Fair Value Measurements

9 Months Ended

Sep. 30, 2020

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets (in thousands):


Description	September 30, 2020		Quoted Prices In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	8,002	$	8,002	$	—	$	—

Total assets measured and recorded at fair value	$	8,002	$	8,002	$	—	$	—
Liabilities:
Warrant liability	$	27	$	—	$	—	$	27
Contingent consideration	5,180		—		—		5,180
Total liabilities measured and recorded at fair value	$	5,207	$	—	$	—	$	5,207


Description	December 31, 2019		Quoted Prices In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	7,027	$	7,027	$	—	$	—

Total assets measured and recorded at fair value	$	7,027	$	7,027	$	—	$	—
Liabilities:
Warrant liability	$	52	$	—	$	—	$	52
Contingent consideration	4,912		—		—		4,912
Total liabilities measured and recorded at fair value	$	4,964	$	—	$	—	$	4,964

The Company did not transfer any financial instruments into or out of Level 3 classification during the three or nine months ended September 30, 2020 or during the year ended December 31, 2019. See Note 8, Warrants to Acquire Shares of Common Stock, for a reconciliation of the changes in the fair value of the warrant liability for the nine months ended September 30, 2020.

A reconciliation of the change in the fair value of the contingent consideration liability for the nine months ended September 30, 2020 is as follows (in thousands):


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Contingent consideration, December 31, 2019	$	4,912
Change in the estimated fair value of the contingent consideration	268
Contingent consideration, September 30, 2020	$	5,180

The fair value of the contingent consideration is measured at the end of each reporting period using Level 3 inputs in a probability-weighted, discounted cash-outflow model. The contingent consideration relates to Galena's acquisition of Apthera, Inc. in 2011 and the future contingent payments of up to $32.0 million based on the achievement of certain development and commercial milestones relating to the Company’s nelipepimut-S ("NPS") product candidate, of which $2.0 million has been paid to date. The remaining contingent consideration of up to $30.0 million is payable at the election of the Company in either cash or shares of common stock, provided that the Company may not issue any shares in satisfaction of any contingent consideration unless it has first obtained approval from its stockholders in accordance with Rule 5635(a) of the Nasdaq Marketplace Rules.

The significant unobservable assumptions include the probability of achieving each milestone, the date the Company expects to reach the milestone, and a determination of present value factors used to discount future expected cash outflows. Changes in fair value reflect new information about the probability and anticipated timing of meeting the conditions of the milestone payments. In the absence of new information, changes in fair value will only reflect the interest component of contingent consideration related to the passage of time. As of September 30, 2020, estimated future contingent milestone payments related to the Company's business range from zero, if no milestone events are achieved, to a maximum of $30.0 million if all development and commercial milestones are reached. As of September 30, 2020, resulting probability-weighted cash flows were discounted using a weighted average cost of capital of 11.8% for development milestones and cost of debt of 5.4% for the commercial milestones. The Company estimates the timing of achievement of these development milestones to range from five to eight years as of September 30, 2020.