Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of assets recognized or disclosed at fair value on recurring basis

The following tables summarize assets and liabilities recognized or disclosed at fair value on a recurring basis at December 31, 2018 and 2017 (in thousands):


	Level 1		Level 2		Level 3		Total
December 31, 2018
Assets:
Cash equivalents:
Money market funds	$	63,232	$	—	$	—	$	63,232



Marketable securities:
Commercial paper	—		152,940		—		152,940
Corporate debt securities	—		60,605		—		60,605
Certificates of deposit	—		128,647		—		128,647
U.S. Treasury securities	—		103,541		—		103,541
Total assets(1)	$	63,232	$	445,733	$	—	$	508,965

Liabilities:
Common stock warrant liabilities (2)	$	—	$	—	$	343	$	343
Contingent consideration liabilities (3)	—		—		78,200		78,200
Total liabilities	$	—	$	—	$	78,543	$	78,543

December 31, 2017
Assets:
Cash equivalents:
Money market funds (1)	$	289,782	$	—	$	—	$	289,782
Total assets	$	289,782	$	—	$	—	$	289,782

Liabilities:
Common stock warrant liabilities (2)	$	—	$	—	$	512	$	512
Contingent consideration liabilities (3)	—		—		76,900		76,900
Total liabilities	$	—	$	—	$	77,412	$	77,412

(1) Fair value is determined by taking into consideration valuations obtained from third-party pricing services. The third-party pricing services utilize industry standard valuation models, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; and other observable inputs.

(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, 2018, 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 and expires in July 2021.

(3) In connection with the acquisition of Brabant in 2014 (See Note 3), 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 Brabant range from zero if none of the milestones are achieved to a maximum of $95.0 million (undiscounted). As of December 31, 2018, the Company classified $32.3 million of the total contingent consideration liabilities of $78.2 million as current liabilities. The classification was based upon the Company's reasonable expectation as to the timing of settlement of certain specified milestones.

Schedule of liabilities recognized or disclosed at fair value on recurring basis

The following tables summarize assets and liabilities recognized or disclosed at fair value on a recurring basis at December 31, 2018 and 2017 (in thousands):


	Level 1		Level 2		Level 3		Total
December 31, 2018
Assets:
Cash equivalents:
Money market funds	$	63,232	$	—	$	—	$	63,232



Marketable securities:
Commercial paper	—		152,940		—		152,940
Corporate debt securities	—		60,605		—		60,605
Certificates of deposit	—		128,647		—		128,647
U.S. Treasury securities	—		103,541		—		103,541
Total assets(1)	$	63,232	$	445,733	$	—	$	508,965

Liabilities:
Common stock warrant liabilities (2)	$	—	$	—	$	343	$	343
Contingent consideration liabilities (3)	—		—		78,200		78,200
Total liabilities	$	—	$	—	$	78,543	$	78,543

December 31, 2017
Assets:
Cash equivalents:
Money market funds (1)	$	289,782	$	—	$	—	$	289,782
Total assets	$	289,782	$	—	$	—	$	289,782

Liabilities:
Common stock warrant liabilities (2)	$	—	$	—	$	512	$	512
Contingent consideration liabilities (3)	—		—		76,900		76,900
Total liabilities	$	—	$	—	$	77,412	$	77,412

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, 2018 and 2017 (in thousands):


	Contingent Purchase Consideration		Common Stock Warrant Liabilities
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
Additions	—		—

Settlements	—		—
Changes in fair value	1,300		(169)
Balance at December 31, 2018	$	78,200	$	343