Fair Value Measurements

12 Months Ended

Dec. 31, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

Fair Value Measurements

The Company uses various inputs in determining the fair value of its investments and measures these assets on a recurring basis.  Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized by the level of objectivity associated with the inputs used to measure their fair value.  The following levels are directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities:

• Level 1 – quoted prices in active markets for identical assets

• Level 2 – other significant observable inputs (including quoted prices for similar investments, market corroborated inputs, etc.)

• Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of assets and liabilities)

The inputs or methodology used for valuing securities are not necessarily an indication of the credit risk associated with investing in those securities.  The following tables provide the fair value measurements of applicable Company assets and liabilities that are measured at fair value on a recurring basis according to the fair value levels defined above as of December 31, 2011 and 2010.

	Assets and Liabilities at Fair Value
	As of December 31, 2011
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Cash and cash equivalents	$	186,309	$	—	$	—	$	186,309
Short-term investments	95,383		—		—		95,383
Total cash and cash equivalents and investments	$	281,692	$	—	$	—	$	281,692
Liabilities
Other long-term liabilities	$	—	$	—	$	55,033	$	55,033
Total liabilities	$	—	$	—	$	55,033	$	55,033

	Assets and Liabilities at Fair Value
	As of December 31, 2010
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Cash and cash equivalents	$	47,208	$	—	$	—	$	47,208
Short-term investments	163,903		—		—		163,903
Total cash and cash equivalents and investments	$	211,111	$	—	$	—	$	211,111
Liabilities
Other long-term liabilities	$	—	$	—	$	48,267	$	48,267
Total liabilities	$	—	$	—	$	48,267	$	48,267

The Company did not have any Level 3 financial assets during the year ended December 31, 2011. In 2009 and 2010, Lexicon held auction rate securities and related rights that permitted Lexicon to require the investment bank that sold Lexicon the auction rate securities to purchase its auction rate securities at par value. On June 30, 2010, Lexicon exercised the rights and the investment bank purchased Lexicon's remaining auction rate securities at par value on July 1, 2010. The table presented below summarizes the change in consolidated balance sheet carrying value associated with Level 3 financial assets for the years ended December 31, 2009 and 2010.

	Short-term Investments			Long-term Investments			Total
	(in thousands)
Balance at December 31, 2008	$	—		$	55,686		$	55,686
Unrealized gains included in earnings as gain on investments	350			823			1,173
Net sales and settlements	(725		)	(100		)	(825		)
Reclassification from long-term to short-term investments	56,409			(56,409		)	—
Balance at December 31, 2009	56,034			—			56,034
Unrealized gains included in earnings as gain on investments, net	141			—			141
Net sales and settlements	(56,175		)	—			(56,175		)
Balance at December 31, 2010	$	—		$	—		$	—

Transfers between levels are recognized at the actual date of circumstance that caused the transfer. The Company's Level 3 liabilities are estimated using a probability-based income approach utilizing an appropriate discount rate. Subsequent changes in the fair value of the Symphony Icon purchase consideration liability are recorded as an increase or decrease in Symphony Icon purchase liability in the accompanying consolidated statements of operations. During the years ended December 31, 2011 and 2010, the fair value of the Symphony Icon purchase consideration liability increased by $6.8 million and $2.7 million, respectively. The following table summarizes the change in consolidated balance sheet carrying value associated with Level 3 liabilities for the years ended December 31, 2010 and 2011.

	Other Long-term Liabilities
	(in thousands)
Balance at December 31, 2009	$	—
Purchase consideration liability resulting from the Symphony Icon acquisition	45,557
Change in valuation of purchase consideration payable to former Symphony Icon stockholders	2,710
Balance at December 31, 2010	48,267
Change in valuation of purchase consideration payable to former Symphony Icon stockholders	6,766
Balance at December 31, 2011	$	55,033

The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis.  These assets include goodwill associated with the acquisitions of Coelacanth Corporation in 2001 and Symphony Icon on July 30, 2010 and intangible assets associated with the acquisition of Symphony Icon on July 30, 2010.  For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if one or more is determined to be impaired.