Fair value measurements

3 Months Ended

Mar. 31, 2020

Fair value measurements

Fair value measurements

3. Fair value measurements

Assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 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)
March 31, 2020	(in thousands)
Money market funds included in cash and cash equivalents	$	153,395	$	153,395	$	—	$	—
Marketable securities:
U.S. Treasury notes		85,704		85,704		—		—
Equity securities		1,432		1,432		—		—
Total marketable securities	$	87,136	$	87,136	$	—	$	—
Warrants to purchase equity securities		234		—		234		—
Total	$	240,765	$	240,531	$	234	$	—
December 31, 2019
Money market funds included in cash and cash equivalents	$	78,303	$	78,303	$	—	$	—
Marketable securities:
U.S. Treasury notes		195,491		195,491		—		—
Equity securities		1,920		1,920		—		—
Total marketable securities	$	197,411	$	197,411	$	—	$	—
Warrants to purchase equity securities		554		—		554		—
Total	$	276,268	$	275,714	$	554	$	—

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 March 31, 2020 and December 31, 2019 are as follows:

	As of March 31,		As of December 31,
	2020		2019
Risk-free interest rate	0.2	%	1.6	%
Expected dividend yield	—	%	—	%
Expected term (in years)	1.4		1.7
Expected volatility	68.0	%	71.6	%

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.