Fair Value Measurement

12 Months Ended

Dec. 31, 2020

FAIR VALUE MEASUREMENT

The Company measures certain assets and liabilities at fair value on a recurring basis, including cash equivalents, marketable securities and the free shares asset. The accounting guidance establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The fair value measurements of the Company’s cash equivalents, marketable securities and the free shares asset are identified at the following levels within the fair value hierarchy (in thousands):


	December 31, 2020
	Fair Value Measurement
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents:
Money market funds	$	53,165	$	53,165	$	—	$	—

Total	53,165		53,165		—		—
Marketable securities:
Commercial paper	213,533		—		213,533		—
Corporate debt securities	59,574		—		59,574		—
Certificates of deposit	12,311		—		12,311		—
Asset-backed securities	17,908		—		17,908		—
U.S. government-sponsored entity debt securities	257,298		—		257,298		—
Total	560,624		—		560,624		—
Total cash equivalents and marketable securities	$	613,789	$	53,165	$	560,624	$	—

Free shares asset	$	70	$	—	$	—	$	70


	December 31, 2019
	Fair Value Measurement
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents:
Money market funds	$	30,496	$	30,496	$	—	$	—
Commercial paper	2,999		—		2,999		—
Total	33,495		30,496		2,999		—
Marketable securities:
Commercial paper	155,368		—		155,368		—
Corporate debt securities	95,017		—		95,017		—
U.S. government-sponsored entity debt securities	53,493		—		53,493		—
Total	303,878		—		303,878		—
Total cash equivalents and marketable securities	$	337,373	$	30,496	$	306,877	$	—

Free shares asset	$	236	$	—	$	—	$	236

Cash Equivalents and Marketable Securities

The Company generally classifies its marketable securities and some cash equivalents as Level 2. Instruments are classified as Level 2 when observable market prices for identical securities that are traded in less active markets are used. When observable market prices for identical securities are not available, such instruments are priced using benchmark curves, benchmarking of like securities, sector groupings, matrix pricing and valuation models. These valuation models are proprietary to the pricing providers or brokers and incorporate a number of inputs, including in approximate order of priority: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications. For certain security types, additional inputs may be used, or some of the standard inputs may not be applicable. Evaluators may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs listed are available for use in the evaluation process for each security evaluation on any given day.

Free Shares Asset

As a result of the July 20, 2018 Share Purchase Agreement (“Sangamo France SPA”) to acquire Sangamo France (see Note 5 – Acquisition of Sangamo France), the Company entered into arrangements with the holders of approximately 477,000 “free shares” of Sangamo France pursuant to which the Company has the right to purchase such shares from the holders (a call option) and such holders have the right to sell to the Company such shares from time to time through mid-2021 (a put option). The Company initially recorded a liability of $0.2 million on the acquisition date. The put options were classified within Level 3 of the fair value hierarchy as the Company utilized a binomial-lattice pricing model (the “Monte Carlo simulation model”) that involved certain market conditions to estimate the fair value of the options. The assumptions used in this simulation model are reviewed on a quarterly basis and adjusted, as needed. Subsequent changes in the fair value of the free shares are recorded in general and administrative expenses in the Consolidated Statements of Operations. The Company purchased approximately 111,000 and 322,000 shares during 2019 and 2020 respectively, of the 477,000 total free shares for a cash payment of approximately $0.3 million and $0.7 million respectively, upon exercise of the put options. As of December 31, 2020, approximately 44,000 free shares remain outstanding and subject to purchase by the Company.

The fair value of the free shares’ asset was approximately $0.2 million at December 31, 2019. The Company recognized a gain due to an increase in the fair value of the free shares of approximately $0.1 million for the year ended December 31, 2020, offset by approximately $0.2 million for the shares purchased during the year, resulting in an asset balance of approximately $0.1 million at December 31, 2020.


	December 31,
Free Shares valuation assumptions:	2020			2019
Sangamo stock price (USD)	$	15.61		$	8.68
Sangamo France stock price (EUR)	€	3.85		€	2.14
EUR/ USD exchange rate	0.82			0.91
Estimated correlation Sangamo and Sangamo France stock prices	100.0		%	100.0		%
Sangamo stock price (USD) volatility estimate	88.9		%	72.5		%
Sangamo France stock price (EUR) volatility estimate	88.9		%	72.5		%
EUR/ USD exchange rate volatility estimate	6.3		%	6.6		%
Risk free rate and cost of debt by expected exercise date	Varies			Varies

- 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