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Fair Value of Financial Assets and Liabilities

9 Months Ended

Sep. 30, 2022

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:


		September 30, 2022
(In thousands)		Level 1			Level 2			Level 3			Total
Assets:
Cash equivalents		$	46,713		$	—		$	—		$	46,713
Marketable securities			—			186,409			—			186,409
Total assets		$	46,713		$	186,409		$	—		$	233,122


Liabilities:
Contingent consideration		$	—		$	—		$	26,000		$	26,000
Total liabilities		$	—		$	—		$	26,000		$	26,000


		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

As of September 30, 2022 and December 31, 2021, the Company’s cash equivalents consisted of a money market fund, which was valued based upon Level 1 inputs. The Company’s marketable securities as of September 30, 2022 and December 31, 2021 consisted of commercial paper, and asset-backed, U.S. government, foreign government agency and corporate debt securities, which were all valued based upon Level 2 inputs. Marketable securities also included U.S. government agency debt securities as of September 30, 2022, which were valued based upon Level 2 inputs.

In determining the fair value of its Level 2 investments, the Company relies on quoted prices for identical securities in markets that are not active. These quoted prices are 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. 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 three and nine months ended September 30, 2022 and 2021, there were no transfers into or out of Level 3.

The overall $2.4 million decrease in the fair value of the contingent consideration liability during the nine months ended September 30, 2022 was mainly due to higher discount rates, resulting from higher risk-free rates and wider credit spreads, being applied to potential payments relative to prior periods. The decrease was partially offset by an increase in the contingent consideration liability as a result of the impact of the passage of time and other valuation model assumption modifications.

As of September 30, 2022 and December 31, 2021, the fair value of the Company’s available-for-sale marketable securities by type of security was as follows:


		September 30, 2022
					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
(In thousands)		Cost			Gain			Loss			Value
Marketable securities:
Corporate debt securities		$	47,270		$	—		$	(472)		$	46,798
Commercial paper			59,659			—			—			59,659
Asset-backed debt securities			21,366			—			(176)			21,190
Foreign government agency debt securities			4,039			—			(27)			4,012
U.S. government and agency debt securities			55,542			—			(792)			54,750
Total marketable securities		$	187,876		$	—		$	(1,467)		$	186,409


		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 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 debt securities is $25.0 million with maturity dates between one and five years.

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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