Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level valuation hierarchy has been established under GAAP for disclosure of fair value measurements. The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1:Observable inputs such as quoted prices in active markets;

Level 2:Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3:Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The following tables summarize assets and liabilities recognized or at fair value on a recurring basis as of September 30, 2021 and December 31, 2020:

	September 30, 2021
(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	39,422	$	—	$	—	$	39,422
Commercial paper	—		35,444		—		35,444
Corporate debt securities	—		2,003		—		$	2,003
Marketable securities:
U.S. Treasuries	—		15,511		—		15,511
Certificate of deposits	—		41,874		—		41,874
Commercial paper	—		158,837		—		158,837
U.S. Government-sponsored enterprises debt securities	—		6,205		—		6,205
Corporate debt securities	—		14,459		—		14,459
Total(1)	$	39,422	$	274,333	$	—	$	313,755
Liabilities:
Contingent consideration	$	—	$	—	$	39,400	$	39,400

	December 31, 2020
(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	80,986	$	—	$	—	$	80,986
Commercial paper	—		61,043		—		61,043
Certificate of deposits	—		1,000		—		1,000
Marketable securities:
U.S. Treasuries	—		43,050				43,050
Commercial paper	—		210,986				210,986
Certificate of deposits	—		44,480				44,480
U.S. Government-sponsored enterprises debt securities	—		6,217				6,217
Corporate debt securities	—		33,460		—		33,460
Total(1)	$	80,986	$	400,236	$	—	$	481,222
Liabilities:
Contingent consideration	$	—	$	—	$	42,400	$	42,400

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(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.

Contingent Consideration Liability

As of September 30, 2021, our contingent consideration liability consisted of sales-based milestones for Fintepla, which resulted from our 2014 acquisition of Brabant. The maximum amount of future contingent consideration (undiscounted) that we could be required to pay was $40.5 million.

The following table provides a reconciliation of our contingent consideration liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2021 and 2020 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Balance at beginning of period	$	39,000	$	53,100	$	42,400	$	63,800
Change in fair value	400		1,800		1,500		6,100
Settlements	—		—		(4,500)		(15,000)
Balance at end of period	$	39,400	$	54,900	$	39,400	$	54,900

For the three and nine months ended September 30, 2021, the increases to the estimated fair value of the contingent consideration liability primarily reflects the interest component of contingent consideration related to the passage of time.

The following table summarizes the significant unobservable inputs used in the fair value measurement of our contingent consideration liability as of September 30, 2021.

Fair Value as of September 30, 2021 (in thousands)	Valuation Technique	Unobservable Input	Range	Weighted Average(1)
		Discount rate	0.0% — 2.0%	1.0%
$39,400	Discounted cash flow	Probability of payment	100%	100%
		Projected year of payment	2022 — 2023	2022

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(1)Unobservable inputs were weighted by the relative fair value of each sales-based milestone payment.

Fair Value Disclosures

Some of our financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their short-term nature. Such financial assets and financial liabilities include accounts receivable, promissory note receivable, certain other current assets, accounts payable and accrued liabilities.

Convertible Senior Notes

As of September 30, 2021 and December 31, 2020, the estimated fair value of our convertible senior notes due 2027 was approximately $227.0 million and $260.5 million, respectively, and was determined based on a binomial lattice model with Level 2 inputs. When determining the estimated fair value of the Notes, we utilize a binomial lattice model which incorporates the terms and conditions of our convertible senior notes and market-based risk measurements that are indirectly observable, such as credit risk. The lattice model produces an estimated fair value based on changes in the price of the underlying common stock price over successive periods of time. An estimated yield based on comparable non-convertible debt instruments in the market is used to discount the cash flows.