Investments and Fair Value Measurements

12 Months Ended

Dec. 31, 2019

Investments and Fair Value Measurements

Investments and Fair Value Measurements

6. Investments and Fair Value Measurements

Available-for-Sale Securities

The estimated fair value of marketable securities is based on quoted market prices for these or similar investments obtained from a commercial pricing service. The fair market value of marketable securities classified within Level 1 is based on quoted prices for identical instruments in active markets. The fair value of marketable securities classified within Level 2 is based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; or model-driven valuations whose inputs are observable or whose significant value drivers are observable. Observable inputs may include benchmark yields, reported trades, broker/dealer

quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications.

Available-for-sale securities are summarized below:

		December 31, 2019
				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
(In thousands)		Cost		Gains		Losses		Fair Value
US government securities	Level 1	$	100,746	$	108	$	—	$	100,854
US government agency securities	Level 2		—		—		—		—
Corporate notes	Level 2		25,466		9		(1)		25,474
Commercial paper	Level 2		112,066		31		(2)		112,095
Marketable securities			238,278		148		(3)		238,423
Money market funds	Level 1		35,736		—		—		35,736
Total		$	274,014	$	148	$	(3)	$	274,159

		December 31, 2018
				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
(In thousands)		Cost		Gains		Losses		Fair Value
US government securities	Level 1	$	48,807	$	—	$	(86)	$	48,721
US government agency securities	Level 2		9,852		2		—		9,854
Corporate notes	Level 2		57,508		6		(88)		57,426
Commercial paper	Level 2		90,919		—		—		90,919
Marketable securities			207,086		8		(174)		206,920
Money market funds	Level 1		294,751		—		—		294,751
Total		$	501,837	$	8	$	(174)	$	501,671

As of December 31, 2019, all of the available-for-sale securities had contractual maturities within sixteen months and the weighted average maturity of marketable securities was approximately three months. There were no transfers between Level 1 and Level 2 during the periods presented, and there have been no material changes to the Company’s valuation techniques during the years ended December 31, 2019 and 2018.

In general, the Company invests in debt securities with the intent to hold such securities until maturity at par value. The Company does not intend to sell the investments that are currently in an unrealized loss position, and it is unlikely that it will be required to sell the investments before recovery of their amortized cost basis, which may be maturity. The Company has determined that the gross unrealized losses on its marketable securities, as of December 31, 2019, were temporary in nature, and there were no material unrealized losses on investments which have been in a loss position for more than twelve months as of December 31, 2019.

As of December 31, 2019, the Company’s accumulated other comprehensive income (loss) on its consolidated balance sheets consisted of net unrealized gains or losses on available-for-sale investments. During the years ended December 31, 2019 and 2018, the Company did not sell any of its marketable securities.

Non-Marketable Equity Securities and Other-Than-Temporary Impairment

In September 2015, the Company and Trek Therapeutics, PBC ("TREKtx") entered into a licensing agreement (the "TREKtx Agreement") granting TREKtx an exclusive worldwide license for the development, manufacturing, use, marketing and sale of the Company’s NS5A inhibitor known as TD-6450 as a component in combination hepatitis C virus ("HCV") products (the "HCV Products"). Pursuant to the TREKtx Agreement, the Company received an upfront payment of $8.0 million in the form of TREKtx's Series A preferred stock and would be eligible to receive future royalties based on net sales of the HCV Products. TREKtx is solely responsible for all future costs associated with the supply, manufacture, development, sale and marketing of the licensed compound.

At the date of the acquisition of the investment, the Company estimated the fair value of the consideration received to be $8.0 million based upon the price of similar Series A preferred stock that TREKtx sold to an independent third-party for cash consideration. The Company accounted for this investment using the cost-method of accounting and recorded it in other investments on the Company’s consolidated balance sheets. The Company is not considered to be the primary beneficiary of TREKtx and therefore, does not consolidate the financial results of the company into its financial statements. The Company’s equity investments are reviewed at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value of the investment might not be recoverable.

During 2017, the Company identified indicators of impairment were present for its investment in TREKtx. The Company concluded that the impairment of this investment was other-than-temporary due to TREKtx's challenges in securing additional funding and, as a result, the Company recorded an impairment charge. Due to the uncertainty in the recovery of the investment, the Company recorded an impairment charge for the full carrying value of the investment. The $8.0 million other-than-temporary impairment charge was reported as "Other-than-temporary impairment loss" on the consolidated statements of operations for the year ended December 31, 2017. As the inputs utilized for the assessment were not based on observable market data, the determination of fair value of this cost-method investment was classified within Level 3 of the fair value hierarchy. To determine the fair value of this investment, the Company used all available financial information related to the investee, including liquidity, rate of cash use, and ability to secure additional funding.