4. Fair value measurements

The following table sets forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016 (in thousands):

Description	Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
September 30, 2017
Assets:
Cash and cash equivalents	$	237,962	$	227,245	$	10,717	$	—
Marketable securities:
U.S. government agency securities and treasuries		886,186		—		886,186		—
Certificates of deposit		18,482		—		18,482		—
Total assets	$	1,142,630	$	227,245	$	915,385	$	—
Liabilities:
Contingent consideration	$	2,961	$	—	$	—	$	2,961
Total liabilities	$	2,961	$	—	$	—	$	2,961
December 31, 2016
Assets:
Cash and cash equivalents	$	278,887	$	278,887	$	—	$	—
Marketable securities:
U.S. government agency securities and treasuries		599,460		—		599,460		—
Certificates of deposit		6,483		—		6,483		—
Total assets	$	884,830	$	278,887	$	605,943	$	—
Liabilities:
Contingent consideration	$	7,756	$	—	$	—	$	7,756
Total liabilities	$	7,756	$	—	$	—	$	7,756

Cash and cash equivalents

The Company considers all highly liquid securities with original final maturities of three months or less from the date of purchase to be cash equivalents. As of September 30, 2017 and December 31, 2016, cash and cash equivalents is composed of funds in cash, money market accounts, U.S. Treasury securities, certificates of deposit and federally insured deposits.

Marketable securities

The amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts to maturity. At September 30, 2017 and December 31, 2016, the balance in the Company’s accumulated other comprehensive loss was composed primarily of activity related to the Company’s available-for-sale marketable securities. There were no realized gains on the sale of available-for-sale securities during the nine months ended September 30, 2017, and as a result, the Company did not reclassify any amounts out of accumulated other comprehensive loss for the same period.

The aggregate fair value of securities held by the Company in an unrealized loss position for less than twelve months as of September 30, 2017 and December 31, 2016 was $775.2 million and $376.1 million, respectively. As of September 30, 2017 and December 31, 2016, there were $79.1 million and $95.5 million in securities held by the Company in an unrealized loss position for more than twelve months. The Company has the intent and ability to hold such securities until recovery. The Company determined that there was no material change in the credit risk of the above investments. As a result, the Company determined it did not hold any investments with any other-than-temporary impairment as of September 30, 2017 and December 31, 2016.

Contingent consideration

On June 30, 2014, the Company acquired Pregenen. In connection with the acquisition, the Company recorded contingent consideration pertaining to the amounts potentially payable to Pregenen’s former equityholders pursuant to the Stock Purchase Agreement (the “Stock Purchase Agreement”) by and among the Company, Pregenen and Pregenen’s former equityholders. 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.

Contingent consideration may change significantly as development progresses and additional data are obtained, impacting the Company’s assumptions regarding probabilities of successful achievement of related milestones used to estimate the fair value of the liability and the timing in which they are expected to be achieved. In evaluating the fair value information, considerable judgment is required to interpret the market and internal data used to develop the estimates. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use of different market and internal assumptions and/or different valuation techniques could result in materially different fair value estimates.

The significant unobservable inputs used in the measurement of fair value of the Company’s contingent consideration are probabilities of successful achievement of clinical and commercial milestones, the period in which these milestones are expected to be achieved ranging from 2021 to 2028 and discount rates ranging from 14.6% to 15.8%. Significant increases or decreases in any of the probabilities of success would result in a significantly higher or lower fair value measurement, respectively. Significant increases or decreases in the other inputs would result in a significantly lower or higher fair value measurement, respectively.

The table below provides a roll-forward of fair value of the Company’s contingent consideration obligations, which include Level 3 inputs (in thousands):

	For the Nine Months Ended
	September 30, 2017
Fair value, beginning of period	$	7,756
Additions		—
Changes in fair value		205
Payments		(5,000	)
Fair value, end of period	$	2,961

The Company may be required to make up to $120.0 million in remaining future contingent cash payments to the former equityholders of Pregenen upon the achievement of certain milestones related to the Pregenen technology, of which $20.1 million relates to clinical milestones and $99.9 million relates to commercial milestones. The clinical and commercial milestone achievement end dates are between 2021 and 2028. During the nine months ended September 30, 2017, a $5.0 million preclinical milestone was achieved and paid to the former equityholders of Pregenen. The remaining $3.0 million contingent consideration obligation is reflected as a non-current liability in the condensed consolidated balance sheet as of September 30, 2017.