Fair value measurements

3 Months Ended

Mar. 31, 2021

The following table sets forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 (in thousands):


Description	Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
March 31, 2021
Assets:
Cash and cash equivalents	$	439,714	$	410,715	$	28,999	$	—
Marketable securities:
U.S. government agency securities and treasuries	429,279		—		429,279		—
Corporate bonds	142,896		—		142,896		—
Commercial paper	78,955		—		78,955		—
Equity securities	2,707		2,707		—		—
Total	$	1,093,551	$	413,422	$	680,129	$	—
Liabilities:
Contingent consideration	$	1,878	$	—	$	—	$	1,878
Total	$	1,878	$	—	$	—	$	1,878
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	$	1,274,142	$	323,358	$	950,784	$	—
Liabilities:
Contingent consideration	$	1,509	$	—	$	—	$	1,509
Total	$	1,509	$	—	$	—	$	1,509

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 March 31, 2021, cash and cash equivalents comprise funds in cash, money market accounts, and commercial paper. As of December 31, 2020, cash and cash equivalents comprise funds in cash and money market accounts.

Marketable securities

Marketable securities classified as Level 2 within the valuation hierarchy generally consist of 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 next call date for premiums or to maturity for discounts. At March 31, 2021 and December 31, 2020, the balance in the Company’s accumulated other comprehensive loss includes 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 debt securities during the three months ended March 31, 2021 or 2020.

Accrued interest receivable on the Company's available-for-sale debt securities totaled $2.2 million and $3.1 million as of March 31, 2021 and December 31, 2020, respectively. No accrued interest receivable was written off during the three months ended March 31, 2021 or 2020.

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 March 31, 2021 and December 31, 2020 (in thousands):


	Less than 12 months				12 months or greater				Total
Description	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
March 31, 2021
U.S. government agency securities and treasuries	$	48,802	$	(16)	$	—	$	—	$	48,802	$	(16)
Corporate bonds	92,855		(40)		—		—		92,855		(40)
Total	$	141,657	$	(56)	$	—	$	—	$	141,657	$	(56)
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)

The Company determined that there was no material change in the credit risk of the above investments during the three months ended March 31, 2021. As such, an allowance for credit losses was not recognized. As of March 31, 2021, 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 held equity securities with an aggregate fair value of $2.7 million and $5.7 million as of March 31, 2021 and December 31, 2020, respectively, within short-term marketable securities on its condensed consolidated balance sheets. In January 2021, the Company sold a portion of its equity securities for proceeds of $31.3 million. During the three months ended March 31, 2021 and 2020, the Company recorded gains of $28.4 million and losses of $4.5 million, respectively, related to its equity securities, which are included in other income (expense), net on the condensed consolidated statements of operations and comprehensive loss.

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 condensed consolidated statements of operations and comprehensive loss. In the absence of new information, 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 condensed 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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