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Fair Value Measurements
9 Months Ended
Sep. 30, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
The fair value of the Company’s financial assets and liabilities reflects the Company’s estimate of amounts that it would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from sources independent from the Company) and to minimize the use of unobservable inputs (the Company’s assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1:
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3:
Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.
The Company’s investment strategy is focused on capital preservation. The Company invests in instruments that meet the credit quality standards outlined in the Company’s investment policy. This policy also limits the amount of credit exposure to any one issue or type of instrument. As of September 30, 2016, the Company’s investments were primarily in money market funds, short-term government-sponsored enterprise securities, corporate debt securities and commercial paper.
As of September 30, 2016, all of the Company’s financial assets that were subject to fair value measurements were valued using observable inputs. The Company’s financial assets valued based on Level 1 inputs consisted of money market funds and short-term government-sponsored enterprise securities. The Company’s financial assets valued based on Level 2 inputs consisted of corporate debt securities and commercial paper, which consisted of investments in highly-rated investment-grade corporations.
The following table sets forth the Company’s financial assets (excluding VIE cash and cash equivalents) and liabilities subject to fair value measurements:
 
Fair Value Measurements as
of September 30, 2016
 
 
 
Fair Value Hierarchy
 
Total
 
Level 1
 
Level 2
 
Level 3
 
(in thousands)
Financial assets carried at fair value:
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
101,844

 
$
101,844

 
$

 
$

Marketable securities:
 
 
 
 
 
 
 
Government-sponsored enterprise securities
130,431

 
130,431

 

 

Corporate debt securities
146,942

 

 
146,942

 

Commercial paper
131,376

 

 
131,376

 

Prepaid and other current assets:
 
 
 
 
 
 
 
Foreign currency forward contracts
7,644

 

 
7,644

 

Other assets:
 
 
 
 
 
 
 
Foreign currency forward contracts
217

 

 
217

 

Total financial assets
$
518,454


$
232,275

 
$
286,179

 
$

Financial liabilities carried at fair value:
 
 
 
 
 
 
 
Other liabilities, current portion:
 
 
 
 
 
 
 
Foreign currency forward contracts
$
(1,459
)
 
$

 
$
(1,459
)
 
$

Other liabilities, excluding current portion:
 
 
 
 
 
 
 
Foreign currency forward contracts
(315
)
 

 
(315
)
 

Total financial liabilities
$
(1,774
)
 
$

 
$
(1,774
)
 
$


 
Fair Value Measurements as
of December 31, 2015
 
 
 
Fair Value Hierarchy
 
Total
 
Level 1
 
Level 2
 
Level 3
 
(in thousands)
Financial instruments carried at fair value (asset position):
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
199,507

 
$
199,507

 
$

 
$

Government-sponsored enterprise securities
85,994

 
85,994

 

 

Commercial paper
34,889

 

 
34,889

 

Corporate debt securities
11,533

 

 
11,533

 

Marketable securities:
 
 
 
 
 
 
 
Government-sponsored enterprise securities
87,162

 
87,162

 

 

Commercial paper
99,123

 

 
99,123

 

Corporate debt securities
141,409

 

 
141,409

 

Prepaid and other current assets:
 
 
 
 
 
 
 
Foreign currency forward contracts
5,161

 

 
5,161

 

Other assets:
 
 
 
 
 
 
 
Foreign currency forward contracts
605

 
$

 
605

 
$

Total financial assets
$
665,383

 
$
372,663

 
$
292,720

 
$

Financial instruments carried at fair value (liability position):
 
 
 
 
 
 
 
Other liabilities, current portion:
 
 
 
 
 
 
 
Foreign currency forward contracts
$
(769
)
 
$

 
$
(769
)
 
$

Other liabilities, excluding current portion:
 
 
 
 
 
 
 
Foreign currency forward contracts
(132
)
 

 
(132
)
 

Total financial liabilities
$
(901
)
 
$

 
$
(901
)
 
$


The Company's VIEs invested in cash equivalents consisting of money market funds of $57.9 million as of September 30, 2016, which are valued based on Level 1 inputs. These cash equivalents are not included in the table above. The Company’s noncontrolling interest related to VIEs includes the fair value of the contingent milestone and royalty payments, which are valued based on Level 3 inputs. Please refer to Note C, “Collaborative Arrangements,” for further information.
As of September 30, 2016, the fair value and carrying value of the Company's Term Loan was $297.8 million. The fair value of the Company's Term Loan was estimated based on Level 3 inputs computed using the effective interest rate of the Term Loan. The effective interest rate considers the timing and amount of estimated future interest payments as well as current market rates. Please refer to Note K, "Long-term Obligations" for further information regarding the Company's Term Loan.