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FAIR VALUE MEASUREMENT AND FINANCIAL INSTRUMENTS
 9 Months Ended
Sep. 30, 2021
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENT AND FINANCIAL INSTRUMENTS FAIR VALUE MEASUREMENT AND FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, restricted cash, prepaid expenses and other current assets, and accounts payable on the Company’s condensed consolidated balance sheets approximated their fair values as of September 30, 2021 and December 31, 2020 due to their short-term nature.
Certain of the Company’s financial instruments are measured at fair value using a three-level hierarchy that prioritizes the inputs used to measure fair value. This fair value hierarchy prioritizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1:    Inputs are quoted prices for identical instruments in active markets.
Level 2:    Inputs are quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; or model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3:    Inputs are unobservable and reflect the Company’s own assumptions, based on the best information available, including the Company’s own data.
The following tables set forth the carrying amounts and fair values of the Company's financial instruments measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 (in thousands):
September 30, 2021
Fair Value Measurement Based on
Carrying AmountFair ValueQuoted Prices in Active
Markets
(Level 1)		Significant Other Observable
Inputs
(Level 2)		Significant Unobservable
Inputs
(Level 3)
Assets:
Money market funds
(cash equivalents)		$16,380 $16,380 $16,380 $— $— 
Liabilities:
Contingent consideration - short term$— $— $— $— $— 
Contingent consideration - long term$56,600 $56,600 $— $— $56,600 
December 31, 2020
Fair Value Measurement Based on
Carrying AmountFair ValueQuoted Prices in Active
Markets
(Level 1)		Significant Other Observable
Inputs
(Level 2)		Significant Unobservable
Inputs
(Level 3)
Assets:
Money market funds
(cash equivalents)		$16,374 $16,374 $16,374 $— $— 
Liabilities:
Contingent consideration - short term$8,985 $8,985 $— $— $8,985 
Contingent consideration - long term$99,855 $99,855 $— $— $99,855 
The Company evaluates transfers between fair value levels at the end of each reporting period. There were no transfers of assets or liabilities between fair value levels during the nine months ended September 30, 2021.
Contingent Consideration
On September 20, 2016, the Company acquired Viventia through the issuance of shares of common stock plus contingent consideration, pursuant to the terms of a Share Purchase Agreement. The Company recorded the acquired assets and liabilities based on their estimated fair values as of the acquisition date and finalized its purchase accounting for the Viventia Acquisition during the third quarter of 2017. The contingent consideration relates to amounts potentially payable to the former shareholders of Viventia under the Share Purchase Agreement. Contingent consideration is measured at its estimated fair value at each reporting period, with fluctuations in value resulting in a non-cash charge to earnings (or loss) during the period. The estimated fair value measurement is based on significant inputs, including internally developed financial forecasts, probabilities of success, and the timing of certain milestone events and achievements, which are not observable in the market, representing a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration requires the use of significant assumptions and judgments, which management believes are consistent with those that would be made by a market participant. Management reviews its assumptions and judgments on an ongoing basis as additional market and other data is obtained, and any future changes in the assumptions and judgments utilized by management may cause the estimated fair value of contingent consideration to fluctuate materially, resulting in earnings volatility.
The estimated fair value of the Company’s contingent consideration was determined using probabilities of successful achievement of clinical and regulatory milestones and commercial sales, the period in which these milestones and sales are expected to be achieved ranging from 2024 to 2033, the level of commercial sales of Vicineum forecasted for the United States, Europe, Japan, China and other potential markets and discount rates ranging from 7.5% to 8.6% as of September 30, 2021 and 8.4% to 8.8% as of December 31, 2020. There have been no changes to the valuation methods utilized during the nine months ended September 30, 2021.
The following table sets forth a summary of the change in the fair value of the Company's total contingent consideration liability, measured on a recurring basis at each reporting period, for the nine months ended September 30, 2021 (in thousands):
Balance at December 31, 2020$108,840
Change in fair value of contingent consideration - short term (8,985)
Change in fair value of contingent consideration - long term(43,255)
Balance at September 30, 2021$56,600 
The fair value of the Company’s contingent consideration is determined based on the present value of projected future cash flows associated with sales based milestones and earnouts on net sales and is heavily dependent on discount rates to estimate the fair value at each reporting period. Earnouts are determined using an earnout rate of 2% on all commercial net sales of Vicineum through December 2033. The discount rate applied to the 2% earnout is derived from the Company’s estimated weighted-average cost of capital (“WACC”), which has fluctuated from 8.8% as of December 31, 2020 to 8.6% as of September 30, 2021. Milestone payments constitute debt-like obligations, and therefore a high-yield debt index rate is applied to the milestones in order to determine the estimated fair value. This index rate changed from 8.4% as of December 31, 2020 to 7.5% as of September 30, 2021. The decrease in the fair value of contingent consideration of $52.2 million for the nine months ended September 30, 2021 was driven by the receipt of the CRL from the FDA, in which the FDA determined that it could not approve the BLA for Vicineum in its present form. Due to the inherent uncertainty in the path forward for Vicineum at this time, the Company reassessed the underlying assumptions used to develop the revenue projections upon which the fair value of its contingent consideration is based. The most significant and impactful assumptions in our revenue projection models are timing of product launch and probabilities of clinical and regulatory success (POS); the Company expects delays in the start of commercialization and estimates lower POS as a direct result of the CRL. The Company anticipates needing to conduct an additional clinical trial, which will lead to delays in the start of commercialization globally. The Company has assessed a range of commercialization timeline assumptions and applied a probability to each outcome based on management’s best estimate. In addition, the Company now assumes a lower POS in achieving certain clinical and regulatory milestones in the range of approximately 45% to 55% globally. The Company participated in a Type A Meeting with the FDA on October 29, 2021 to discuss questions related to CMC raised in the CRL, and expects to engage in a Type A meeting with the FDA later this year to discuss questions related to clinical matters raised in the CRL. Both meetings are intended to help the Company determine the appropriate path forward for Vicineum. Any changes in these assumptions and estimates as a result of these meetings, or other information obtained, may have a significant impact on the remeasurement of the contingent consideration liability in the future.