Available for Sale Debt Securities

3 Months Ended

Mar. 31, 2024

Investments, Debt and Equity Securities [Abstract]

Cytokinetics Commercial Launch Funding

On January 7, 2022, we entered into a long-term funding agreement, which was later amended in 2022, with Cytokinetics, Incorporated (“Cytokinetics”). We agreed to provide funding of up to $300 million (“Cytokinetics Commercial Launch Funding”) in five tranches. The initial tranche of $50 million was funded upon closing. Cytokinetics is required to draw $50 million if a certain contingency is met and has the option to draw the remaining $200 million upon the occurrence of certain regulatory and clinical development milestones (“Cytokinetics Funding Commitments”). Because the regulatory milestones for the second and third tranches were not met, $75 million of the optional funding is not available. For tranches one, four and five, we expect to receive a return of 1.9 times the amount drawn over 34 consecutive quarterly payments beginning on the last business day of the seventh quarter following the quarter of the funding date of each tranche. In the fourth quarter of 2023, we began receiving quarterly payments on the return of the first tranche. As of March 31, 2024, $175 million remained available under the Cytokinetics Funding Commitments.

We elected the fair value option to account for the Cytokinetics Commercial Launch Funding due to the nature of the funding arrangement. The funded Cytokinetics Commercial Launch Funding is recorded within Available for sale debt securities on the condensed consolidated balance sheets. The Cytokinetics Funding Commitments, which include options and forwards over the subsequent tranches, are recognized at fair value within Other liabilities on the condensed consolidated balance sheets. The changes in the fair value of the funded Cytokinetics Commercial Launch Funding and the Cytokinetics Funding Commitments are recorded within Gains on available for sale debt securities in the condensed consolidated statements of operations.

MorphoSys Development Funding Bonds

On June 2, 2021, we announced a long-term strategic funding agreement with MorphoSys AG (“MorphoSys”) to support its acquisition of Constellation Pharmaceuticals, Inc. In September 2022, we provided MorphoSys funding of $300 million (“Development Funding Bonds”). We expect to receive a return of 2.2 times the Development Funding Bonds, payable on a quarterly basis over nine years, with the first payment beginning in the fourth quarter of 2024.

We elected the fair value option to account for the Development Funding Bonds as it most accurately reflects the nature of these instruments. The Development Funding Bonds are recorded within Available for sale debt securities on the condensed consolidated balance sheets. The changes in the fair value of the Development Funding Bonds are recorded within Gains on available for sale debt securities in the condensed consolidated statements of operations.

The table below summarizes our available for sale debt securities recorded at fair value (in thousands):


	Cost		Unrealized Gains		Fair Value		Current Assets		Non-Current Assets		Non-Current Liabilities		Total
As of March 31, 2024
Debt securities(1)	$	359,923	$	142,777	$	502,700	$	29,000	$	473,700	$	—	$	502,700

Funding commitments(2)	(7,300)		4,080		(3,220)		—		—		(3,220)		(3,220)
Total available for sale debt securities	$	352,623	$	146,857	$	499,480	$	29,000	$	473,700	$	(3,220)	$	499,480

As of December 31, 2023
Debt securities(1)	$	359,667	$	95,733	$	455,400	$	18,300	$	437,100	$	—	$	455,400
Funding commitments(2)	(7,300)		6,400		(900)		—		—		(900)		(900)
Total available for sale debt securities	$	352,367	$	102,133	$	454,500	$	18,300	$	437,100	$	(900)	$	454,500

(1)The cost associated with the funded Cytokinetics Commercial Launch Funding reflects the fair value on the purchase date which is amortized as we received quarterly repayments on the first tranche. The cost of the Development Funding Bonds represents the amount funded.

(2)Related to Cytokinetics Funding Commitments for which related tranches remain available as of the respective balance sheet dates. The cost associated with the Cytokinetics Funding Commitments represents the fair value on the purchase date.