Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2017

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, 2017 and December 31, 2016 were 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
March 31, 2017
Assets
Cash equivalents⁽¹⁾	$	75,386	$	—	$	—	$	75,386
Liabilities
Common stock warrant liabilities⁽²⁾	$	—	$	—	$	222	$	222
Contingent consideration liabilities⁽³⁾	$	—	$	—	$	53,400	$	53,400
December 31, 2016
Assets
Cash equivalents⁽¹⁾	$	87,792	$	—	$	—	$	87,792
Liabilities
Common stock warrant liabilities⁽²⁾	$	—	$	—	$	809	$	809
Contingent consideration liabilities⁽³⁾	$	—	$	—	$	52,800	$	52,800


(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)

Represents the fair value of common stock warrants outstanding that may require cash settlement under certain circumstances. The liability primarily relates to warrants sold in connection with the Company’s July 2012 public offering of common stock and warrants. These warrants entitle the holders to purchase up to 1.9 million shares of common stock at an exercise price of $20.00 per share. The warrants are set to expire in July 2017. The fair value of the warrants were estimated using the Black-Scholes option pricing model. The decrease in the fair value of the common stock warrant liabilities as of March 31, 2017, as compared to the fair value at December 31, 2016, was attributable to the warrants being out-of-the money combined with the short remaining contractual term.

(3)

In connection with certain acquisition, the Company may be required to pay future consideration that is contingent upon the achievement of specified development, regulatory approval or sales-based milestone events. The Company estimated the fair value of the contingent consideration liabilities on the acquisition date using a probability-weighted income approach, which reflects the probability and timing of future payments. This fair value measurement is based on significant Level 3 inputs such as the anticipated timelines and probability of achieving development, regulatory approval or sales-based milestone events and projected revenues. The resulting probability-weighted cash flows are discounted at risk-adjusted rates. Subsequent to the acquisition date, at each reporting period prior to settlement, the Company revalues these liabilities by performing a review of the assumptions listed above and record increases or decreases in the fair value of these contingent consideration liabilities. In the absence of any significant changes in key assumptions, the quarterly determination of fair values of these contingent consideration liabilities would primarily reflect the passage of time. Significant judgment is used in determining Level 3 inputs and fair value measurements as of the acquisition date and for each subsequent reporting period. Updates to assumptions could have a significant impact on the Company’s results of operations in any given period and actual results may differ from estimates. For example, significant increases in the probability of achieving a milestone or projected revenues would result in a significantly higher fair value measurement while significant decreases in the estimated probability of achieving a milestone or projected revenues would result in a significantly lower fair value measurement. Significant increases in the discount rate or in the anticipated timelines would result in a significantly lower fair value measurement while significant decreases in the discount rate or anticipated timelines would result in a significantly higher fair value measurement. The potential contingent consideration payments required upon achievement of development, regulatory approval and sales-based milestones related to the Company’s acquisition of ZX008 range from zero if none of the milestones are achieved to a maximum of $95.0 million (undiscounted).

There were no transfers between levels during the periods presented.

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

The following table provides a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2017 and 2016 (in thousands):



	December 31, 2016		Change in Fair Value			March 31, 2017		December 31, 2015		Change in Fair Value			March 31, 2016
Contingent consideration liabilities	$	52,800	$	600		$	53,400	$	51,000	$	1,300		$	52,300
Common stock warrant liabilities	809		(587		)	222		6,196		(4,527		)	1,669

Basic and Diluted Net Loss Per Share

A reconciliation of the numerators and denominators used in computing net loss from continuing operations per share is as follows (in thousands, except for share data):



	Three Months Ended March 31,
	2017			2016
Numerator:
Net loss from continuing operations	$	(21,126	)	$	(10,220	)

Denominator:
Shares used in per share calculation	24,813			24,722

Net loss from continuing operations per share, basic and diluted	$	(0.85	)	$	(0.41	)