XOMA Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements (Tables)

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of Financial Assets and Liabilities Carried at Fair Value on Recurring Basis

The following tables set forth the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as follows (in thousands):


	Fair Value Measurements at December 31, 2019 Using
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Equity securities	$	—	$	—	$	681	$	681
Liabilities:
Contingent consideration	$	—	$	—	$	75	$	75

Fair Value Measurements at December 31, 2018 Using

Quoted Prices in

Significant Other

Significant

Active Markets for

Observable

Unobservable

Identical Assets

Inputs

(Level 1)

(Level 2)

(Level 3)

Total

Assets:

Equity securities

—

392

Summary of Changes in Estimated Fair Value of Level 3 Financial Assets

Equity Securities

The following table provides a summary of changes in the estimated fair value of the Company’s Level 3 financial assets for the year ended December 31, 2019 (in thousands):


Balance at December 31, 2018	$	392
Change in fair value		289
Balance at December 31, 2019	$	681

Schedule of Estimated Fair Value of Equity Securities Assumptions

The estimated fair value of the equity securities was calculated based on the following assumptions as of December 31, 2018:


Discount for lack of marketability	35	%
Estimated time to liquidity of shares	1.45 years

Scenario probabilities
Liquidation	20	%
Near-term sale	5	%
Near-term financing	75	%

In the first quarter of 2019, the Company updated the methodology used to value the equity securities due to Rezolute’s completion of a Qualified Financing (see Note 4). As of December 31, 2019, the Company and its valuation specialist valued the equity securities using the closing price for Rezolute’s common stock traded on the over-the-counter exchange and adjusted for an illiquidity discount. The inputs used to calculate the illiquidity discount are based on observable and unobservable estimates and judgments and therefore is classified as a Level 3 fair value measurement. As the Company has the right and option to sell up to 5,000,000 shares of Rezolute’s common stock back to Rezolute after December 31, 2019 (see Note 4), the fair value of the equity securities was determined by dividing the total shares of Rezolute’s common stock held by the Company into two tranches based on the estimated time to a potential liquidity event.

The estimated fair value of the equity securities was calculated based on the following assumptions as of December 31, 2019.


Closing common stock price on the Over-the-counter (OTC) exchange	$	0.12

Tranche 1:
Discount for lack of marketability		13	%
Estimated time to liquidity of shares		0.25 years

Tranche 2:
Discount for lack of marketability		33	%
Estimated time to liquidity of shares		1.5 years

Outstanding Long Term Debt Carrying Amount and Estimated Fair Value

The carrying amount and the estimated fair value of the Company’s outstanding long-term debt at December 31, 2019 and 2018, are as follows (in thousands):


	December 31, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
SVB Loans	$	16,374	$	16,048	$	7,286	$	7,281
Novartis note		15,903		15,713		15,193		14,825
Total	$	32,277	$	31,761	$	22,479	$	22,106