Fair Value Measurements

9 Months Ended

Sep. 30, 2015

4.	FAIR VALUE MEASUREMENTS

The following tables and disclosure present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2015 and December 31, 2014 and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

	As of September 30, 2015
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	67,493	$	—	$	—	$	67,493
Total	$	67,493	$	—	$	—	$	67,493

	As of December 31, 2014
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	4,800	$	—	$	—	$	4,800
Total	$	4,800	$	—	$	—	$	4,800
Liabilities
Preferred stock warrant liabilities	$	—	$	—	$	2,460	$	2,460
Total	$	—	$	—	$	2,460	$	2,460

The carrying amounts of the Company’s financial instruments, including cash, restricted cash, deposits, accounts payable, and accrued expenses and other liabilities, approximate fair value due to their short maturities. The Company’s lease obligations, term loan and convertible notes have fair values that approximate their carrying value based on prevailing borrowing rates available to the Company for loans with similar terms. Financial assets and liabilities, which are measured or disclosed at fair value on a recurring basis and are classified within the Level 3 designation, consist of preferred stock warrant liabilities. On May 4, 2015, the preferred stock warrants outstanding were converted to warrants to purchase common stock eliminating the terms that caused the preferred stock warrants to be accounted for as a liability and revalued at each reporting date.

The Company acquired IPR&D in connection with its Merger. IPR&D consists of intellectual property related to Regado’s aptamer platform and is valued based on the estimated net present value of future cash flows expected to be generated from commercialization. The valuation of the aptamer platform technology was valued using the income approach which values the asset by estimating the present value of future economic benefits that the asset is expected to produce. There was no carrying value of IPR&D for the periods presented.

None of the Company’s non-financial assets or liabilities is recorded at fair value on a non-recurring basis for the periods presented. There were no transfers between levels within the fair value hierarchy during the periods presented.

The following table provides a reconciliation of liabilities measured at fair value using Level 3 significant unobservable inputs (in thousands) for the nine months ended September 30, 2015 and the year ended December 31, 2014:

	Nine Months Ended September 30, 2015			Year Ended December 31, 2014
Balance, beginning of period	$	2,460		$	2,773
Issuance of preferred stock warrants		—			868
Reclassification of stock award liability from equity upon modification		—			399
Reclassification of stock award liability to equity upon expiration		—			(292	)
Change in fair value of stock award liability		—			(107	)
Reclassification of preferred stock warrant liability to equity upon conversion to common stock		(521	)		—
Change in fair value of preferred stock warrant liabilities ⁽¹⁾		(1,939	)		(1,181	)
Balance, end of period	$	—		$	2,460

(1)	Changes in fair value of the preferred stock warrant liabilities are recorded in other income (expense), net on the accompanying Statements of Operations and Comprehensive Loss.

As of September 30, 2015, there were no Level 3 liabilities measured at fair value outstanding. As of December 31, 2014, the significant unobservable inputs used to determine the fair value of preferred stock warrant liabilities using an option-pricing model and the weighted average assumptions used in determining the fair value of the outstanding preferred stock warrant liabilities were as follows: risk-free interest rate of 0.13%, no expected dividend yield, expected price volatility of 107%, and expected term (in years) of 0.8.

- 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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