Fair Value Measurement (Tables)

12 Months Ended

Dec. 31, 2022

Schedule of Assets and Liabilities Measured at Fair Value

The following table provides a summary of the assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2022 and 2021 (in thousands):


Fair Value Measurements at Reporting Date Using
December 31, 2022			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Short-term investments (1)	$	103,742	$	3,992	$	99,615	$	135
Investment in Viking common stock (2)	63,122		63,122		—		—
Total assets	$	166,864	$	67,114	$	99,615	$	135
Liabilities:

Contingent liabilities - Cydex	$	84	$	—	$	—	$	84
Contingent liabilities - Metabasis (3)	3,429		—		3,429		—

Liability for amounts owed to a former licensor	44		44		—		—
Total liabilities	$	3,557	$	44	$	3,429	$	84


Fair Value Measurements at Reporting Date Using
December 31, 2021(a)			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Short-term investments (1)	$	290,697	$	9,735	$	280,553	$	409
Investment in Viking common stock (2)	30,889		30,889		—		—

Total assets	$	321,586	$	40,624	$	280,553	$	409
Liabilities:
Contingent liabilities - Cydex	$	349	$	—	$	—	$	349
Contingent liabilities - Metabasis (3)	3,358		—		3,358		—
Liability for amounts owed to a former licensor	86		86		—		—
Total liabilities	$	3,793	$	86	$	3,358	$	349

(a) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation.

(1) Excluding our investment in Viking, our short-term investments in marketable debt and equity securities are classified as available-for-sale securities based on management's intentions and are at level 2 of the fair value hierarchy, as these investment securities are valued based upon quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Short-term investments in mutual funds are valued at their net asset value (NAV) on the last day of the period. We have classified marketable securities with original maturities of greater than one year as short-term investments based upon our ability and intent to use any and all of those marketable securities to satisfy the liquidity needs of our current operations. In addition, we have investment in warrants resulting from Seelos Therapeutics Inc. milestone payments that were settled in shares during the first quarter of 2019 and are at level 3 of the fair value hierarchy, based on Black Scholes value estimated by management on the last day of the period.

(2) Investment in Viking warrants, which we received as a result of Viking’s partial repayment of the Viking note receivable and our purchase of Viking common stock and warrants in April 2016, is classified as level 1 as the fair value is determined using quoted market prices in active markets for the same securities. The change of the fair value is recorded in “gain (loss) from short-term investments” in our consolidated statement of operations. See further discussion in “Note (3), Short-term Investments: Investment in Viking.”

(3) In connection with our acquisition of Metabasis in January 2010, we issued Metabasis stockholders four tradable CVRs, one CVR from each of four respective series of CVR, for each Metabasis share. The CVRs entitle Metabasis stockholders to cash payments as frequently as every six months as cash is received by us from proceeds from the sale or partnering of any of the Metabasis drug development programs, among other triggering events. The liability for the CVRs is determined using quoted prices in a market that is not active for the underlying CVR. The carrying amount of the liability may fluctuate significantly based upon quoted market prices and actual amounts paid under the agreements may be materially differ than the carrying amount of the liability. Several of the Metabasis drug development programs have been outlicensed to Viking, including VK2809. VK2809 is a novel selective TR-β agonist with potential in multiple indications, including hypercholesterolemia, dyslipidemia, NASH, and X-ALD. Under the terms of the agreement with Viking, we may be entitled to up to $375.0 million of development, regulatory and commercial milestones and tiered royalties on potential future sales including a $10.0 million payment upon initiation of a Phase 3 clinical trial.

Schedule of Reconciliation of Level 3 Financial Instruments

A reconciliation of the level 3 financial instruments as of December 31, 2022 is as follows (in thousands):


Liabilities
Fair value of level 3 financial instruments as of December 31, 2021	$	349
Fair value adjustments to contingent liabilities	(265)
Fair value of level 3 financial instruments as of December 31, 2022	$	84

A reconciliation of the level 3 financial instruments as of December 31, 2021 is as follows (in thousands):


Liabilities
Fair value of level 3 financial instruments as of December 31, 2020	$	38,107
Payments to CVR holders and other contingency payments	(50)
Fair value adjustments to contingent liabilities	(37,708)
Fair value of level 3 financial instruments as of December 31, 2021	$	349

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details