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Investment in Non-Controlled Entity and Other Arrangements (Notes)
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6 Months Ended |
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Jun. 30, 2014
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| Investment and Loan With Non-Controllable Entity [Abstract] | |
| Loans, Notes, Trade and Other Receivables Disclosure [Text Block] |
INVESTMENT IN NON-CONTROLLED ENTITY AND OTHER ARRANGEMENTS
In August 2013, PDI entered into phase one of a collaboration agreement with a privately held, emerging molecular diagnostics company (the Diagnostics Company) to commercialize its fully-developed, molecular diagnostic tests. The Diagnostics Company does not have experience in, or a history of, successfully commercializing diagnostic products. Under the terms of phase one of the collaboration agreement, PDI paid an initial fee of $1.5 million and has the ability to enter the second phase of the collaboration agreement in the form of a call option to purchase the outstanding common stock of the Diagnostics Company. PDI has recorded the initial fee as an investment in a non-controlled entity within Other current assets in the Consolidated Balance Sheets in accordance with ASC 325-20 Investments Other - Cost Method Investments.
The Company also has the option to contribute an additional $0.5 million for mutually agreed upon activities in furtherance of collaboration efforts. The option price is dependent on the achievement of certain milestones during the collaboration period (the period up to the exercise of the purchase option or termination of the collaboration agreement) and could be up to $6.0 million if all milestones are achieved at their maximum levels. PDI can terminate the collaboration agreement if all milestones are not achieved by August 2014 and would receive a $1.0 million termination fee, leaving the Company with a maximum exposure of $0.5 million plus amounts contributed in furtherance of collaboration efforts.
If all milestones are achieved by August 2014 and PDI has not exercised its option, the Diagnostics Company can require PDI to exercise the option to purchase its outstanding common stock or terminate the collaboration agreement and pay PDI a termination fee of approximately $2.0 million. If PDI purchases the outstanding common stock of the Diagnostics Company, in addition to the option price based on the achievement of milestones, beginning in 2015, PDI would pay a royalty of 7% on annual net revenue up to $50.0 million with escalating royalty percentages for higher annual net revenue capped at 11% for annual net revenue in excess of $100.0 million.
During the three month period ended March 31, 2014, PDI provided the Diagnostics Company approximately a loan of approximately $0.6 million for the acquisition of a CLIA approved laboratory bearing a 4% interest rate. During the three month period ended June 30, 2014, PDI made additional loans of $0.1 million bearing the same interest rate. These loans are secured by the laboratory and the assets of the laboratory and are payable to PDI at the sooner of: May 31, 2015; the expiration or termination of the collaboration agreement between the parties; the acquisition of the Diagnostics Company by PDI; or default by the Diagnostics Company. PDI has recorded the loan receivable within Other current assets in the Condensed Consolidated Balance Sheets.
Other Arrangements
In October 2013, the Company entered into phase one of a collaboration agreement to commercialize CardioPredict™, a molecular diagnostic test developed by Transgenomic, in the United States. Under the terms of the strategic collaboration agreement, PDI was responsible for all U.S.-based marketing and promotion of CardioPredict™, while Transgenomic would be responsible for processing CardioPredict™ in its state-of-the-art CLIA lab and all customer support. Both parties were responsible for their respective expenses. Subsequently, the Company has determined that it would not enter into the second phase of the collaboration agreement with Transgenomic and notified Transgenomic of its decision to terminate the collaboration agreement effective June 30, 2014. If the Company had determined that it would enter the second phase of the collaboration agreement, profits would have been split on a formula basis and PDI may have provided Transgenomic with funding support of up to $3.0 million, principally to finance working capital requirements for the product. The Company did not provide any funding to Transgenomic.
PDI's costs related to both of these agreements are expensed in the Company's PC Services segment and reflected in Cost of services or Selling, general and administrative expenses in the Consolidated Statement of Comprehensive (Loss) Income, depending upon the underlying nature of the expenses incurred.
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