Fair value measurements

12 Months Ended

Dec. 31, 2020

The following table sets forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2020 and 2019 (in thousands):


	Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
December 31, 2020
Assets:
Cash and cash equivalents	$	317,705	$	317,705	$	—	$	—
Marketable securities:
U.S. government agency securities and treasuries	675,271		—		675,271		—
Corporate bonds	197,563		—		197,563		—
Commercial paper	77,950		—		77,950		—
Equity securities	5,653		5,653		—		—
Total assets	$	1,274,142	$	323,358	$	950,784	$	—
Liabilities:
Contingent consideration	$	1,509	$	—	$	—	$	1,509
Total liabilities	$	1,509	$	—	$	—	$	1,509
December 31, 2019
Assets:
Cash and cash equivalents	$	327,214	$	311,245	$	15,969	$	—
Marketable securities:
U.S. government agency securities and treasuries	635,936		—		635,936		—
Certificates of deposit	960		—		960		—
Corporate bonds	186,608		—		186,608		—
Commercial paper	74,378		—		74,378
Equity securities	12,870		12,870		—		—
Total assets	$	1,237,966	$	324,115	$	913,851	$	—
Liabilities:
Contingent consideration	$	7,977	$	—	$	—	$	7,977
Total liabilities	$	7,977	$	—	$	—	$	7,977

Cash and cash equivalents

The Company considers all highly liquid securities with original final maturities of 90 days or less from the date of purchase to be cash equivalents. As of December 31, 2020, cash and cash equivalents comprise funds in cash and money market accounts. As of December 31, 2019, cash and cash equivalents comprise funds in cash, money market accounts, and commercial paper.

Marketable securities

Marketable securities classified as Level 2 within the valuation hierarchy generally consist of certificates of deposit, U.S. government agency securities and treasuries, corporate bonds, and commercial paper. The Company estimates 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. These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. The Company validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.

The amortized cost of available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to the earliest call date for premiums or to maturity for discounts. At December 31, 2020 and 2019, the balance in the Company’s accumulated other comprehensive loss was composed primarily of activity related to the Company’s available-for-sale debt securities. There were no material realized gains or losses recognized on the sale or maturity of available-for-sale securities during the year ended December 31, 2020 or 2019.

Accrued interest receivable on the Company's available-for-sale debt securities totaled $3.1 million and $3.6 million as of December 31, 2020 and 2019, respectively. No accrued interest receivable was written off during the twelve months ended December 31, 2020 or 2019.

The following table summarizes available-for-sale debt securities in a continuous unrealized loss position for less than and greater than twelve months, and for which an allowance for credit losses has not been recorded at December 31, 2020 and 2019 (in thousands):


	Less than 12 months				12 months or greater				Total
Description	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
December 31, 2020
U.S. government agency securities and treasuries	$	211,384	$	(74)	$	—	$	—	$	211,384	$	(74)
Corporate bonds	76,598		(40)		1,205		—		77,803		(40)
Total	$	287,982	$	(114)	$	1,205	$	—	$	289,187	$	(114)
December 31, 2019
U.S. government agency securities and treasuries	$	13,234	$	(3)	$	79,618	$	(45)	$	92,852	$	(48)
Corporate bonds	53,983		(43)		—		—		53,983		(43)
Total	$	67,217	$	(46)	$	79,618	$	(45)	$	146,835	$	(91)

The Company determined that there was no material change in the credit risk of the above investments during the twelve months ended December 31, 2020. As such, an allowance for credit losses was not recognized. As of December 31, 2020, the Company does not intend to sell such securities and it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost bases.

The Company holds equity securities with an aggregate fair value of $5.7 million and $12.9 million at December 31, 2020 and 2019, respectively within current marketable securities on its consolidated balance sheet. The Company recorded unrealized losses of $7.2 million and $9.3 million and an unrealized gain of $2.2 million during the years ended December 31, 2020, 2019, and 2018 respectively, related to its equity securities, which are included in other (expense) income, net on the consolidated statements of operations and comprehensive loss. In January 2021, the Company sold a portion of its equity securities for proceeds of $31.3 million. The fair value of the remaining equity securities held as of the trade date is $7.3 million.

Contingent consideration

In connection with its prior acquisition of Precision Genome Engineering, Inc. (“Pregenen”), the Company may be required to pay future consideration that is contingent upon the achievement of specified development, regulatory approvals or sales-based milestone events. Contingent consideration is measured at fair value and is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions the Company believes would be made by a market participant. The Company assesses these estimates on an on-going basis as additional data impacting the assumptions is obtained. Future changes in the fair value of contingent consideration related to updated assumptions and estimates are recognized within the consolidated statements of operations and comprehensive loss. In the absence of new information related to the probability of milestone achievement, changes in fair value will reflect changing discount rates and the passage of time. Contingent consideration is included in accrued expenses and other current liabilities and other non-current liabilities on the consolidated balance sheets.

Please refer to Note 9, Commitments and contingencies, for further information.

- 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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