Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Tables)

v3.19.1
Fair Value Measurements (Tables)
3 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
Schedule of Assets and Liabilities Measured at Fair Value The following table presents the hierarchy for our assets and liabilities measured at fair value (in thousands):
March 31, 2019 December 31, 2018
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets:
Short-term investments(1)
$ 67,458  $ 1,315,625  $ —  $ 1,383,083  $ 47,517  $ 599,891  $ —  $ 647,408 
Investment in warrants(2)
12,723  —  510  13,233  9,257  —  —  9,257 
Total assets $ 80,181  $ 1,315,625  $ 510  $ 1,396,316  $ 56,774  $ 599,891  $ —  $ 656,665 
Liabilities:
Crystal contingent liabilities(3)
$ —  $ —  $ 4,976  $ 4,976  $ —  $ —  $ 6,477  $ 6,477 
CyDex contingent liabilities —  —  464  464  —  —  514  514 
Metabasis contingent liabilities(4)
—  —  8,181  8,181  —  5,551  —  5,551 
Amounts owed to former licensor 147  —  —  147  199  —  —  199 
Total liabilities $ 147  $ —  $ 13,621  $ 13,768  $ 199  $ 5,551  $ 6,991  $ 12,741 

1.Investments in equity securities, which we received from Viking and another licensee as upfront and event-based payments, 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 debt securities with maturities greater than 90 days are classified as available-for-sale securities based on management's intentions and are at 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.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, are classified as level 1 as the fair value is determined using quoted market prices in active markets for the same securities. The change of the fair value is recorded in Gain (loss) from Viking in our condensed consolidated statement of operations. In addition, we have investment in warrants resulting from Seelos milestone payments that were settled in shares during the first quarter of 2019 and are at level 3 of the fair value hierarchy, based on intrinsic value estimated by management as of March 31, 2019.
3.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 March 31, 2019, most of the development and regulatory milestones were estimated to be highly probable of being achieved between 2018 and 2019. Changes in these estimates may materially affect the fair value.
4.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 the Company 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 million of development, regulatory and commercial milestones and tiered royalties on potential future sales including a $10 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.”