Investments in Non-Marketable Securities

9 Months Ended

Sep. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Investments in Non-Marketable Securities

Non-Marketable Debt Securities

We classify non-marketable debt securities, which are accounted for as available-for-sale, within Level 3 in the fair value hierarchy because we estimate the fair value based on a qualitative analysis using the most recent observable transaction price and other significant unobservable inputs including volatility, rights, and obligations of the securities we hold.

We determine gains or losses on the sale or extinguishment of non-marketable debt securities using a specific identification method. Unrealized gains and losses from bifurcated embedded derivatives, which represent share-settled redemption features, are recorded as other expense, net, in the unaudited condensed consolidated statements of operations. Unrealized gains and losses on non-marketable debt securities are recorded as a component of other comprehensive loss until realized. Realized gains or losses are recorded as a component of other income (expense), net.

In November 2020, we purchased convertible subordinated notes issued by Arzeda Corp., an early-stage computational protein design company, for $1.0 million. The investment was classified as available-for-sale non-marketable interest-bearing debt securities with a carrying value of $1.0 million as of December 31, 2020. In July 2021, we converted the non-marketable debt security with a carrying value of $1.3 million into 207,070 shares of Series B-2 preferred stock of Arzeda Corp. In the three and nine months ended September 30, 2021, we recognized nil and $0.3 million, respectively, in interest income from amortization of debt discount and interest earned on our investment in this debt security, and nil and $10.5 thousand in other expense, respectively, in other income (expense), net, on the change in the fair value of an embedded bifurcated derivative. We recognized no unrealized or realized gains or losses during the three and nine months ended September 30, 2021. We recognized no interest income, other expenses, and unrealized or realized gains or losses during the three and nine months ended September 30, 2020.

There were no investments in non-marketable debt securities at September 30, 2021. As of December 31, 2020, the adjusted cost and carrying value and fair value of the non-marketable debt security is the following (in thousands):


	December 31, 2020
	Adjusted Cost and Carrying Value		Fair Value
Non-marketable debt security due in 1 year or less	$	1,000	$	1,000

Non-Marketable Equity Securities

Non-marketable equity securities are investments in privately held companies without readily determinable market value. We measure investments in non-marketable equity securities without a readily determinable fair value using a measurement alternative that measures these securities at the cost method minus impairment, if any, plus or minus changes resulting from observable price changes on a non-recurring basis. We adjust the carrying value of non-marketable equity securities which have been remeasured during the period and recognize resulting gains or losses as a component of other income (expense), net.

We measured our equity investments in MAI and Arzeda Corp. based on the measurement alternative and adjusted the carrying values for observable price changes in orderly transactions for an identical or similar equity securities of the same issuer. We recognized a $0.7 million gain in other income (expense), net, on the change in the carrying value of our investment in MAI as a result of a recent round of financing. We recognized no unrealized or realized gain or losses during the three and nine months ended September 30, 2020. The carrying value of our investment in MAI was $11.5 million and $1.5 million at September 30, 2021 and December 31, 2020, respectively. The carrying value of our investment in Arzeda Corp. was $1.3 million at September 30, 2021.

The following table presents balances of the carrying value of non-marketable equity securities (in thousands):


	September 30, 2021		December 31, 2020
Non-marketable equity securities	$	12,763	$	1,450