Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.20.2
Fair Value Measurements
6 Months Ended
Jun. 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 June 30, 2020, we had 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, Xenetic and Phio.
Our financial assets and liabilities measured at fair value on a recurring basis are as follows:
  Fair value measurements as of June 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 $ 24,777    $ —    $ —    $ 24,777   
Common stock options/warrants —    51    —    51   
Forward contracts —    215    —    215   
Total assets $ 24,777    $ 266    $ —    $ 25,043   
Liabilities:
Contingent consideration —    —    9,934    9,934   
Total liabilities $ —    $ —    $ 9,934    $ 9,934   
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   

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, 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 June 30, 2020:
June 30, 2020
(In thousands) Contingent
consideration
Balance at December 31, 2019 $ 9,683   
Change in fair value:
Included in results of operations 251   
Balance at June 30, 2020 $ 9,934   
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 June 30, 2020, of the $9.9 million of contingent consideration, $2.4 million was recorded in Accrued expenses and $7.6 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.