Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables summarize each major class of our financial assets and liabilities measured at fair value on a recurring basis as of the dates indicated, classified by valuation hierarchy (in thousands):

			Fair Value Measurements at June 30, 2016
	Balance at June 30, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	58,587	$	58,587	$	-	$	-
Total assets	$	58,587	$	58,587	$	-	$	-

Liabilities:
Contingent consideration liability	$	19,600	$	-	$	-	$	19,600
Total liabilities	$	19,600	$	-	$	-	$	19,600

			Fair Value Measurements at December 31, 2015
	Balance at December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	68,140	$	68,140	$	-	$	-
Total assets	$	68,140	$	68,140	$	-	$	-

Liabilities:
Contingent consideration liability	$	18,800	$	-	$	-	$	18,800
Total liabilities	$	18,800	$	-	$	-	$	18,800

Quantitative Information for Fair Value Measurement of Level 3

The following table summarizes quantitative information and assumptions pertaining to the fair value measurement of the Level 3 inputs at June 30, 2016 and December 31, 2015 (in thousands). The increase in the contingent consideration liability of $800 thousand during the six months ended June 30, 2016 was primarily attributable to a decrease in the discount period.

	Fair Value at
	June 30, 2016		December 31, 2015		Valuation Technique	Unobservable Input	Range (Weighted-Average)
Contingent Consideration Liability:
AZEDRA commercialization	$	2,600	$	2,500	Probability adjusted discounted cash flow model	Probability of success	40%
						Period of expected milestone achievement	2018
						Discount rate	10%

1404 commercialization		4,400		4,200	Probability adjusted discounted cash flow model	Probability of success	59%
						Period of expected milestone achievement	2019
						Discount rate	10%

1095 commercialization		500		500	Probability adjusted discounted cash flow model	Probability of success	19%
						Period of expected milestone achievement	2023
						Discount rate	10%

Net sales targets		12,100		11,600	Monte-Carlo simulation	Probability of success	19%- 59% (37%)
						Period of expected milestone achievement	2019-2022 at June 30, 2016 2019-2025 at December 31, 2015
						Discount rate ⁽¹⁾	11%/4.3% at June 30, 2016 12%/3.5% at December 31, 2015
Total	$	19,600	$	18,800

(1) The contingent consideration liability related to the net sales targets was derived from a model under a risk neutral framework resulting in the application of 11 % and 4.3 % at June 30, 2016 and 12 % and 3.5 % at December 31, 2015, discount rates to estimated cash flows.

Summary of Activities in Financial Instruments with Level 3 Inputs

For those financial instruments with significant Level 3 inputs, the following tables summarize the activities for the periods indicated:

	Liability – Contingent Consideration Fair Value Measurements Using Significant Unobservable Inputs (Level 3) For the Three Months Ended June 30,
	2016		2015
Balance at beginning of period	$	19,000	$	17,500
Fair value change included in net loss		600		800
Balance at end of period	$	19,600	$	18,300
Changes in unrealized gains or losses for the period included in earnings (or changes in net assets) for liabilities held at the end of the reporting period	$	600	$	800

	Liability – Contingent Consideration Fair Value Measurements Using Significant Unobservable Inputs (Level 3) For the Six Months Ended June 30,
	2016		2015

Balance at beginning of period	$	18,800	$	17,200
Fair value change included in net loss		800		1,100
Balance at end of period	$	19,600	$	18,300
Changes in unrealized gains or losses for the period included in earnings (or changes in net assets) for liabilities held at the end of the reporting period	$	800	$	1,100

Note 6. Accounts Receivable