Fair value measurements

9 Months Ended

Sep. 30, 2019

Fair value measurements

Fair value measurements

3. Fair value measurements

Assets and liabilities measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018 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)
September 30, 2019	(in thousands)
Money market funds included in cash and cash equivalents	$	81,711	$	81,711	$	—	$	—
Marketable securities:
U.S. Treasury notes		224,760		224,760		—		—
Equity securities		2,024		2,024		—		—
Total marketable securities	$	226,784	$	226,784	$	—	$	—
Warrants to purchase equity securities		648		—		648		—
Total	$	309,143	$	308,495	$	648	$	—
December 31, 2018
Money market funds included in cash and cash equivalents	$	46,173	$	46,173	$	—	$	—
Marketable securities:
U.S. Treasury notes		108,947		108,947		—		—
Equity securities		628		628		—		—
Total marketable securities	$	109,575	$	109,575	$	—	$	—
Warrants to purchase equity securities		234		—		234		—
Total	$	155,982	$	155,748	$	234	$	—

The Company measures the fair value of money market funds, U.S. Treasury notes and equity securities based on quoted prices in active markets for identical securities. The Level 2 equity securities include warrants used to purchase equity securities that are valued using the Black-Scholes model. The Black-Scholes option pricing model requires inputs based on certain subjective assumptions, including (a) the expected stock price volatility, (b) the calculation of expected term of the awards, (c) the risk-free interest rate, and (d) expected dividends. The assumptions utilized to value the warrants to purchase equity securities as of September 30, 2019 and December 31, 2018 are as follows:

	As of September 30,		As of December 31,
	2019		2018
Risk-free interest rate	1.6	%	2.5	%
Expected dividend yield	—	%	—	%
Expected term (in years)	1.9		2.7
Expected volatility	70.1	%	112.7	%

The expected volatility is based on the historic volatility for the equity securities underlying the warrants and is calculated based on a period of time commensurate with the expected term assumption. The expected term is based on the remaining contractual life of the warrants on each measurement date. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the warrants. The expected dividend yield is assumed to be zero as the entity that issued the warrants has never paid and has not indicated any intention to pay dividends.