Fair Value Measurements

9 Months Ended

Sep. 30, 2019

Assets and Liabilities Measured at Fair Value on a Recurring Basis

We estimate the fair value of our Level 1 financial instruments, which are in active markets, using unadjusted quoted market prices for identical instruments.

We obtain the fair values for our Level 2 financial instruments, which are not in active markets, from a primary professional pricing source that uses quoted market prices for identical or comparable instruments, rather than direct observations of quoted prices in active markets. Fair values obtained from this professional pricing source can also be based on

pricing models whereby all significant observable inputs, including maturity dates, issue dates, settlement dates, benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers or other market-related data, are observable or can be derived from, or corroborated by, observable market data for substantially the full term of the asset. We validate the quoted market prices provided by our primary pricing service by comparing the fair values of our Level 2 marketable securities portfolio balance provided by our primary pricing service against the fair values of our Level 2 marketable securities portfolio balance provided by our investment managers.

The following table summarizes financial assets that we measured at fair value on a recurring basis as of September 30, 2019, classified in accordance with the fair value hierarchy. We sold the equity investment in Tandem Diabetes Care, Inc. that we held as of December 31, 2018 during the first quarter of 2019.



	Fair Value Measurements Using
(In millions)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	256.9	$	45.0	$	—	$	301.9

Debt securities, available for sale:
U.S. government agencies	—		699.0		—		699.0
Commercial paper	—		277.9		—		277.9
Corporate debt	—		57.4		—		57.4
Total debt securities, available for sale	—		1,034.3		—		1,034.3

Total assets measured at fair value on a recurring basis	$	256.9	$	1,079.3	$	—	$	1,336.2

The following table summarizes financial assets that we measured at fair value on a recurring basis as of December 31, 2018, classified in accordance with the fair value hierarchy.



	Fair Value Measurements Using
(In millions)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	199.3	$	66.7	$	—	$	266.0

Equity investment in Tandem Diabetes Care, Inc.	38.0		—		—		38.0

Debt securities, available for sale:
U.S. government agencies	—		173.1		—		173.1
Commercial paper	—		36.2		—		36.2
Corporate debt	—		1.3		—		1.3
Total debt securities, available for sale	—		210.6		—		210.6

Total assets measured at fair value on a recurring basis	$	237.3	$	277.3	$	—	$	514.6

There were no transfers between Level 1 and Level 2 securities during the three and nine months ended September 30, 2019 and 2018. There were no transfers into or out of Level 3 securities during the three and nine months ended September 30, 2019 and 2018.

We hold certain other investments that we do not measure at fair value on a recurring basis. The carrying values of these investments are not significant and we include them in other assets in our consolidated balance sheets. It is impracticable for us to estimate the fair value of these investments on a recurring basis due to the fact that these entities are privately held and limited information is available. We monitor the information that becomes available from time to time and adjust the carrying values of these investments if there are identified events or changes in circumstances that have a significant adverse effect on the fair values.

Fair Value of Senior Convertible Notes

The fair value, based on trading prices (Level 1), of our Senior Convertible Notes were as follows as of the dates indicated.



	Fair Value Measurements Using Level 1
(In millions)	September 30, 2019		December 31, 2018
0.75% Senior Convertible Notes due 2022	$	635.6	$	540.2
0.75% Senior Convertible Notes due 2023	996.5		859.6
Total fair value of outstanding senior convertible notes	$	1,632.1	$	1,399.8

For more information on the carrying values and fair values of our 2022 Notes and 2023 Notes, see Note 5, “Debt.”

Foreign Currency and Derivative Financial Instruments

From time to time we engage in limited hedging transactions to reduce foreign currency risks on certain intercompany balances. The fair values of these derivatives are based on quoted market prices, which are Level 1 inputs. As of September 30, 2019, we had no outstanding currency hedging transactions.