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Fair Value Measurements (Tables) | 3 Months Ended
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Mar. 31, 2015
Fair Value Disclosures [Abstract] |
Summary of the assets and liabilities measured at fair value on recurring basis | The following table provides a summary of the carrying value of assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2015 (in thousands):
Fair Value Measurements at Reporting Date Using
|  |  | Quoted Prices in Active Markets for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs
| Total |  | (Level 1) |  | (Level 2) |  | (Level 3)
Assets: |  |  |  |  |  |  |
Current co-promote termination payments receivable (1) | $ | 88 |  |  | $ | — |  |  | $ | — |  |  | $ | 88 |
Short-term investments (2) | 11,459 |  |  | 11,459 |  |  | — |  |  | — |
Total assets | $ | 11,547 |  |  | $ | 11,459 |  |  | $ | — |  |  | $ | 88 |
Liabilities: |  |  |  |  |  |  |
Current contingent liabilities-CyDex (3) | $ | 3,692 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,692 |
Current co-promote termination liability (1) | 88 |  |  | — |  |  | — |  |  | 88 |
Long-term contingent liabilities-Metabasis (4) | 2,495 |  |  | 2,495 |  |  | — |  |  | — |
Long-term contingent liabilities-CyDex (3) | 5,718 |  |  | — |  |  | — |  |  | 5,718 |
Liability for amounts owed to former licensees(5) | 1,429 |  |  | 1,429 |  |  | — |  |  | — |
Total liabilities | $ | 13,422 |  |  | $ | 3,924 |  |  | $ | — |  |  | $ | 9,498 |
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, 2014 (in thousands):
Fair Value Measurements at Reporting Date Using
|  |  | Quoted Prices in Active Markets for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs
| Total |  | (Level 1) |  | (Level 2) |  | (Level 3)
Assets: |  |  |  |  |  |  |
Current co-promote termination payments receivable (1) | $ | 322 |  |  | $ | — |  |  | $ | — |  |  | $ | 322 |
Short-term investments (2) | 7,133 |  |  | 7,133 |  |  | — |  |  | — |
Total assets | $ | 7,455 |  |  | $ | 7,133 |  |  | $ | — |  |  | $ | 322 |
Liabilities: |  |  |  |  |  |  |
Current contingent liabilities-CyDex (3) | $ | 6,796 |  |  | $ | — |  |  | $ | — |  |  | $ | 6,796 |
Current co-promote termination liability (1) | 322 |  |  | — |  |  | — |  |  | 322 |
Long-term contingent liabilities-Metabasis (4) | 3,652 |  |  | 3,652 |  |  | — |  |  | — |
Long-term contingent liabilities-CyDex (3) | 4,701 |  |  | — |  |  | — |  |  | 4,701 |
Liability for amounts owed to former licensees (5) | 773 |  |  | 773 |  |  | — |  |  | — |
Total liabilities | $ | 16,244 |  |  | $ | 4,425 |  |  | $ | — |  |  | $ | 11,819 |
(1) | The co-promote termination payments receivable represents a non-interest-bearing receivable for future payments to be made by Pfizer related to product sales and is recorded at its fair value. The receivable and liability will remain equal, and are adjusted each quarter for changes in the fair value of the obligation including any changes in the estimate of future net Avinza product sales. The fair value is determined based on a valuation model using an income approach. For additional information, see Note 4 Avinza Co-Promotion.
(2) | The Company’s short-term investments include investments in equity securities which the Company received as a result of event-based and upfront payments from licensees. The fair value is determined using quoted market prices in active markets for the same securities.
(3) | The fair value of the liabilities for CyDex contingent liabilities were determined based on the income approach using a Monte Carlo analysis. The fair value is subjective and is affected by changes in inputs to the valuation model including management’s assumptions regarding revenue volatility, probability of commercialization of products, estimates of timing and probability of achievement of certain revenue thresholds and developmental and regulatory milestones which may be achieved and affect amounts owed to former license holders and CVR holders. Changes in these assumptions can materially affect the fair value estimate.
(4) | The liability for CVRs for Metabasis are determined using quoted market prices in active markets for the underlying CVR.
(5) | The liability for amounts owed to former licensees are determined using quoted market prices in active markets for the underlying investment received from a partner, a portion of which is owed to former licensees.
CyDex Acquisition | The following table represents significant unobservable inputs used in determining the fair value of contingent liabilities assumed in the acquisition of CyDex:
| March 31, 2015 |  | December 31, 2014
Range of annual revenue subject to revenue sharing (1) | $17.7 million-$21.6 million |  | $17.2 million-$17.3 million
Revenue volatility | 25% |  | 25%
Average of probability of commercialization | 77% |  | 81%
Sales beta | 0.70 |  | 0.60
Credit rating | B |  | B
Equity risk premium | 6% |  | 6%
(1) | Revenue subject to revenue sharing represent management’s estimate of the range of total annual revenue subject to revenue sharing (i.e. annual revenues in excess of $15 million) through December 31, 2016, which is the term of the CVR agreement.
Reconciliation of level 3 financial instruments | A reconciliation of the level 3 financial instruments as of March 31, 2015 is as follows (in thousands):
Assets: |
Fair value of level 3 financial instrument assets as of December 31, 2014 | $ | 322 |
Assumed payments made by Pfizer or assignee | (297 | )
Fair value adjustments to co-promote termination liability | 63 |
Fair value of level 3 financial instrument assets as of March 31, 2015 | $ | 88 |
Liabilities: |
Fair value of level 3 financial instrument liabilities as of December 31, 2014 | $ | 11,819 |
Assumed payments made by Pfizer or assignee | (297 | )
Payments to CVR and other former license holders | (3,246 | )
Fair value adjustments to contingent liabilities | 1,159 |
Fair value adjustments to co-promote termination liability | 63 |
Fair value of level 3 financial instrument liabilities as of March 31, 2015 | $ | 9,498 |

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- 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 Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19279-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (a,b,bb) -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2C -URI http://asc.fasb.org/extlink&oid=36462937&loc=SL7498348-110258 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19190-110258 + Details
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- Definition Tabular disclosure of quantitative information about the inputs used in the fair value measurement of liabilities. This disclosure may include, but is not limited to, the fair value of the liability, valuation technique used to measure fair value, the inputs used to measure fair value, the ranges of the inputs, and the weighted averages of the inputs. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (bbb) -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 + Details
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