FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2011

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

7.     FAIR VALUE MEASUREMENTS

• Assets Measured at Fair Value on a Recurring Basis

  The following fair value hierarchy table presents the components and classification of the Company's financial assets measured at fair value as of December 31, 2011 and 2010:

			2011										2010
			Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Carrying Value			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		$	27,711		$	27,711	$	—	$	—		$	91,448		$	91,448	$	—	$	—
	Available-for-sale equity securities			3,364			3,364		—		—			—			—		—		—
	Available-for-sale debt securities:
		Corporate bonds		2,974			2,974		—		—			6,340			—		6,340		—
		Government-sponsored enterprise securities		—			—		—		—			1,826			—		1,826		—
Total financial assets			$	34,049		$	34,049	$	—	$	—		$	99,614		$	91,448	$	8,166	$	—
Cash equivalents			$	27,711		$	27,711	$	—	$	—		$	91,448		$	91,448	$	—	$	—
Marketable securities				6,338			6,338		—		—			8,166			—		8,166		—
Total financial assets			$	34,049		$	34,049	$	—	$	—		$	99,614		$	91,448	$	8,166	$	—
Liabilities:
	Acquisition-related contingent consideration		$	(420,084	)	$	—	$	—	$	(420,084	)	$	(20,220	)	$	—	$	—	$	(20,220	)

• Fair value measurements are estimated based on valuation techniques and inputs categorized as follows:

  •

  Level 1 — Quoted prices in active markets for identical assets or liabilities;

  •

  Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

  •

  Level 3 — Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using discounted cash flow methodologies, pricing models, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

  If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

  Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

  The fair value measurement of contingent consideration obligations arising from business combinations is determined using unobservable (Level 3) inputs. These inputs include (i) the estimated amount and timing of projected cash flows; (ii) the probability of the achievement of the factor(s) on which the contingency is based; and (iii) the risk-adjusted discount rate used to present value the probability-weighted cash flows.

  As of December 31, 2009, the Company's marketable securities portfolio included $26.8 million of principal invested in nine individual auction rate securities, which had an estimated fair value of $6.0 million at that date. In May 2009, the Company had received $22.0 million in a settlement with an investment bank in respect of these securities, and retained ownership of the securities under the terms of the settlement. In August 2010, the Company disposed of these securities for cash proceeds of $1.4 million.

  The following table presents a reconciliation of contingent consideration obligations and the auction rate securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2011 and 2010:

			2011			2010
Balance, beginning of year			$	(20,220	)	$	6,009
Total unrealized gains (losses):
	Included in net income (loss):
		Arising during the year		11,817	(1)		(5,163	)(2)
		Reclassification from other comprehensive (loss) income		—			(389	)
	Included in other comprehensive income:
		Arising during year		—			554
		Reclassification to net income (loss)		—			389
Proceeds on disposal				—			(1,400	)
Acquisition-related contingent consideration:
	Issuances			(443,481	)		(20,220	)
	Payments			31,800			—
Balance, end of year			$	(420,084	)	$	(20,220	)

• (1)

  $11.0 million is recognized as Acquisition-related contingent consideration and $0.8 million is included in Foreign exchange and other in the consolidated statements of income (loss).
  
  

  (2)

  Included in Gain (loss) on investments, net (as described in note 20).

  Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

  As of December 31, 2011, the Company's assets measured at fair value on a non-recurring basis subsequent to initial recognition included intangible assets related to the IDP-111 and 5-FU products classified as held for sale on the consolidated balance sheet. Refer to note 4 for additional information. The Company recognized impairment charges in 2011 of $7.9 million and $19.8 million for IDP-111 and 5-FU, respectively. The adjusted carrying amounts of $54.4 million and $14.8 million for IDP-111 and 5-FU, respectively, are equal to estimated fair value, less costs to sell, which was based on observable market prices and represents Level 2 inputs.

  Also, the Company recognized impairment charges on IPR&D assets of $105.2 million in the fourth quarter of 2011, relating to the A002, A004, and A006 programs acquired as part of the Aton acquisition in 2010 described above under note 3, as well as the IDP-109 and IDP-115 dermatology programs. The adjusted carrying amounts of $12.6 million, in the aggregate, for these assets are equal to their estimated fair value, which was determined using discounted cash flows and represents Level 3 inputs. For further information, see note 12 titled "INTANGIBLE ASSETS AND GOODWILL".

  In addition, the Company's assets measured at fair value on a non-recurring basis include a property in Warsaw, Poland, which is classified as held for sale on the consolidated balance sheet. The fair value less costs to sell of this property is $3.1 million as of December 31, 2011 based on observed prices for comparable market transactions, which represent Level 2 inputs. The Company recognized impairment charges in 2011 of $0.6 million on this property.