Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2022

4. Fair Value of Financial Instruments

The following tables summarize the Company’s financial assets that are measured at fair value on a recurring basis (in thousands):


	June 30, 2022
	Level 1		Level 2		Total
Cash equivalents:
U.S. treasury securities	$	-	$	93,922	$	93,922
Money market funds		6,783		-		6,783
U.S. agency obligations		-		3,993		3,993
Marketable securities:
U.S. treasury securities		-		1,157,731		1,157,731
Corporate notes and bonds		-		135,134		135,134
U.S. agency obligations		-		98,480		98,480
Commercial paper		-		36,514		36,514
Total	$	6,783	$	1,525,774	$	1,532,557


	December 31, 2021
	Level 1		Level 2		Total
Cash equivalents:
U.S. treasury securities	$	-	$	69,999	$	69,999
Money market funds		23,857		-		23,857
Commercial paper		-		4,999		4,999
Marketable securities:
U.S. treasury securities		-		446,435		446,435
Corporate notes and bonds		-		125,604		125,604
U.S. agency obligations		-		54,007		54,007
Commercial paper		-		10,995		10,995
Municipal bonds		-		3,044		3,044
Total	$	23,857	$	715,083	$	738,940

The Company classifies its highly liquid money market funds within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. The Company classifies its U.S. treasury securities, corporate notes and bonds, U.S. agency obligations, commercial paper, and municipal bonds within Level 2 of the fair value hierarchy because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security that may not be actively traded. There were no transfers of financial assets between valuation levels during the three and six months ended June 30, 2022 and 2021.

As of June 30, 2022 and December 31, 2021, the total estimated fair value of the Company’s 0% convertible senior notes due 2027 was $804.7 million and $1,206.7 million, respectively. The fair value was determined based on the quoted price of the convertible senior notes in an inactive market on the last trading day of the reporting period and is classified within Level 2 of the fair value hierarchy. See Note 6 for further information on the Company’s convertible senior notes.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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