XML 18 R8.htm IDEA: XBRL DOCUMENT

Fair Value of Financial Assets and Liabilities

6 Months Ended

Jun. 30, 2020

Fair Value of Financial Assets and Liabilities

The Company held no financial assets or liabilities measured at fair value on a recurring basis as of June 30, 2020, and held no financial assets measured at fair value on a recurring basis as of December 31, 2019.

The following tables present information about the Company's financial liability measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair value:


	Fair Value Measurement as of December 31, 2019 Using:
	Level 1		Level 2		Level 3		Total
Liabilities:
Derivative liability	$	—	$	—	$	37,690	$	37,690
	$	—	$	—	$	37,690	$	37,690

The following table provides a roll forward of the aggregate fair value of the Company’s derivative liability (see Note 9) for which fair value is determined by Level 3 inputs for the six months ended June 30, 2020 and 2019:


	Derivative Liability



Balance at December 31, 2019	$	37,690
Change in fair value	5,131
Settlement of derivative liability	(42,821)
Balance at June 30, 2020	$	—

Transaction date balance	$	33,815
Change in fair value	1,263

Balance at June 30, 2019	$	35,078

Valuation of Derivative Liability

The fair value of the derivative liability recognized in connection with the Series A preferred shares agreement with RPI, as described in Note 9, was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the derivative liability relates to certain scenarios outlined in the agreement that would result in accelerated payments as compared to the agreement's host instrument. The with-and-without valuation method was used to determine the fair value of the embedded derivatives within the agreement.

As inputs into the valuation, the Company considered the type and probability of occurrence of certain events, the amount of the payments, the expected timing of certain events, and a risk-adjusted discount rate using credit spreads of biopharmaceutical companies in similar stages of development to the Company. In accordance with ASC 815, Derivatives and Hedging, the fair value of the derivative was recorded on the balance sheet as a derivative liability with changes in fair value recorded in other income (expense) in the condensed consolidated statements of operations and comprehensive loss.

Upon the FDA's approval of NURTEC ODT the Company remeasured the derivative using the inputs noted above. In the first quarter of 2020, the Company partially settled the derivative liability associated with this approval of $42,821, which modified the timing of the payment obligation related to the redeemable preferred share liability. During the second quarter of 2020, the Company recorded a $650 gain in other income in its condensed consolidated statement of operations.

Valuation of Liability Related to Sale of Future Royalties

In June 2018, and as described in Note 8, the Company entered into a funding agreement with RPI, accounted for as a liability financing. As of June 30, 2020, the fair value of the liability related to sale of future royalties, used in determining the effective interest rate of the liability, is based on the Company's current estimates of future royalties expected to be paid to RPI over the life of the arrangement, which is considered Level 3.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details