Fair Value Measurement

9 Months Ended

Sep. 30, 2023

Available-for-sale marketable securities consisted of the following (in thousands):


	September 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Asset-backed securities	$	4,599	$	—	$	(20)	$	4,579
Corporate debt securities	5,976		—		(31)		5,945
U.S. treasury securities	160,034		—		(104)		159,930

Agency bonds	16,020		—		(73)		15,947
Commercial paper	22,655		—		(1)		22,654
Total marketable securities, available-for-sale	$	209,284	$	—	$	(229)	$	209,055


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Asset-backed securities	$	1,146	$	—	$	—	$	1,146
Corporate debt securities	7,139		—		(9)		7,130
U.S. treasury securities	111,469		—		(934)		110,535
Agency bonds	2,783		2		(1)		2,784

Commercial paper	7,004		—		—		7,004
Total marketable securities, available-for-sale	$	129,541	$	2	$	(944)	$	128,599

As of September 30, 2023, 43 available-for-sale marketable securities with a fair market value of $196.8 million were in a gross unrealized loss position of $0.2 million. Based on our review of these marketable securities, we believe none of the unrealized loss is as a result of a credit loss as of September 30, 2023 because we do not intend to sell these securities and it is not more-likely-than-not that we will be required to sell these securities before the recovery of their amortized cost basis.

The estimated fair value of our contractual maturities of available-for-sale debt securities were as follows (in thousands):


	September 30, 2023		December 31, 2022

Due within one year	$	179,400	$	114,353
Due after one year but within five years	29,655		14,246
Total estimated fair value of contractual maturities, available-for-sale	$	209,055	$	128,599

The following table summarizes, by major security type, our cash equivalents and available-for-sale marketable securities measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):


	September 30, 2023						December 31, 2022
	Level 1		Level 2		Total estimated fair value		Level 1		Level 2		Total estimated fair value
Assets
Cash equivalents
Money market funds	$	147,113	$	—	$	147,113	$	191,704	$	—	$	191,704
U.S. treasury securities	23,000		—		23,000		—		—		—

Available-for-sale marketable securities
Asset-backed securities	—		4,579		4,579		—		1,146		1,146
Corporate debt securities	—		5,945		5,945		—		7,130		7,130
U.S. treasury securities	159,930		—		159,930		110,535		—		110,535
Agency bonds	15,947		—		15,947		2,784		—		2,784

Commercial paper	—		22,654		22,654		—		7,004		7,004
Derivative instruments
Currency hedging contracts (1)	—		2,163		2,163		—		—		—
Total assets	$	345,990	$	35,341	$	381,331	$	305,023	$	15,280	$	320,303

Liabilities
Derivative instruments
Currency hedging contracts (1)	$	—	$	347	347		$	—	$	—	—

(1) Based on observable market transactions of spot currency rates, forward currency rates or equivalently-termed instruments. Carrying amounts of the financial assets and liabilities are equal to the fair value. As of September 30, 2023, the derivative assets and liabilities recorded within prepaid expenses and other current assets, prepaid expense and other assets and other long-term liabilities were $1.6 million, $0.6 million and $0.3 million, respectively.

We had no available for sale securities that were classified within Level 3 as of September 30, 2023 and December 31, 2022.

A contingent liability was assumed as part of the Antares acquisition related to TLANDO. The acquisition date fair value was measured using the income approach, specifically the probability weighted expected return method for the development milestone payments and the option pricing methodology using the Monte Carlo simulation for commercial milestone payments and royalty payments. Estimates and assumptions used in the Monte Carlo simulation include forecasted revenues, cost of debt, risk free rate, weighted average cost of capital, revenue market price risk and revenue volatility. Estimates and assumptions used in the income approach include the probability of achieving certain milestones and a discount rate. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Changes in the fair value subsequent to the acquisition date will be recognized in our condensed consolidated statements of income. In September 2023, we provided Lipocine notice of termination of the TLANDO license agreement effective January 31, 2024. Based on the fair value remeasurement performed as of September 30, 2023, we recognized a gain on change in fair value of the contingent liability of $13.2 million for the three months ended September 30, 2023 in our condensed consolidated statements of income.

- 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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