Investments in Non-Marketable Securities

12 Months Ended

Dec. 31, 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 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. During the year ended December 31, 2021, we recognized $0.3 million in interest income from interest earned on our investment in this debt security.

There were no investments in non-marketable debt securities at December 31, 2021. As of December 31, 2020, the adjusted cost, 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 securities due in 1 year or less	$	1,000	$	1,000

Non-Marketable Equity Securities

Our non-marketable equity securities are investments in privately held companies without readily determinable market value and primarily relate to our investments in MAI and Arzeda Corp. These investments are accounted for under the measurement alternative and are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes for identical or similar security of the same issuer. Non-marketable equity securities are measured at fair value on a non-recurring basis and classified within Level 2 in the fair value hierarchy because we estimate the fair value of these using the observable transaction price paid by third party investors for the same or similar security of the same issuers. 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 in the consolidated statements of operations.

For the year ended December 31, 2021, we recognized a $1.0 million unrealized gain in other income (expense), net, in the consolidated statements of operations, and included as adjustment to the carrying value of our investment in MAI based on an analysis of observed transaction price from MAI's recent round of financing during the third and fourth quarter of 2021. There was no remeasurement event for our investment in MAI and Arzeda Corp that occurred during the remainder of 2021. We recognized no realized gains or losses during the years ended December 31, 2021 and 2020. The carrying value of our investment in MAI was $12.7 million and $1.5 million at December 31, 2021 and December 31, 2020, respectively. The carrying value of our investment in Arzeda Corp. was $1.3 million at December 31, 2021.

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


	December 31, 2021		December 31, 2020
Non-marketable equity securities	$	14,002	$	1,450