4.FAIR VALUE

The following tables set forth the Company’s assets and liabilities that are measured at fair value on a recurring basis at:


	June 30, 2017
	Financial Instruments Carried at Fair Value
			Significant
	Quoted prices in		other		Significant
	active markets for		observable		unobservable
	identical items		inputs		inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Cash and cash equivalents	$	55,776	$	—	$	—	$	55,776

Liabilities:
Contingent consideration	$	—	$	—	$	74,966	$	74,966


	December 31, 2016
	Financial Instruments Carried at Fair Value
			Significant
	Quoted prices in		other		Significant
	active markets for		observable		unobservable
	identical items		inputs		inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Cash and cash equivalents	$	64,943	$	—	$	—	$	64,943

Liabilities:
Contingent consideration	$	—	$	—	$	71,115	$	71,115
Warrants liability	$	—	$	—	$	24	$	24

Contingent Consideration

In connection with the acquisitions of Zontivity and Toprol-XL and the AG, the Company recorded short-term and long-term contingent consideration liabilities for future cash payments based on the occurrence of certain milestone events and royalty payments. The contingent consideration liability for both Zontivity and Toprol-XL and the AG is valued using a model, which incorporates Level 3 assumptions, including the estimated amount and timing of projected cash flows, the probability of success (achievement of the contingent event) and the risk-adjusted discount rate used to present value the probability-weighted cash flows. During the three and six months ended June 30, 2017, the Company recorded accretion expense related to the contingent consideration for its acquisitions of Zontivity totaling $0.7 million and $1.3 million, respectively, and Toprol-XL totaling $3.7 million and $6.7 million for the same periods, respectively. There was no corresponding contingent consideration accretion expense recorded during the three and six months ended June 30, 2016.

Warrants Liability

In connection with the acquisition of Tribute, the Company assumed a liability for warrants that are treated as derivatives under accounting guidance for derivatives and hedging as they were issued with exercise prices denominated in a currency different than the Company’s reporting currency. Approximately 46 thousand of the total 0.9 million common shares underlying the warrants outstanding as of March 31, 2017 were classified as liabilities. These warrants, whose fair value was de minimis as of March 31, 2017, expired in May 2017. The warrants liability was valued using a Black-Scholes valuation model, which incorporates Level 3 assumptions including the volatility of the underlying share price and the expected term. A decrease in the fair value of the warrants liability of $24 thousand and $4.7 million for the six months ended June 30, 2017 and 2016, respectively, is included within other income, net in the condensed consolidated statements of operations. See Note 9, “Earnings Per Share,” for additional information.

Level 3 Disclosures

The following table provides quantitative information associated with the fair value measurement of the Company’s Level 3 inputs at June 30, 2017:


					Range of
			Valuation technique	Unobservable Inputs	Inputs Utilized
Contingent consideration	$	74,966	Monte Carlo	Volatility	33% - 68%
				Discount rate	13%

The significant unobservable inputs used in the fair value measurement of the Company’s contingent consideration liability include the estimated amount and timing of projected cash flows, the probability of success (achievement of the contingent event) and the risk-adjusted discount rate used to calculate the present value of the probability-weighted cash flows. The significant unobservable inputs used in the fair value measurement of the Company’s warrants liability included the volatility of the Company’s share price and the expected term. Significant increases or decreases in the volatility and expected term utilized would have resulted in a significantly higher or lower fair value measurement, respectively.

The table below provides a roll-forward of the contingent consideration liability fair value balances that used Level 3 inputs:


Balance at December 31, 2016	$	71,115
Cash payments		(4,186)
Change in fair value during the period		8,037
Balance at June 30, 2017	$	74,966

The table below provides a roll-forward of the warrants liability fair value balances that used Level 3 inputs:


Balance at December 31, 2016	$	24
Change in fair value during the period		(24)
Impact of foreign exchange		—
Balance at June 30, 2017	$	—