Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The Company categorizes its financial instruments into a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. Financial assets recorded at fair value on the Company’s Consolidated Balance Sheets are categorized as follows:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following table provides the carrying value and fair value of certain financial assets and liabilities of the Company measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012:

	Carrying Value		Fair Value Measurement at September 30, 2013
			Level 1		Level 2		Level 3
	(In thousands) (Unaudited)
Cash and cash equivalents	$	108,694	$	108,694	$	—	$	—
Restricted marketable securities	5		5		—		—
Ownership interest in common stock of NuPathe	12,437		12,437		—		—
Ownership interest in warrants and options of NuPathe	2,123		—		—		2,123
Available-for-sale securities	32		32		—		—
Warrant participations	417		—		—		417
Marketable securities—held-to-maturity:
Commercial paper	$	23,749	$	23,749	$	—	$	—
U.S. Treasury Bills	16,181		16,181		—		—
Government agency bonds	2,645		2,645		—		—
Certificates of deposit	14,849		14,849		—		—
Total marketable securities	$	57,424	$	57,424	$	—	$	—

	Carrying Value		Fair Value Measurement at December 31, 2012
			Level 1		Level 2		Level 3
	(In thousands) (Unaudited)
Cash and cash equivalents	$	66,029	$	66,029	$	—	$	—
Cash held in escrow	6,434		6,434		—		—
Restricted marketable securities	10		10		—		—
Ownership interest in common stock of NuPathe	8,897		8,897		—		—
Ownership interest in preferred stock, warrants and options of NuPathe	12,075		—		—		12,075
Available-for-sale securities	58		58		—		—
Warrant participations	423		—		—		423
Marketable securities—held-to-maturity:
Commercial paper	$	50,932	$	50,932	$	—	$	—
U.S. Treasury Bills	21,352		21,352		—		—
Government agency bonds	45,909		45,909		—		—
Certificates of deposit	21,823		21,823		—		—
Total marketable securities	$	140,016	$	140,016	$	—	$	—

As of September 30, 2013, $54.1 million of marketable securities had contractual maturities which were less than one year and $3.3 million of marketable securities had contractual maturities greater than one year. Held-to-maturity securities are carried at amortized cost, which, due to the short-term maturity of these instruments, approximates fair value using quoted prices in active markets for identical assets or liabilities defined as Level 1 inputs under the fair value hierarchy.

The Company recorded an impairment charge of $1.3 million related to PixelOptics in the three months ended September 30, 2013, measured as the amount by which PixelOptics’ carrying value exceeded its estimated fair value.  The Company also recorded an impairment charge of $9.9 million related to PixelOptics in the three months ended June 30, 2013. The fair market value of the Company’s equity ownership in PixelOptics was determined to be $0 at September 30, 2013 based on Level 3 inputs as defined above.  The inputs and valuation techniques used were primarily an evaluation of discounted cash flows for PixelOptics.

The Company’s Penn Mezzanine warrant participations are carried at fair value. The value of the Company’s holdings in warrant participations is measured by reference to Level 3 inputs. The inputs and valuation techniques used include discounted cash flows and valuation of comparable public companies.  The Company recorded an impairment charge of $0.3 million related to its Penn Mezzanine debt and equity participations in the second quarter of 2013 measured as the amount by which the carrying value of the Company’s participation in the debt, equity and warrant interests acquired by Penn Mezzanine exceeded their estimated fair values.  

The Company’s ownership interests in NuPathe are accounted for at fair value. In February 2013, the Company converted its 2,500 shares of preferred stock units, acquired in October 2012, into 2.5 million shares of common stock in NuPathe. The preferred stock units had been valued using Level 3 inputs. The fair value of the Company’s ownership interest in NuPathe’s common stock was measured using quoted market prices for NuPathe’s common stock as traded on the NASDAQ Global Market, which is considered a Level 1 input under the valuation hierarchy. The fair value of the Company’s ownership interest in NuPathe’s warrants and options was measured using a Black-Scholes option pricing model, which is based on Level 3 inputs as defined above.