Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

Summary of Significant Accounting Policies

Consolidation and Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Portola and its wholly-owned subsidiaries. During the third quarter of 2019, we deconsolidated SRX Cardio, LLC (“SRX Cardio”), a variable interest entity for which Portola was deemed, under applicable accounting guidance, to be the primary beneficiary and as such, had been consolidated by us since 2015. The unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP has been condensed or omitted.

These Condensed Consolidated Financial Statements have been prepared on the same basis as our annual Consolidated Financial Statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments that are necessary for a fair statement of our financial information. The accompanying unaudited Condensed Consolidated Financial Statements and related financial information should be read in conjunction with the audited Consolidated Financial Statements and the related notes thereto for the year ended December 31, 2019 included in our Annual Report on Form 10-K filed on February 28, 2020 with the SEC.

We have incurred substantial operating losses since inception and expect to continue to incur operating losses in the near term. We estimate our existing capital resources, together with interest thereon, to be sufficient to meet our projected operating requirements into the second quarter of 2021 while maintaining compliance with covenants pursuant to the 2019 Credit Agreement of a minimum of $50.0 million of cash on hand. In light of the estimated costs to support the global launch and continued development of Andexxa, we will need to implement cost saving measures, defer the timing of capital expenditures and potentially raise additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and/or other marketing and distribution arrangements. There can be no assurance that additional financing will be available on acceptable terms, if at all. If we are unable to obtain needed financing, we will need to curtail planned activities to reduce costs. Doing so will likely have an unfavorable effect on our ability to execute on our business plan, and have an adverse effect on our business, results of operations and future prospects.

The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any other interim period or for any other future year. The Condensed Consolidated Balance Sheet as of December 31, 2019 has been derived from the audited Consolidated Financial Statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements.

Use of Estimates

The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities and the reported amounts of revenues and expenses in these Condensed Consolidated Financial Statements and the accompanying

notes. On an ongoing basis, we evaluate our significant accounting policies and estimates. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results may differ from those estimates.

Cash as Reported in Condensed Consolidated Statements of Cash Flows

Cash as reported in these Condensed Consolidated Statements of Cash Flows includes the aggregate amounts of cash and cash equivalents and restricted cash. As of March 31, 2020, restricted cash represents cash restricted for royalty payments to HealthCare Royalty Partners and its affiliates (“HCR”) and cash held as security deposits for our office leases in Europe. Cash restricted for HCR royalty payments is classified as a current asset, while cash restricted for the Germany office lease is classified as a non-current asset, included in prepaid and other long-term assets in our Condensed Consolidated Balance Sheets. Cash as reported in these Condensed Consolidated Statements of Cash Flows consists of the following (in thousands):



	March 31, 2020		December 31, 2019		March 31, 2019		December 31, 2018
Cash and cash equivalents	$	196,235	$	215,229	$	226,793	$	138,951
Restricted cash (SRX Cardio)	—		—		29		30
Restricted cash for royalty payments to HCR	4,266		3,375		1,499		1,032
Restricted cash for office leases in Europe	54		46		—		—
Total cash balance in Condensed Consolidated Statements of Cash Flows	$	200,555	$	218,650	$	228,321	$	140,013

Customer Concentration

During the three months ended March 31, 2020, we had four Andexxa specialty distributor customers who each accounted for 10% or more of total net revenues, and no collaboration revenue customers that accounted for more than 10% of total net revenues.

During the three months ended March 31, 2019, we had four Andexxa specialty distributor customers who each accounted for 10% or more of total net revenues, and no collaboration revenue customers that accounted for more than 10% of total net revenues.

Recent Accounting Pronouncements Adopted

In March 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments—Credit Losses (Topic 326). This ASU implements an impairment model, known as the current expected credit loss model that is based on expected losses rather than incurred losses, and applies to most financial assets measured at amortized cost, such as trade and other receivable, and certain other instruments, such as available-for-sale debt securities. Entities are required to estimate expected credit losses over the life of financial assets and record an allowance against the assets’ amortized cost basis to present them at the amount expected to be collected. Additionally, the guidance amends the impairment model for available-for-sale debt securities and requires entities to determine whether all or a portion of the unrealized loss on such debt security is a credit loss. We adopted the standard on January 1, 2020 under the modified-retrospective approach. Upon adoption, the standard did not have an impact on our Condensed Consolidated Financial Statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This standard modifies certain disclosure requirements on fair value measurements. We adopted the standard on January 1, 2020 under the prospective approach as it relates to the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. Upon adoption, the standard did not have a material impact on our disclosures. For the new disclosures regarding our Level 3 instruments, see Note 4, Fair Value Measurements, to these Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract

with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Accordingly, this ASU requires a customer in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. We adopted the standard on January 1, 2020 under the prospective approach. Upon adoption, the standard did not have an impact on our Condensed Consolidated Financial Statements and related disclosures.

In November 2018, the FASB issued ASU 2018-18, Collaborative arrangements (Topic 808): Clarifying the interaction between Topic 808 and Topic 606. This ASU clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer and precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. We adopted the standard on January 1, 2020 retrospectively to the date of

our initial application of Topic 606 and only to contracts that were not completed at the date of initial application of Topic 606. Upon adoption, the standard did not have an impact on our Condensed Consolidated Financial Statements and related disclosures.