The Company has certain financial assets and liabilities that are recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.

During the nine and twelve months ended September 30, 2023 and December 31, 2022, there were no transfers into or out of Level 3. The tables below present information about the Company’s financial assets and liabilities that are measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation techniques it utilizes to determine such fair value:


	Fair Value Measurement as of September 30, 2023
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets
Money market funds	$	139,682	$	139,682	$	—	$	—
Commercial paper		88,450		—		88,450		—
Government and government agency bonds		989,257		—		989,257		—
Corporate bonds		145,898		—		145,898		—
Strategic investments		7,500		—		—		7,500
Certificates of deposit		45,066		—		45,066		—
Total assets	$	1,415,853	$	139,682	$	1,268,671	$	7,500

Liabilities
Contingent consideration	$	38,100	$	—	$	—	$	38,100
Total liabilities	$	38,100	$	—	$	—	$	38,100


	Fair Value Measurement as of December 31, 2022
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets
Money market funds	$	467,553	$	467,553	$	—	$	—
Commercial paper		211,369		—		211,369		—
Government and government agency bonds		807,540		—		807,540		—
Corporate bonds		125,741		—		125,741		—
Strategic investments		31,321		321		—		31,000
Certificates of deposit		42,745		—		42,745		—
Total assets	$	1,686,269	$	467,874	$	1,187,395	$	31,000

Liabilities
Contingent consideration	$	36,900	$	—	$	—	$	36,900
Total liabilities	$	36,900	$	—	$	—	$	36,900

The Company’s assets with a fair value categorized as Level 1 within the fair value hierarchy primarily include money market funds.

The Company's assets with a fair value categorized as Level 2 within the fair value hierarchy consist of commercial paper, government and government agency bonds, corporate bonds and certificates of deposit. These assets have been initially valued at the transaction price and subsequently valued at the end of each reporting period utilizing third-party pricing services. The Company uses observable market inputs to determine value, which primarily consist of reportable trades. Certain of the short-term investments with maturities of less than three months at the date of acquisition are presented as cash equivalents on the unaudited condensed consolidated balance sheets as of September 30, 2023.

The Company’s assets with a fair value categorized as Level 3 within the fair value hierarchy consist of a strategic investment in Series A preferred stock of Lacerta Therapeutics, Inc. (“Lacerta”) and strategic investments in three other private companies. For more information related to Lacerta, please read Note 3, License and Collaboration Agreements to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The fair value of the Lacerta investment was initially based on a cost approach corroborated by the Black-Scholes-Merton option-pricing model. The most significant assumptions in the initial option pricing model include historical volatility of similar public companies, estimated term through Lacerta’s potential exit and a risk-free rate based on certain U.S. Treasury rates. The investments in the other private companies are recorded at fair value at the time of purchase as measured by their respective investment cost. Included in the Company's strategic investments is a $4.0 million strategic investment in a private biotechnology company made during the three and nine months ended September 30, 2023, which was included in other non-current assets within the unaudited condensed consolidated balance sheets as of September 30, 2023.

At the end of each reporting period, the fair value of the Company's strategic investments will be adjusted if the issuers were to issue similar or identical securities or when there is a triggering event for impairment. Equity securities without a readily determinable fair value are written down to its fair value if a qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than its carrying value. During the three and nine months ended September 30, 2023, the Company recorded an impairment loss of $27.5 million related to the Company's strategic investment in Series A preferred stock of Lacerta after comparing the fair value of the Lacerta strategic investment to its carrying value. The Company's assessment performed during the three and nine months ended September 30, 2023 considered entity-specific impairment indicators, such as the future business prospects of Lacerta's existing programs and expected future cash flows. The fair value as of September 30, 2023 was estimated based on a range of future cash flows that are expected to be realized by the Company, which could range from $0 to $2.5 million and reflects a Level 3 fair value measurement given the significant unobservable inputs. The impairment loss is included in Other (expense) income, net within the unaudited condensed consolidated statements of operations and comprehensive loss. There were no additional valuation measurement events related to the fair value of the Company's Level 3 strategic investments during the three and nine months ended September 30, 2023 or 2022, as no additional impairment indicators were identified nor were similar securities issued.

The Company’s contingent consideration liability with a fair value categorized as Level 3 within the fair value hierarchy relates to the regulatory-related contingent payments to Myonexus Therapeutics, Inc. (“Myonexus”) selling shareholders as well as to two academic institutions under separate license agreements that meet the definition of a derivative. For more information related to Myonexus, please read Note 3, License and Collaboration Agreements to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The contingent consideration liability was estimated using an income approach based on the probability-weighted expected cash flows that incorporated industry-based probability adjusted assumptions relating to the achievement of the milestone and thus the likelihood of making the payments. This fair value measurement was based upon significant inputs not observable in the market and therefore represented a Level 3 measurement. Significant changes which increase or decrease the probabilities of achieving the milestone, or shorten or lengthen the time required to achieve the milestone, would result in a corresponding increase or decrease in the fair value of the liability. At the end of each reporting period, the fair value is adjusted to reflect the most current assumptions through earnings.

For the three and nine months ended September 30, 2023, the Company recorded a net increase of $1.2 million and $2.0 million to account for the change in fair value of the Company's existing contingent consideration liabilities. These changes, which are recorded through earnings, were a result of updates made to certain inputs and assumptions impacting the probability-weighted expected cash flows, principally the discount rate utilized to determine the present value of future payments to be made, the probability of success of the underlying programs and the approval date of the underlying programs, offset by the termination of a license agreement with an academic institution that included an embedded derivative. As of September 30, 2023, the remaining contingent consideration was recorded as a non-current liability on the Company's unaudited condensed consolidated balance sheets.

The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximated fair value because of the immediate or short-term maturity of these financial instruments. For fair value information related to the Company's debt facilities, please read Note 11, Indebtedness.