Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Measurements

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, which includes our money market funds and treasury securities classified as available-for-sale securities and 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 an entity to develop its own assumptions.  To estimate the fair value of securities classified as Level 2, we utilize the services of a fixed income pricing provider that uses an industry standard valuation model, which is based on a market approach.  The significant inputs for the valuation model include reported trades, broker/dealer quotes, benchmark securities and bids.  At September 30, 2011, we had no securities that we classified as Level 3.

Below is a table of our assets that we measure at fair value on a recurring basis. For the following major security types, we break down the inputs used to measure fair value at September 30, 2011 (in thousands):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents (1)	$	55,239	$	48,073	$	7,166	$	—
Corporate debt securities (2)	207,997		—		207,997		—
Debt securities issued by U.S. government agencies (2)	77,832		—		77,832		—
Debt securities issued by the U.S. Treasury (2)	4,512		4,512		—		—
Debt securities issued by states of the United States and political subdivisions of the states (2)	19,159		—		19,159		—
Equity securities (3)	1,169		1,169		—		—
Total	$	365,908	$	53,754	$	312,154	$	—

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

(2)Included in short-term investments on our condensed consolidated balance sheet.

(3)Included in other current assets on our condensed consolidated balance sheet.