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Marketable Securities | 12 Months Ended
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Dec. 31, 2018
Marketable Securities |
Marketable Securities | Note 4. Marketable Securities The following is a summary of our marketable security portfolio for the periods presented (in thousands):
|  |  |  |  | Net |  |  |  |
|  | Amortized |  | Unrealized |  | Estimated |
|  | Cost |  | Losses |  | Fair Value |
December 31, 2018 |  |  |  |  |  |  |  |  |  |
Debt securities (corporate and government) |  | $ | 275,405 |  | $ | (1,062) |  | $ | 274,343 |
December 31, 2017 |  |  |  |  |  |  |  |  |  |
Debt securities (corporate and government) |  | $ | 271,401 |  | $ | (1,265) |  | $ | 270,136 |
Our debt securities generally have contractual maturity dates of between 12 to 18 months. Fair Value Measurements FASB accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (“the exit price”) in an orderly transaction between market participants at the measurement date. The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. In determining fair value we use quoted prices and observable inputs. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of us. The fair value hierarchy is broken down into three levels based on the source of inputs as follows: Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2—Valuations based on observable inputs and quoted prices in active markets for similar assets and liabilities. Level 3—Valuations based on inputs that are unobservable and models that are significant to the overall fair value measurement. Recurring Fair Value Measurements Our marketable securities consist of investments in corporate debt securities and U.S. government securities that are classified as available-for-sale. At December 31, 2018 and 2017, our Level 2 corporate debt securities and U.S government securities were valued using readily available pricing sources which utilize market observable inputs, including the current interest rate and other characteristics for similar types of investments. Our long term investments classified as Level 1 were valued using their respective closing stock prices on The Nasdaq Stock Market. Our policy is to recognize transfers into and transfers out of fair value hierarchy levels as of the end of the reporting period. There were no transfers out of or into hierarchy levels during the year ended December 31, 2018. The following fair value hierarchy table presents information about each major category of our financial assets measured at fair value on a recurring basis (in thousands):
|  | Fair Value Measurement at Reporting Date Using: |  |  |  |
|  | Quoted Prices in |  | Significant Other |  | Significant |  |  |  |
|  | Active Markets for |  | Observable |  | Unobservable |  |  |  |
|  | Identical Assets |  | Inputs |  | Inputs |  | Balance as of |
|  | (Level 1) |  | (Level 2) |  | (Level 3) |  | December 31, 2018 |
Cash and cash equivalents |  | $ | 1,163,980 |  | $ | — |  | $ | — |  | $ | 1,163,980 |
Debt securities (corporate and government) |  |  | — |  |  | 274,343 |  |  | — |  |  | 274,343 |
Long term investments (Note 7) |  |  | 99,199 |  |  | — |  |  | — |  |  | 99,199 |
Total assets |  | $ | 1,263,179 |  | $ | 274,343 |  | $ | — |  | $ | 1,537,522 |
|  | Fair Value Measurement at Reporting Date Using: |  |  |  |
|  | Quoted Prices in |  | Significant Other |  | Significant |  |  |  |
|  | Active Markets for |  | Observable |  | Unobservable |  |  |  |
|  | Identical Assets |  | Inputs |  | Inputs |  | Balance as of |
|  | (Level 1) |  | (Level 2) |  | (Level 3) |  | December 31, 2017 |
Cash and cash equivalents |  | $ | 899,509 |  | $ | — |  | $ | — |  | $ | 899,509 |
Debt securities (corporate and government) |  |  | — |  |  | 270,136 |  |  | — |  |  | 270,136 |
Long term investment (Note 7) |  |  | 134,356 |  |  | — |  |  | — |  |  | 134,356 |
Total assets |  | $ | 1,033,865 |  | $ | 270,136 |  | $ | — |  | $ | 1,304,001 |
The following fair value hierarchy table presents information about each major category of our financial liabilities measured at fair value on a recurring basis (in thousands):
|  | Fair Value Measurement at Reporting Date Using: |  |  |
|  | Quoted Prices in |  | Significant Other |  | Significant |  |  |
|  | Active Markets for |  | Observable |  | Unobservable |  |  |
|  | Identical Assets |  | Inputs |  | Inputs |  | Balance as of
|  | (Level 1) |  | (Level 2) |  | (Level 3) |  | December 31, 2018
Acquisition-related contingent consideration |  | $ | — |  | $ | — |  | $ | 287,001 |  | $ | 287,001
Total liabilities |  | $ | — |  | $ | — |  | $ | 287,001 |  | $ | 287,001
|  | Fair Value Measurement at Reporting Date Using: |  |  |  |
|  | Quoted Prices in |  | Significant Other |  | Significant |  |  |  |
|  | Active Markets for |  | Observable |  | Unobservable |  |  |  |
|  | Identical Assets |  | Inputs |  | Inputs |  | Balance as of |
|  | (Level 1) |  | (Level 2) |  | (Level 3) |  | December 31, 2017 |
Acquisition-related contingent consideration |  | $ | — |  | $ | — |  | $ | 287,000 |  | $ | 287,000 |
Total liabilities |  | $ | — |  | $ | — |  | $ | 287,000 |  | $ | 287,000 |
The following is a roll forward of our Level 3 liabilities (in thousands):
|  | 2018 |  | 2017 |
Balance at January 1, |  | $ | 287,000 |  | $ | 301,000 |
Contingent consideration earned during the period but not yet paid |  |  | (13,184) |  |  | (6,618) |
Payments made during the period |  |  | (12,988) |  |  | (15,086) |
Change in fair value of contingent consideration |  |  | 26,173 |  |  | 7,704 |
Balance at December 31, |  | $ | 287,001 |  | $ | 287,000 |
The fair value of the contingent consideration was determined using an income approach based on estimated ICLUSIG revenues in the European Union and other countries for the approved third line treatment. The fair value of the contingent consideration is remeasured each reporting period, with changes in fair value recorded in the consolidated statements of operations. The change in fair value of the contingent consideration during the period ending December 31, 2018 was due primarily to the passage of time as there were no other significant changes in the key assumptions. The change in fair value of the contingent consideration during the period ending December 31, 2017 was due primarily to the passage of time and a benefit of $24.0 million recorded during the third quarter to the lack of expected future sales royalties payable due to the discontinued OPTIC-2L clinical trial. We make payments to Takeda quarterly based on the royalties or any additional milestone payments earned in the previous quarter. As of December 31, 2018, contingent consideration earned but not yet paid was $13.2 million. The royalties earned in the third quarter of $6.7 million were included in accounts payable and the royalties earned in the fourth quarter of $6.5 million were included in accrued and other current liabilities at December 31, 2018. As of December 31, 2017, contingent consideration earned but not yet paid was $6.6 million were included in accrued and other current liabilities. Non-Recurring Fair Value Measurements During the years ended December 31, 2018 and 2017, there were no measurements required for any assets or liabilities at fair value on a non-recurring basis.

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