XML 20 R10.htm IDEA: XBRL DOCUMENT

Fair Value Measurements

9 Months Ended

Sep. 30, 2022

The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.

The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance prioritizes the inputs used in measuring fair value into the following hierarchy:

•Level 1- Quoted prices (unadjusted) in active markets for identical assets or liabilities;

•Level 2- Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and

•Level 3- Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

The following tables summarize the assets measured at fair value on a recurring basis (in thousands):


	September 30, 2022
	Total		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Cash	$	125,310	$	125,310	$	—	$	—
Money market funds	125,656		125,656		—		—
Commercial paper	47,877		—		47,877		—
Total cash and cash equivalents	298,843		250,966		47,877		—

Short-term investments:
U.S. Treasury bills	209,991		209,991		—		—
Corporate debt securities	131,134		—		131,134		—
Commercial paper	520,392		—		520,392		—
U.S. Agency bonds	40,632		—		40,632		—

Total short-term investments	902,149		209,991		692,158		—

Long-term investment:
ORIC Pharmaceuticals, Inc.	1,882		1,882		—		—

Total	$	1,202,874	$	462,839	$	740,035	$	—


	December 31, 2021
	Total		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Cash	$	19,347	$	19,347	$	—	$	—
Money market funds	393,736		393,736		—		—
Total cash and cash equivalents	413,083		413,083		—		—

Short-term investments:
U.S. Treasury bills	162,228		162,228		—		—
Corporate debt securities	235,958		—		235,958		—
Commercial paper	621,979		—		621,979		—
U.S. Agency bonds	58,092		—		58,092		—

Total short-term investments	1,078,257		162,228		916,029		—

Long-term investment:
ORIC Pharmaceuticals, Inc.	8,218		—		—		8,218

Total	$	1,499,558	$	575,311	$	916,029	$	8,218

The Company’s investments in Level 1 assets are valued based on publicly available quoted market prices for identical securities as of September 30, 2022 and December 31, 2021. The Company determines the fair value of Level 2 related securities with the aid of valuations provided by third parties using proprietary valuation models and analytical tools. These valuation models and analytical tools use market pricing or prices for similar instruments that are both objective and publicly available, including matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids and/or offers.

The Company’s long-term investment in ORIC as of December 31, 2021 was considered a Level 3 fair value measurement and utilized a combination of the Asian Protective Put Option and Finnerty Put Option fair value techniques with unobservable inputs of 69% volatility and an expected term of 0.1 years to determine the discount for lack of marketability of 5.0%. In February 2022, the eighteen-month lock-up period expired, and because ORIC common stock is quoted in an active market, it meets the criteria of a Level 1 investment. In February 2022, the Company transferred the investment in ORIC from a Level 3 fair value measurement to a Level 1 fair value measurement.

The following table represents the change in estimated fair value of the Company’s Level 3 investment during 2022:


	March 31, 2022
Fair value of Level 3 investment - December 31, 2021	$	8,218

Change in fair value during the first quarter of 2022	(5,077)
Transfer from Level 3 to Level 1 in February 2022	(3,141)
Fair value of Level 3 investment - March 31, 2022	$	—

There were no transfers between fair value measurement levels during the three months ended September 30, 2022. There were no transfers between fair value measurement levels during the three and nine months ended September 30, 2021.

- 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.

+ References + Details