Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2015

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis at March 31, 2015 and December 31, 2014 are as follows (in thousands):



	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
At March 31, 2015
Assets
Cash equivalents⁽¹⁾	$	18,125	—	—	$	18,125
Liabilities
Common stock warrant liabilities⁽²⁾	$	—	—	4,683	$	4,683
Contingent purchase consideration ⁽³⁾	$	—	—	52,000	$	52,000
At December 31, 2014
Assets
Cash equivalents⁽¹⁾	$	8,021	—	—	$	8,021
Liabilities
Common stock warrant liabilities⁽²⁾	$	—	—	5,093	$	5,093
Contingent purchase consideration ⁽³⁾	$	—	—	53,000	$	53,000


(1)	Cash equivalents are comprised of money market fund shares and are included as a component of cash and cash equivalents on the consolidated balance sheets.

(2)

Common stock warrant liabilities include liabilities associated with warrants issued in connection with the Company's July 2012 public offering of common stock and warrants (see Note 4) and warrants issued in connection with the financing agreement entered into with Healthcare Royalty Partners (Healthcare Royalty), dated June 30, 2011, (the Healthcare Royalty financing agreement), which are measured at fair value using the Black-Scholes option pricing valuation model. The assumptions used in the Black-Scholes option pricing valuation model for both common stock warrant liabilities were: (a) a risk-free interest rate based on the rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the remaining contractual term of the warrants; (b) an assumed dividend yield of zero based on the Company’s expectation that it will not pay dividends in the foreseeable future; (c) an expected term based on the remaining contractual term of the warrants; and (d) given the Company’s lack of relevant historical data due to the Company’s limited historical experience, an expected volatility based upon the Company's historical volatility, supplemented with historical volatility of comparable companies whose share prices have been publicly available for a sufficient period of time. The significant unobservable input used in measuring the fair value of the common stock warrant liabilities associated with the Healthcare Royalty financing agreement is the expected volatility. Significant increases in volatility would result in a higher fair value measurement. The following additional assumptions were used in the Black-Scholes option pricing valuation model to measure the fair value of the warrants sold in the July 2012 public offering: (a) management's projections regarding the probability of the occurrence of an extraordinary event and the timing of such event; and for the valuation scenario in which an extraordinary event occurs that is not an all cash transaction or an event whereby a public acquirer would assume the warrants, and (b) an expected volatility rate using the Company's historical volatility, supplemented with historical volatility of comparable companies, through the projected date of public announcement of an extraordinary transaction, blended with a rate equal to the lesser of 40% and the 180-day volatility rate obtained from the HVT function on Bloomberg as of the trading day immediately following the public announcement of an extraordinary transaction. The significant unobservable inputs used in measuring the fair value of the common stock warrant liabilities associated with the July 2012 public offering are the expected volatility and the probability of the occurrence of an extraordinary event. Significant increases in volatility would result in a higher fair value measurement and significant increases in the probability of an extraordinary event occurring would result in a significantly lower fair value measurement. The change in the fair value of the common stock warrant liabilities as of March 31, 2015 was primarily driven by the decrease in the expected term of the warrant at March 31, 2015 as compared against December 31, 2014 measurement dates.

(3)

Contingent purchase consideration was measured at fair value using the income approach based on significant unobservable inputs including management's estimates of the probabilities of achieving specific net sales levels and development milestones and appropriate risk adjusted discount rates. Significant changes of either unobservable input could have a significant effect on the calculation of fair value of the contingent purchase consideration liability.

Reconciliation of Liabilities Measured at Fair Value Using Significant Observable Inputs (Level 3)

The following table provides a reconciliation of liabilities measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31, 2015 (in thousands):



	Contingent Purchase Consideration			Common Stock Warrant Liabilities
Balance at December 31, 2014	$	53,000		$	5,093
Changes in fair value	(1,000		)	(410		)
Balance at March 31, 2015	$	52,000		$	4,683

Basic and Diluted Net Loss Per Share

The following table presents the computation of basic and diluted net loss per share for continuing and discontinued operations (in thousands, except per share amounts):



	Three Months Ended March 31,
	2015						2014
	Continuing operations			Discontinued operations			Continuing operations			Discontinued operations
Numerator
Net loss, basic	$	(10,165	)	$	(12,696	)	$	(4,952	)	$	(15,980	)
Effect of dilutive securities:
Common stock warrants	—			—			(8,269		)	—
Non-employee stock options and restricted stock units	—			—			(132		)	—
	—			—			(8,401		)	—
Net loss, diluted	$	(10,165	)	$	(12,696	)	$	(13,353	)	$	(15,980	)

Denominator
Weighted average common shares outstanding, basic	153,362			153,362			139,309			139,309
Effect of dilutive securities:
Common stock warrants	—			—			5,870			—
Non-employee stock options and restricted stock units	—			—			144			—
Dilutive potential shares of common stock	—			—			6,014			—
Weighted average common shares outstanding, diluted	153,362			153,362			145,323			139,309

Basic net loss per share	$	(0.07	)	$	(0.08	)	$	(0.04	)	$	(0.11	)
Diluted net loss per share	$	(0.07	)	$	(0.08	)	$	(0.09	)	$	(0.11	)

Schedule of Calculation of Diluted Net Loss Per Share

There were 730,000 and 11,246,000 dilutive securities (in common stock equivalent shares), from common stock options and restricted stock units excluded from the calculation of diluted net loss during the three months ended March 31, 2015 and 2014, respectively, because to include them would be anti-dilutive. Common stock warrants of 15,724,000 and 508,000 were excluded from the calculation of diluted net loss during the three months ended March 31, 2015 and 2014, respectively, as the exercise price of the warrants was greater than the Company's average stock price during these periods.

- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

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