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Fair Value Measurements
9 Months Ended
Sep. 30, 2022
Fair Value Measurements [Abstract]  
Fair Value Measurements
4.  Fair Value Measurements


We use a three-tier fair value hierarchy to prioritize the inputs used in our fair value measurements. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets, which includes our money market funds and treasury securities classified as available-for-sale securities and our investment in equity securities in publicly held biotechnology companies; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, which includes our fixed income securities and commercial paper classified as available-for-sale securities; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions, which includes our investments in equity securities in privately held biotechnology companies. We classify most of our securities as Level 2. We obtain the fair value of our Level 2 investments from our custodian bank or from a professional pricing service. We validate the fair value of our Level 2 investments by understanding the pricing model used by the custodian banks or professional pricing service provider and comparing that fair value to the fair value based on observable market prices.


The following tables present the major security types we held at September 30, 2022 and December 31, 2021 that we regularly measure and carry at fair value. As of December 31, 2021, one of our investments in publicly held biotechnology companies was subject to trading restrictions that ended in the third quarter of 2022; as a result, we included a lack of marketability discount in valuing this investment, which is a Level 3 input. The following tables segregate each security type by the level within the fair value hierarchy of the valuation techniques we utilized to determine the respective securities’ fair value (in thousands):

 
At
September 30, 2022
   
Quoted Prices in
Active Markets
(Level 1)
   
Significant Other
Observable Inputs
(Level 2)
   
Significant
Unobservable Inputs
(Level 3)
 
Cash equivalents (1)
 
$
231,960
   
$
231,960
   
$
   
$
 
Corporate debt securities (2)
   
728,054
     
     
728,054
     
 
Debt securities issued by U.S. government agencies (2)
   
130,767
     
     
130,767
     
 
Debt securities issued by the U.S. Treasury (3)
   
750,933
     
750,933
     
     
 
Debt securities issued by states of the U.S. and political subdivisions of the states (4)
   
85,315
     
     
85,315
     
 
Other municipal debt securities (3)
   
5,964
     
     
5,964
     
 
Publicly traded equity securities included in other current assets
   
7,256
     
7,256
     
     
 
Total
 
$
1,940,249
   
$
990,149
   
$
950,100
   
$
 

 
At
December 31, 2021
   
Quoted Prices in
Active Markets
(Level 1)
   
Significant Other
Observable Inputs
(Level 2)
   
Significant
Unobservable Inputs
(Level 3)
 
Cash equivalents (1)
 
$
541,199
   
$
541,199
   
$
   
$
 
Corporate debt securities (3)
   
764,059
     
     
764,059
     
 
Debt securities issued by U.S. government agencies (3)
   
120,868
     
     
120,868
     
 
Debt securities issued by the U.S. Treasury (3)
   
182,634
     
182,634
     
     
 
Debt securities issued by states of the U.S. and political subdivisions of the states (5)
   
174,464
     
     
174,464
     
 
Other municipal debt securities (3)
   
6,099
     
     
6,099
     
 
Publicly traded equity securities included in other current assets
   
18,205
     
3,875
     
     
14,330
 
Total
 
$
1,807,528
   
$
727,708
   
$
1,065,490
   
$
14,330
 

The following footnotes reference lines in our condensed consolidated balance sheet:

(1)
Included in cash and cash equivalents in our condensed consolidated balance sheet.

(2)
$23.5 million was included in cash and cash equivalents in our condensed consolidated balance sheet, with the difference included in short-term investments in our condensed consolidated balance sheet.

(3)
Included in short-term investments.

(4)
$10.0 million was included in cash and cash equivalents in our condensed consolidated balance sheet, with the difference included in short-term investments in our condensed consolidated balance sheet.

(5)
$2.3 million was included in cash and cash equivalents in our condensed consolidated balance sheet, with the difference included in short-term investments in our condensed consolidated balance sheet.

Convertible Notes


Our 0.125% Notes and 0% Notes had a fair value of $498.7 million and $631.8 million at September 30, 2022, respectively. We determine the fair value of our notes based on quoted market prices for these notes, which are Level 2 measurements because the notes do not trade regularly.