Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.10.0.1
Fair Value Measurements
6 Months Ended
Jun. 30, 2018
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 include: 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 June 30, 2018, we have equity securities (refer to Note 5), forward foreign currency exchange contracts for inventory purchases (refer to Note 9) 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, Inc., Xenetic, RXi and Neovasc.
Our financial assets and liabilities measured at fair value on a recurring basis are as follows:
 
Fair value measurements as of June 30, 2018
(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
22,350

 

 

 
22,350

Common stock options/warrants

 
1,799

 

 
1,799

Forward contracts

 
23

 

 
23

Total assets
$
22,350

 
$
1,822

 
$

 
$
24,172

Liabilities:
 
 
 
 
 
 
 
Contingent consideration

 

 
27,754

 
27,754

Total liabilities
$

 
$

 
$
27,754

 
$
27,754

 
Fair value measurements as of December 31, 2017
(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:
 
 
 
 
 
 
 
Money market funds
$
107

 
$

 
$

 
$
107

Equity securities
12,461

 

 

 
12,461

Common stock options/warrants

 
3,333

 

 
3,333

Total assets
$
12,568

 
$
3,333

 
$

 
$
15,901

Liabilities:
 
 
 
 
 
 
 
Forward contracts

 
317

 

 
317

Contingent consideration

 

 
41,353

 
41,353

Total liabilities
$

 
$
317

 
$
41,353

 
$
41,670



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 June 30, 2018 and December 31, 2017, 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 June 30, 2018:
 
June 30, 2018
(In thousands)
Contingent
consideration
Balance at December 31, 2017
$
41,353

Change in fair value:
 
Included in results of operations
(13,599
)
Balance at June 30, 2018
$
27,754

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. If estimated future sales were to decrease by 10%, the contingent consideration related to OPKO Renal, which represents the majority of our contingent consideration liability, would decrease by $1.7 million. As of June 30, 2018, of the $27.7 million of contingent consideration, $2.0 million is recorded in Accrued expenses and $25.7 million is recorded in Other long-term liabilities. As of December 31, 2017, of the $41.4 million of contingent consideration, $11.8 million is recorded in Accrued expenses and $29.6 million is recorded in Other long-term liabilities.