XML 18 R9.htm IDEA: XBRL DOCUMENT
v3.22.2.2

Fair Value Measurements | 9 Months Ended
--- | ---
Sep. 30, 2022
Fair Value Measurements | 2. Fair Value Measurements The Company uses various valuation approaches in determining the fair value of its assets and liabilities. The Company employs a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:
Level 1 – | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2 – | Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.
Level 3 – | Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair value measurement. 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 September 30, 2022 and December 31, 2021 (amounts in thousands):
|  | As of September 30, 2022 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Money market accounts |  | $ | 408,923 |  |  | $ | — |  |  | $ | — |  |  | $ | 408,923 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Short-term contingent consideration |  | $ | — |  |  | $ | — |  |  | $ | 13,491 |  |  | $ | 13,491 |
Long-term contingent consideration |  | $ | — |  |  | $ | — |  |  | $ | 69,143 |  |  | $ | 69,143 |
|  | As of December 31, 2021 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Money market accounts |  | $ | 460,936 |  |  | $ | — |  |  | $ | — |  |  | $ | 460,936 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Long-term contingent consideration |  | $ | — |  |  | $ | — |  |  | $ | 94,238 |  |  | $ | 94,238 |
Cash and cash equivalents As of September 30, 2022 and December 31, 2021, cash and cash equivalents on the Company's consolidated balance sheets included $408.9 million and $460.9 million, respectively, in money market accounts. These funds are valued on a recurring basis using Level 1 inputs. Contingent Consideration – Earnout On September 20, 2021, the Company completed the acquisition of Avitide, Inc. ("Avitide") (the "Avitide Acquisition"), a privately-held affinity ligand discovery and development company headquartered in Lebanon, New Hampshire. The transaction consisted of upfront payments of $150.0 million, comprised of cash and the Company's common stock, and up to an additional $125.0 million (undiscounted) in contingent consideration for performance-based earnout payments made equally in cash and the Company's common stock over a three-year performance period beginning January 1, 2022 and ending December 31, 2024. See Note 3, "Acquisitions" below for additional information. During 2022, an increase in risk-free interest rates that are used to calculate the discount rate and a minor shift in revenue and volume projections, due to the expected timing of achievement over the three-year performance period resulted in a material change in amounts reported as of September 30, 2022. A reconciliation of the change in the fair value of contingent consideration - earnout is included in the following table (amounts in thousands):
Balance at December 31, 2021 |  | $ | 94,238 |
Decrease in fair value of contingent consideration earnouts |  |  | (11,604 | )
Balance at September 30, 2022 |  | $ | 82,634 |
The recurring Level 3 fair value measurement of our contingent consideration earnout that we expect to be required to settle include the following significant unobservable inputs (amounts in thousands, except percent data):
Contingent Consideration Earnout |  | Fair Value as of September 30, 2022 |  | Valuation Technique |  | Unobservable Input |  | Range |  | Weighted Average(1)
|  |  |  |  |  |  | Probability of |  |  |  |
Commercialization-based |  |  |  |  | Monte Carlo |  | Success |  | 100% |  | 100%
payments |  | $ |  | 28,441 |  | Simulation |  | Earnout Discount Rate |  | 5.4%-6.7% |  | 6.0%
|  |  |  |  |  |  | Volatility |  | 23.7% |  | 23.7%
Revenue and Volume- |  |  |  |  | Monte Carlo |  | Revenue & Volume |  |  |  |
based payments |  | $ |  | 54,193 |  | Simulation |  | Discount Rate |  | 7.7% |  | 7.7%
|  |  |  |  |  |  | Earnout Discount Rate |  | 5.4%-6.7% |  | 6.0%
(1) Unobservable inputs were weighted by the relative fair value of the contingent consideration liability. Fair Value Measured on a Nonrecurring Basis During the three and nine months ended September 30, 2022, there were no re-measurements to the 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 September 30, 2022 and December 31, 2021, the carrying value of the 2019 Notes was $284.2 million and $255.3 million, respectively, net of unamortized discount and issuance costs, and the fair value of the 2019 Notes was $494.6 million and $678.5 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 September 30, 2022. The 2019 Notes are discussed in more detail in Note 7, “Convertible Senior Notes” to this report.

X
- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration