Fair Value Measurements

3 Months Ended

Mar. 31, 2017

FAIR VALUE MEASUREMENTS

The following table sets forth the classification of our financial assets within the fair value hierarchy that were measured and recorded at fair value on a recurring basis as of March 31, 2017 and December 31, 2016. We did not have any financial liabilities measured and recorded at fair value on a recurring basis as of those dates. The amounts presented exclude cash, but include investments classified as cash equivalents (in thousands):



	March 31, 2017
	Level 1		Level 2		Total
Money market funds	$	44,641	$	—	$	44,641
Commercial paper	—		193,968		193,968
Corporate bonds	—		175,061		175,061
U.S. Treasury and government sponsored enterprises	—		43,286		43,286
Total financial assets	$	44,641	$	412,315	$	456,956



	December 31, 2016
	Level 1		Level 2		Total
Money market funds	$	71,457	$	—	$	71,457
Commercial paper	—		165,375		165,375
Corporate bonds	—		152,407		152,407
U.S. Treasury and government sponsored enterprises	—		70,727		70,727
Total financial assets	$	71,457	$	388,509	$	459,966

We did not have any financial assets classified as Level 3 in the fair value hierarchy as of March 31, 2017 or December 31, 2016 and there were no transfers of financial assets classified as Level 3 during the three months ended March 31, 2017 or the year ended December 31, 2016.

The estimated fair value of our financial instruments that are carried at amortized cost is as follows (in thousands):



	March 31, 2017				December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Deerfield Notes	$	113,349	$	121,895	$	109,122	$	121,220
Term loan payable	$	—	$	—	$	80,000	$	79,784

The carrying amounts of cash, trade and other receivables, accounts payable, accrued clinical trial liabilities, accrued compensation and benefits, and other liabilities approximate their fair values and are excluded from the tables above.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:


•	When available, we value investments based on quoted prices for those financial instruments, which is a Level 1 input. Our remaining investments are valued using third-party pricing sources, which use observable market prices, interest rates and yield curves observable at commonly quoted intervals of similar assets as observable inputs for pricing, which are Level 2 inputs.

•

We estimate the fair value of our debt instruments using the net present value of the payments. For the Deerfield Notes, we used a discount rate of 9.5%, which we estimate as our current borrowing rate for similar debt as of March 31, 2017, which is a Level 3 input. For the term loan payable, we used an interest rate that is consistent with money-market rates that would have been earned on our non-interest-bearing compensating balances as our discount rate, which is a Level 2 input.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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