Fair Value Measurement (Tables)
|12 Months Ended|
Dec. 31, 2018
|Fair Value Disclosures [Abstract]|
|Schedule of Assets and Liabilities Measured on Recurring Basis||
The following table provides a summary of the assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2018 and 2017 (in thousands):
(1) Amounts Investments in equity securities (including investments in Viking), are classified as level 1 as the fair value is determined using quoted market prices in active markets for the same securities. Short-term investments in marketable securities with maturities greater than 90 days are classified as level 2 of the fair value hierarchy, as these investment securities are valued based upon quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
(2) The fair value of the Convertible Note receivable from Viking at December 31, 2017 approximated the book value since the contractual maturity date was within five months from the end of 2017, and there was no plan to extend the maturity date. The fair value at December 31, 2017 was determined using a probability weighted option pricing model. The fair value is subjective and is affected by certain significant input to the valuation model such as the estimated volatility of the common stock, which was estimated to be 75% at December 31, 2017. Changes in these assumptions may materially affect the fair value estimate. For the years ended December 31, 2018, December 31, 2017, and December 31, 2016, we reported an increase in the fair value of 0.0 million, an increase in the fair value of $0.9 million, and a decrease in the fair value of $0.2 million, respectively in "Other, net" of the consolidated statement of operations. See further discussion in “Note (2), Investment in Viking.”
(3) Investment in warrants, which we received as a result of Viking’s partial repayment of the Viking note receivable and our purchase of Viking common stock and warrants in April 2016, is classified as level 1 as the fair value is determined using quoted market prices in active markets for the same securities. See further discussion in “Note (2), Investment in Viking.”
(4) The fair value of Crystal contingent liabilities was determined using a probability weighted income approach. Most of the contingent payments are based on development or regulatory milestones as defined in the merger agreement with Crystal. The fair value is subjective and is affected by changes in inputs to the valuation model including management’s estimates regarding the timing and probability of achievement of certain developmental and regulatory milestones. At
December 31, 2018, most of the development and regulatory milestones were estimated to be highly probable of being achieved in 2019. Changes in these estimates may materially affect the fair value.
(5) The fair value of CyDex contingent liabilities was determined based on the income approach. To the extent the estimated future income may vary significantly given the long-term nature of the estimate, we utilize a Monte Carlo model. The fair value is subjective and is affected by changes in inputs to the valuation model including management’s estimates of timing and probability of achievement of certain revenue thresholds and developmental and regulatory milestones which may be achieved and affect amounts owed to former license holders.
(6) In connection with our acquisition of Metabasis in January 2010, we issued Metabasis stockholders four tradable CVRs, one CVR from each of four respective series of CVR, for each Metabasis share. The CVRs entitle Metabasis stockholders to cash payments as frequently as every six months as cash is received by us from proceeds from the sale or partnering of any of the Metabasis drug development programs, among other triggering events. The liability for the CVRs is determined using quoted prices in a market that is not active for the underlying CVR. The carrying amount of the liability may fluctuate significantly based upon quoted market prices and actual amounts paid under the agreements may be materially different than the carrying amount of the liability. Several of the Metabasis drug development programs have been outlicensed to Viking, including VK2809. VK2809 is a novel selective TR-β agonist with potential in multiple indications, including hypercholesterolemia, dyslipidemia, NASH, and X-ALD. Under the terms of the agreement with Viking, we may be entitled to up to $375.0 million of development, regulatory and commercial milestones and tiered royalties on potential future sales including a $10.0 million payment upon initiation of a Phase 3 clinical trial. Another Metabasis drug development program, RVT-1502, has been outlicensed to Metavant. RVT-1502 is a novel, orally-bioavailable, small molecule, glucagon receptor antagonist or “GRA.” We may be entitled to up to $529.0 million in milestone payments and royalties.
(7) The liability for amounts owed to a former licensor is determined using quoted market prices in active markets for the underlying investment received from a partner, a portion of which is owed to a former licensor.
|Schedule of Reconciliation of Level 3 Financial Instruments||
A reconciliation of the level 3 financial instruments as of December 31, 2018 is as follows (in thousands):
Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]
No definition available.
Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef