Liability Related to Sale of Future Royalties, net

3 Months Ended

Mar. 31, 2020

In June 2018, the Company entered into a funding agreement (the "Funding Agreement") to sell tiered, sales-based royalty rights on global net sales of pharmaceutical products containing the compounds rimegepant or vazegepant (previously known as BHV-3500) and certain derivative compounds thereof ("Products") to RPI, a Delaware statutory trust. The Company issued to RPI the right to receive certain revenue participation payments, subject to certain reductions, based on the future global net sales of the Products for each calendar quarter during the royalty term contemplated by the Funding Agreement ("Revenue Participation Right"), in exchange for $100,000 in cash.

Concurrent with the Funding Agreement, the Company entered into a common stock purchase agreement (the "Purchase Agreement") with RPI. Pursuant to the Purchase Agreement, the Company sold 1,111,111 common shares of the Company to RPI at a price of $45.00 per share, for gross proceeds of $50,000.

The Company concluded that there were two units of accounting for the consideration received comprised of the liability related to sale of future royalties and the common shares. The Company allocated the $100,000 from the Funding Agreement and $50,000 from the Purchase Agreement among the two units of accounting on a relative fair value basis at the time of the transaction. The Company allocated $106,047 in transaction consideration to the liability, and $43,953 to the common shares.

The Company determined the fair value of the common shares based on the closing share price on the transaction date, adjusted for the trading restrictions. The transaction costs of $377 were allocated in proportion to the allocation of total consideration to the two units of accounting. The effective interest rate under the Funding Agreement, including transaction costs, is approximately 27% as of March 31, 2020.

The following table shows the activity within the liability account for the three months ended March 31, 2020 and 2019, respectively, related to the Funding Agreement.


	Three Months Ended March 31,
	2020		2019
Liability related to sale of future royalties - beginning balance	$	144,111	$	117,515
Royalty revenues payable to RPI	(24)		—
Non-cash interest expense on liability related to sale of future royalties	8,425		6,817
Liability related to sale of future royalties - ending balance	$	152,512	$	124,332