Investments in Non-Marketable Securities

9 Months Ended

Sep. 30, 2022

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, net.

In November 2020, we purchased convertible subordinated notes issued by Arzeda Corp. (“Arzeda”), an early-stage computational protein design company, for $1.0 million and the investment was classified as available-for-sale non-marketable interest-bearing debt securities. 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 three and nine months ended September 30, 2021, we recognized nil and $0.3 million, respectively, in interest income from interest earned on our investment in this debt security.

There were no investments in non-marketable debt securities as of September 30, 2022 and December 31, 2021.

Non-Marketable Equity Securities

In March 2022, we entered into a Stock Purchase Agreement with seqWell, Inc. (“seqWell”), a privately held biotechnology company, pursuant to which we purchased 1,000,000 shares of seqWell's Series C preferred stock for $5.0 million.

Our non-marketable equity securities are investments in privately held companies without readily determinable market value. 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 securities 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 investments 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, net in the unaudited condensed consolidated statements of operations.

For the three months ended September 30, 2022, we recognized a $0.2 million unrealized gain in other income, net, and included as adjustment to the carrying value of our investment in MAI, for the remeasurement of the additional 1,587,049 shares of Series B preferred stock received as milestone payment during the three months ended September 30, 2022 based on the latest observed transaction price of MAI's preferred stock. See Note 11 “Related Party Transactions” for additional information on our investment in MAI. For the three months ended September 30, 2021, we recognized a $0.7 million unrealized gain in other income, net, due to an adjustment to the carrying value of our investment in MAI based on an analysis of observed transaction price from MAI's round of financing during the third quarter of 2021. There was no remeasurement event for our investments in MAI and in other non-marketable equity securities that occurred during the remainder of 2022 and 2021. We recognized no realized gains or losses during the three and nine months ended September 30, 2022 and 2021.

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


	September 30, 2022		December 31, 2021
Molecular Assemblies, Inc. (“MAI”)	$	13,921	$	12,713
seqWell	5,000		—
Arzeda	1,289		1,289
Other investments in non-marketable equity securities	300		—
Total non-marketable equity securities	$	20,510	$	14,002