Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2019

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, 2019 and 2018 (in thousands):


	December 31, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	11,527	$	—	$	—	$	11,527
Commercial paper			7,485				7,485


Marketable securities:
Commercial paper	—		$	73,366	—		73,366
Corporate debt securities	—		74,417		—		74,417
Certificates of deposit	—		41,302		—		41,302

Total assets⁽¹⁾	$	11,527	$	196,570	$	—	$	208,097

Liabilities:
Common stock warrant liabilities⁽²⁾	$	—	$	—	$	198	$	198
Contingent consideration liabilities⁽³⁾	—		—		63,800		63,800
Total liabilities	$	—	$	—	$	63,998	$	63,998

	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
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

(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. As of December 31, 2019 and 2018, common stock warrant liabilities consists 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 5), we may be required to pay future consideration that is contingent upon the achievement of specified development, regulatory approval or sales-based milestone events. We estimate 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, we remeasure these liabilities by performing a review of the assumptions discussed above and record an adjustment to reflect any changes in the estimated fair value of our contingent consideration liabilities. In the absence of any significant changes in key assumptions during a reporting period, the fair value of the contingent consideration liability is expected to increase each period with the recognition of change in fair value of contingent consideration resulting from the passage of time at the applicable discount rate as we approach the payment dates of the contingent consideration. Significant judgment is used in determining Level 3 inputs and fair value measurements as of a reporting date. Updates to assumptions could have a significant impact on our 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. Through December 31, 2019, we have made milestone payments of $20.0 million. The potential amount of future payments that we may be required to make related to the remaining contingent consideration is between zero, if none of the remaining milestones are achieved, to a maximum of $75.0 million (undiscounted). As of December 31, 2019, we classified $25.6 million of the total contingent consideration liabilities of $38.2 million as current liabilities. The balance sheet classification between current and non-current liabilities was based upon our 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, 2019 and 2018 (in thousands):


	December 31, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	11,527	$	—	$	—	$	11,527
Commercial paper			7,485				7,485


Marketable securities:
Commercial paper	—		$	73,366	—		73,366
Corporate debt securities	—		74,417		—		74,417
Certificates of deposit	—		41,302		—		41,302

Total assets⁽¹⁾	$	11,527	$	196,570	$	—	$	208,097

Liabilities:
Common stock warrant liabilities⁽²⁾	$	—	$	—	$	198	$	198
Contingent consideration liabilities⁽³⁾	—		—		63,800		63,800
Total liabilities	$	—	$	—	$	63,998	$	63,998

	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
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

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, 2019 and 2018 (in thousands):


	Contingent Consideration		Common Stock Warrant Liabilities
Balance at December 31, 2017	$	76,900	$	512

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


Settlements	(20,000)		—
Changes in fair value	5,600		(145)
Balance at December 31, 2019	$	63,800	$	198