Derivative Liability

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Derivative Liability

Derivative Liability

In 2012, we entered into a settlement agreement in which we are obligated to pay $4.0 million upon achieving regulatory approval for DaxibotulinumtoxinA for Injection or DaxibotulinumtoxinA Topical. We determined that such payment was a derivative instrument that requires fair value accounting as a liability and periodic fair value remeasurement until settled. The fair value of the derivative liability was determined by estimating the timing and probability of the related regulatory approval and multiplying the payment amount by this probability percentage and a discount factor.

As of September 30, 2020, the fair value of the derivative liability was $3.2 million, which was measured using a term of 0.2 years based on expected BLA approval in 2020, a risk-free rate of 0.1% and a credit risk adjustment of 7.5%. As of December 31, 2019, the fair value of the derivative liability was $3.0 million, which was measured using a term of 0.9 years based on expected BLA approval in 2020, a risk-free rate of 1.6% and a credit risk adjustment of 7.5%.