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Fair Value Measurements

6 Months Ended

Jun. 30, 2021

Authoritative guidance on fair value measurements defines fair value, and provides a consistent framework for measuring fair value and for disclosures of each major asset and liability category measured at fair value on either a recurring or a nonrecurring basis. Fair value is intended to reflect an assumed exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly for substantially the full term of the asset or liability.

Level 3: Unobservable inputs in which there is little or no market data and that are significant to the fair value of the assets or liabilities, which require the reporting entity to develop its own valuation techniques that require input assumptions.

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):


			Fair Value Measurements at June 30, 2021
			(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents(1)	$	94,966	$	94,966	$	—	$	—
Commercial paper	222,328		—		222,328		—
U.S. Government-sponsored enterprise	63,174		—		63,174		—
U.S. Treasury securities	104,916		104,916		—		—
Corporate debt securities	53,296		—		53,296		—
Supranational bonds	3,010		—		3,010		—
Total assets	$	541,690	$	199,882	$	341,808	$	—

Liabilities
Common stock warrants	$	2,789	$	—	$	—	$	2,789

Total liabilities	$	2,789	$	—	$	—	$	2,789


			Fair Value Measurements at December 31, 2020
			(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents(1)	$	87,300	$	87,300	$	—	$	—
Commercial paper	108,896		—		108,896		—
U.S. Government-sponsored enterprise	52,350		—		52,350		—
U.S. Treasury securities	143,254		143,254		—		—
Corporate debt securities	85,823		—		85,823		—
Total assets	$	477,623	$	230,554	$	247,069	$	—

Liabilities
Common stock warrants	$	14,261	$	—	$	—	$	14,261
Total liabilities	$	14,261	$	—	$	—	$	14,261

(1)Generally, cash equivalents include money market funds and investments with a maturity of three months or less from the date of purchase.

The Company’s Level 2 financial instruments are valued using market prices on less active markets with observable valuation inputs such as interest rates and yield curves. The Company obtains the fair value of Level 2 financial instruments from quoted market prices, calculated prices or quotes from third-party pricing services. The Company validates these prices through independent valuation testing and review of portfolio valuations provided by the Company’s investment managers.

The Company’s Level 3 liabilities at June 30, 2021 and December 31, 2020 include the remaining Series A warrants issued by the Company in connection with the public offering of common stock in October 2017, and which expire in October 2022. As of June 30, 2021 and 2020, there were Series A warrants outstanding to purchase 29,700 shares and 415,200 shares, respectively, of the Company’s common stock (see Note 8, “Stockholders’ Equity”).

The Company reassesses the fair value of the outstanding Series A warrants at each reporting date utilizing a Black-Scholes pricing model. Variables used in the pricing model include the closing market price of the Company’s common stock at the balance sheet date, and estimates of stock price volatility, dividend yield, remaining warrant term and risk-free interest rate. The Company develops its estimates based on publicly available historical data. A significant increase (decrease) in any of these inputs in isolation, particularly the market price of the Company’s common stock, would have resulted in a significantly higher (lower) fair value measurement. The assumptions used to estimate the fair values of the outstanding Series A warrants at June 30, 2021 and December 31, 2020 are presented below:


	Series A Warrants
	June 30, 2021		December 31, 2020
Risk-free interest rate	0.1	%	0.1	%
Expected dividend yield	0.0	%	0.0	%
Expected volatility	50.3	%	55.3	%
Remaining term (in years)	1.3		1.8

The following table presents a summary of changes in the fair value of the Company’s Level 3 financial liabilities for the six months ended June 30, 2021 and 2020:


	Six Months Ended June 30,
	2021		2020
Balance at beginning of the period	$	14,261	$	23,509
Loss recognized from the change in fair value of common stock warrants	962		16,258
Common stock warrants exercised during the period	(12,434)		(142)
Balance at end of the period	$	2,789	$	39,625

Of the loss recognized from the change in fair value of common stock warrants for the six months ended June 30, 2021 and 2020, $0.1 million and $16.2 million, respectively, was attributable to warrants outstanding as of June 30, 2021 and 2020.

- 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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