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Fair Value of Financial Assets and Liabilities

12 Months Ended

Dec. 31, 2021

Fair Value of Financial Assets and Liabilities

Fair Value of Financial Assets and Liabilities

4. 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:


		December 31, 2021
(In thousands)		Level 1			Level 2			Level 3			Total
Assets:
Cash equivalents		$	21,678		$	—		$	—		$	21,678
Marketable securities			—			198,307			—			198,307
Total assets		$	21,678		$	198,307		$	—		$	219,985


Liabilities:
Contingent consideration		$	—		$	—		$	28,400		$	28,400
Total liabilities		$	—		$	—		$	28,400		$	28,400


		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 December 31, 2021 and 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 December 31, 2021 and 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 December 31, 2021 also included corporate debt securities and foreign government agency 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 years ended December 31, 2021 and 2020, there were no transfers into or out of Level 3.

The increase in contingent consideration of $24.3 million during the year ended December 31, 2021 primarily 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 zunsemetinib in subjects with moderate to severe rheumatoid arthritis and the inclusion of estimated future sales of zunsemetinib for the potential treatment of moderate to severe psoriatic arthritis and moderate to severe hidradenitis suppurativa, which are additional planned indications for zunsemetinib, 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 December 31, 2021 and 2020, the fair value of the Company’s available-for-sale marketable securities by type of security was as follows:


		December 31, 2021
					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
(In thousands)		Cost			Gain			Loss			Value
Marketable securities:
Corporate debt securities⁽¹⁾		$	40,993		$	6			(50)		$	40,949
Commercial paper			71,837			—			—			71,837
Asset-backed debt securities			36,166			—			(43)			36,123
Foreign government agency debt securities			4,073			—			(13)			4,060
U.S. government agency debt securities⁽²⁾			45,465			—			(127)			45,338
Total marketable securities		$	198,534		$	6		$	(233)		$	198,307
⁽¹⁾ Included in Corporate debt securities is $9.2 million with maturity dates between one and five years.
⁽²⁾ Included in US government agency debt securities is $25.0 million with maturity dates between one and five years.


		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

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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