Fair Value Measurements

3 Months Ended

Mar. 31, 2024

3. Fair Value Measurements

The following table sets forth the fair value of the Company’s financial assets and liabilities measured on a recurring basis by level within the fair value hierarchy:


	March 31, 2024
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Money market funds	$	42,498	$	42,498	$	-	$	-
Commercial paper		21,379	-			21,379		-
Corporate debt securities		44,036	-			44,036		-
Equity securities		45,616		45,616		-		-
Asset-backed securities		44,598	-			44,598		-
U.S. government securities		113,130		113,130		-		-
Total	$	311,257	$	201,244	$	110,013	$	-


	December 31, 2023
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Money market funds	$	56,397	$	56,397	$	-	$	-
Commercial paper		82,152		-		82,152		-
Corporate debt securities		61,894		-		61,894		-
Equity securities		41,937		41,937		-		-
Asset-backed securities		10,505		-		10,505		-
U.S. government securities		113,652		113,652		-		-
U.S. agency securities		4,961		-		4,961		-
Total	$	371,498	$	211,986	$	159,512	$	-

Where applicable, the Company uses quoted market prices in active markets for identical assets to determine fair value. This pricing methodology applies to Level 1 investments, which are comprised of money market funds, U.S. government securities and the shares of Vaxcyte common stock held by the Company.

If quoted prices in active markets for identical assets are not available, then the Company uses quoted prices for similar assets or inputs other than quoted prices that are observable, either directly or indirectly. These investments are included in Level 2 and consist of commercial paper, corporate debt securities, asset-backed securities, and U.S. agency securities. These assets are valued using market prices when available, adjusting for accretion of the purchase price to face value at maturity.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

In certain cases where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3 within the valuation hierarchy. As of March 31, 2024 and December 31, 2023, the deferred royalty obligation related to the sale of future Vaxcyte royalties was classified as Level 3 within the valuation hierarchy. Refer to Note 8 below for information relating to the Purchase Agreement between the Company and Blackstone, pursuant to which the Company sold to Blackstone its 4% royalty, or revenue interest, in potential future net sales of Vaxcyte’s pneumococcal conjugate vaccine, or PCV, products, including VAX-24 and VAX-31.

Investments in Equity Securities

As of March 31, 2024 and December 31, 2023, the Company held 667,780 shares of Vaxcyte common stock with an estimated fair value of $45.6 million and $41.9 million, respectively. The Company recognized an unrealized gain of $3.7 million and an unrealized loss of $7.0 million for the three months ended March 31, 2024 and 2023, respectively.

- 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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