Fair Value of Financial Instruments

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The following table presents information about the Company’s financial assets and liabilities that have been measured at fair value, and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value. The Company determines the fair value of contingent consideration using Level 3 inputs.

The following table summarizes the assets and liabilities measured at fair value on a recurring basis at March 31, 2019 (in thousands):



Description	March 31, 2019		Active Markets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	42,437	$	42,437	$	—	$	—
Restricted cash	20		20		—		—
Total assets	$	42,457	$	42,457	$	—	$	—
Liabilities:
Contingent consideration	47,400		—		—		47,400
Total liabilities	$	47,400	$	—	$	—	$	47,400

The following table summarizes the assets and liabilities measured at fair value on a recurring basis at December 31, 2018 (in thousands):



Description	December 31, 2018		Active Markets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	50,422	$	50,422	$	—	$	—
Restricted cash	20		20		—		—
Total assets	$	50,442	$	50,442	$	—	$	—
Liabilities:
Contingent consideration	48,400		—		—		48,400
Total liabilities	$	48,400	$	—	$	—	$	48,400

Contingent consideration

In 2016, the Company acquired Viventia through the issuance of common stock and contingent consideration (the "Acquisition"), pursuant to the terms of a share purchase agreement (the "Share Purchase Agreement"). The Company has valued the acquired assets and liabilities based on their estimated fair values as of September 20, 2016 and finalized its purchase accounting for the Acquisition during the third quarter of 2017. The contingent consideration relates to amounts potentially payable to Viventia's shareholders pursuant to the terms of the Share Purchase Agreement. Contingent consideration is measured at fair value and is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions the Company believes would be made by a market participant. The Company assesses these estimates on an on-going basis as additional data impacting the assumptions is obtained. Future changes in the fair value of contingent consideration related to updated assumptions and estimates are recognized within the condensed consolidated statements of operations and comprehensive loss.

Contingent consideration may change significantly as development progresses and additional data are obtained, impacting the Company’s assumptions regarding probabilities of successful achievement of related milestones used to estimate the fair value of the liability and the timing in which they are expected to be achieved. In evaluating the fair value information, considerable judgment is required to interpret the market data used to develop the estimates. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use of different market assumptions and/or different valuation techniques could result in materially different fair value estimates. The following table sets forth a summary of changes in the fair value of the Company's contingent consideration liability (in thousands):



Beginning balance, December 31, 2018	$	48,400
Gain from change in fair value of contingent consideration	(1,000		)
Ending balance, March 31, 2019	$	47,400

The fair value of the Company’s contingent consideration was determined using probabilities of successful achievement of regulatory milestones and commercial sales, the period in which these milestones and sales are expected to be achieved ranging from 2021 to 2033, the level of commercial sales of Vicinium^®, and discount rates ranging from 6.6% to 13.7% as of December 31, 2018 and 6.2% to 11.7% as of March 31, 2019. Significant changes in any of these assumptions would result in a significantly higher or lower fair value measurement.

There have been no changes to the valuation methods utilized during the three months ended March 31, 2019. The Company evaluates transfers between levels at the end of each reporting period. There were no transfers of assets or liabilities between levels during the three months ended March 31, 2019.