Fair Value Measurements

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

4. Fair Value Measurements

Fair value accounting is applied for all financial assets and liabilities, including short-term and long-term investments, and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). The carrying amount of the Company’s financial instruments, including accounts payable and accrued liabilities and other current liabilities approximate fair value due to their short-term maturities.

Marketable securities are stated at their estimated fair values. The counterparties to the agreements relating to the Company’s investment securities consist of the U.S. Treasury, governmental agencies, various major corporations and financial institutions with high credit standing. The carrying amounts for financial instruments consisting of cash and cash equivalents, receivable from collaboration partner, accounts payable and accrued liabilities approximate fair value due to their short maturities.

The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Inputs other than quoted market prices included in Level 1 are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

All investments have been classified as “available-for-sale” and are carried at fair value based upon quoted market prices or pricing models for similar securities at period end. Generally, those investments with contractual maturities greater than 12 months are considered long-term investments.  Unrealized gains and losses, deemed temporary in nature, are reported as a component of accumulated other comprehensive loss, net of tax, on the consolidated balance sheets.

A decline in the fair value of any security below cost that is deemed other than temporary results in a charge to earnings and the corresponding establishment of a new cost basis for the security. The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. Dividend and interest income are recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of securities sold.

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

	Fair Value Measurements at December 31, 2019
	Total		Level 1		Level 2		Level 3
Assets
Money market funds	$	100,441	$	100,441	$	—	$	—
U.S. government agency obligations		134,055		—		134,055		—
Corporate securities		194,789		—		194,789		—
Total	$	429,285	$	100,441	$	328,844	$	—
	Fair Value Measurements at December 31, 2018
	Total		Level 1		Level 2		Level 3
Assets
Money market funds	$	245,194	$	245,194	$	—	$	—
U.S. government agency obligations		85,033		—		85,033		—
Corporate securities		63,679		—		63,679		—
Total	$	393,906	$	245,194	$	148,712	$	—

The following table is a summary of amortized cost, unrealized gain and loss, and fair value (in thousands) of the Company’s marketable securities by contractual maturities:

	Fair Value Measurements at December 31, 2019
	Amortized Cost		Unrealized Gain		Unrealized Loss			Fair Value
Cash equivalents (due within 90 days)	$	100,440	$	1	$	—		$	100,441
Short-term investments (due within one year)		314,181		523		(13	)		314,691
Long-term investments (due between one and two years)		14,110		47		(4	)		14,153
Total	$	428,731	$	571	$	(17	)	$	429,285
	Fair Value Measurements at December 31, 2018
	Amortized Cost		Unrealized Gain		Unrealized Loss			Fair Value
Cash equivalents (due within 90 days)	$	245,194	$	—	$	—		$	245,194
Short-term investments (due within one year)		68,656		—		(92	)		68,564
Long-term investments (due between one and two years)		80,118		98		(68	)		80,148
Total	$	393,968	$	98	$	(160	)	$	393,906

The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy during the years ended December 31, 2019 and 2018. There were no material realized gains or losses on available-for- sale securities during the periods presented.