Fair Value Measurements. Cash Equivalents and Marketable Securities

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements. Cash Equivalents and Marketable Securities

Fair Value Measurements, Cash Equivalents and Marketable Securities

Financial instruments consist of cash equivalents, marketable securities, accounts receivable, net, prepaid expenses and other current assets, accounts payable and accrued expenses. Cash equivalents and marketable securities are stated at fair value. Prepaid expenses and other current assets, accounts payable and accrued expenses are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date.

Fair value is defined as the exchange price that would be received from sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The identification of market participant assumptions provides a basis for determining what inputs are to be used for pricing each asset or liability. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

A fair value hierarchy has been established which gives precedence to fair value measurements calculated using observable inputs over those using unobservable inputs. This hierarchy prioritized the inputs into three broad levels as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements were as follows:

	March 31, 2020
	Fair Value		Level 1		Level 2		Level 3
	(unaudited)
	(in thousands)
Financial Assets:
Money market funds	$	35,592	$	35,592	$	—	$	—
Total cash equivalents	$	35,592	$	35,592	$	—	$	—
Corporate bonds	$	4,035	$	—	$	4,035	$	—
U.S. government debt securities	363,818		—		363,818		—
Total short-term marketable securities	$	367,853	$	—	$	367,853	$	—
U.S. government debt securities	$	238,206	$	—	$	238,206	$	—
Total long-term marketable securities	$	238,206	$	—	$	238,206	$	—
Total	$	641,651	$	35,592	$	606,059	$	—
Financial Liabilities:
Contingent consideration	$	1,175	$	—	$	—	$	1,175
Total	$	1,175	$	—	$	—	$	1,175

	December 31, 2019
	Fair Value		Level 1		Level 2		Level 3
	(in thousands)
Financial Assets:
Money market funds	$	10,734	$	10,734	$	—	$	—
Total cash equivalents	$	10,734	$	10,734	$	—	$	—
Corporate bonds	$	16,690	$	—	$	16,690	$	—
U.S. government debt securities	362,884		—		362,884		—
Total short-term marketable securities	$	379,574	$	—	$	379,574	$	—
U.S. government debt securities	$	268,783	$	—	$	268,783	$	—
Total long-term marketable securities	$	268,783	$	—	$	268,783	$	—
Total	$	659,091	$	10,734	$	648,357	$	—
Financial Liabilities:
Contingent consideration	$	1,365	$	—	$	—	$	1,365
Total	$	1,365	$	—	$	—	$	1,365

The Company measures the fair value of money market funds based on quoted prices in active markets for identical securities. Corporate bonds, U.S. government debt securities and U.S. government agency bonds are valued taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads; benchmark securities; prepayment/default projections based on historical data and other observable inputs.

The following table summarizes the activities for the Level 3 financial instruments for the three months ended March 31, 2020 and 2019:

	Redeemable Noncontrolling Interest						Contingent consideration
	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2020			2019
	(unaudited)
	(in thousands)
Fair value — beginning of period	$	49,600		$	41,800		$	1,365		$	—
Increase (decrease) in fair value	(3,027		)	5,022			(190		)	—
Net loss for the period	(1,073		)	(322		)	—			—
Fair value — end of period	$	45,500		$	46,500		$	1,175		$	—

As of March 31, 2020 and December 31, 2019, contingent consideration liability of $1.2 million and $1.4 million, respectively, was recorded within other long-term liabilities on the condensed consolidated balance sheets.

Cash Equivalents and Marketable Securities

The following tables summarizes the Company’s cash equivalents and marketable securities’ amortized costs, gross unrealized gains, gross unrealized losses and estimated fair values by significant investment category:

	March 31, 2020
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
	(unaudited)
	(in thousands)
Money market fund	$	35,592	$	—	$	—	$	35,592
Corporate bond	4,035		—		—		4,035
U.S. government debt securities	594,064		7,961		—		602,025
Total	$	633,691	$	7,961	$	—	$	641,652

	December 31, 2019
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
	(in thousands)
Money market fund	$	10,734	$	—	$	—		$	10,734
Corporate bond	16,679		11		—			16,690
U.S. government debt securities	630,283		1,422		(39		)	631,666
Total	$	657,696	$	1,433	$	(39	)	$	659,090

There have been no material realized gains or losses on marketable securities for the periods presented. None of the Company’s investments in marketable securities has been in an unrealized loss position for more than one year. The Company determined that it did have the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity or recovery, thus there has been no recognition of credit losses in the three months ended March 31, 2020 and 2019, respectively. The maturities of the Company’s long-term marketable securities range from 1.0 year to 1.7 years as of March 31, 2020.