FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2014

Assets and liabilities measured at fair value on a recurring basis

The following table sets forth our assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2014:



	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Cash and cash equivalents: ⁽¹⁾
Corporate and municipal notes	$	—	$	1,502	$	—	$	1,502
Short-term investments: ⁽²⁾
Bank deposits	—		60,200		—		60,200
U.S. Treasury securities	70,185		—		—		70,185
Corporate and municipal notes	—		307,897		—		307,897
Total assets	$	70,185	$	369,599	$	—	$	439,784
Liabilities
Contingent consideration - Optimer CVRs	$	6,094	$	—	$	—	$	6,094
Contingent consideration - other	—		—		161,360		161,360
Total liabilities	$	6,094	$	—	$	161,360	$	167,454

⁽¹⁾ Excludes $232.2 million of cash as of September 30, 2014.

⁽²⁾ Excludes certificates of deposit of $15.0 million recorded at cost as of September 30, 2014.

Quantitative information associated with fair value measurement of the entity's Level 3 contingent consideration

The following table provides quantitative information associated with the fair value measurement of our Level 3 contingent consideration:



	Fair Value as of September 30, 2014 (in thousands)			Unobservable Inputs
	Fair Value as of September 30, 2014 (in thousands)		Valuation technique	Probability of success - range (weighted average)	Periods in which milestones are expected to be achieved	Discount rate
Trius	$	5,310	Probability-adjusted discounted cash flow	4.0% - 6.5% (5.8%)	2016	8.0%
Adolor	46,128		Probability-adjusted discounted cash flow	25.0% - 30.0% (27.0%)	2018 - 2022	5.3% / 13.0%
Calixa	109,922		Probability-adjusted discounted cash flow	40.0% - 86.0% (65.0%)	2014 - 2018	5.3%
Total	$	161,360

Schedule of changes in the fair value of the entity's Level 3 contingent consideration

Changes in the fair value of our Level 3 contingent consideration were as follows:



	Contingent Consideration
	(in thousands)
Beginning balance as of December 31, 2013	$	154,761
Contingent consideration expense	6,599
Ending balance as of September 30, 2014	$	161,360

Schedule of estimated fair values of the Convertible Senior Notes

The estimated fair values of the Convertible Senior Notes consisted of the following at:



	September 30, 2014		December 31, 2013
	(in thousands)
2020 Notes	$	499,235	$	516,843
2018 Notes	378,452		403,473
2017 Notes	526,833		550,317
Total estimated fair value of Convertible Senior Notes	$	1,404,520	$	1,470,633

- Definition

Tabular disclosure of liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, by class that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). Where the quoted price in an active market for the identical liability is not available, the Level 1 input is the quoted price of an identical liability when traded as an 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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