FAIR VALUE MEASUREMENTS

9 Months Ended

Mar. 31, 2019

We use the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value our financial instruments:


•	Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments.


•	Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace.


•	Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires us to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed or initial amounts recorded may not be indicative of the amount that we or holders of the instruments could realize in a current market exchange.

The following tables show the fair value of our financial instruments classified into the fair value hierarchy and measured on a recurring basis on the unaudited condensed consolidated balance sheets as of March 31, 2019 and June 30, 2018 (in thousands):



	Fair Value Measurement as of March 31, 2019
	Level 1		Level 2		Level 3		Total
Assets
Current Assets
U.S. treasury securities	$	—	$	123,146	$	—	$	123,146
Commercial paper	—		110,478		—		110,478
Corporate bonds	—		61,773		—		61,773
Asset-backed securities	—		30,759		—		30,759
Mutual fund securities	296		—		—		296
Non-current Assets
Corporate bonds	—		32,465		—		32,465
Asset-back securities	—		22,753		—		22,753
Mutual fund securities	790		—		—		790
Total assets	$	1,086	$	381,374	$	—	$	382,460



	Fair Value Measurement as of June 30, 2018
	Level 1		Level 2		Level 3		Total
Assets
Current Assets
U.S. treasury securities	$	297,504	$	—	$	—	$	297,504
Mutual fund securities	235				—		235
Non-current Assets
Mutual fund securities	919		—		—		919
Total assets	$	298,658	$	—	$	—	$	298,658

Liabilities
Notes payable, at fair value	$	—	$	—	$	15,899	$	15,899

Our debt-based marketable securities are classified as level 2 within the valuation hierarchy. We estimate the fair values of these marketable securities by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. During the three months ended December 31, 2018, we diversified our investment portfolio and are classifying our investments in debt securities, including U.S. treasury securities, as Level 2 securities.

The table below provides a rollforward of the changes in fair value of Level 3 financial instruments for the three and nine months ended March 31, 2019, comprised of the Redmile Notes (in thousands):



	Three Months Ended March 31, 2019				Nine Months Ended March 31, 2019
	2019		2018		2019			2018
Beginning balance	$	—	$	12,700	$	15,899		$	12,600
Change in fair value	—		100		65			200
Settlement upon maturity	—				(15,964		)	—
Ending balance	$	—	$	12,800	$	—		$	12,800

- 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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