Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.20.2
Fair Value Measurements
9 Months Ended
Sep. 30, 2020
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS
We record fair values at an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement determined based on assumptions that market participants would use in pricing an asset or liability. We utilize a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
As of September 30, 2020, we had equity securities (refer to Note 6), forward foreign currency exchange contracts for inventory purchases (refer to Note 10) and contingent consideration related to the acquisitions of CURNA, OPKO Diagnostics and OPKO Renal that are required to be measured at fair value on a recurring basis. In addition, in connection with our investment and our consulting agreement with BioCardia, we record the related BioCardia options at fair value as well as the warrants from COCP, InCellDx, Xenetic and Phio.
Our financial assets and liabilities measured at fair value on a recurring basis are as follows:
  Fair value measurements as of September 30, 2020
(In thousands) Quoted
prices in
active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Total
Assets:
Equity securities $ 12,720  $ —  $ —  $ 12,720 
Common stock options/warrants —  38  —  38 
Forward contracts —  171  —  171 
Total assets $ 12,720  $ 209  $ —  $ 12,929 
Liabilities:
Contingent consideration —  —  11,017  11,017 
Total liabilities $ —  $ —  $ 11,017  $ 11,017 
Fair value measurements as of December 31, 2019
(In thousands) Quoted
prices in
active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Total
Assets:
Equity securities $ 18,870  $ —  $ —  $ 18,870 
Common stock options/warrants —  120  —  120 
Forward contracts —  133  —  133 
Total assets $ 18,870  $ 253  $ —  $ 19,123 
Liabilities:
Contingent consideration —  —  9,683  9,683 
Total liabilities $ —  $ —  $ 9,683  $ 9,683 

The carrying amount and estimated fair value of our 2025 Notes, as well as the applicable fair value hierarchy tiers, are contained in the table below. The fair value of the 2025 Notes is determined using inputs other than quoted prices in active markets that are directly observable.
September 30, 2020
(In thousands) Carrying
Value
Total
Fair Value
Level 1 Level 2 Level 3
2025 Notes $ 154,061  $ 247,158  $ —  $ 247,158  $ — 
There have been no transfers between Level 1 and Level 2 and no transfers to or from Level 3 of the fair value hierarchy.
As of September 30, 2020 and December 31, 2019, the carrying value of our other financial instrument assets approximates their fair value due to their short-term nature or variable rate of interest.
The following table reconciles the beginning and ending balances of our Level 3 assets and liabilities as of September 30, 2020:
September 30, 2020
(In thousands) Contingent
consideration
Balance at December 31, 2019 $ 9,683 
Change in fair value:
Included in results of operations 1,334 
Balance at September 30, 2020 $ 11,017 
The estimated fair values of our financial instruments have been determined by using available market information and what we believe to be appropriate valuation methodologies. We use the following methods and assumptions in estimating fair value:
Contingent consideration – We estimate the fair value of the contingent consideration utilizing a discounted cash flow model for the expected payments based on estimated timing and expected revenues. We use several discount rates depending on each type of contingent consideration related to OPKO Diagnostics, CURNA and OPKO Renal transactions. As of September 30, 2020, of the $11.0 million of contingent consideration, $2.4 million was recorded in Accrued expenses and $8.6 million was recorded in Other long-term liabilities. As of December 31, 2019, of the $9.7 million of contingent consideration, $2.4 million was recorded in Accrued expenses and $7.3 million was recorded in Other long-term liabilities.