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 June 30, 2018, the Company’s investments were primarily in money market funds, U.S. Treasury securities, government-sponsored enterprise securities, corporate equity securities, corporate debt securities and commercial paper. Additionally, the Company utilizes foreign currency forward contracts intended to mitigate the effect of changes in foreign exchange rates on its condensed consolidated statement of operations.

As of June 30, 2018, all of the Company’s financial assets and liabilities 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, U.S. Treasury securities, government-sponsored enterprise securities and corporate equity securities. The Company’s financial assets and liabilities valued based on Level 2 inputs consisted of corporate debt securities and commercial paper, which consisted of investments in highly-rated investment-grade corporations, and foreign currency forward contracts with reputable and creditworthy counterparties. During the three and six months ended June 30, 2018 and 2017, the Company did not record any other-than-temporary impairment charges related to its financial assets.

The following table sets forth the Company’s financial assets and liabilities (excluding VIE cash and cash equivalents) subject to fair value measurements:



	Fair Value Measurements as of June 30, 2018
				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	$	971,044		$	971,044	$	—		$	—
Government-sponsored enterprise securities	10,982			10,982		—			—
Commercial paper	21,263			—		21,263			—
Marketable securities:
Corporate equity securities	242,775			242,775		—			—
U.S. Treasury securities	11,020			11,020		—			—
Government-sponsored enterprise securities	2,491			2,491		—			—
Corporate debt securities	232,704			—		232,704			—
Commercial paper	133,406			—		133,406			—
Prepaid and other current assets:
Foreign currency forward contracts	10,812			—		10,812			—
Other assets:
Foreign currency forward contracts	1,451			—		1,451			—
Total financial assets	$	1,637,948		$	1,238,312	$	399,636		$	—
Financial instruments carried at fair value (liability position):
Other liabilities, current portion:
Foreign currency forward contracts	$	(1,948	)	$	—	$	(1,948	)	$	—
Other liabilities, excluding current portion:
Foreign currency forward contracts	(299		)	—		(299		)	—
Total financial liabilities	$	(2,247	)	$	—	$	(2,247	)	$	—



	Fair Value Measurements as of December 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	$	614,951		$	614,951	$	—		$	—
Government-sponsored enterprise securities	12,678			12,678		—			—
Commercial paper	57,357			—		57,357			—
Marketable securities:
Corporate equity securities	74,821			74,821		—			—
Government-sponsored enterprise securities	2,303			2,303		—			—
Corporate debt securities	265,867			—		265,867			—
Commercial paper	80,263			—		80,263			—
Prepaid and other current assets:
Foreign currency forward contracts	13			—		13			—
Total financial assets	$	1,108,253		$	704,753	$	403,500		$	—
Financial instruments carried at fair value (liability position):
Other liabilities, current portion:
Foreign currency forward contracts	$	(13,642	)	$	—	$	(13,642	)	$	—
Other liabilities, excluding current portion:
Foreign currency forward contracts	(866		)	—		(866		)	—
Total financial liabilities	$	(14,508	)	$	—	$	(14,508	)	$	—

Please refer to Note F, “Marketable Securities and Equity Investments,” for the carrying amount and related unrealized gains (losses) by type of the Company’s financial assets and liabilities.

The Company’s VIE invested in cash equivalents consisting of U.S. Treasury securities of $5.0 million as of June 30, 2018, 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 the Company’s VIE includes the fair value of the contingent payments, which could consist of milestone, royalty and option payments, which are valued based on Level 3 inputs. Please refer to Note C, “Collaborative Arrangements and Acquisitions,” for further information.