FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2012

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

6.     FAIR VALUE MEASUREMENTS

• Assets and Liabilities Measured at Fair Value on a Recurring Basis

  The following fair value hierarchy table presents the components of the Company's financial assets and liabilities measured at fair value as of March 31, 2012 and December 31, 2011:

	As of March 31, 2012										As of December 31, 2011
	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	$	171,970		$	171,970	$	—	$	—		$	27,711		$	27,711	$	—	$	—
Available-for-sale equity securities		—			—		—		—			3,364			3,364		—		—
Available-for-sale debt securities:
Corporate bonds		1,049			1,049		—		—			2,974			2,974		—		—
Total financial assets	$	173,019		$	173,019	$	—	$	—		$	34,049		$	34,049	$	—	$	—
Cash equivalents	$	171,970		$	171,970	$	—	$	—		$	27,711		$	27,711	$	—	$	—
Marketable securities		1,049			1,049		—		—			6,338			6,338		—		—
Total financial assets	$	173,019		$	173,019	$	—	$	—		$	34,049		$	34,049	$	—	$	—
Liabilities:
Acquisition-related contingent consideration	$	(421,333	)	$	—	$	—	$	(421,333	)	$	(420,084	)	$	—	$	—	$	(420,084	)

• 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.

  There were no transfers between Level 1 and Level 2 during the three-month period ended March 31, 2012.

  Liabilities 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. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement.

  The following table presents a reconciliation of contingent consideration obligations measured on a recurring basis using significant unobservable inputs (Level 3) for the three-month period ended March 31, 2012:

	January 1, 2012			Issuances(a)			Payments(b)		Unrealized Loss(c)			Foreign Exchange(d)			Transfers Into Level 3		Transfers Out of Level 3		March 31, 2012
Acquisition-related contingent consideration	$	(420,084	)	$	(17,744	)	$	27,500	$	(9,839	)	$	(1,166	)	$	—	$	—	$	(421,333	)

(a)

Relates to the Gerot Lannach and Eyetech acquisitions as described above in note 3.

(b)

Relates to payments of acquisition-related contingent consideration related to Elidel®/Xerese®.

(c)

Recognized as Acquisition-related contingent consideration in the consolidated statements of (loss) income. The balance is primarily driven by fair value adjustments of $6.9 million related to the Elidel®/Xerese® license agreement entered into in June 2011 and $2.2 million related to the iNova acquisition described above in note 3.

(d)

Included in Foreign exchange and other in the consolidated statements of (loss) income.

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

  There were no significant assets or liabilities that were re-measured at fair value on a non-recurring basis subsequent to initial recognition in the three-month period ended March 31, 2012.