Fair Value Measurements

12 Months Ended

Dec. 31, 2014

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 (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 of the Company measured at fair value on a recurring basis as of December 31, 2014 and 2013:



	Carrying Value		Fair Value Measurement at December 31, 2014
	Carrying Value		Level 1		Level 2		Level 3
	(in thousands)
Cash and cash equivalents	$	111,897	$	111,897	$	—	$	—
Warrant participations	61		—		—		61
Marketable securities—held-to-maturity:
Commercial paper	$	6,596	$	6,596	$	—	$	—
U.S. Treasury Bills	1,503		1,503		—		—
Government agency bonds	503		503		—		—
Certificates of deposit	36,026		36,026		—		—
Total marketable securities	$	44,628	$	44,628	$	—	$	—



	Carrying Value		Fair Value Measurement at December 31, 2013
	Carrying Value		Level 1		Level 2		Level 3
	(In thousands)
Cash and cash equivalents	$	139,318	$	139,318	$	—	$	—
Ownership interest in common stock of NuPathe	16,874		16,874		—		—
Ownership interest in warrants and options of NuPathe	3,183		—		—		3,183
Warrant participations	1,563		—		—		1,563
Marketable securities—held-to-maturity:
Commercial paper	$	13,599	$	13,599	$	—	$	—
U.S. Treasury Bills	8,014		8,014		—		—
Government agency bonds	9,945		9,945		—		—
Certificates of deposit	12,780		12,780		—		—
Total marketable securities	$	44,338	$	44,338	$	—	$	—

As of December 31, 2014, $25.3 million of marketable securities had contractual maturities which were less than one year and $19.4 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 $11.2 million related to PixelOptics, formerly an equity method partner company, for the year ended December 31, 2013 measured as the amount by which PixelOptics’ carrying value exceeded its estimated fair value. On November 4, 2013, PixelOptics filed a voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The carrying value of the Company’s equity ownership in PixelOptics is $0 and the Company believes it will not recover any of its capital.

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 recognized a gain of $1.1 million associated with mark-to-market adjustment related to its warrant participations with Penn Mezzanine for the year ended December 31, 2013, which is reflected in Other income (loss), net in the Consolidated Statements of Operations.

The Company recognized an impairment charge of $1.8 million related to its ownership interest in the management company of Penn Mezzanine for the year ended December 31, 2013. The inputs and valuation techniques used were primarily an evaluation of the future cash flows associated with the Company's interest in the management company of Penn Mezzanine.

The Company recorded an impairment charge of $0.3 million related to its Penn Mezzanine debt and equity participations for the year ended December 31, 2013 measured as the amount by which the carrying value of the Company’s participation in the debt and equity interests acquired by Penn Mezzanine exceeded their estimated fair values. The fair market values of the Company's participating interests in debt and equity acquired by Penn Mezzanine were determined based on Level 3 inputs as defined above. The inputs and valuation techniques used included discounted cash flows and valuations of comparable public companies.

The Company recognized impairment charges of $0.1 million and $0.3 million related to a legacy private equity fund for the years ended December 31, 2014 and 2013, respectively, measured as the amount by which the carrying value of the Company’s interest in the fund exceeded its estimated fair value. The fair market value of the Company’s interest in the fund was determined to be $1.6 million at December 31, 2014 based on the fair value of the Company’s pro rata portion of the fund’s net assets, which is a Level 3 input under the fair value hierarchy.

- 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.

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