Fair Value Measurements

3 Months Ended

Mar. 31, 2017

Note 4 – Fair Value Measurements

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value (in thousands):

	Fair Value at March 31, 2017						Fair Value at December 31, 2016
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets
Money market funds(1)	$	51,816	$	—	$	—	$	95,896	$	—	$	—
Government-backed securities		—		19,000		—		—		19,000		—
Asset-backed securities(2)		—		48,573		—		—		23,632		—
Corporate debt securities(3)		—		76,249		—		—		79,470		—
Total assets	$	51,816	$	143,822	$	—	$	95,896	$	122,102	$	—
Liabilities
Convertible notes payable	$	—	$	148,671	$	—	$	—	$	141,989	$	—

(1)

Classified as cash and cash equivalents as of March 31, 2017 and December 31, 2016, respectively (see Note 3).

(2)

Includes $3,500 classified as cash and cash equivalents as of March 31, 2017 (see Note 3).

(3)

Includes $5,991 and $11,976 classified as cash and cash equivalents as of March 31, 2017 and December 31, 2016, respectively (see Note 3).

Fixed-income investments categorized as Level 2 are valued at the custodian bank by a third-party pricing vendor’s valuation models that use verifiable observable market data, e.g., interest rates and yield curves observable at commonly quoted intervals and credit spreads, bids provided by brokers or dealers or quoted prices of securities with similar characteristics. Pricing of the Company’s Notes (see Note 7) has been estimated using other observable inputs, including the price of the Company’s common stock, implied volatility, interest rates and credit spreads among others. Over time, the Company expects a market for the Notes to develop. At that time, the Company intends to use trade data as the principal basis for measuring fair value.

During the three months ended March 31, 2017, the Company did not have any transfers between levels.

The amount in the Company’s unaudited consolidated balance sheets for accounts payable approximates its fair value due to its short-term nature. The Company’s milestone payment due to Wyeth (see Note 11) approximates its fair value at March 31, 2017, as the liability has been calculated based on an anticipated future payment date discounted at borrowing rates available to the Company.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details