fair value per share		Number of shares (in thousands)		Weighted- average grant-date fair value per share
Nonvested at beginning of year	586		$	7.13	277		$	8.39	114		$	7.45
Awards granted	1,264		$	3.31	522		$	6.40	312		$	8.39
Awards vested	(366	)	$	6.65	(173	)	$	8.38	(149	)	$	7.67
Forfeited	(12	)	$	7.10	(40	)	$	7.79	—		$	—
Nonvested at end of year	1,472		$	3.96	586		$	7.13	277		$	8.39

Tabular disclosure of an equity-based arrangement (such as stock or unit options and stock or unit awards) with an individual employee, which is generally an employment contract between the entity and a selected officer or key employee containing a promise by the employer to pay certain equity-based awards at future dates, sometimes including a period after retirement, upon compliance with stipulated requirements. This type of arrangement is distinguished from broader based employee benefit plans as it is usually tailored to the employee. Disclosure also typically includes the amount of related compensation expense recognized during the reporting period, the number of shares or units issued during the period under such arrangements, and the carrying amount as of the balance sheet date of the related liability.