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Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2021

4. Fair Value of Financial Instruments

Financial instruments reported at fair value on a recurring basis include cash equivalents and marketable securities. The following tables present the fair value of cash equivalents and marketable securities in accordance with the hierarchy discussed in Note 2 (in thousands):

	Quoted		Significant
	prices		other		Significant
	in active		observable		unobservable
	markets		inputs		inputs
	(Level 1)		(Level 2)		(Level 3)		Total
December 31, 2021
Cash equivalents:
Money market mutual funds	$	—	$	236,340	$	—	$	236,340
Total cash equivalents		—		236,340		—		236,340
Marketable securities:
U.S. government and agency securities		—		59,889		—		59,889
Certificates of deposit		—		2,927		—		2,927
Corporate bonds		—		441,321		—		441,321
Total marketable securities		—		504,137		—		504,137
Total cash equivalents and marketable securities	$	—	$	740,477	$	—	$	740,477

	Quoted		Significant
	prices		other		Significant
	in active		observable		unobservable
	markets		inputs		inputs
	(Level 1)		(Level 2)		(Level 3)		Total
December 31, 2020
Cash equivalents:
Money market mutual funds	$	—	$	96,307	$	—	$	96,307
Total cash equivalents		—		96,307		—		96,307
Marketable securities:
U.S. government and agency securities		—		12,804		—		12,804
Certificates of deposit		—		1,990		—		1,990
Corporate bonds		—		166,292		—		166,292
Municipal securities		—		3,037		—		3,037
Total marketable securities		—		184,123		—		184,123
Total cash equivalents and marketable securities	$	—	$	280,430	$	—	$	280,430

Management estimates that the carrying amounts of its current accounts receivable, other current assets, accounts payable, accrued expenses and other current liabilities approximate fair value due to the short-term nature of those instruments. Accounts receivable which contain non-current portions are recorded at their present values using a discount rate that is based on prevailing market rates and the credit profile of the licensee on the date the amounts are initially recorded. Management does not believe there have been any significant changes in market conditions or credit quality that would cause the discount rates initially used to be materially different from those that would be used as of December 31, 2021 to determine the present value of the receivables. Accordingly, management estimates that the carrying value of its non-current accounts receivable approximates the fair value of those instruments. Management estimates that the carrying value of the liability related to the sale of future royalties approximates fair value. As discussed in Note 7, the carrying value of the liability related to the sale of future royalties is based on the Company’s estimate of future royalty payments expected to be paid to HCR over the life of the arrangement, which are considered Level 3 inputs.

Non-marketable Equity Securities

Non-marketable equity securities are measured at cost less impairment, adjusted for observable price changes for identical or similar investments of the same issuer. As of December 31, 2021, the Company did not hold any non-marketable equity securities. As of December 31, 2020, non-marketable equity securities had a carrying value of $1.1 million and were included in other assets on the consolidated balance sheet. The Company did not identify any observable price changes or changes in circumstances that would have had an adverse effect on the fair value of the securities as of December 31, 2020. No remeasurements or impairment losses were recorded on non-marketable equity securities during the years ended December 31, 2021, 2020 and 2019.

The Company’s non-marketable equity securities as of December 31, 2020 consisted solely of equity securities of Corlieve Therapeutics SAS (Corlieve), which were acquired in June 2020 as consideration under a license and collaboration agreement with Corlieve. In July 2021, Corlieve was acquired by uniQure N.V. (uniQure). In exchange for its ownership in Corlieve, the Company received sales proceeds of €4.8 million ($5.6 million) from uniQure and is entitled to receive additional proceeds of €0.5 million ($0.6 million as of December 31, 2021) by July 2022. The Company recorded a realized gain of $5.2 million during the year ended December 31, 2021 as a result of the acquisition of its Corlieve securities by uniQure, which is included in investment income in the consolidated statements of operations and comprehensive income (loss). In connection with the acquisition, the Company is also eligible to receive payments of up to €37.1 million ($42.1 million as of December 31, 2021) from uniQure contingent upon the achievement of various development and regulatory milestones, none of which have been recognized in the consolidated financial statements as of December 31, 2021. Proceeds contingent upon the achievement of these milestones will be recognized as investment income in the period in which any uncertainty regarding realization is substantially resolved, which may not occur until the achievement of the underlying milestones. It is at least reasonably possible that some or all of the proceeds contingent upon these milestones will not be realized by the Company.

- 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.

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