Fair Value Measurements and Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2022

Fair Value Measurements and Fair Value of Financial Instruments

3. Fair Value Measurements and Fair Value of Financial Instruments

The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified in their entirety based on 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.

During the years ended December 31, 2022 and 2021, financial assets measured on a recurring basis consist of cash invested in money market accounts, short-term investments, and long-term investments. The fair value of short-term and long-term investments is based upon market prices quoted on the last day of the fiscal period or other observable market inputs. The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker/dealer quotes, bids and/or offers. Financial liabilities measured at fair value on a recurring basis include the convertible preferred stock purchase right liability described below.

There were no transfers within the hierarchy during the years ended December 31, 2022 and 2021.

Marketable securities, all of which are classified as available-for-sale securities, consisted of the following at December 31, 2022 and 2021 (in thousands):


	December 31, 2022
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
Asset backed securities	$	12,754	$	11	$	(99	)	$	12,666
U.S. treasury securities		54,747		1		(517	)		54,231
Other government agency securities		5,009				(29	)		4,980
Commercial paper		56,170		—		—			56,170
Corporate debt securities		55,827		—		(287	)		55,540
Total	$	184,507	$	12	$	(932	)	$	183,587


	December 31, 2021
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
Asset backed securities	$	34,058	$	—	$	(18	)	$	34,040
U.S. treasury securities		39,985		—		(171	)		39,814
Other government agency securities		5,068				(22	)		5,046
Commercial paper		64,956		—		—			64,956
Corporate debt securities		100,438		12		(122	)		100,328
Total	$	244,505	$	12	$	(333	)	$	244,184

At December 31, 2022 and 2021, the fair values of the Company’s assets and liabilities, which are measured at fair value on a recurring basis, were determined using the following inputs (in thousands):


	December 31, 2022
	Total		(Level 1)		(Level 2)		(Level 3)
Money market funds	$	6,885	$	6,885	$	—	$	—
Asset backed securities		12,666		—		12,666		—
U.S. treasury securities		54,231		54,231		—		—
Other government agency securities		4,980		—		4,980
Commercial paper		56,170		—		56,170		—
Corporate debt securities		55,540		—		55,540		—
Total	$	190,472	$	61,116	$	129,356	$	—


	December 31, 2021
	Total		(Level 1)		(Level 2)		(Level 3)
Money market funds	$	22,917	$	22,917	$	—	$	—
Asset backed securities		34,040		—		34,040		—
U.S. treasury securities		39,814		39,814		—		—
Other government agency securities		5,046		-		5,046
Commercial paper		64,956		—		64,956		—
Corporate debt securities		100,328		—		100,328		—
Total	$	267,101	$	62,731	$	204,370	$	—

- 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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