Fair Value Measurements

12 Months Ended

Dec. 31, 2015

Fair Value Measurements

Fair value of financial measurements

3. Fair Value Measurements

All Convertible Preferred Stock converted at the time of the IPO, therefore there were no liabilities outstanding as of December 31, 2015.  Assets and liabilities measured at fair value on a recurring basis as of December 31, 2014are as follows:

			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
Liabilities	Total		(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Convertible PS tranche liability	$	6,305	$	—	$	—	$	6,305
Total	$	6,305	$	—	$	—	$	6,305

The Company estimates the fair value of its Series A redeemable convertible preferred stock (“Series A Preferred Stock”) tranche liability at the time of issuance and subsequently remeasures it using a probability‑weighted present value model that considers the probability of closing a tranche (67%), the estimated future value of Series A Preferred Stock at closing ($1.51), and the investment required ($20.0 million) at closing. Future values are converted to present value using a discount rate (16.2%) appropriate for probability‑adjusted cash flows. These estimates are based, in part, on subjective assumptions. Changes to these assumptions as well as the Company’s stock value on the reporting date can have a significant impact on the fair value of the Series A Preferred Stock tranche liability.

The following table provides a reconciliation of all assets and liabilities measured at fair value using Level 3 significant unobservable inputs (in thousands):

	Preferred Stock
	Tranche Liability
	(in thousands)
Balance at December 31, 2014	$	6,305
Changes in fair value		9,750
Reclassification to Series A Preferred Stock		(16,055)
Balance at December 31, 2015	$	—

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2015 are as follows:

			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
Assets	Total		(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Money market funds included in cash and cash equivalents	$	29,601	$	29,601	$	—	$	—
Marketable securities:
U.S. Treasury notes		157,981		157,981		—		—
U.S. Government agency securities		35,055		—		35,055		—
Total	$	222,637	$	187,582	$	35,055	$	—

The Company measures the fair value of money market funds and U.S. Treasuries based on quoted prices in active markets for identical securities. The Level 2 marketable securities include U.S. government agency securities that are valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. The Company did not hold any marketable securities at December 31, 2014.