Note 3 - Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Text Block]

3. Fair Value Measurements

The fair value of our financial instruments are estimates of the amounts that would be received if we were to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date or exit price. The assets and liabilities are categorized and disclosed in one of the following three categories:

Level 1 – based on quoted market prices in active markets for identical assets and liabilities;

Level 2 – based on quoted market prices for similar assets and liabilities, using observable market based inputs or unobservable market based inputs corroborated by market data; and

Level 3 – based on unobservable inputs using management’s best estimate and assumptions when inputs are unavailable.

The following tables present the fair value of our financial instruments measured at fair value on a recurring basis by level within the valuation hierarchy.

	September 30, 2012						December 31, 2011
	Level 1		Level 2		Total		Level 1		Level 2		Total
(In thousands)
Financial assets:
Money market funds	$	128,962	$	-	$	128,962	$	163,368	$	-	$	163,368
Certificate of deposit		-		20,000		20,000		-		-		-
Corporate debt securities		-		23,772		23,772		-		44,877		44,877
Commercial paper		-		-		-		-		8,996		8,996
U.S. government sponsored agency bonds		2,004		-		2,004		2,015		-		2,015
U.S. treasury securities		2,001		-		2,001		5,513		-		5,513
Foreign currency hedge contracts		-		562		562		-		6,838		6,838
Total	$	132,967	$	44,334	$	177,301	$	170,896	$	60,711	$	231,607
Financial liabilities:
Foreign currency hedge contracts	$	-	$	4,446	$	4,446	$	-	$	9,783	$	9,783

The fair value of the certificate of deposit is priced using quoted market prices for similar instruments, non-binding market prices that are corroborated by observable market data. The certificate of deposit is restricted as it was purchased to collateralize the line of credit for Merus Labs International, Inc., see Note 6.

Corporate debt securities consist primarily of U.S. corporate bonds. The fair value of corporate debt securities is estimated using recently executed transactions or market quoted prices, where observable. Independent pricing sources are also used for valuation.

The fair value of commercial paper is estimated based on observable inputs of comparable securities.

The fair value of foreign currency hedging contracts is estimated based on pricing models using readily observable inputs from actively quoted markets and is disclosed on a gross basis.

The following tables present the fair value of assets and liabilities not subject to fair value recognition by level within the valuation hierarchy:

	September 30, 2012						December 31, 2011
	Carrying Value		Fair Value Level 2		Fair Value Level 3		Carrying Value		Fair Value Level 2		Fair Value Level 3
(In thousands)
Assets:
Merus Labs Note Receivable	$	35,000	$	34,999	$	-	$	-	$	-	$	-
Senior Secured Note Receivable		9,922		9,813		-		-		-		-
Other Note Receivable		1,750		-		1,750		-		-		-
Total	$	46,672	$	44,812	$	1,750	$	-	$	-	$	-
Liabilities:
Series 2012 Notes	$	164,065	$	239,413	$	-	$	-	$	-	$	-
May 2015 Notes		142,282		191,152		-		138,952		156,123		-
February 2015 Notes		990		1,338		-		177,663		191,475		-
Non-recourse Notes		-		-		-		93,370		95,237		-
Total	$	307,337	$	431,903	$	-	$	409,985	$	442,835	$	-

As of September 30, 2012, the fair values of our Merus Labs Note Receivable, our Senior Secured Note Receivable, and our Other Notes Receivable were determined using one or more discounted cash flow models, incorporating expected payments and the interest rate extended on the notes with fixed interest rates and incorporating expected payments for notes with a variable rate of return.

The fair values of our convertible notes and our Non-recourse Notes, as defined herein, were determined using quoted market pricing or dealer quotes of our then outstanding notes.