Fair Value Measurements

3 Months Ended

Mar. 31, 2017

(5) Fair Value Measurements

The following tables set forth the Company’s financial assets subject to fair value measurements:

	As of December 31, 2016		Level 1	Level 2		Level 3
	(In thousands)
Assets:
Money market funds and cash equivalents	$	20,445	—	$	20,445	—
Marketable securities	$	147,315	—	$	147,315	—

	$	167,760	—	$	167,760	—

Liabilities:
Kolltan acquisition contingent consideration	$	44,200	—	—		$	44,200

	$	44,200	—	—		$	44,200

	As of March 31, 2017		Level 1	Level 2		Level 3
	(In thousands)
Assets:
Money market funds and cash equivalents	$	28,572	—	$	28,572	—
Marketable securities	$	124,526	—	$	124,526	—

	$	153,098	—	$	153,098	—

Liabilities:
Kolltan acquisition contingent consideration	$	47,600	—	—		$	47,600

	$	47,600	—	—		$	47,600

Contingent consideration liabilities related to acquisitions are classified as Level 3 within the valuation hierarchy and are valued based on various estimates, including probability of success, discount rates and amount of time until the conditions of the milestone payments are met. In connection with the Kolltan acquisition, we may be required to pay future consideration that is contingent upon the achievement of specified development, regulatory approvals or sales-based milestone events. We determine the fair value of these obligations on the acquisition date using various estimates that are not observable in the market and represent a Level 3 measurement within the fair value hierarchy. During the three months ended March 31, 2017, the Company recorded a $3.4 million loss on fair value remeasurement of contingent consideration primarily due to changes in discount rates and the passage of time. The following table represents a roll-forward of our acquisition-related contingent consideration (in thousands):

	Three Months Ended March 31, 2017
Balance at beginning of period	$	44,200
Milestone payments	—
Changes in fair value	3,400

Balance at end of period	$	47,600

There have been no transfers of assets or liabilities between the fair value measurement classifications. The Company’s financial instruments consist mainly of cash and cash equivalents, marketable securities, short-term accounts receivable and accounts payable. The Company values its marketable securities utilizing independent pricing services which normally derive security prices from recently reported trades for identical or similar securities, making adjustments based on significant observable transactions. At each balance sheet date, observable market inputs may include trade information, broker or dealer quotes, bids, offers or a combination of these data sources. Short-term accounts receivable and accounts payable are reflected in the accompanying consolidated financial statements at cost, which approximates fair value due to the short-term nature of these instruments.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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