The Company has certain financial assets and liabilities that are recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.

During the nine months ended September 30, 2024, there were no transfers into or out of Level 3. The tables below present information about the Company’s financial assets and liabilities that are measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation techniques it utilizes to determine such fair value:


	Fair Value Measurement as of September 30, 2024
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets
Money market funds	$	21,951	$	21,951	$	—	$	—
Commercial paper		34,995		—		34,995		—
Government and government agency bonds		900,407		13,494		886,913		—
Corporate bonds		233,245		—		233,245		—
Strategic investments		4,723		3,723		—		1,000
Certificates of deposit		17,988		—		17,988		—
Derivative assets		44,622		—		44,622		—
Total assets	$	1,257,931	$	39,168	$	1,217,763	$	1,000

Liabilities
Contingent consideration	$	47,400	$	—	$	—	$	47,400
Total liabilities	$	47,400	$	—	$	—	$	47,400


	Fair Value Measurement as of December 31, 2023
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets
Money market funds	$	63,919	$	63,919	$	—	$	—
Commercial paper		113,362		—		113,362		—
Government and government agency bonds		1,001,137		—		1,001,137		—
Corporate bonds		130,380		—		130,380		—
Strategic investments		6,527		5,527		—		1,000
Certificates of deposit		56,621		—		56,621		—
Total assets	$	1,371,946	$	69,446	$	1,301,500	$	1,000

Liabilities
Contingent consideration	$	38,100	$	—	$	—	$	38,100
Total liabilities	$	38,100	$	—	$	—	$	38,100

The Company’s assets with a fair value categorized as Level 1 within the fair value hierarchy include money market funds, certain government and government agency bonds and the Company's strategic investment in a biotechnology company listed on the Nasdaq Global Market.

The Company's assets with a fair value categorized as Level 2 within the fair value hierarchy consist of commercial paper, government and government agency bonds, corporate bonds, certificates of deposit and the derivative assets associated with capped call options (the “2017 Capped Calls”) for the Company's $570.0 million aggregate principal amount of senior convertible notes due on November 15, 2024 (the “2024 Notes”). The Company's commercial paper, government and government agency bonds, corporate bonds and certificates of deposit have been initially valued at the transaction price and subsequently valued at the end of each reporting period utilizing third-party pricing services. The Company uses observable market inputs to determine value, which primarily consist of reportable trades. Certain short-term investments with maturities of less than three months at the date of acquisition are presented as cash equivalents on the unaudited condensed consolidated balance sheets as of September 30, 2024.

The fair value of the derivative assets related to the 2017 Capped Calls was determined using an option pricing model with Monte Carlo simulations. The significant inputs to the model are the Company’s share price, estimated volatility and corresponding risk free rate. At the end of each reporting period, the fair value is adjusted to reflect the most current assumptions through earnings. The fair value of the derivative assets from the effective date of the 2017 Capped Calls modification on September 16, 2024 to September 30, 2024 increased by $0.7 million. The increase was recorded within other income (expense), net in the unaudited condensed consolidated statements of comprehensive income (loss). For additional information related to the 2017 Capped Calls, please refer to Note 10, Indebtedness.

The Company’s assets with a fair value categorized as Level 3 within the fair value hierarchy consist of a strategic investment in a private biotechnology company whose fair value measurement was based upon significant inputs not observable in the market and therefore represented a Level 3 measurement. At the end of each reporting period, the fair value of the Company's strategic investments that are not publicly traded securities are adjusted if the issuers issue similar or identical securities or when there is a triggering event for impairment. There were no valuation measurement events related to the fair value of the Company's Level 3 strategic investments during the nine months ended September 30, 2024, as no impairment indicators were identified nor were similar securities issued. During the three months ended September 30, 2023, the Company recorded an impairment loss of $27.5 million related to the Company's strategic investment in Series A preferred stock of Lacerta Therapeutics, Inc. (“Lacerta”) after comparing the fair value of the Lacerta strategic investment to its carrying value. The impairment loss for the three and nine months ended September 30, 2023 is included in other (expense) income, net within the unaudited condensed consolidated statements of comprehensive income (loss).

The Company’s contingent consideration liability with a fair value categorized as Level 3 within the fair value hierarchy relates to the regulatory-related contingent payments to Myonexus Therapeutics, Inc. (“Myonexus”) selling shareholders as well as to an academic institution under a separate license agreement that meet the definition of a derivative. For more information related to Myonexus, please read Note 3, License and Collaboration Agreements to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The contingent consideration liability was estimated using an income approach based on the probability-weighted expected cash flows that incorporated industry-based probability adjusted assumptions relating to the achievement of the milestone and thus the likelihood of making the payments. This fair value measurement was based upon significant inputs not observable in the market and therefore represented a Level 3 measurement. Significant changes, which increase or decrease the probabilities of achieving the milestone or shorten or lengthen the time required to achieve the milestone, would result in a corresponding increase or decrease in the fair value of the liability. At the end of each reporting period, the fair value is adjusted to reflect the most current assumptions through earnings.

For the three and nine months ended September 30, 2024, the Company recorded a net decrease of $0.8 million and a net increase of $9.3 million, respectively, to account for the change in fair value of the Company's existing contingent consideration liabilities and any liabilities terminated. These changes, which are recorded through earnings, were a result of updates made to certain inputs and assumptions impacting the probability-weighted expected cash flows, principally the probability of success of the underlying programs and the discount rate utilized to determine the present value of future payments to be made, partially offset by the termination of a license agreement with an academic institution that included an embedded derivative during the three months ended September 30, 2024. For the three and nine months ended September 30, 2023, net increases of $2.0 million and $1.2 million were recorded to account for the change in fair value and a termination of one of the Company's license agreements with an existing contingent consideration liability. As of September 30, 2024, the contingent consideration was recorded as a long-term liability on the Company's unaudited condensed consolidated balance sheets.

The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, net and accounts payable approximated fair value because of the immediate or short-term maturity of these financial instruments. For fair value information related to the Company's debt facilities, please read Note 10, Indebtedness.