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FAIR VALUE MEASUREMENTS
9 Months Ended
Sep. 30, 2018
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

4. FAIR VALUE MEASUREMENTS

The Company has certain financial assets 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.

 

Level 1 — quoted prices for identical instruments in active markets;

 

Level 2 — quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

 

Level 3 — valuations derived from valuation techniques in which one or more significant value drivers are unobservable.

The tables below present information about the Company’s financial assets that are measured and carried at fair value and indicate the level within the fair value hierarchy of valuation techniques it utilizes to determine such fair value: 

 

 

 

Fair Value Measurement as of September 30, 2018

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

85,321

 

 

$

85,321

 

 

$

 

 

$

 

Commercial paper

 

 

89,795

 

 

 

 

 

 

89,795

 

 

 

 

Government and government agency bonds

 

 

510,028

 

 

 

510,028

 

 

 

 

 

 

 

Corporate bonds

 

 

83,261

 

 

 

83,261

 

 

 

 

 

 

 

Strategic investment

 

 

30,000

 

 

 

 

 

 

 

 

 

30,000

 

Certificates of deposit

 

 

1,001

 

 

 

1,001

 

 

 

 

 

 

 

Total

 

$

799,406

 

 

$

679,611

 

 

$

89,795

 

 

$

30,000

 

 

 

 

Fair Value Measurement as of December 31, 2017

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

352,370

 

 

$

352,370

 

 

$

 

 

$

 

Commercial paper

 

 

133,368

 

 

 

 

 

 

133,368

 

 

 

 

Government and government agency bonds

 

 

294,717

 

 

 

284,745

 

 

 

9,972

 

 

 

 

Corporate bonds

 

 

127,956

 

 

 

127,956

 

 

 

 

 

 

 

Certificates of deposit

 

 

648

 

 

 

648

 

 

 

 

 

 

 

Total

 

$

909,059

 

 

$

765,719

 

 

$

143,340

 

 

$

 

 

The Company’s assets with fair value categorized as Level 1 within the fair value hierarchy include money market funds, government and government agency bonds, corporate bonds and certificates of deposit. Certain of the government and government agency bonds and corporate bonds are publically traded fixed income securities and are presented as cash equivalents on the unaudited condensed consolidated balance sheets as of September 30, 2018.

The Company’s assets with fair value categorized as Level 2 within the fair value hierarchy consist of commercial paper and government and government agency bonds. These assets have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, through income-based approaches utilizing market observable data.

The Company’s assets with fair value categorized as Level 3 within the fair value hierarchy consists of a strategic investment in Series A preferred stock of Lacerta as more fully described in Note 3, Collaboration, License and Manufacturing Agreements. The fair value of the asset is based on a cost approach corroborated by the Black-Scholes option pricing model. The most significant assumptions in the 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 as of the Effective Date of the License Agreement with Lacerta.

The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable, and revolving line of credit approximated fair value because of the immediate or short-term maturity of these financial instruments. The carrying amounts for the term loan approximated fair value based on market activity for other debt instruments with similar characteristics and comparable risk.