Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2012

Fair Value Measurements

Schedule of financial assets and financial liabilities measured at fair value on a recurring basis

The following tables summarize the financial assets and liabilities measured at fair value on a recurring basis in the accompanying balance sheets as of December 31, 2012 and 2011 (in thousands):

	As of December 31, 2012
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Cash	$	1,134	$	—	$	—	$	1,134
Money market funds(1)		16,020		—		—		16,020
Domestic corporate commercial paper(2)		—		1,499		—		1,499
Marketable Securities:
Domestic corporate commercial paper(2)		—		4,000		—		4,000
Stock asset(3)		—		—		407		407
	$	17,154	$	5,499	$	407	$	23,060
Liabilities
Warrant liability(3)	$	—	$	—	$	830	$	830
Other liability(3)		—		—		24,387		24,387
Stock liability(3)						245		245
	$	—	$	—	$	25,462	$	25,462

	As of December 31, 2011
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Cash	$	5,003	$	—	$	—	$	5,003
Money market funds(1)		20,125		—		—		20,125
Marketable securities:
Domestic corporate debt securities(2)		—		10,254		—		10,254
Domestic corporate commercial paper(2)		—		18,998		—		18,998
U.S. government securities(2)		—		2,328		—		2,328
Stock asset(3)		—		—		3,379		3,379
	$	25,128	$	31,580	$	3,379	$	60,087
Liabilities
Warrant liability(3)	$	—	$	—	$	450	$	450
Other liability(3)		—		—		10,470		10,470
	$	—	$	—	$	10,920	$	10,920

(1)

Fair value is based upon quoted market prices.

(2)

Fair value is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Inputs are obtained from various sources include market participants, dealers and brokers.

(3)

Fair value is determined using the probability-weighted expected return model ("PWERM"), as discussed below. Changes in the fair value of the Level 3 assets and liabilities are recorded as other income (expense) in the statement of operations.

Schedule of quantitative information about the Company's Level 3 fair value measurements, including significant unobservable inputs

Instrument	Valuation Technique	Unobservable Input	Estimate
Preferred Stock	PWERM	• Time to becoming a listed, publicly-traded entity (years)	• 0.0 – 0.8
		• Probability of BA058 coming to market	• 70% – 80%
		• Discount rate	• 20% – 30%
		• Long-term revenue growth rate(1)	• 2% – 117%
		• Long-term revenue growth rate(2)	• 8% – 63%
		• Long-term pre-tax operating margin(3)	• 13% – 79%
		• Long-term pre-tax operating margin(4)	• 28% – 73%
		• Discount for lack of marketability	• 22% – 50%
	Market Comparable Companies	• Revenue multiple(5)	• 3.3 – 7.2

(1)

Estimated long-term revenue growth rate in one scenario has the above range and an average of approximately 24% over 16 revenue years.

(2)

Estimated long-term revenue growth rate in a second scenario has the above range and an average of approximately 20% over 16 revenue years.

(3)

Estimated long-term pretax operating margin in one scenario has the above range after achieving positive pretax operating margin and an average of approximately 69% for 17 years.

(4)

Estimated long-term pretax operating margin in a second scenario has the above range after achieving positive pretax operating margin and an average of approximately 59% for 17 years.

(5)

Represents amounts used when the Company has determined that market participants would use such multiples when valuing the Company's preferred stock.

Roll forward of fair value of asset determined by Level 3 inputs

The following table provides a roll forward of the fair value of the assets, where fair value is determined using Level 3 inputs (in thousands):

Balance at January 1, 2011	$	—
Additions		3,482
Change in fair value		(103	)
Balance at December 31, 2011	$	3,379
Expense recognized		(4,080	)
Additions		398
Change in fair value		710
Balance at December 31, 2012	$	407

Roll forward of fair value of liabilities determined by Level 3 inputs

The following table provides a roll forward of the fair value of the liabilities, where fair value is determined using Level 3 inputs (in thousands):

Balance at January 1, 2011	$	—
Additions		10,759
Change in fair value		161
Balance at December 31, 2011	$	10,920
Additions		11,763
Change in fair value		2,779
Balance at December 31, 2012	$	25,462