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Fair Value Measurements
9 Months Ended
Sep. 30, 2011
Fair Value Measurements [Abstract] 
Fair Value, Measurement Inputs, Disclosure
Fair Value Measurements
 
The Company uses various inputs in determining the fair value of its investments and measures these assets on a recurring basis. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized by the level of objectivity associated with the inputs used to measure their fair value. The following levels are directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities:

•
Level 1 - quoted prices in active markets for identical investments

•
Level 2 - other significant observable inputs (including quoted prices for similar investments, market corroborated inputs, etc.)

•
Level 3 - significant unobservable inputs (including the Company's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the credit risk associated with investing in those securities. The following table provides the fair value measurements of applicable Company assets and liabilities that are measured at fair value on a recurring basis according to the fair value levels described above as of September 30, 2011 and December 31, 2010.

 
 
Assets and Liabilities at Fair Value as of September 30, 2011
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(in thousands)
Assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
30,521

 
$
—

 
$
—

 
$
30,521

Short-term investments
 
113,634

 
—

 
—

 
113,634

Total cash and cash equivalents and investments
 
$
144,155

 
$
—

 
$
—

 
$
144,155

Liabilities
 
 
 
 
 
 
 
 
Other long-term liabilities
 
$
—

 
$
—

 
$
53,465

 
$
53,465

Total liabilities
 
$
—

 
$
—

 
$
53,465

 
$
53,465

 
 
Assets and Liabilities at Fair Value as of December 31, 2010
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(in thousands)
Assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
47,208

 
$
—

 
$
—

 
$
47,208

Short-term investments
 
163,903

 
—

 
—

 
163,903

Total cash and cash equivalents and investments
 
$
211,111

 
$
—

 
$
—

 
$
211,111

Liabilities
 
 
 
 
 
 
 
 
Other long-term liabilities
 
$
—

 
$
—

 
$
48,267

 
$
48,267

Total liabilities
 
$
—

 
$
—

 
$
48,267

 
$
48,267


The Company did not have any Level 3 financial assets during the nine months ended September 30, 2011. In 2010, Lexicon held auction rate securities and related rights that permitted Lexicon to require the investment bank that sold Lexicon the auction rate securities to purchase its auction rate securities at par value. On June 30, 2010, Lexicon exercised the rights and the investment bank purchased Lexicon's remaining auction rate securities at par value on July 1, 2010. The table presented below summarizes the change in consolidated balance sheet carrying value associated with these Level 3 financial assets for the nine months ended September 30, 2010.
 
 
Short-term Investments
 
 
(in thousands)
Balance at December 31, 2009
 
$
56,034

Unrealized gains included in earnings as gain on investments, net
 
141

Net sales and settlements
 
(56,175
)
Balance at September 30, 2010
 
$
—

The Company's Level 3 liabilities are estimated using a probability-based income approach utilizing an appropriate discount rate. Subsequent changes in the fair value of the Symphony Icon purchase consideration liability are recorded as an increase or decrease in Symphony Icon purchase liability expense in the accompanying consolidated statements of operations. The following table summarizes the change in consolidated balance sheet carrying value associated with Level 3 liabilities for the nine months ended September 30, 2011 and 2010.
 
 
Other Long-term Liabilities
 
 
(in thousands)
Balance at December 31, 2010
 
$
48,267

Change in valuation of purchase consideration payable to former Symphony Icon stockholders
 
5,198

Balance at September 30, 2011
 
$
53,465

 
 
 
Balance at December 31, 2009
 
$
—

Purchase consideration liability resulting from the Symphony Icon acquisition
 
45,557

Change in valuation of purchase consideration payable to former Symphony Icon stockholders
 
1,145

Balance at September 30, 2010
 
$
46,702

The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets include goodwill associated with the acquisitions of Coelacanth Corporation in 2001 and Symphony Icon on July 30, 2010 and intangible assets associated with the acquisition of Symphony Icon on July 30, 2010. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if one or more is determined to be impaired.

During the nine months ended September 30, 2011, the Company determined that one of its buildings was impaired and therefore recorded an impairment loss of $800,000 in addition to an impairment loss of $900,000 recorded in the year ended December 31, 2010, which was recorded as research and development expense in the accompanying consolidated statement of operations. The fair value of the impaired building was estimated using offers received from potential purchasers of the building. In June 2011, the Company sold this building with an immaterial additional loss on the sale.