Marketable Debt and Equity Securities

9 Months Ended

Sep. 30, 2022

Marketable Debt and Equity Securities

Marketable Debt and Equity Securities

5. Marketable Debt and Equity Securities

The Company’s marketable debt securities held as of September 30, 2022 and December 31, 2021 are summarized below:

			Gross		Gross
	Amortized		Unrealized		Unrealized
September 30, 2022	Cost		Gains		Losses		Fair Value
(in thousands)
Money Market Funds	$	24,506	$	—	$	—	$	24,506
Corporate Securities		188,360		—		(1,763)		186,597
Government Securities		378,623		—		(8,102)		370,521
	$	591,489	$	—	$	(9,865)	$	581,624
Reported as
Cash and cash equivalents							$	24,506
Marketable securities								557,118
Total investments							$	581,624
			Gross		Gross
	Amortized		Unrealized		Unrealized
December 31, 2021	Cost		Gains		Losses		Fair Value
(in thousands)
Money Market Funds	$	123,892	$	—	$	—	$	123,892
Corporate Securities		144,584		—		(166)		144,418
Government Securities		311,148		1		(1,335)		309,814
	$	579,624	$	1	$	(1,501)	$	578,124
Reported as
Cash and cash equivalents							$	123,892
Marketable securities								454,232
Total investments							$	578,124

The maturities of the Company’s marketable debt securities as of September 30, 2022 are as follows:

	Amortized		Estimated
September 30, 2022	Cost		Fair Value
(in thousands)
Mature in one year or less	$	523,629	$	515,398
Mature within two years		43,354		41,720
	$	566,983	$	557,118

The unrealized losses on available-for-sale investments and their related fair values as of September 30, 2022 and December 31, 2021 are as follows:

	Less than 12 months				12 months or greater
			Unrealized				Unrealized
September 30, 2022	Fair value		losses		Fair value		losses
(in thousands)
Corporate Securities	$	143,625	$	(1,649)	$	2,880	$	(114)
Government Securities		331,407		(6,582)		38,840		(1,520)
	$	475,032	$	(8,231)	$	41,720	$	(1,634)
	Less than 12 months				12 months or greater
			Unrealized				Unrealized
December 31, 2021	Fair value		losses		Fair value		losses
(in thousands)
Corporate Securities	$	50,337	$	(51)	$	45,872	$	(115)
Government Securities		39,909		(54)		254,593		(1,281)
	$	90,246	$	(105)	$	300,465	$	(1,396)

The unrealized losses from the available-for-sale securities are primarily due to changes in the interest rate environment and not changes in the credit quality of the underlying securities in the portfolio.

The Company’s equity securities include securities with a readily determinable fair value. These investments are carried at fair value with changes in fair value recognized each period and reported within other income (expense). For the three and nine months ended September 30, 2022, a gain of $5.3 million and a loss of $4.7 million, respectively, were recorded under other income (expense) related to these securities. Equity securities with a readily determinable fair value, which are categorized as Level 1 in the fair value hierarchy under ASC 820, and their fair values (in thousands) as of September 30, 2022 and December 31, 2021 are as follows:

	Fair Value		Fair Value
	September 30, 2022		December 31, 2021
Astria Common Stock	$	5,785	$	3,449
INmune Common Stock		11,690		19,233
Viridian Common Stock		14,709		14,178
	$	32,184	$	36,860

The Company also has investments in equity securities without a readily determinable fair value. The Company elects the measurement alternative to record these investments at their initial cost and evaluate such investments at each reporting period for evidence of impairment, or observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Equity securities without a readily determinable fair value and their carrying values (in thousands) as of September 30, 2022 and December 31, 2021 are as follows:

	Carrying Value		Carrying Value
	September 30, 2022		December 31, 2021
Astria Preferred Stock	$	174	$	312
Zenas Preferred Stock		30,950		30,950
	$	31,124	$	31,262

In 2018, the Company received equity shares in Quellis Biosciences, Inc. (Quellis) in connection with a licensing transaction. In 2021, Quellis merged into Astria Therapeutics, Inc. (Astria) (formerly Catabasis Pharmaceuticals, Inc.), and the Company received common and preferred stock in Astria in exchange for its Quellis equity. The shares of Astria common stock have a readily determinable fair value. The adjustment in the fair value of the Astria common stock has been recorded as a gain in equity securities for the three and nine months ended September 30, 2022.

The Company records its investment in the shares of Astria preferred stock as an equity interest without a readily determinable fair value. The Company elected to record the shares of preferred stock at their initial cost and to review the carrying value for impairment or other changes in carrying value at each reporting period. During the nine months ended September 30, 2022, the Company recorded an impairment charge of $0.1 million related to its investment in Astria’s preferred stock.

The Company currently holds 1,885,533 shares of common stock of INmune Bio, Inc. (INmune). The 1,885,533 shares of INmune common stock are classified as equity securities with a readily determinable fair value, and the adjustment in the fair value of the shares of INmune common stock has been recorded as a loss in equity securities for the three and nine months ended September 30, 2022.

The Company currently holds 717,144 shares of common stock of Viridian Therapeutics, Inc. (Viridian). The shares of Viridian common stock are classified as equity securities with a readily determinable fair value, and the adjustment in the fair value of the shares of Viridian common stock was recorded as a gain in equity securities for the three and nine months ended September 30, 2022.

The Company currently holds an equity interest in Zenas BioPharma Limited (Zenas), a private biotechnology company. The Company’s equity interests include preferred stock in Zenas and a warrant to acquire additional equity in Zenas in a subsequent financing. The Company also holds a convertible promissory note from Zenas. The Company elected the measurement alternative to carry the Zenas equity and the warrant at cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. During the three and nine months ended September 30, 2022, there has not been any impairment or observable price changes related to this investment.

Unrealized (loss) gain recognized on equity securities during each of the three- and nine-month periods ended September 30, 2022 and 2021, consist of the following:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net gain (loss) recognized on equity securities	$	5,299	$	1,506	$	(4,676)	$	57,507
Less: net gain recognized on sale of equity securities		—		—		—		(18,301)
Unrealized gain (loss) recognized on equity securities	$	5,299	$	1,506	$	(4,676)	$	39,206