Fair Value Measurements

12 Months Ended

Dec. 31, 2019

The carrying amount of cash and cash equivalents, restricted cash, receivables, accounts payable, accrued compensation and benefits, other accrued liabilities, and related party payables approximate fair value due to the short maturity of these instruments.

Assets

The following table presents the placement in the fair value hierarchy of financial assets that are measured at fair value on a recurring basis, including the items for which the fair value option has been elected, as of December 31, 2019:



	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		December 31, 2019
Assets
United States government debt securities	$	—	$	8,996	$	—	$	8,996
Other	—		264		—		264
Total	$	—	$	9,260	$	—	$	9,260



	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		December 31, 2018
Assets
United States government debt securities	$	—	$	119,340	$	—	$	119,340
Equity securities	950		74		—		1,024
Other	—		394		191		585
Total	$	950	$	119,808	$	191	$	120,949

The method used to estimate the fair value of the Level 1 assets in the tables above is based on observable market data as these equity securities are publicly-traded. The method used to estimate the fair value of the Level 2 short-term debt investments in the tables above is based on professional pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets. The methods used to estimate the fair value of the Level 2 equity securities in the tables above are based on the quoted market price of the publicly-traded security, adjusted for adjusted for a discount for lack of marketability. The Company owned preferred stock in certain of its collaborators, and these investments were classified as Level 3 within the fair value hierarchy. See Note 18 for additional discussion of these investments in preferred stock.

The following table summarizes the changes in the Level 3 investments during the years ended December 31, 2019 and 2018.



	2019			2018
Beginning balance	$	191		$	161,225
Retained interest in deconsolidated subsidiary	14,239			—
Dividend income from investments in preferred stock	48			14,841
Net unrealized appreciation (depreciation) in the fair value of the investments in equity securities and preferred stock	7,446			(17,499		)
Return of preferred stock	—			(158,376		)
Proceeds from sale of equity securities	(21,587		)	—
Proceeds to be received from preferred stock	(337		)	—
Ending balance	$	—		$	191

There were no transfers of assets between levels of the fair value hierarchy during the year ended December 31, 2019.

Liabilities

The carrying values of the Company's long-term debt, excluding the Convertible Notes, approximates fair value due to the length of time to maturity and/or the existence of interest rates that approximate prevailing market rates.

The calculated fair value of the Convertible Notes (Note 12) was approximately $126,000 and $141,000 as of December 31, 2019 and 2018, respectively, and is based on the recent third-party trades of the instrument as of the balance sheet dates. The fair value of the Convertible Notes is classified as Level 2 within the fair value hierarchy as there is not an active market for the Convertible Notes, however, third-party trades of the instrument are considered observable inputs. The Convertible Notes are reflected on the accompanying consolidated balance sheets at amortized cost, which was $157,560 and $148,101 as of December 31, 2019 and 2018, respectively.

The Company's contingent consideration liabilities (Note 4) are measured on a recurring basis and were $585 as of December 31, 2019 and 2018. These fair value measurements were based on significant inputs not observable in the market and thus represented a Level 3 measurement. A significant change in unobservable inputs could result in a significant impact on the fair value of the Company's contingent consideration liabilities. The contingent consideration liabilities are remeasured to fair

value at each reporting date until the contingencies are resolved, and those changes in fair value are recognized in earnings. There were no changes in the fair value of the Level 3 liabilities during the years ended December 31, 2019 and 2018.

- 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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