Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2017

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value of cash equivalents was determined based on Level 1 inputs utilizing quoted prices in active markets. The fair value of the Company’s common stock warrant liabilities and contingent consideration liabilities were determined based on Level 3 inputs using valuation models with significant unobservable inputs. Assets and liabilities measured at fair value on a recurring basis at December 31, 2017 and 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
At December 31, 2017
Assets
Cash equivalents (1)	$	289,782	$	—	$	—	$	289,782
Liabilities
Common stock warrant liabilities (2)	$	—	$	—	$	512	$	512
Contingent purchase consideration (3)	$	—	$	—	$	76,900	$	76,900

At December 31, 2016
Assets
Cash equivalents (1)	$	87,792	$	—	—		$	87,792
Liabilities
Common stock warrant liabilities (2)	$	—	$	—	$	809	$	809
Contingent purchase consideration (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 consolidated balance sheets.

(2)

Represents the fair value of common stock warrants outstanding that may require cash settlement under certain circumstances. The Company estimated the fair value of the warrant liabilities using the Black-Scholes valuation model. As of December 31, 2017, common stock warrant liabilities consisted of warrants issued in July 2011 in connection with a debt financing arrangement. The warrants entitle the holder to purchase up to 28,125 shares of common stock at an exercise price of $72.00 per share. The warrants will expire in July 2021. As of December 31, 2016, common stock warrant liabilities were primarily attributable to warrants sold as part of the Company’s July 2012 public offering. The warrants were exercisable into 1,901,918 shares of the Company’s common stock at an exercise price of $20.00 per share and had a contractual term of 5 years from the issuance date. In July 2017, these warrants expired unexercised.

(3)

In connection with the acquisition of ZX008 in 2014, 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 estimates the fair value of contingent purchase consideration liabilities 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 records an adjustment to reflect any changes in the estimated fair values of these contingent consideration liabilities. In the absence of any significant changes in key assumptions during a reporting period, the change in fair values of these contingent consideration liabilities would primarily reflect an increase in fair value from the passage of time. Significant judgment is used in determining Level 3 inputs and fair value measurements as of a reporting period. Updates to assumptions could have a significant impact on the Company’s results of operations in a reporting period and actual results may differ from estimates. For example, significant increases in the estimated 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).

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 on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2017 and 2016 (in thousands):



	Contingent Purchase Consideration		Common Stock Warrant Liabilities
Balance at December 31, 2015	$	51,000	$	6,196
Additions	—		—
Settlements	—		—
Changes in fair value	1,800		(5,387		)
Balance at December 31, 2016	52,800		809
Additions	—		—
Settlements	—		—
Changes in fair value	24,100		(297		)
Balance at December 31, 2017	$	76,900	$	512

Property and Equipment Useful Lives

Depreciation is calculated on a straight-line basis over the estimated useful lives of the respective assets and primarily consists of the following:



Computer equipment and software		3 years
Furniture and fixtures		3-7 years
Leasehold improvements		Shorter of estimated useful life or lease term

Property and Equipment, Net (in thousands)



	December 31,
	2017			2016
Machinery, equipment and tooling	$	—		$	11,011
Construction in progress	—			104
Computer equipment and software	141			78
Leasehold improvements	976			1,372
Furniture and fixtures	407			659
Total	1,524			13,224
Less accumulated depreciation	(1,279		)	(11,514		)
Property and equipment, net	$	245		$	1,710

Basic and Diluted Net Loss Per Share

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



	2017			2016			2015
Numerator
Net loss from continuing operations	$	(126,022	)	$	(68,686	)	$	(41,704	)
Denominator
Weighted average common shares outstanding, basic and diluted	27,301			24,785			21,449
Loss from continuing operations per share, basic and diluted	$	(4.62	)	$	(2.77	)	$	(1.94	)

Schedule of Calculation of Diluted Net Loss Per Share

The following table presents the potential common shares outstanding that were excluded from the computation of diluted loss from continuing operations per share of common stock for the periods presented because including them would have been antidilutive (in thousands):



	Year Ended December 31,
	2017	2016	2015
Shares subject to outstanding common stock options	3,865	3,171	529
Shares subject to outstanding restricted stock units	237	85	—
Shares subject to outstanding warrants to purchase common stock	282	1,975	1,975
	4,384	5,231	2,504