Fair Value of Financial Assets

3 Months Ended

Mar. 31, 2022

Fair Value of Financial Assets

Fair Value of Financial Assets

4. Fair Value of Financial Assets

As of March 31, 2022 and December 31, 2021, the carrying amount of cash and cash equivalents and short-term investments was $240,964 and $294,855, respectively, which approximates fair value. Cash and cash equivalents and short-term investments includes investments in U.S. treasury securities and money market funds that invest in U.S. government securities that are valued using quoted market prices. Accordingly, money market funds and government funds are categorized as Level 1.  The financial assets valued based on Level 2 inputs consist of corporate debt securities and commercial paper, which consist of investments in highly-rated investment-grade corporations.

The following tables present information about the Company's financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

	Fair value Measurements as of
	March 31, 2022 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Commercial Paper	$	—	$	49,477	$	—	$	49,477
Money Market Funds		17,505		—		—		17,505
Marketable Securities:
Corporate Debt Securities and Commercial Paper		—		162,427		—		162,427
Other Long-term Assets:
RareStone Common Stock		—		—		2,440		2,440
Total	$	17,505	$	211,904	$	2,440	$	231,849

	Fair value Measurements as of
	December 31, 2021 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Corporate Debt Securities and Commercial Paper	$	—	$	—	$	—	$	—
Money Market Funds		48,297		—		—		48,297
Marketable Securities:
Corporate Debt Securities and Commercial Paper		—		235,607		—		235,607
Total	$	48,297	$	235,607	$	—	$	283,904

The estimated fair value of the shares of RareStone equity was determined using Level 3 inputs.  As of March 31, 2022, our RareStone equity represents our only Level 3 assets and liabilities carried at fair market value. The fair value measurement of the RareStone equity is sensitive to changes in the unobservable inputs used to value the financial instrument. Changes in the inputs could result in changes to the fair value of each financial instrument.

Our RareStone equity was valued at $2,440 at March 31, 2022. The Company determined the estimated fair values using a discounted cash flow model under the income approach and an option pricing allocation model for the period end March 31, 2022.

Inherent in  discounted cash flow and option pricing allocation models are assumptions related to the equity value of the entity, expected equity volatility, holding period, risk-free interest rate and discount for lack of marketability. The Company estimated equity volatility based on historical volatility of guideline public companies. The risk-free interest rate was based on the U.S. Treasury rates for a maturity similar to the expected holding period.

Changes in our level 3 secruities for the three months ended March 31, 2022 and 2021 are as follows:

	Three months ended
	March 31,
	2022		2021
Beginning aggregate estimated fair value of Level 3 securities	$	—	$	—
Initial recording of RareStone equity		2,440		—
Ending aggregate estimated fair value of Level 3 securities	$	2,440	$	—

Marketable Securities

The following tables summarize the Company's marketable securities:

	March 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	163,056	$	—	$	(629)	$	162,427
	$	163,056	$	—	$	(629)	$	162,427

	December 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	235,608	$	50	$	(51)	$	235,607
	$	235,608	$	50	$	(51)	$	235,607