Fair Value Measurements

3 Months Ended

Mar. 31, 2022

4. Fair Value Measurements

The Company classifies fair value-based measurements using a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1, quoted market prices (unadjusted) in active markets for identical assets or liabilities; Level 2, observable inputs other than quoted market prices included in Level 1, such as quoted market prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data; and 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, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

As of March 31, 2022 and December 31, 2021, the Company’s financial assets and liabilities recognized at fair value on a recurring basis consisted of the following:


	Fair Value as of March 31, 2022
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents and restricted cash equivalents	$	138,269	$	138,269	$	-	$	-
Marketable securities:
U.S. Treasury and other government securities		292,473		277,345		15,128		-
Financial institution debt securities		378,507		-		378,507		-
Corporate debt securities		52,175		-		52,175		-
Other asset-backed securities		138,200		-		138,200		-
Total marketable securities		861,355		277,345		584,010		-
Total Assets	$	999,624	$	415,614	$	584,010	$	-

Liabilities
Contingent consideration liability - research	$	10,962	$	-	$	-	$	10,962
Total Liabilities	$	10,962	$	-	$	-	$	10,962

	Fair Value as of December 31, 2021
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents and restricted cash equivalents	$	124,636	$	124,636	$	-	$	-
Marketable securities:
U.S. Treasury and other government securities		300,477		280,085		20,392		-
Financial institution debt securities		440,416		-		440,416		-
Corporate debt securities		62,349		-		62,349		-
Other asset-backed securities		159,401		-		159,401		-
Total marketable securities		962,643		280,085		682,558		-
Total Assets	$	1,087,279	$	404,721	$	682,558	$	-

Certain of the Company’s financial assets, including cash equivalents, restricted cash equivalents and marketable securities, have been initially valued at the transaction price, and subsequently revalued at the end of each reporting period, utilizing third party pricing services or other observable market data. The pricing services utilize industry standard valuation models and observable market inputs to determine value. After completing its validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of March 31, 2022 or December 31, 2021.

Other financial instruments, including accounts receivable, accounts payable and accrued expense, are carried at cost, which approximates fair value due to the short duration and term to maturity.

The Company's investment in AvenCell Therapeutics, Inc. (“AvenCell”) was recorded at fair value, determined according to Level 3 inputs in the fair value hierarchy described above. Refer to Note 8 for further details.

The Company's investment in SparingVision SAS (“SparingVision”) was recorded at fair value, determined according to Level 3 inputs in the fair value hierarchy described above. The Company's investment in Kyverna Therapeutics, Inc. (“Kyverna”) was recorded at cost, which is representative of fair value. Refer to Note 8 for further details. The SparingVision and Kyverna investments (the “investments”) are included in “Investments and other assets” on the condensed consolidated balance sheet. There were no changes in observable prices of these investments as of March 31, 2022.

As discussed further in Note 9, Rewrite Acquisition, under the Merger Agreement, the Rewrite Holders are eligible to receive up to an additional $25.0 million in research milestone payments, payable in the Company’s common stock valued using the volume-weighted average price of the Company’s stock over the ten-day trading period ending two trading days prior to the date on which the applicable milestone is achieved. As such research milestone is payable in the Company’s common stock, the milestone payment results in liability classification under ASC 480. This contingent consideration liability is carried at fair value which was estimated by applying a probability-based model, which utilized inputs based on timing of achievement that were unobservable in the market. The contingent consideration liability, which is recorded in "Other long-term liabilities" on the condensed consolidated balance sheet, is classified within Level 3 of the fair value hierarchy.

The following table reconciles the change in fair value of the contingent consideration liability based on the level 3 inputs listed below (in thousands):


	For the quarter ended March 31, 2022
Balance at February 2, 2022 (at inception)	$	10,541
Change in fair value		421
Balance at March 31, 2022	$	10,962


	As of inception (February 2, 2022)	For the quarter ended March 31, 2022
Discount rate	7%	8%
Probability of achievement	50%	50%
Projected year of achievement	2023-2024	2023-2024

- 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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