Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2016

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, 2016 and December 31, 2015 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, 2016
Assets
Cash equivalents⁽¹⁾	$	128,959	—	—	$	128,959
Liabilities
Common stock warrant liabilities⁽²⁾	$	—	—	1,669	$	1,669
Contingent purchase consideration ⁽³⁾	$	—	—	52,300	$	52,300
At December 31, 2015
Assets
Cash equivalents⁽¹⁾	$	148,588	—	—	$	148,588
Liabilities
Common stock warrant liabilities⁽²⁾	$	—	—	6,196	$	6,196
Contingent purchase consideration ⁽³⁾	$	—	—	51,000	$	51,000


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

(2)

Common stock warrant liabilities were incurred in connection with the Company's July 2012 public offering of common stock and warrants and with the financing agreement (the Healthcare Royalty financing agreement) entered into with Healthcare Royalty Partners (Healthcare Royalty) (see Note 5), 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) expected volatility based upon the Company's historical volatility. 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 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, 2016 was primarily driven by the decrease in the market price of the Company's common shares at March 31, 2016 as compared against the December 31, 2015 measurement date.

(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 assets and liabilities measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31, 2016 (in thousands):



	Contingent Purchase Consideration		Common Stock Warrant Liabilities
Balance at December 31, 2015	$	51,000	$	6,196
Changes in fair value	1,300		(4,527		)
Balance at March 31, 2016	$	52,300	$	1,669

Basic and Diluted Net Loss Per Share

Common stock equivalents that could potentially reduce net earnings per common share in the future that were not included in the determination of diluted net loss per common share as their effects were antidilutive are as follows (in thousands):



	Three Months Ended March 31,
	2016	2015
Options to purchase common stock	6	91
Restricted stock units not yet vested and released	106	—
Warrants to purchase common stock	32	64
Total	144	155