| Financial Instruments and Fair Value Measurement |
Financial Instruments and Fair Value Measurement
The table below presents information about assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2015 and the valuation techniques we utilized to determine such fair value. | | • | Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Our Level 1 assets consist of marketable equity securities. Our Level 1 liability relates to our publicly traded Contingent Value Rights (CVRs). See Note 18 of Notes to Consolidated Financial Statements included in our 2014 Annual Report on Form 10-K for a description of the CVRs. |
| | • | Level 2 inputs utilize observable quoted prices for similar assets and liabilities in active markets and observable quoted prices for identical or similar assets in markets that are not very active. Our Level 2 assets consist primarily of U.S. Treasury securities, U.S. government-sponsored agency securities, U.S. government-sponsored agency MBS, non-U.S. government, agency and supranational securities, global corporate debt securities, asset backed securities, foreign currency forward contracts, purchased foreign currency options and interest rate swap contracts. Our Level 2 liabilities relate to written foreign currency options, foreign currency forward contracts and interest rate swap contracts. |
| | • | Level 3 inputs utilize unobservable inputs and include valuations of assets or liabilities for which there is little, if any, market activity. We do not have any Level 3 assets. Our Level 3 liabilities consist of contingent consideration related to undeveloped product rights resulting from the acquisitions of Gloucester Pharmaceuticals, Inc. (Gloucester) and Nogra in addition to contingent consideration related to the undeveloped product rights and technology platform acquired as part of the acquisition of Avila Therapeutics, Inc. (now known as Celgene Avilomics Research, Inc.) (Avila). The maximum remaining potential payments related to the contingent consideration from the acquisitions of Gloucester and Avila are estimated to be $120.0 million and $555.0 million, respectively, and $1.865 billion plus amounts based on sales pursuant to the license agreement with Nogra. |
| | | | | | | | | | | | | | | | | | Balance at March 31, 2015 | | Quoted Price in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | Assets: | | | | | | | | Available-for-sale securities | $ | 2,945.8 |
| | $ | 967.1 |
| | $ | 1,978.7 |
| | $ | — |
| Forward currency contracts | 901.8 |
| | — |
| | 901.8 |
| | — |
| Purchased currency options | 25.3 |
| | — |
| | 25.3 |
| | — |
| Interest rate swaps | 32.8 |
| | — |
| | 32.8 |
| | — |
| Total assets | $ | 3,905.7 |
| | $ | 967.1 |
| | $ | 2,938.6 |
| | $ | — |
| Liabilities: | |
| | |
| | |
| | |
| Contingent value rights | $ | (128.5 | ) | | $ | (128.5 | ) | | $ | — |
| | $ | — |
| Written currency options | (3.8 | ) | | — |
| | (3.8 | ) | | — |
| Other acquisition related contingent consideration | (1,305.8 | ) | | — |
| | — |
| | (1,305.8 | ) | Total liabilities | $ | (1,438.1 | ) | | $ | (128.5 | ) | | $ | (3.8 | ) | | $ | (1,305.8 | ) | | | | | | | | | | Balance at December 31, 2014 | | Quoted Price in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | Assets: | |
| | |
| | |
| | |
| Available-for-sale securities | $ | 3,425.1 |
| | $ | 1,051.3 |
| | $ | 2,373.8 |
| | $ | — |
| Forward currency contracts | 550.7 |
| | — |
| | 550.7 |
| | — |
| Purchased currency options | 9.8 |
| | — |
| | 9.8 |
| | — |
| Interest rate swaps | 20.0 |
| | — |
| | 20.0 |
| | — |
| Total assets | $ | 4,005.6 |
| | $ | 1,051.3 |
| | $ | 2,954.3 |
| | $ | — |
| Liabilities: | |
| | |
| | |
| | |
| Contingent value rights | $ | (136.3 | ) | | $ | (136.3 | ) | | $ | — |
| | $ | — |
| Written currency options | (4.6 | ) | | — |
| | (4.6 | ) | | — |
| Other acquisition related contingent consideration | (1,279.0 | ) | | — |
| | — |
| | (1,279.0 | ) | Total liabilities | $ | (1,419.9 | ) | | $ | (136.3 | ) | | $ | (4.6 | ) | | $ | (1,279.0 | ) |
There were no security transfers between Levels 1 and 2 during the three-month periods ended March 31, 2015 and 2014. The following table represents a roll-forward of the fair value of Level 3 instruments: | | | | | | | | | | Three-Month Periods Ended March 31, | | 2015 | | 2014 | Liabilities: | |
| | |
| Balance at beginning of period | $ | (1,279.0 | ) | | $ | (228.5 | ) | Amounts acquired or issued | — |
| | — |
| Net change in fair value | (26.8 | ) | | (5.2 | ) | Settlements | — |
| | 20.0 |
| Transfers in and/or out of Level 3 | — |
| | — |
| Balance at end of period | $ | (1,305.8 | ) | | $ | (213.7 | ) |
Level 3 liabilities outstanding as of March 31, 2015 primarily consisted of contingent consideration related to the acquisitions of Avila and Nogra. The $26.8 million net increase in the fair value of Level 3 liabilities in 2015 was related to accretion of the fair value of our contingent consideration due to the passage of time. Changes to the fair value of contingent consideration are recorded on the Consolidated Statements of Income as acquisition related charges, net. |