Financial Instruments and Fair Value Measurements

9 Months Ended

Sep. 30, 2019

Financial Instruments and Fair Value Measurements

Financial Instruments and Fair Value Measurements

3. Financial Instruments and Fair Value Measurements

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (at exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The three levels of inputs that may be used to measure fair value include:

Level 1:	Quoted prices in active markets for identical assets or liabilities. Our Level 1 assets consist of money market investments and U.S. treasury securities. We do not have Level 1 liabilities.
Level 2:	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Our Level 2 assets consist of U.S. treasury securities. We do not have Level 2 liabilities.
Level 3:	Unobservable inputs that are supported by little or no market activity. We do not have Level 3 assets or liabilities that are measured at fair value on a recurring basis.

The following table identifies our assets and liabilities that were measured at fair value on a recurring basis (in thousands):

	Balance		Level 1		Level 2		Level 3
September 30, 2019
Assets:
Money market	$	98,103	$	98,103	$	—	$	—
U.S. treasury securities		152,622		—		152,622		—
Total assets at fair value	$	250,725	$	98,103	$	152,622	$	—
December 31, 2018
Assets:
Money market	$	81,968	$	81,968	$	—	$	—
U.S. treasury securities		308,251		9,981		298,270		—
Total assets at fair value	$	390,219	$	91,949	$	298,270	$	—

There we no liabilities that were measured at fair value on a recurring basis as of September 30, 2019. There were no transfers between the Level 1 and Level 2 categories or into or out of the Level 3 category during the three and nine months ended September 30, 2019.

Financial instruments not recorded at fair value include our convertible senior notes. At September 30, 2019, the carrying amount of the 2021 Notes was $96.3 million, which represents the aggregate principal amount net of remaining debt issuance costs, and the fair value was $84.3 million. At September 30, 2019, the carrying amount of the 2024 Notes was $255.1 million, which represents the aggregate principal amount net of remaining debt issuance costs, and the fair value was $187.8 million. At September 30, 2019, the carrying amount of the 2025 Notes was $292.7 million, which represents the aggregate principal amount net of remaining debt issuance costs, and the fair value was $126.0 million. The fair value was determined using Level 2 inputs based on the indicative pricing published by certain investment banks or trading levels of these notes, which are not listed on any securities exchange or quoted on an inter-dealer automated quotation system. See Note 10, Long-term Debt for discussion of the convertible senior notes.