XML 34 R20.htm IDEA: XBRL DOCUMENT
v3.22.1

Fair Value Measurements | 3 Months Ended
--- | ---
Mar. 31, 2022
Fair Value Disclosures [Abstract] |
Fair Value Measurements | 13. Fair Value Measurements. Assets (Liabilities) Measured at Fair Value on a Recurring Basis Our financial assets and (liabilities) carried at fair value and measured on a recurring basis as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Fair Value Measurements Using
​ | ​ | Total Fair | ​ | Quoted prices in | ​ | Significant other | ​ | Significant
​ | ​ | Value at | ​ | active markets | ​ | observable inputs | ​ | unobservable inputs
​ |  | March 31, 2022 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Interest rate contract asset, long-term (1) | ​ | $ | 1,161 | ​ | $ | — | ​ | $ | 1,161 | ​ | $ | —
Foreign currency contract assets, current and long-term (2) | ​ | $ | 3,398 | ​ | $ | — | ​ | $ | 3,398 | ​ | $ | —
Foreign currency contract liabilities, current and long-term (3) | ​ | $ | (4,718) | ​ | $ | — | ​ | $ | (4,718) | ​ | $ | —
Contingent consideration liabilities | ​ | $ | (26,333) | ​ | $ | — | ​ | $ | — | ​ | $ | (26,333)
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Fair Value Measurements Using
​ | ​ | Total Fair | ​ | Quoted prices in | ​ | Significant other | ​ | Significant
​ | ​ | Value at | ​ | active markets | ​ | observable inputs | ​ | unobservable inputs
​ |  | December 31, 2021 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Interest rate contract liability, long-term (1) | ​ | $ | (1,447) | ​ | $ | — | ​ | $ | (1,447) | ​ | $ | —
Foreign currency contract assets, current and long-term (2) | ​ | $ | 2,241 | ​ | $ | — | ​ | $ | 2,241 | ​ | $ | —
Foreign currency contract liabilities, current and long-term (3) | ​ | $ | (3,646) | ​ | $ | — | ​ | $ | (3,646) | ​ | $ | —
Contingent consideration liabilities | ​ | $ | (48,234) | ​ | $ | — | ​ | $ | — | ​ | $ | (48,234)
(1) | The fair value of the interest rate contract is determined using Level 2 fair value inputs and is reported with other long-term assets or other long-term obligations in the consolidated balance sheets.
(2) | The fair value of the foreign currency contract assets (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as prepaid expenses and other current assets or other long-term assets in the consolidated balance sheets.
(3) | The fair value of the foreign currency contract liabilities (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as accrued expenses or other long-term obligations in the consolidated balance sheets.
Certain of our business combinations involve the potential for the payment of future contingent consideration, generally based on a percentage of future product sales or upon attaining specified future revenue or other milestones. The contingent consideration liability is re-measured at the estimated fair value at the end of each reporting period with the change in fair value recognized within operating expenses in the accompanying consolidated statements of income for such period. We measure the initial liability and re-measure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value measurements. Changes in the fair value of our contingent consideration liabilities during the three-month periods ended March 31, 2022 and 2021 consisted of the following (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three Months Ended
​ |  | March 31,
​ |  | 2022 |  | 2021
Beginning balance | ​ | $ | 48,234 | ​ | $ | 55,750
Contingent consideration expense | ​ |  | 2,600 | ​ |  | 402
Contingent payments made | ​ |  | (24,491) | ​ |  | (403)
Effect of foreign exchange | ​ | ​ | (10) | ​ | ​ | 5
Ending balance | ​ | $ | 26,333 | ​ | $ | 55,754
​ As of March 31, 2022, $5.8 million in contingent consideration liability was included in other long-term obligations and $20.5 million in contingent consideration liability was included in accrued expenses in our consolidated balance sheet. As of December 31, 2021, $13.5 million in contingent consideration liability was included in other long-term obligations and $34.7 million in contingent consideration liability was included in accrued expenses in our consolidated balance sheet. Cash paid to settle the contingent consideration liability recognized at fair value as of the applicable acquisition date has been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows. The recurring Level 3 measurement of our contingent consideration liabilities included the following significant unobservable inputs at March 31, 2022 and December 31, 2021 (amounts in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fair value at | ​ | ​ | ​ | ​ | ​ | ​ |  | ​
​ | ​ | March 31, | ​ | Valuation | ​ | ​ | ​ | ​ | ​ | Weighted
Contingent consideration liability |  | 2022 |  | technique |  | Unobservable inputs |  | Range | ​ | Average(1)
Revenue-based royalty payments contingent liability | ​ | $ | 2,405 |  | Discounted cash flow |  | Discount rate | ​ | 13% - 16% | ​ | 15.5%
​ | ​ |  |  |  | ​ |  | Projected year of payments | ​ | 2022-2034 | ​ | 2026
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Revenue milestones contingent liability | ​ | $ | 20,269 |  | Monte Carlo simulation |  | Discount rate | ​ | 0% - 13% | ​ | 3.8%
​ | ​ |  |  |  | ​ |  | Projected year of payments | ​ | 2022-2031 | ​ | 2022
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Regulatory approval contingent liability | ​ | $ | 3,659 | ​ | Scenario-based method | ​ | Discount rate | ​ | 3.1% | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | Probability of milestone payment | ​ | 80% | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | Projected year of payment | ​ | 2024-2025 | ​ | 2025
​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fair value at | ​ | ​ | ​ | ​ | ​ | ​ |  | ​
​ | ​ | December 31, | ​ | Valuation | ​ | ​ | ​ | ​ | ​ | Weighted
Contingent consideration liability |  | 2021 |  | technique |  | Unobservable inputs |  | Range | ​ | Average(1)
Revenue-based royalty payments contingent liability | ​ | $ | 2,870 |  | Discounted cash flow |  | Discount rate | ​ | 13% - 16% | ​ | 14.7%
​ | ​ |  |  |  | ​ |  | Projected year of payments | ​ | 2022-2034 | ​ | 2026
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Revenue milestones contingent liability | ​ | $ | 41,671 |  | Monte Carlo simulation |  | Discount rate | ​ | 7.5% - 12.5% | ​ | 8.2%
​ | ​ |  |  |  | ​ |  | Projected year of payments | ​ | 2022-2031 | ​ | 2022
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Regulatory approval contingent liability | ​ | $ | 3,693 | ​ | Scenario-based method | ​ | Discount rate | ​ | 2.6% | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | Probability of milestone payment | ​ | 80% | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | Projected year of payment | ​ | 2024-2025 | ​ | 2025
(1) | Unobservable inputs were weighted by the relative fair value of the instruments. No weighted average is reported for contingent consideration liabilities without a range of unobservable inputs.
​ The contingent consideration liability is re-measured to fair value each reporting period. Significant increases or decreases in projected revenues, based on our most recent internal operational budgets and long-range strategic plans, discount rates or the time until payment is made would have resulted in a significantly lower or higher fair value measurement. Our determination of the fair value of the contingent consideration liability could change in future periods based upon our ongoing evaluation of these significant unobservable inputs. We intend to record any such change in fair value to operating expenses in our consolidated statements of income. Contingent Payments to Related Parties During the three-month period ended March 31, 2022, we made contingent payments of $1.6 million to a current director of Merit and former shareholder of Cianna Medical, Inc. (“Cianna Medical”), which we acquired in 2018. We made no such payments during the three-month period ended March 31, 2021. The terms of the acquisition, including contingent consideration payments, were determined prior to the appointment of the former Cianna Medical shareholder as a Merit director. As a former shareholder of Cianna Medical, the Merit director may be eligible for additional payments for the achievement of sales milestones specified in our merger agreement with Cianna Medical. Fair Value of Other Assets (Liabilities) The carrying amount of cash and cash equivalents, receivables, and trade payables approximate fair value because of the immediate, short-term maturity of these financial instruments. Our long-term debt re-prices frequently due to variable rates and entails no significant changes in credit risk and, as a result, we believe the fair value of long-term debt approximates carrying value. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash and cash equivalents, which use Level 1 inputs. We analyze our investments in privately-held companies to determine if they should be accounted for using the equity method based on our ability to exercise significant influence over operating and financial policies of the company in which we have invested. Investments not accounted for under the equity method of accounting are accounted for at cost minus impairment, if applicable, plus or minus changes in valuation resulting from observable transactions for identical or similar investments. Impairment Charges We recognize or disclose the fair value of certain assets, such as non-financial assets, primarily property and equipment, right-of-use operating lease assets, equity investments, intangible assets and goodwill in connection with impairment evaluations. Such assets are reported at carrying value and are not subject to recurring fair value measurements. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Fair value is generally determined based on discounted future cash flow. All our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. During the three-month period ended March 31, 2022, we recorded an impairment charge of $1.7 million related to the acquired intangible assets from our August 2019 acquisition of STD Pharmaceutical. As of March 31, 2022, the net assets associated with the STD Pharmaceutical business were not material. On April 30, 2022, we divested our ownership of the STD Pharmaceutical business. We do not anticipate the recognition of a material loss upon the divestiture of this business. During the three-month period ended March 31, 2021, we had no losses related to acquired intangible assets (see Note 5). Notes Receivable Our outstanding long-term notes receivable, including accrued interest and our allowance for current expected credit losses, were $2.4 million and $2.3 million as of March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022 and December 31, 2021, we had an allowance for current expected credit losses of $0.2 million and $0.2 million, respectively, associated with these notes receivable. We assess the allowance for current expected credit losses on an individual security basis, due to the limited number of securities, using a probability of default model, which is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the expected collectability of securities, and other security specific factors. The table below presents a rollforward of the allowance for current expected credit losses on our notes receivable for the three-month periods ended March 31, 2022 and 2021 (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
​ | ​ | 2022 |  | 2021
Beginning balance | ​ | $ | 199 | ​ | $ | 730
Provision for credit loss expense | ​ | ​ | — | ​ | ​ | 202
Ending balance | ​ | $ | 199 | ​ | $ | 932
​

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration