Fair Value Measurements

3 Months Ended

Mar. 31, 2012

Fair Value Measurements

Fair Value Measurements

5. Fair Value Measurements

The Company defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s market assumptions. The Company classifies these inputs into the following hierarchy:

Level 1 Inputs—Quoted prices for identical instruments in active markets.

Level 2 Inputs—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs—Unobservable inputs and little, if any, market activity for the assets.

The estimated fair values of the Company’s financial assets were as follows:

	Fair Value Measurements at Reporting Date Using
March 31, 2012	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Level 1		Level 2		Level 3		Total
U.S. government securities	$	25,998	$	35,033	$	—	$	61,031
U.S. government agency securities	34,441		48,488		—		82,929
U.S. corporate notes	—		550		—		550
U.S. commercial paper	—		45,737		—		45,737
Money market funds	6,213		—		—		6,213
Total	$	66,652	$	129,808	$	—	$	196,460

	Fair Value Measurements at Reporting Date Using
December 31, 2011	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Level 1		Level 2		Level 3		Total
U.S. government securities	$	66,174	$	—	$	—	$	66,174
U.S. government agency securities	55,901		37,274		—		93,175
U.S. corporate notes	2,705		—		—		2,705
U.S. commercial paper	—		34,976		—		34,976
Money market funds	38,721		—		—		38,721
Total	$	163,501	$	72,250	$	—	$	235,751

At March 31, 2012, securities with a total fair value of $19.6 million were measured using Level 1 inputs in comparison to December 31, 2011, at which time the securities had a fair value of $19.7 million and were measured using Level 2 inputs. The transfer to Level 1 from Level 2 was primarily the result of increased trading volume of the securities at and around March 31, 2012, compared to December 31, 2011.

At March 31, 2012, securities with a total fair value of $56.2 million were measured using Level 2 inputs in comparison to December 31, 2011, at which time the securities had a fair value of $56.5 million and were measured using Level 1 inputs. The transfer to Level 2 from Level 1 was primarily the result of decreased trading volume of the securities at and around March 31, 2012, compared to December 31, 2011.