Fair Value Measurement and Marketable Securities

6 Months Ended

Jun. 30, 2022

Fair Value Measurement and Marketable Securities

3. Fair Value Measurement and Marketable Securities

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be

determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

As of June 30, 2022, financial assets measured and recognized at fair value are as follows (in thousands):


		June 30, 2022
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Assets
U.S. government securities	Level 1	$	140,484	$	—	$	(2,918	)	$	137,566
Corporate bonds	Level 2		72,275		—		(710	)		71,565
Commercial paper	Level 2		65,554		—		(1	)		65,553
Marketable securities			278,313		—		(3,629	)		274,684
Money market funds(1)	Level 1		49,195		—		—			49,195
Total fair value of assets		$	327,508	$	—	$	(3,629	)	$	323,879

(1)

Included in cash and cash equivalents on the condensed balance sheets.

As of December 31, 2021, financial assets measured and recognized at fair value are as follows (in thousands):


		December 31, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Assets
U.S. government securities	Level 1	$	122,657	$	—	$	(592	)	$	122,065
Corporate bonds	Level 2		76,628		8		(127	)		76,509
Commercial paper	Level 2		77,444	—			(1	)		77,443
Marketable securities			276,729		8		(720	)		276,017
Money market funds(1)	Level 1		91,825		—		—			91,825
Total fair value of assets		$	368,554	$	8	$	(720	)	$	367,842

(1)

Included in cash and cash equivalents on the condensed balance sheets.

The Company considers available evidence in evaluating potential other-than-temporary impairments of its marketable securities, including the duration and extent to which fair value is less than cost, and the Company’s ability and intent to hold the investment. As of June 30, 2022 and December 31, 2021, the Company held certain securities in an unrealized loss position. These unrealized losses were considered to be temporary as the Company expects to recover the entire amortized cost basis on the securities in unrealized loss positions based on the creditworthiness of the underlying issuer, and the Company neither intends to sell these securities nor considers it

more likely than not that the Company would be required to sell any such security before its anticipated recovery. As a result, the Company did not consider any of these investments to be other-than-temporarily impaired at June 30, 2022 and December 31, 2021.

As of June 30, 2022 and December 31, 2021, all marketable securities had a remaining maturity of less than two years. There were no financial liabilities measured and recognized at fair value as of June 30, 2022 and December 31, 2021.