Fair Value of Financial Assets and Liabilities

6 Months Ended

Jun. 30, 2021

Fair Value of Financial Assets and Liabilities

Fair Value of Financial Assets and Liabilities

3. Fair Value of Financial Assets and Liabilities

The following tables present information about the fair value measurements of the Company’s financial assets and liabilities which are measured at fair value on a recurring and non-recurring basis, and indicate the level of the fair value hierarchy utilized to determine such fair values:

	June 30, 2021
(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	103,855	$	—	$	—	$	103,855
Marketable securities		—		152,730		—		152,730
Total assets	$	103,855	$	152,730	$	—	$	256,585
Liabilities:
Contingent consideration	$	—	$	—	$	25,300	$	25,300
Total liabilities	$	—	$	—	$	25,300	$	25,300

	December 31, 2020
(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	14,955	$	1,500	$	—	$	16,455
Marketable securities		—		32,068		—		32,068
Total assets	$	14,955	$	33,568	$	—	$	48,523
Liabilities:
Contingent consideration	$	—	$	—	$	4,061	$	4,061
Total liabilities	$	—	$	—	$	4,061	$	4,061

As of June 30, 2021 and December 31, 2020, the Company’s cash equivalents consisted of a money market fund, which was valued based upon Level 1 inputs.  The Company’s cash equivalents as of December 31, 2020 also included commercial paper, which was valued based upon Level 2 inputs.  The Company’s marketable securities as of June 30, 2021 and December 31, 2020 consisted of commercial paper and asset-backed and U.S. government agency debt securities, which were valued based upon Level 2 inputs.  The Company’s marketable securities as of June 30, 2021 also included corporate debt securities, which were valued based upon Level 2 inputs.

In determining the fair value of its Level 2 investments, the Company relied on quoted prices for identical securities in markets that are not active. These quoted prices were obtained by the Company with the assistance of a third-party pricing service based on available trade, bid and other observable market data for identical securities.  Quarterly, the Company compares the quoted prices obtained from the third-party pricing service to other available independent pricing information to validate the reasonableness of the quoted prices provided.  The Company evaluates whether adjustments to third-party pricing are necessary and, historically, the Company has not made adjustments to quoted prices obtained from the third-party pricing service.  During the six months ended June 30, 2021 and 2020, there were no transfers between Level 1, Level 2 and Level 3.

The increase in contingent consideration of $21.2 million during the six months ended June 30, 2021 resulted from updates to the Company’s probability of achieving regulatory milestones and commencing commercialization and estimated future sales level assumptions as a result of the completion of a Phase 2a clinical trial of ATI-450 in subjects with moderate to severe rheumatoid arthritis and the inclusion of estimated future sales of ATI-450 for the potential treatment of hidradenitis suppurativa and psoriatic arthritis, which are additional planned indications for ATI-450, as well as a result of the completion of a Phase 2a clinical trial of ATI-1777 in subjects with moderate to severe atopic dermatitis.

As of June 30, 2021 and December 31, 2020, the fair value of the Company’s available for sale marketable securities by type of security was as follows:

	June 30, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gain		Loss		Value
Marketable securities:
Corporate debt securities	$	28,548	$	3	$	(7)	$	28,544
Commercial paper		70,518		—		—		70,518
Asset-backed debt securities		30,951		1		(7)		30,945
U.S. government agency debt securities		22,721		3		(1)		22,723
Total marketable securities	$	152,738	$	7	$	(15)	$	152,730

	December 31, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gain		Loss		Value
Marketable securities:
Commercial paper	$	20,483	$	—	$	—	$	20,483
Asset-backed debt securities		4,036		1		—		4,037
U.S. government agency debt securities		7,547		1		—		7,548
Total marketable securities	$	32,066	$	2	$	—	$	32,068