4. Fair value

The fair value of our financial assets and liabilities reflects our estimate of amounts that we would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of our assets and liabilities, we seek to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (our assumptions about how market participants would price assets and liabilities). We use the following fair value hierarchy to classify assets and liabilities based on the observable inputs and unobservable inputs we used to value our assets and liabilities:

· Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2—quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

· Level 3—unobservable inputs based on our assumptions used to measure assets and liabilities at fair value.

For fixed income securities, we reference pricing data supplied by our custodial agent and nationally known pricing vendors, using a variety of daily data sources, largely readily-available market data and broker quotes. The prices provided by third-party pricing services are validated by reviewing their pricing methods and obtaining market values from other pricing sources. After completing these validation procedures, we did not adjust or override any fair value measurements provided by the pricing services as of March 31, 2014 or December 31, 2013. We valued the balance of the technology access fee payable to Intrexon for $2.5 million in cash in December 2014 based on a discounted cash flow model. We used a 15% discount rate, which we believe approximates our one year unsecured borrowing rate.

We review investments for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, we consider the intent to sell, or whether it is more likely than not that we will be required to sell, the investment before recovery of the investment’s amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, compliance with our investment policy, the severity and the duration of the impairment and changes in value subsequent to year end. As of March 31, 2014 and December 31, 2013, there were no investments with a fair value that was significantly lower than the amortized cost basis or any investments that had been in an unrealized loss position for a significant period.

The following tables provide our assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013 (in thousands):

Description	Balance as of March 31, 2014		Level 1		Level 2		Level 3
Assets:
Cash and money market funds	$	56,134	$	56,134	$	—	$	—
Corporate obligations (including commercial paper)	33,331		—		33,331		—
Total assets	$	89,465	$	56,134	$	33,331	$	—
Liabilities:
Technology access fee due to Intrexon	$	2,270	$	—	$	—	$	2,270
Total liabilities	$	2,270	$	—	$	—	$	2,270

Description	Balance as of December 31, 2013		Level 1		Level 2		Level 3
Assets:
Cash and money market funds	$	18,078	$	18,078	$	—	$	—
Corporate obligations (including commercial paper)	26,349		—		26,349		—
Total assets	$	44,427	$	18,078	$	26,349	$	—
Liabilities:
Technology access fee due to Intrexon	$	2,186	$	—	$	—	$	2,186
Total liabilities	$	2,186	$	—	$	—	$	2,186

Changes in the fair value of the Level 3 technology access fee due to Intrexon for the three months ended March 31, 2014 were as follows (in thousands):

	Technology access fee
Balance at December 31, 2013	$	2,186
Fair value adjustment(1)	84
Balance at March 31, 2014	$	2,270

(1) Fair value adjustments consist of interest expense recorded for the three months ended March 31, 2014.

There have been no changes to the valuation methods during the three months ended March 31, 2014 and 2013. There were no transfers of assets or liabilities between Level 1 and Level 2 during the quarter ended March 31, 2014 or the year ended December 31, 2013. We had no short-term investments that were classified as Level 3 during the quarter ended March 31, 2014 or the year ended December 31, 2013.

Cash and cash equivalents, prepaid expenses, accounts payable and accrued expenses are carried at amounts that approximate fair value due to their short-term maturities.