Fair Value Measurements

6 Months Ended

Jun. 30, 2015

Fair Value Measurements

Fair Value Measurements

6. Fair Value Measurements

The Company determines the fair values of its financial instruments based upon the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Below are the three levels of inputs that may be used to measure fair value:

· Level 1—Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

· Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

· Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table summarizes the financial instruments measured at fair value on a recurring basis in the accompanying condensed balance sheets as of June 30, 2015 and December 31, 2014 (in thousands):

	As of June 30, 2015
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Cash	$	4,012	$	—	$	—	$	4,012
Money market funds (1)	40,358		—		—		40,358
Total	$	44,370	$	—	$	—	$	44,370
Marketable securities:
Domestic corporate debt securities (2)	$	—	$	123,145	$	—	$	123,145
Domestic corporate commercial paper (2)	—		56,498		—		56,498
Total	$	—	$	179,643	$	—	$	179,643

	As of December 31, 2014
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Cash	$	1,519	$	—	$	—	$	1,519
Money market funds (1)	23,994		—		—		23,994
Domestic corporate debt securities (2)	—		3,005		—		3,005
Total	$	25,513	$	3,005	$	—	$	28,518
Marketable securities:
Domestic corporate debt securities (2)	$	—	$	69,509	$	—	$	69,509
Domestic corporate commercial paper (2)	—		7,249		—		7,249
Total	$	—	$	76,758	$	—	$	76,758

(1) Fair value is based upon quoted market prices.

(2) Fair value is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets.  Inputs are obtained from various sources, including market participants, dealers and brokers.

The fair value of the Company’s note payable is determined using current applicable rates for similar instruments as of the balance sheet date. The carrying value of the Company’s note payable approximated its fair value as of June 30, 2015, as the Company’s interest rate is near current market rates. The fair value of the Company’s notes payable was determined using Level 3 inputs.