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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

Assets Measured at Fair Value on Recurring Basis

The following tables summarize assets and liabilities recognized or disclosed at fair value on a recurring basis as of June 30, 2019 and December 31, 2018 (in thousands):


	June 30, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Commercial paper	$	—	$	17,443	$	—	$	17,443
Money market funds	15,188		—		—		15,188

Marketable securities:
Commercial paper	—		153,691		—		153,691
Corporate debt securities	—		83,534		—		83,534
Certificate of deposits	—		70,175		—		70,175
U.S. Treasury securities	—		104,780		—		104,780
Total assets⁽¹⁾	$	15,188	$	429,623	$	—	$	444,811
Liabilities:
Common stock warrant liabilities⁽²⁾	$	—	$	—	$	501	$	501
Contingent consideration liabilities⁽³⁾	—		—		70,500		70,500
Total liabilities	$	—	$	—	$	71,001	$	71,001


	December 31, 2018
	Level 1		Level 2		Level 3		Total
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
Certificate of deposits	—		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

(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. We estimated the fair value of the warrant liabilities using the Black-Scholes valuation model. As of June 30, 2019 and December 31, 2018, common stock warrant liabilities relate to 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 our common stock at an exercise price of $72.00 per share and expires in July 2021.

(3) In connection with a prior acquisition in 2014, we may be required to pay future contingent consideration upon the achievement of specified development, regulatory approval or sales-based milestone events. We 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 interest rates. Subsequent to the acquisition date, at each reporting period prior to settlement, we revalue 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 and risk-adjusted interest rates. 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 our 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 acquisition provides for aggregate contingent consideration of up to $95.0 million, of which $10.0 million was paid in March 2019. As of June 30, 2019, the estimated fair value of our contingent consideration liabilities was $70.5 million, of which $34.8 million has been classified as current liabilities. The classification was based upon our reasonable expectation as to the timing of settlement of certain specified milestones

Liabilities Measured at Fair Value on Recurring Basis

The following tables summarize assets and liabilities recognized or disclosed at fair value on a recurring basis as of June 30, 2019 and December 31, 2018 (in thousands):


	June 30, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Commercial paper	$	—	$	17,443	$	—	$	17,443
Money market funds	15,188		—		—		15,188

Marketable securities:
Commercial paper	—		153,691		—		153,691
Corporate debt securities	—		83,534		—		83,534
Certificate of deposits	—		70,175		—		70,175
U.S. Treasury securities	—		104,780		—		104,780
Total assets⁽¹⁾	$	15,188	$	429,623	$	—	$	444,811
Liabilities:
Common stock warrant liabilities⁽²⁾	$	—	$	—	$	501	$	501
Contingent consideration liabilities⁽³⁾	—		—		70,500		70,500
Total liabilities	$	—	$	—	$	71,001	$	71,001


	December 31, 2018
	Level 1		Level 2		Level 3		Total
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
Certificate of deposits	—		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

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

The following tables provide a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2019 and 2018 (in thousands):

Contingent Consideration Liabilities


	Three Months Ended June 30,						Six Months Ended June 30,
	2019		2018		2019		2018
Balance at beginning of period	$	71,200	$	76,900	$	78,200	$	76,900
Change in fair value	(700)		(2,500)		2,300		(2,500)
Settlements	—		—		(10,000)		—
Balance at end of period	$	70,500	$	74,400	$	70,500	$	74,400

Common Stock Warrant Liabilities


	Three Months Ended June 30,						Six Months Ended June 30,
	2019		2018		2019		2018
Balance at beginning of period	$	646	$	495	$	343	$	512
Change in fair value	(145)		48		158		31
Balance at end of period	$	501	$	543	$	501	$	543