XML 38 R16.htm IDEA: XBRL DOCUMENT
v3.6.0.2

Fair Value of Financial Instruments | 12 Months Ended
--- | ---
Dec. 31, 2016
Fair Value of Financial Instruments | 9. Fair Value of Financial Instruments The carrying amounts reported in the accompanying consolidated financial statements for cash, accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their fair value due to their relatively short maturities. The fair value of the cash equivalents, note payable to principal stockholder, senior convertible notes, the Facility Financing Obligation (as defined below), the Milestone Rights (as defined below) and warrant liability are discussed below. Cash Equivalents — As of December 31, 2016 and 2015, the Company held $20.5 million and $55.8 million, respectively, of cash equivalents, consisting of money market funds. The fair value of these money market funds was determined by using quoted prices for identical investments in an active market (Level 1 in the fair value hierarchy). Note Payable to Principal Stockholder — The fair value of the note payable to the Company’s principal stockholder cannot be reasonably estimated as the Company would not be able to obtain a similar credit arrangement in the current economic environment. Therefore, the fair value is based upon carrying value. Financial Liabilities — The following tables set forth the fair value of the Company’s financial instruments (in millions):
|  | As of December 31, 2016 |
|  | Carrying Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Senior convertible notes |  | $ | 27.6 |  |  | $ | — |  |  | $ | — |  |  | $ | 22.9 |  |  | $ | 22.9 |
Facility Financing Obligation |  |  | 71.3 |  |  |  | — |  |  |  | — |  |  |  | 74.5 |  |  |  | 74.5 |
Milestone Rights |  |  | 8.9 |  |  |  | — |  |  |  | — |  |  |  | 18.4 |  |  |  | 18.4 |
Warrant liability (at recurring fair values) |  |  | 7.4 |  |  |  | — |  |  |  | — |  |  |  | 7.4 |  |  |  | 7.4 |
Total financial liabilities |  | $ | 115.2 |  |  | $ | — |  |  | $ | — |  |  | $ | 123.2 |  |  | $ | 123.2 |
|  | As of December 31, 2015 |
|  | Carrying Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Senior convertible notes |  | $ | 27.6 |  |  | $ | — |  |  | $ | — |  |  | $ | 21.3 |  |  | $ | 21.3 |
Facility Financing Obligation |  |  | 74.6 |  |  |  | — |  |  |  | — |  |  |  | 78.4 |  |  |  | 78.4 |
Milestone Rights |  |  | 8.9 |  |  |  | — |  |  |  | — |  |  |  | 14.4 |  |  |  | 14.4 |
Sanofi Loan Facility |  |  | 44.5 |  |  |  | — |  |  |  | — |  |  |  | 36.5 |  |  |  | 36.5 |
Total financial liabilities |  | $ | 155.6 |  |  | $ | — |  |  | $ | — |  |  | $ | 150.6 |  |  | $ | 150.6 |
The following table provides a roll forward of the fair values of financial assets and liabilities that are carried at fair value (in millions):
|  | Warrants |  |  | Assets Held for Sale |
Fair value, January 1, 2015 |  | $ | — |  |  | $ | — |
Additions |  |  | — |  |  |  | — |
Changes in fair value |  |  | — |  |  |  | — |
Payments |  |  | — |  |  |  | — |
Fair value, December 31, 2015 |  | $ | — |  |  | $ | — |
Additions |  |  | 12.8 |  |  |  | 17.3 |
Changes in fair value |  |  | (5.4 | ) |  |  | (0.6 | )
Payments |  |  | — |  |  |  | — |
Fair value, December 31, 2016 |  | $ | 7.4 |  |  | $ | 16.7 |
Senior Convertible Notes — The estimated fair value of the 2018 notes was calculated based on model-derived valuations where inputs were observable, such as the Company’s stock price and yields on U.S. Treasury notes and actively traded bonds, and non-observable, such as the Company’s longer-term historical volatility, and estimated yields implied from any available market trades of the Company’s issued debt instruments. As there is no current active and observable market for the 2018 notes, the Company determined the estimated fair value using a convertible bond valuation model within a lattice framework. The convertible bond valuation model combined expected cash flows based on terms of the notes with market-based assumptions regarding risk-free rate, risk-adjusted yields (20%), stock price volatility (111%) and recent price quotes and trading information regarding Company issued debt instruments and shares of common stock into which the notes are convertible. Facility Financing Obligation — As discussed in Note 7 — Borrowings, in connection with the Facility Agreement, the Company issued 2019 notes and subsequently issued Tranche B notes (the “Facility Financing Obligation”). As there is no current observable market for the Facility Financing Obligation, the Company determined the estimated fair value using a bond valuation model based on a discounted cash flow methodology. The bond valuation model combined expected cash flows associated with principal repayment and interest based on the contractual terms of the debt agreement discounted to present value using a selected market discount rate. On December 31, 2016 the market discount rate was recalculated at 12.0% for the Facility Financing Obligation. Under the terms of the Facility Agreement, the Company is restricted from distributing any of its assets or declaring and distributing a dividend to its stockholders. Milestone Rights Liability — In addition to the Facility Financing Obligation, the Company also issued certain rights to receive payments of up to $90.0 million upon occurrence of specified strategic and sales milestones (the “Milestone Rights”). These rights are not reflected in the Facility Financing Obligation. The estimated fair value of the Milestone Rights was calculated using the income approach in which the cash flows associated with the specified contractual payments were adjusted for both the expected timing and the probability of achieving the milestones discounted to present value using a selected market discount rate (Level 3 in the fair value hierarchy). The expected timing and probability of achieving the milestones, starting in 2014, was developed with consideration given to both internal data, such as the Company’s forecast, progress made to date towards meeting the milestones, and assessment of criteria required for achievement, and external data, such as market research studies. The discount rate (14.5%) was selected based on an estimation of required rate of returns for similar investment opportunities using available market data. As of December 31, 2016, the carrying value of the Milestone Rights is $8.9 million, classified as a long-term liability and the fair value is estimated at $18.4 million. Warrant Liability — Warrant liabilities are measured at fair value using a Monte Carlo pricing valuation model and various assumptions. The significant unobservable input used in measuring the fair value of the common stock warrant liabilities is the expected volatility. Significant increases in volatility would result in a higher fair value measurement (Level 3 in the fair value hierarchy). See Note 16 — Warrants for further discussion of the valuation technique and inputs used in the fair value measurement. Sanofi Loan Facility — As discussed in Note 8 — Collaboration Arrangements, the Sanofi Loan Facility consisted of a senior secured revolving promissory note and a guaranty and security agreement with an affiliate of Sanofi which provided the Company with a secured loan facility of up to $175.0 million to fund the Company’s share of net losses under the Sanofi License Agreement. The estimated fair value was determined using a discounted cash flow model where time outstanding and discount rate were primary variables. This method considered the key elements of the contractual terms of the Sanofi Loan Facility, market-based estimated cost of capital, and time value of money, namely the amount of time to settlement and the estimated discount rate (11%) appropriate for the liability (Level 3 in the fair value hierarchy). The Sanofi Loan Facility was forgiven on November 9, 2016. There were no transfers of assets or liabilities between the fair value measurement levels during the twelve months ended December 31, 2016, 2015 and 2014. Assets and Liabilities Measured at Fair Value on a Non-recurring Basis — Land, buildings, and machinery and equipment, with a carrying amount of $189.2 million, were written down to a fair value of $48.8 million, resulting in an impairment charge of $140.4 million, which is included in our consolidated statements of operations for the year ended December 31, 2015. See Note 4- Property and Equipment for further discussion of the valuation technique and inputs used in the fair value measurement. An additional impairment of $0.7 million was charged for the year ended December 31, 2016. At that time, an analysis of the lower of carrying value to fair value, which was deemed to be the sales price of the property, less selling costs determined a loss of $0.6 million, which is included in property and equipment impairment on the consolidated statement of operations for 2016. Our assessment of the real property includes Level 3 inputs, and was based on a combination of the income, market and cost approaches and the market approach was used for machinery and equipment which required Level 3 inputs. Embedded Derivatives — The Company identified and evaluated a number of embedded features in the notes issued under the Facility Agreement to determine if they represented embedded derivatives that are required to be separated from the notes and accounted for as freestanding instruments. The Company analyzed the Tranche B notes and identified embedded derivatives, which required separate accounting. However, all of the embedded derivatives were determined to have a de minimis value at December 31, 2016 and 2015.

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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13433-108611 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration