Fair Value Measurements

3 Months Ended

Mar. 31, 2017

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 March 31, 2017, the Company’s investments were primarily in money market funds, corporate equity securities, corporate debt securities and commercial paper.

As of March 31, 2017, 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, corporate debt securities, commercial paper and corporate equity 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 March 31, 2017
				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	$	313,629		$	313,629	$	—		$	—
Corporate debt securities	11,027			11,027		—			—
Commercial paper	6,834			6,834		—			—
Marketable securities:
Corporate equity securities	69,372			69,372		—			—
Corporate debt securities	203,181			—		203,181			—
Commercial paper	132,550			—		132,550			—
Prepaid and other current assets:
Foreign currency forward contracts	8,318			—		8,318			—
Other assets:
Foreign currency forward contracts	249			—		249			—
Total financial assets	$	745,160		$	400,862	$	344,298		$	—
Financial instruments carried at fair value (liability position):
Other liabilities, current portion:
Foreign currency forward contracts	$	(613	)	$	—	$	(613	)	$	—
Other liabilities, excluding current portion:
Foreign currency forward contracts	(86		)	—		(86		)	—
Total financial liabilities	$	(699	)	$	—	$	(699	)	$	—



	Fair Value Measurements as of December 31, 2016
				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	$	280,560		$	280,560	$	—		$	—
Marketable securities:
Government-sponsored enterprise securities	15,508			15,508		—			—
Corporate equity securities	64,560			64,560		—			—
Commercial paper	59,404			—		59,404			—
Corporate debt securities	111,140			—		111,140			—
Prepaid and other current assets:
Foreign currency forward contracts	14,407			—		14,407			—
Other assets:
Foreign currency forward contracts	1,186			$	—	1,186			$	—
Total financial assets	$	546,765		$	360,628	$	186,137		$	—
Financial instruments carried at fair value (liability position):
Other liabilities, current portion:
Foreign currency forward contracts	$	(144	)	$	—	$	(144	)	$	—
Total financial liabilities	$	(144	)	$	—	$	(144	)	$	—

The Company’s VIEs invested in cash equivalents consisting of money market funds of $44.1 million as of March 31, 2017, 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 payments, which consist of milestone, royalty and option payments, which are valued based on Level 3 inputs. Please refer to Note C, “Collaborative Arrangements,” for further information.

- 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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