Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2017

Assets and Liabilities Measured at Fair Value on Recurring Basis

Except for the Company’s Level 2 liabilities which are discussed in Note 10, “Convertible Senior Notes,” the following table sets forth the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2017 and December 31, 2016, by level, within the fair value hierarchy:



	As of June 30, 2017								As of December 31, 2016
Assets and Liabilities	Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of June 30, 2017		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2016
	(in thousands)
Assets:
Cash equivalents⁽¹⁾	$	12,877	$	93,208	$	—	$	106,085	$	56,097	$	—	$	—	$	56,097
Available for sale securities	—		131,545		—		131,545		$	—	$	—	$	—	—
Total assets at fair value	$	12,877	$	224,753	$	—	$	237,630	$	56,097	$	—	$	—	$	56,097
Liabilities:
Contingent purchase price	$	—	$	—	$	111,171	$	111,171	$	—	$	—	$	137,289	$	137,289
Total liabilities at fair value	$	—	$	—	$	111,171	$	111,171	$	—	$	—	$	137,289	$	137,289

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(1)

Cash equivalents represents money market funds with original maturities of less than three months of $12.9 million (Level 1) corporate debt securities with an original maturity of less than three months of $85.7 million (Level 2) and U.S. government agency notes with an original maturity of less than three months of $7.5 million (Level 2), as discussed in Note 6, “Cash, Cash Equivalents and Available for Sale Securities.”

Fair Value Inputs, Quantitative Information

The following table provides quantitative information associated with the fair value measurements of the Company’s Level 3 liabilities:



	Fair Value as of June 30, 2017		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in thousands)
Targanta:
Contingent purchase price	$	6,171	Probability-adjusted discounted cash flow	Probability of success	20%
				Period in which milestone is expected to be achieved	2021
				Discount rate	11%
Rempex:
Contingent purchase price: Event-based milestones	$	81,400	Probability-adjusted discounted cash flow	Probabilities of successes	18% - 90% (77%)
				Period in which milestones are expected to be achieved	2017 - 2024
				Discount rate	4.2% - 7.3%
Contingent purchase price: Sales-based milestones	$	23,600	Risk-adjusted revenue simulation	Probabilities of successes	13% - 72% (61%)
				Period in which milestones are expected to be achieved	2020 - 2022
				Discount rate	5.5% - 6.7%



	Fair Value as of December 31, 2016		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in thousands)
Targanta:
Contingent purchase price	$	5,857	Probability-adjusted discounted cash flow	Probability of success	20%
				Period in which milestone is expected to be achieved	2021
				Discount rate	11%
Incline:
Contingent purchase price	$	1,269	Probability-adjusted discounted cash flow	Probabilities of successes	5%
				Period in which milestones are expected to be achieved	2019
				Discount rate	18%
Rempex:
Contingent purchase price: Event-based milestones	$	95,800	Probability-adjusted discounted cash flow	Probabilities of successes	18% - 95% (78%)
				Period in which milestones are expected to be achieved	2017 - 2024
				Discount rate	5.2% - 8.5%
Contingent purchase price: Sales-based milestones	$	20,300	Risk-adjusted revenue simulation	Probabilities of successes	16% - 65% (56%)
				Period in which milestones are expected to be achieved	2018 - 2022
				Discount rate	6.6% - 8.2%
Annovation:
Contingent purchase price	$	14,063	Probability-adjusted discounted cash flow	Probabilities of successes	9% - 50% (34%)
				Period in which milestones are expected to be achieved	2018 - 2031
				Discount rate	6.0% - 10.0%

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

The changes in fair value of the Company’s Level 3 contingent purchase price during the three and six months ended June 30, 2017 and 2016 were as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
	(in thousands)
Balance at beginning of period	$	124,735		$	119,612		$	137,289		$	123,757
Payments	(936		)	(4,474		)	(22,002		)	(7,247		)
Fair value adjustments to contingent purchase prices included in net loss	(12,628		)	3,433			(4,116		)	2,061
Balance at end of period	$	111,171		$	118,571		$	111,171		$	118,571