Sale of Future Royalties

3 Months Ended

Mar. 31, 2025

On June 27, 2024, the Company entered into the Purchase Agreement with OCM IP Healthcare Portfolio LP ("the Purchaser") ("OMERS"). Pursuant to the Purchase Agreement, the Company sold to the Purchaser, and the Purchaser purchased for $304.7 million, a portion of the royalties payable on net sales of Bempedoic Acid (as defined in the License and Collaboration Agreement) and any other Licensed Products (as defined in the License and Collaboration Agreement) in the DSE Territory (as defined in the License and Collaboration Agreement) pursuant to the License and Collaboration Agreement dated January 2, 2019, between Daiichi Sankyo Europe GMBH and the Company, as amended (the “License and Collaboration Agreement” and such royalties being the “Royalty Interests”). In connection with the Purchase Agreement, the Company incurred $9.6 million in issuance costs.

The Purchaser acquired 100% of the Royalty Interests until such time as the Purchaser has received an aggregate amount equal to 1.7x of the Purchase Price (equivalent to $517.9 million). Following receipt of such amount, 100% of all Royalty Interests will revert to the Company. The Purchase Agreement contains other customary terms and conditions, including representations and warranties, covenants and indemnification obligations in favor of each party.

The Company evaluated the arrangement and determined that the proceeds from the sale of future royalties should be treated as a debt instrument according to ASC 470 Debt. The Company imputes interest expense associated with the liability using the effective interest rate method. The effective interest rate is calculated based on the rate that would enable the liability to be repaid in full over the anticipated life of the arrangement. The interest rate on the liability may vary during the term of the agreement depending on a number of factors, including the level of forecasted royalty sales. The Company evaluates the interest rate quarterly based on its expectations of forecasted royalty sales from its license partner, historical experience and current market conditions utilizing the prospective method. A significant increase or decrease in future royalty sales will materially impact the royalty sale liability, interest expense and the time period for repayment. The repayment of the royalty sale liability to the Purchaser does not have a fixed repayment schedule. Rather, it will be completely repaid and extinguished when the Company has repaid an aggregate amount equal to 1.7x of the Purchase Price. The $9.6 million in issuance costs will be amortized through interest expense over the life of the agreement. Royalties are remitted to the Purchaser in the subsequent quarter from when it's earned. The Company recognizes those royalties in accounts receivable, net and accounts payable on the condensed balance sheets until the royalties are remitted to the Purchaser from DSE.

As of March 31, 2025, the Company has recorded a liability, referred to as the “Royalty sale liability” on the condensed balance sheets, of $296.2 million, net of $8.4 million of capitalized issuance costs in connection with the royalty sale liability, which will be amortized to interest expense over the estimated term, $2.0 million of which will be amortized over the next 12 months and $6.4 million thereafter. The Company currently expects to repay $57.2 million in the next twelve months.

The Company recorded $13.1 million in interest expense related to this arrangement for the three months ended March 31, 2025, which included $0.4 million of amortized issuance costs.

The effective annual imputed interest rate is 1.4% as of March 31, 2025.

The following table summarizes the royalty sale liability activity during the three months ended March 31, 2025 (in thousands):


	(in thousands)
Total royalty sale liability at December 31, 2024	$	293,610

Royalties recognized and settled to Purchaser	(10,481)

Interest expense recognized	13,090
Total royalty sale liability at March 31, 2025	$	296,219