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Fair Value Measurements

12 Months Ended

Dec. 31, 2023

Cash, Cash Equivalents and Marketable Securities Held to Maturity

The following table summarizes the Company's cash, cash equivalents and marketable securities held to maturity as of December 31, 2023:


	As of December 31, 2023
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash and cash equivalents:
Cash and money market funds	$	751,323	$	—	$	—	$	751,323
Total cash and cash equivalents	$	751,323	$	—	$	—	$	751,323

	As of December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash and cash equivalents:
Cash and money market funds	$	523,458	$	—	$	—	$	523,458
Total cash and cash equivalents		523,458		—		—		523,458
Marketable securities held to maturity:
U.S. treasury bills - short-term		100,299		24		—		100,323
Total cash, cash equivalents and marketable securities	$	623,757	$	24	$	—	$	623,781

During the fourth quarter of 2022, the Company purchased $100.0 million of 6-month U.S. treasury bills with the positive intent and ability to hold them until maturity. Therefore, the Company classified this investment as held to maturity and stated it at amortized cost on the consolidated balance sheets. There is no comparable investment as of December 31, 2023.

The amortized cost and fair value of the Company's held to maturity securities by contractual maturity at December 31, 2022 are summarized below. There were no comparable investments as of December 31, 2023:


	December 31, 2022
	Amortized Costs		Estimated Fair Value
Maturity of one year or less	$	100,299	$	100,323
Total	$	100,299	$	100,323

Fair Value Measured on a Recurring Basis

Financial assets and financial liabilities measured at fair value on a recurring basis consist of the following as of December 31, 2023 and 2022:


	As of December 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Money market accounts	$	658,574	$	—	$	—	$	658,574
Liabilities:
Short-term contingent consideration	$	—	$	—	$	12,983	$	12,983
Long-term contingent consideration	$	—	$	—	$	14,070	$	14,070

	As of December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Money market accounts	$	343,929	$	—	$	—	$	343,929
Liabilities:
Short-term contingent consideration	$	—	$	—	$	13,950	$	13,950
Long-term contingent consideration	$	—	$	—	$	51,559	$	51,559

Contingent Consideration – Earnout

As of December 31, 2023, the maximum amount of future contingent consideration (undiscounted) that the Company could be required to pay in connection with each of the completed acquisitions is; $125.0 million over a three-year earnout period for Avitide, which was acquired in September 2021 and for which the earnout periods run from January 1, 2022 through December 31, 2024; $42.0 million over a two-year earnout period for FlexBiosys, which was acquired in April 2023 and for which the earnout periods run from January 1, 2023 through December 31, 2024; and approximately $10 million over a one-year earnout period for Metenova, which was acquired in October 2023 and for which the earnout period runs from January 1, 2024 through December 31, 2024. See Note 4, “Acquisitions” to this report for more information on the contingent consideration earnouts.

During 2023, expected results and change in market inputs used to calculate the discount rate, resulted in a decrease in amounts reported as of December 31, 2023. A reconciliation of the change in fair value of contingent consideration – earnout is included in the following table (amounts in thousands):


Balance at December 31, 2022	$	65,509
Acquisition date fair value of contingent consideration earnouts		6,640
Payment of contingent consideration earnouts		(14,527	)
Decrease in fair value of contingent consideration earnouts		(30,569	)
Balance at December 31, 2023	$	27,053

The recurring Level 3 fair value measurement of our contingent consideration – earnout that we expect to be required to settle our 2023, 2024 and 2025 contingent consideration obligation for Avitide, FlexBiosys and Metenova include the following significant unobservable inputs (amounts in thousands, except percent data):


Contingent Consideration Earnout	Fair Value as of December 31, 2023		Valuation Technique	Unobservable Input	Range	Weighted Average(1)
				Probability of
				Success	100%	100%
Commercialization-based payments	$	20,094	Monte Carlo Simulation	Earnout Discount Rate	5.8%-5.9%	5.9%

				Volatility	12.5%-24.6%	21.9%

Revenue and Volume- based payments	$	1,454	Monte Carlo Simulation	Revenue & Volume Discount Rate	2.5%-9.3%	8.3%
				Earnout Discount Rate	5.8%-7.2%	6.1%
				Probability of Success	100%	100%
Manufacturing line expansions	$	5,505	Probability-weighted present value	Earnout Discount Rate	6.1%-6.4%	6.3%

(1)

Unobservable inputs were weighted by the relative fair value of the contingent consideration liability.

The Company estimates the fair value of the contingent consideration earnouts using a Monte Carlo simulation. Changes in the projected performance of the acquired business could result in a higher or lower contingent consideration obligation in the future.

Fair Value Measured on a Nonrecurring Basis

During 2023, there were no re-measurements to fair value of financial assets and liabilities that are measured at fair value on a nonrecurring basis.

Convertible Senior Notes

In July 2019, the Company issued $287.5 million aggregate principal amount of the 2019 Notes. Interest is payable semi-annually in arrears on January 15 and July 15 of each year. The 2019 Notes will mature on July 15, 2024, unless earlier converted or repurchased in accordance with their terms. At December 31, 2023 and 2022, subsequent to the adoption of ASU 2020-06, the carrying value of the 2019 Notes was $69.5 million and $284.6 million, respectively, net of unamortized debt issuance costs and the fair value of the 2019 Notes was $109.8 million and $452.0 million, respectively. The fair value of the 2019 Notes is a Level 1 valuation and was determined based on the most recent trade activity of the 2019 Notes as of December 31, 2023 and 2022. The 2019 Notes are discussed in more detail in Note 14, “Convertible Senior Notes,” to these consolidated financial statements.

On December 14, 2023, the Company issued $600.0 million aggregate principal amount of its 2023 Notes in a private placement pursuant to separate, privately negotiated exchange and subscription agreements (the “Exchange and Subscription Agreements”) with a limited number of holders of its outstanding 2019 Notes and certain other qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (“Securities Act”). Pursuant to the Exchange and Subscription Agreements, the Company exchanged $217.7 million of its 2019 Notes for $309.9 million aggregate principal amount of the 2023 Notes (the “Exchange Transaction”) and issued $290.1 million aggregate principal amount of the 2023 Notes (the “Subscription Transactions”) for $290.1 million in cash. At December 31, 2023, the carrying value of the 2023 Notes was $510.1 million, net of unamortized debt issuance costs, and the fair value of the 2023 Notes was $596.0 million. The fair value of the 2023 Notes is a Level 1 valuation and was determined based on the most recent trade activity of the 2023 Notes as of December 31, 2023. The 2023 Notes are discussed in more detail in Note 14, “Convertible Senior Notes,” to these consolidated financial statements.

- 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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