Fair Value Measurements

We record the contingent consideration liability resulting from our acquisition of MIP at fair value in accordance with ASC

820,

Fair Value Measurement

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 December 31, 2018
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
	Balance at		Identical Assets		Inputs		Inputs
	December 31, 2018		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	136,052	$	136,052	$	-	$	-
Total assets	$	136,052	$	136,052	$	-	$	-

Liabilities:
Contingent consideration liability	$	11,000	$	-	$	-	$	11,000
Total liabilities	$	11,000	$	-	$	-	$	11,000

			Fair Value Measurements at December 31, 2017
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
	Balance at		Identical Assets		Inputs		Inputs
	December 31, 2017		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	87,231	$	87,231	$	-	$	-
Total assets	$	87,231	$	87,231	$	-	$	-

Liabilities:
Contingent consideration liability	$	16,800	$	-	$	-	$	16,800
Total liabilities	$	16,800	$	-	$	-	$	16,800

The contingent consideration liability of

$11.0

million and

$16.8

million at

December 31, 2018

and

2017,

respectively, represents the estimated fair value of the future potential milestone payments to former MIP stockholders (shown in the tables below).

Milestone payments due upon

first

commercial sale (in thousands):

Program	Consideration		Form of Payment at Progenics' Option
AZEDRA	$	8,000	Cash or Progenics common stock
1404		10,000	Cash or Progenics common stock
1095		5,000	Cash or Progenics common stock
	$	23,000

Net sales milestone payments due upon

first

achievement of specified net sales target in any single calendar year across all MIP-related programs (in thousands):

Calendar Year Net Sales Level	Consideration		Form of Payment at Progenics' Option
$30 million	$	5,000	Cash or Progenics common stock
$60 million		5,000	Cash or Progenics common stock
$100 million		10,000	Cash or Progenics common stock
$250 million		20,000	Cash or Progenics common stock
$500 million		30,000	Cash or Progenics common stock
	$	70,000

We consider this liability a Level

instrument (

one

with significant unobservable inputs) in the fair value hierarchy. The estimated fair value was determined based on probability adjusted discounted cash flow and Monte Carlo simulation models that included significant estimates and assumptions pertaining to commercialization events and sales targets. The most significant unobservable inputs are the probabilities of achieving regulatory approval of the development projects and subsequent commercial success and discount rates.

The estimated fair value was determined based on probability adjusted discounted cash flow and Monte Carlo simulation models that included significant estimates and assumptions pertaining to commercialization events and sales targets. The most significant unobservable inputs were the probabilities of achieving regulatory approval of the development projects and subsequent commercial success, and discount rates.

Significant changes in any of the probabilities of success would result in a significantly higher or lower fair value measurement, respectively. Significant changes in the probabilities as to the periods in which milestones will be achieved would result in a significantly lower or higher fair value measurement, respectively. We record the contingent consideration liability at fair value with changes in estimated fair values recorded in change in contingent consideration liability in our consolidated statements of operations.

The following tables summarize quantitative information and assumptions pertaining to the fair value measurement of the Level

inputs at

December 31, 2018

and

2017

(in thousands). The

2018

decrease in the contingent consideration liability of

$5.8

million was primarily attributable to a decrease in the sales projections and probability of success for

1404,

following results from the Phase

trial, whereby only

one

of the co-primary endpoints was met, partially offset by higher estimated probability of success of AZEDRA and a decrease in the discount period used to calculate the present value of the contingent consideration liability. The

2017

increase in the contingent consideration liability of

$2.6

million was primarily attributable to the higher probability of success of AZEDRA used to calculate the potential milestone payments to former MIP stockholders and a reduction in the discount period.

	Fair Value at
	December 31,				Range
	2018		Valuation Technique	Unobservable Input	(Weighted-Average)
Contingent Consideration Liability:
AZEDRA commercialization	$	7,050	Probability adjusted	Probability of success			90%
			discounted cash flow model	Period of expected milestone achievement			2019
				Discount rate			10%
1095 commercialization		450	Probability adjusted	Probability of success			18%
			discounted cash flow model	Period of expected milestone achievement			2026
				Discount rate			10%
Net sales targets		3,500	Monte-Carlo simulation	Probability of success		18%	-	90%
				Discount rate			10%
Total	$	11,000

	Fair Value at
	December 31,				Range
	2017		Valuation Technique	Unobservable Input	(Weighted-Average)
Contingent Consideration Liability:
AZEDRA commercialization	$	5,500	Probability adjusted	Probability of success			72%
			discounted cash flow model	Period of expected milestone achievement			2018
				Discount rate			10%
1404 commercialization		4,500	Probability adjusted	Probability of success			59%
			discounted cash flow model	Period of expected milestone achievement			2020
				Discount rate			10%
1095 commercialization		400	Probability adjusted	Probability of success			16%
			discounted cash flow model	Period of expected milestone achievement			2025
				Discount rate			10%
Net sales targets		6,400	Monte-Carlo simulation	Probability of success		16%	-	72%
				Discount rate			10%
Total	$	16,800

For those financial instruments with significant Level

inputs, the following table summarizes the activities for the periods indicated:

	Liability - Contingent Consideration
	Fair Value Measurements Using
	Significant Unobservable Inputs
	(Level 3)
	2018			2017
Balance at beginning of period	$	16,800		$	14,200
Fair value change included in net loss		(5,800	)		2,600
Balance at end of period	$	11,000		$	16,800

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	$	(5,800	)	$	2,600