Fair Value Measurements (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2014

Dec. 31, 2013

Summary of financial instruments measured at fair value on a recurring basis

The following table summarizes the financial instruments measured at fair value on a recurring basis in the accompanying condensed balance sheets as of March 31, 2014 and December 31, 2013 (in thousands):

	March 31, 2014

	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Cash	$	1,887	$	—	$	—	$	1,887
Money market funds⁽¹⁾		27,671		—		—		27,671
Stock asset⁽²⁾		—		—		1,220		1,220

	$	29,558	$	—	$	1,220	$	30,778

Liabilities
Warrant liability⁽²⁾	$	—	$	—	$	4,550	$	4,550

	$	—	$	—	$	4,550	$	4,550

	December 31, 2013

	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Cash	$	2,710	$	—	$	—	$	2,710
Money market funds⁽¹⁾		9,593		—		—		9,593

	$	12,303	$	—	$	—	$	12,303

Liabilities
Warrant liability⁽²⁾	$	—	$	—	$	1,945	$	1,945
Stock liability⁽²⁾		—		—		5,328		5,328

	$	—	$	—	$	7,273	$	7,273

(1): Fair value is based upon quoted market prices.
(2): 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 (expense) income in the condensed statement of operations.

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, 2013 and 2012 (in thousands):

	As of December 31, 2013

	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Cash	$	2,710	$	—	$	—	$	2,710
Money market funds⁽¹⁾		9,593		—		—		9,593

	$	12,303	$	—	$	—	$	12,303

Liabilities
Warrant liability⁽²⁾	$	—	$	—	$	1,945	$	1,945
Stock Liability⁽²⁾					$	5,328	$	5,328

	$	—	$	—	$	7,273	$	7,273

	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⁽³⁾		—		1,499		—		1,499
Marketable Securities:
Domestic corporate commercial paper⁽³⁾		—		4,000		—		4,000
Stock asset⁽²⁾		—		—		407		407

	$	17,154	$	5,499	$	407	$	23,060

Liabilities
Warrant liability⁽²⁾	$	—	$	—	$	830	$	830
Other liability⁽²⁾		—		—		24,387		24,387
Stock liability⁽²⁾						245		245

	$	—	$	—	$	25,462	$	25,462

(1): Fair value is based upon quoted market prices.
(2): 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 (expense) income in the statement of operations.
(3): 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, including market participants, dealers and brokers.

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 until future exit event (years)	• 0.2 - 0.3
		• Probability of Abaloparatide coming to market	• 65% - 75%
		• Discount rate	• 20% - 40%
		• Long-term revenue growth rate⁽¹⁾	• 2% - 117%
		• Long-term pre-tax operating margin⁽²⁾	• 13% - 79%
		• Discount for lack of marketability	• 6% - 33%
	Market Comparable Companies	• Revenue multiple⁽³⁾	• 3.6 - 8.4

(1): Estimated long-term revenue growth rate has the above range and an average of approximately 27% over 16 revenue years.
(2): Estimated long-term pretax operating margin has the above range after achieving positive pretax operating margin and an average of approximately 68% for 17 years.

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

Instrument	Valuation Technique	Unobservable Input	Estimate

Preferred Stock	PWERM	• Time until future exit event (years)	• 0.0 - 0.4
		• Probability of abaloparatide coming to market	• 65% - 75%
		• Discount rate	• 20% - 40%
		• Long-term revenue growth rate⁽¹⁾	• 2% - 117%
		• Long-term pre-tax operating margin⁽²⁾	• 13% - 79%
		• Discount for lack of marketability	• 10% - 36%
	Market Comparable Companies	• Revenue multiple⁽³⁾	• 3.2 - 8.0

(1): Estimated long-term revenue growth rate has the above range and an average of approximately 27% over 16 revenue years.
(2): Estimated long-term pretax operating margin has the above range after achieving positive pretax operating margin and an average of approximately 68% for 17 years.
(3): 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 assets 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 December 31, 2013	$	—
Issuance of shares of Series A-6 — prepayment		1,220

Balance at March 31, 2014	$	1,220

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, 2012	$	3,379
Expense recognized		(4,080	)
Additions		398
Change in fair value		710

Balance at December 31, 2012	$	407
Expense recognized		(313	)
Additions		86
Change in fair value		(180	)

Balance at December 31, 2013	$	—

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 December 31, 2013	$	7,273
Issuance of shares of Series A-6		(8,889	)
Additions — accrued shares of Series A-6		2,717
Additions — warrants		1,216
Change in fair value		2,233

Balance at March 31, 2014	$	4,550

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, 2012	$	10,920
Additions		11,763
Change in fair value		2,779

Balance at December 31, 2012	$	25,462
Issuance of shares of Series A-6		(23,168	)
Additions-accrued shares of Series A-6		12,890
Additions-warrants		1,356
Change in fair value		(9,267	)

Balance at December 31, 2013	$	7,273

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

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