Cash And Cash Equivalents, Short-Term Investments, Long-Term Investments And Other Investments

9 Months Ended

Sep. 30, 2011

Cash And Cash Equivalents, Short-Term Investments, Long-Term Investments And Other Investments

Cash And Cash Equivalents, Short-Term Investments, Long-Term Investments And Other Investments

3.	Cash and Cash Equivalents, Short-term Investments, Long-term Investments and Other Investments

Cash and cash equivalents, short-term investments, long-term investments and other investments were composed of the following as of the dates set forth below:


	Cash and Cash Equivalents		Short-term Investments		Long-term Investments		Other Investments		Unrealized Gains		Unrealized Losses
As of December 31, 2010
Cash	$	246,843
Money market funds		232,731
Auction rate securities					$	78,747					$	14,203
Municipal debt securities			$	32,707					$	122		24
Corporate debt securities – FDIC insured				9,160						105		1
Treasury securities				38,109						118		2

Equity method investment:
Celtic Therapeutics Holdings, L.P.							$	30,724

Cost method investments:
Bay City Capital Funds								7,069
A.M. Pappas Funds								3,486
Liquidia Technologies, Inc.								5,000
Other investments								1,554

Total	$	479,574	$	79,976	$	78,747	$	47,833	$	345	$	14,230


As of September 30, 2011
Cash	$	197,077
Money market funds		210,759
Certificates of deposit		8,910
Auction rate securities			$	50,374
Asset-backed securities				13,206

Equity method investments:
Celtic Therapeutics Holdings, L.P.							$	58,347
venBio Global Strategic Fund, L.P.								200

Cost method investments:
Bay City Capital Funds								8,751
A.M. Pappas Funds								3,546
Liquidia Technologies, Inc.								5,000
Other investments								1,733

Total	$	416,746	$	63,580	$	—	$	77,577	$	—	$	—

For the three and nine months ended September 30, 2010 and 2011, the Company had the following gross realized gains and losses on investments:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2011		2010		2011
Gross realized gains on short-term investments	$	—	$	—	$	4	$	422
Gross realized gains on cost method investments		—		—		3,340		244
Gross realized losses on short-term investments		—		—		53		5
Gross realized losses on long-term investments		—		—		—		842
Gross realized losses on cost method investments		—		—		750		924

Short-term and long-term investments

The Company classifies its short-term and long-term investments as available-for-sale securities. The Company determines realized and unrealized gains and losses on short-term and long-term investments on a specific identification basis.

At December 31, 2010, the Company held $78.7 million, net of unrealized losses of $14.2 million, in auction rate securities. The Company classified these securities as long-term investments. The Company concluded that the unrealized losses were temporary because of its ability and intent to hold the auction rate securities until the fair value recovered. In May 2011, the Company converted $14.2 million par value of its government-guaranteed student loan auction rate securities to $14.2 million par value of government-guaranteed student loan asset-backed securities from the same issuer. As a result of the pending Merger Agreement more fully described in Note 16, which requires the Company, at the request of Jaguar Holdings, LLC, or Parent, to sell all or part of the asset-backed and auction rate securities at a price equal or greater than the price proposed by the Parent, the Company classified all of these securities as short-term investments and recorded them at an estimated fair value as of September 30, 2011. Amounts ultimately received upon sale could vary from their estimated fair value; however, the Company does not believe the difference between the estimated fair value and the amounts ultimately received upon sale will be material. In addition, the Company concluded that the previously unrealized losses were other-than-temporary because the Company no longer had the intent to hold these securities until maturity or until their face value recovered. As a result, for the three and nine months ended September 30, 2011, the Company recognized other-than-temporary impairment losses of $17.7 million.

Equity method investment

In 2009, the Company committed to invest up to $102.7 million in Celtic Therapeutics Holdings, L.P., or Celtic, as a limited partner. Celtic is an investment partnership organized for the purpose of identifying, acquiring and investing in a diversified portfolio of novel therapeutic product candidates, with a focus on mid-stage compounds that have progressed through human proof of concept studies and that are targeted to address unmet medical needs. As of September 30, 2011, the Company owned 49.6% of the outstanding partnership interests of Celtic. The Company accounts for this investment under the equity method of accounting because the Company is a limited partner and the general partner has all decision-making authority relating to investment decisions and fund operations. As such, the Company is deemed to lack the control of the entity required for consolidation. As of September 30, 2011, the Company had a remaining commitment of $55.0 million, which it expects to fund over a period of up to four years. During 2010, the Company loaned Celtic $10.0 million, of which $2.0 million was repaid in 2010 and the remaining $8.0 million was converted to additional equity in connection with the settlement of a $10.0 million capital call during the first quarter of 2011. For the three months ended September 30, 2010 and 2011, the Company recognized a loss of $4.6 million and income of $1.9 million, respectively, based on the allocation of profits and losses to the partners' capital accounts. For the nine months ended September 30, 2010 and 2011, the Company recognized a loss of $8.4 million and income of $15.1 million, respectively, based on the allocation of profits or losses to the partners' capital accounts. As of September 30, 2011, the Company had an investment balance of $58.3 million.

In April 2011, the Company committed to invest up to $50.0 million in venBio Global Strategic Fund, L.P., or venBio, as a limited partner over the next five years. venBio invests in early stage life sciences companies. The Company accounts for this investment under the equity method of accounting because the Company is a limited partner and the general partner has all decision-making authority relating to investment decisions and fund operations. As such, the Company is deemed to lack the control of the entity required for consolidation. As of September 30, 2011, the Company had a remaining commitment of $49.8 million. As of September 30, 2011, the Company had an investment balance of $0.2 million and had an ownership interest in venBio of 28.6%.

Cost method investments

The Company is a limited partner in several venture capital funds established for the purpose of investing in life science and healthcare companies. These funds require the Company to commit to make investments in the funds over a period of time. The Company accounts for these funds as cost method investments, determining realized and unrealized losses on a specific identification method.

The Company is a stockholder in Accelerator III Corporation and certain of its incubator companies. Accelerator III requires the Company to make investments upon request up to its committed capital amount. The Company accounts for this investment as a cost method investment, determining realized and unrealized losses on a specific identification method.

The Company's capital commitments in these funds as of September 30, 2011 were as follows:


Fund	Ownership			Total Capital Commitment		Remaining Commitment		Commitment Expiration
Bay City Capital Fund IV, L.P.		2.9	%	$	10,000	$	705	^{September 2010(2)}
Bay City Capital Fund V, L.P.		2.0	%		10,000		5,552	October 2012
A.M. Pappas Life Science Ventures III, L.P.		4.7	%		4,750		594	^{December 2009(2)}
A.M. Pappas Life Science Ventures IV, L.P.		3.0	%		2,935		1,702	February 2014
Accelerator III and incubator companies⁽¹⁾		19.9	%		4,802		819	None

⁽¹⁾	The Company's percentage ownership of Accelerator III and incubator companies might vary but will not exceed 19.9%.

⁽²⁾

The funding commitments to Bay City Capital Fund IV, L.P. and A.M. Pappas Life Science Ventures III, L.P. have expired for new investments. The Company may still be required to fund additional investments in existing fund portfolio companies and the ongoing operations of these funds up to the amount of the remaining capital commitment.

In May 2010, the Company invested $5.0 million for an ownership interest in Liquidia Technologies, Inc. As of September 30, 2011, the Company's ownership interest in Liquidia was 8.6%.

PHARMACEUTICAL PRODUCT DEVELOPMENT INC 10-Q