Fair Value Measurements

6 Months Ended

Jun. 30, 2021

We account for certain assets and liabilities at fair value and classify these assets and liabilities within the fair value hierarchy (Level 1, Level 2, or Level 3). Our other current assets and other current liabilities have fair values that approximate their carrying values.

Assets and liabilities subject to fair value measurements are as follows (in millions):


	As of June 30, 2021
	Level 1		Level 2		Level 3		Balance
Assets
Money market funds(1)	$	503.2	$	—	$	—	$	503.2
Time deposits(1)	88.1		—		—		88.1
U.S. government and agency securities(2)	—		1,906.0		—		1,906.0
Corporate debt securities(2)	—		379.7		—		379.7
Equity securities(3)	65.0		—		—		65.0

Contingent consideration(4)	—		—		5.2		5.2
Total assets	$	656.3	$	2,285.7	$	5.2	$	2,947.2
Liabilities

Contingent consideration(5)	—		—		15.1		15.1
Total liabilities	$	—	$	—	$	15.1	$	15.1


	As of December 31, 2020
	Level 1		Level 2		Level 3		Balance
Assets
Money market funds(1)	$	323.1	$	—	$	—	$	323.1

U.S. government and agency securities(2)	—		1,912.1		—		1,912.1
Corporate debt securities(2)	—		334.4		—		334.4
Equity securities(3)	78.4		—		—		78.4

Contingent consideration(4)	—		—		4.1		4.1
Total assets	$	401.5	$	2,246.5	$	4.1	$	2,652.1
Liabilities

Contingent consideration(5)	—		—		17.1		17.1
Total liabilities	$	—	$	—	$	17.1	$	17.1

(1)Included in cash and cash equivalents on our consolidated balance sheets.

(2)Included in cash and cash equivalents and current and non-current marketable investments on our consolidated balance sheets. Refer to Note 3—Investments—Marketable Investments—Available-for-Sale Debt Securities for further information. The fair value of these securities is principally measured or corroborated by trade data for identical securities for which related trading activity is not sufficiently frequent to be considered a Level 1 input or comparable securities that are more actively traded.

(3)Included in current marketable investments on our consolidated balance sheets. The fair value of these securities is based on quoted market prices for identical instruments in active markets. During the three and six months ended June 30, 2021, we recognized $1.3 million of net unrealized losses and $95.5 million of net unrealized and realized gains, respectively, on these securities. During the three and six months ended June 30, 2020, we recognized $8.9 million and $15.0 million of net unrealized and realized losses on these securities. We recorded these gains and losses on our consolidated statements of operations within other (expense) income, net. Refer to Note 3—Investments—Marketable Investments—Investments in Equity Securities with Readily Determinable Fair Values.

(4)Included in other current and other non-current assets on our consolidated balance sheets. We estimated the fair value of contingent consideration using a Monte Carlo simulation. The Monte Carlo simulation incorporates Level 3 inputs including price volatility of peer company stocks and the probability of completing certain milestones during a specified period of time. The fair value of our contingent consideration assets increased by $1.1 million from December 31, 2020 to June 30, 2021. The gain was recorded within other (expense) income, net on our consolidated statements of operations.

(5)Included in non-current liabilities on our consolidated balance sheets. The fair value of our contingent consideration obligations has been estimated using probability-weighted discounted cash flow models (DCFs). The DCFs incorporate Level 3 inputs including estimated discount rates that we believe market participants would consider relevant in pricing and the projected timing and amount of cash flows, which are estimated and developed, in part, based on the requirements specific to each acquisition agreement. The change in the fair value of our contingent consideration obligations for the six months ended June 30, 2021 was the result of our decision in January 2021 to discontinue our research and development efforts related to biomechanical lungs. As a result of the decision, we de-recognized $2.0 million of a related contingent consideration liability during the first quarter of 2021. The gain was recorded within research and development on our consolidated statements of operations.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value because of their short maturities. The fair values of our marketable investments and contingent consideration are reported above within the fair value hierarchy. Refer to Note 3—Investments. The carrying value of our debt is a reasonable estimate of the fair value of the outstanding debt based on the variable interest rate of the debt.

- 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.

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