Fair Value Measurements

6 Months Ended

Jun. 30, 2023

Various inputs are used in determining the fair value of the Company’s financial assets and liabilities. These inputs are summarized into the following three broad categories:

Level 1 – quoted prices in active markets for identical securities

Level 2 – other significant observable inputs, including quoted prices for similar securities, interest rates, credit risk, etc.

Level 3 – significant unobservable inputs, including the Company’s own assumptions in determining fair value

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Marketable securities, which consist primarily of corporate and U.S. government agency bonds, are classified as available for sale and fair value did not differ significantly from carrying value as of June 30, 2023 and December 31, 2022. The following table presents information about the Company’s assets measured at fair value as of June 30, 2023:


	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents and restricted cash	$	291,016	$	—	$	—	$	291,016
Marketable securities	—		262,710		—		262,710
Equity investments	104,480		—		205		104,685
Total	$	395,496	$	262,710	$	205	$	658,411

The following table presents information about the Company’s assets measured at fair value as of December 31, 2022:


	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents and restricted cash	$	95,717	$	—	$	—	$	95,717
Marketable securities	—		360,613		—		360,613
Equity investments	22,335		—		1,629		23,964
Total	$	118,052	$	360,613	$	1,629	$	480,294

Fair value of the Company’s investment in Nimbus Therapeutics, LLC (“Nimbus”), classified as Level 3 in the fair value hierarchy, was determined under the hypothetical liquidated book value method (“HLBV method”), as further described in Note 10, Equity Investments. During the three months ended March 31, 2023, the Company recorded a gain of $147,300 on account of its equity position in Nimbus following the closing of Takeda's acquisition of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its tyrosine kinase 2 inhibitor, NDI-034858. On February 13, 2023, the Company reported receipt of a $111,300 cash distribution from Nimbus related to the sale. On April 6, 2023, the Company reported receipt of a $35,789 cash distribution from Nimbus related to the sale. The realized gain on Level 3 investment as of June 30, 2023 relates to an additional expected cash receipt of $205 from Nimbus.

Significant unobservable inputs used under the HLBV method include Nimbus’ annual financial statements and the Company’s liquidation preference. The following table sets forth changes in fair value of the Company’s Level 3 investments:


	Amount
As of December 31, 2021	$	1,887
Cash contributions	600
Unrealized loss	(858)
As of December 31, 2022	1,629
Realized gain	35,994
Transfer to Level 1	(1,629)
As of March 31, 2023	35,994
Cash distributions	(35,789)

As of June 30, 2023	$	205

Unrealized gains and losses arising from changes in fair value of the Company’s equity investments are classified within change in fair value in the condensed consolidated statements of operations. Realized gains arising from distributions receivable from the Company's equity investments are classified within gain on equity investments in the condensed consolidated statements of operations. During the three months ended March 31, 2023, the Company recorded a transfer from a Level 3 investment to a Level 1 investment due to the completion of Structure Therapeutics Inc.'s, ("Structure Therapeutics"), initial public offering ("IPO"). The Company's investment in Structure Therapeutics was previously recorded as an equity method investment under ASC Topic 323, Investments - Equity Method and Joint Ventures, using the HLBV method. Following the completion of Structure Therapeutics' IPO, the Company's investment in Structure Therapeutics is recorded under ASC Topic 321, Investments - Equity Securities because there is an observable price of the investment. During the year ended December 31, 2022 there were no transfers between Level 1, Level 2 and Level 3 investments. See Note 10, Equity Investments, for further information.

- 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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