Fair Value Measurement (Tables)

12 Months Ended

Dec. 31, 2015

Schedule of assets and liabilities measured on recurring basis

The following table provide a summary of the assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2015 and 2014 (in thousands):



Fair Value Measurements at Reporting Date Using
December 31, 2015			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents ⁽¹⁾	$	3,015	$	—	$	3,015	$	—
Short-term investments⁽²⁾	92,775		6,786		85,989		—
Note receivable Viking ⁽³⁾	4,782		—		—		4,782
Total assets	$	100,572	$	6,786	$	89,004	$	4,782
Liabilities:
Current contingent liabilities - CyDex ⁽⁴⁾	$	7,812	$	—	$	—	$	7,812
Current contingent liabilities-Metabasis ⁽⁵⁾	$	2,602	—		2,602		—
Long-term contingent liabilities - Metabasis ⁽⁵⁾	1,355		—		1,355		—
Long-term contingent liabilities - CyDex (4)	1,678		—		—		1,678
Liability for amounts owed to former licensees ⁽⁶⁾	794		794		—		—
Total liabilities	$	14,241	$	794	$	3,957	$	9,490



Fair Value Measurements at Reporting Date Using
December 31, 2014			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs *		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents ⁽¹⁾	$	—
Current co-promote termination payments receivable ⁽⁷⁾	$	322	$	—	$	—	$	322
Short-term investments ⁽²⁾	7,133		7,133		—		—
Total assets	$	7,455	$	7,133	$	—	$	322
Liabilities:
Current contingent liabilities - CyDex (4)	$	6,796	$	—	$	—	$	6,796
Current co-promote termination liability ⁽⁷⁾	322		—		—		322
Long-term contingent liabilities - Metabasis⁽⁵⁾	3,652		—		3,652		—
Long-term contingent liabilities - CyDex (4)	4,701		—		—		4,701
Liability for amounts owed to former licensees ⁽⁶⁾	773		773		—		—
Total liabilities	$	16,244	$	773	$	3,652	$	11,819

*Adjusted to correct an error in disclosure that was deemed immaterial to the financial statements taken as a whole. Contingent liabilities related to Metabasis were reclassified from Level 1 to Level 2 as market is deemed inactive. Additionally, certain certificates of deposit with maturities less than 90 days were not previously disclosed in the table above.

Significant unobservable inputs used in determining the fair value of contingent liabilities

The following table represents significant unobservable inputs used in determining the fair value of contingent liabilities assumed in the acquisition of CyDex:



	December 31,
	2015	2014
Range of annual revenue subject to revenue sharing (1)	$22.5 million	$17.2 million-$17.3 million
Revenue volatility	25%	25%
Average of probability of commercialization	73%	81%
Sales beta	0.40	0.60
Credit rating	BB	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 the level 3 financial instruments

A reconciliation of the level 3 financial instruments as of December 31, 2015 is as follows (in thousands):



Assets:
Fair value of level 3 financial instruments as of December 31, 2014	$	322
Assumed payments made by Pfizer or assignee	(390		)
Fair value adjustments to co-promote termination liability	68
Note receivable Viking	4,782
Fair value of level 3 financial instrument assets as of December 31, 2015	$	4,782

Liabilities
Fair value of level 3 financial instruments as of December 31, 2014	$	11,819
Assumed payments made by Pfizer or assignee	(390		)
Payments to CVR holders and other contingency payments	(5,848		)
Fair value adjustments to contingent liabilities	3,841
Fair value adjustments to co-promote termination liability	68
Fair value of level 3 financial instruments as of December 31, 2015	$	9,490

- 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.

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