Fair value of financial instruments and investments

12 Months Ended

Dec. 31, 2014

Fair value of financial instruments and investments

Fair value of financial instruments and investments

3. Fair value of financial instruments and investments

Fair value of certain investments is based upon market prices using quoted prices in active markets for identical assets quoted on the last day of the year. In establishing the estimated fair value of the remaining investments, the Company used the fair value as determined by its investment advisors using observable inputs other than quoted prices.

The Company reviews its investments on a periodic basis for other-than-temporary impairments. This review is subjective, as it requires management to evaluate whether an event or change in circumstances has occurred in that period that may have a significant adverse effect on the fair value of the investment.

The following represents the fair value using the hierarchy described in Note 2 for the Company's financial assets and liabilities that are required to be measured at fair value on a recurring basis as of December 31, 2014 and 2013:

	December 31, 2014
	Total		Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)
Marketable securities	$	265,493	$	—	$	265,493	$	—
Warrant liability	$	188	$	—	$	—	$	188

	December 31, 2013
	Total		Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)
Marketable securities	$	127,053	$	—	$	127,053	$	—
Warrant liability	$	58	$	—	$	—	$	58

The Company uses the market approach to measure fair value for its financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The Company's marketable securities investments classified as Level 2 primarily utilize broker to value these securities. No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the year ended December 31, 2014.

The following is a summary of marketable securities accounted for as available-for-sale securities at December 31, 2014:

	December 31, 2014
			Gross Unrealized
	Amortized Cost		Gross Unrealized					Fair Value
	Amortized Cost		Gains		Losses			Fair Value
Corporate debt securities	$	230,379	$	80	$	(428	)	$	230,031
Government obligations		35,501		7		(46	)		35,462

	$	265,880	$	87	$	(474	)	$	265,493

	December 31, 2013
			Gross Unrealized
	Amortized Cost		Gross Unrealized					Fair Value
	Amortized Cost		Gains		Losses			Fair Value
Commercial paper	$	14,994	$	4	$	—		$	14,998
Corporate debt securities		111,989		97		(31	)		112,055

	$	126,983	$	101	$	(31	)	$	127,053

Unrealized gains and losses are reported as a component of accumulated other comprehensive (loss) income in stockholders' equity. During the year ended December 31, 2014, the Company did not have any realized gains/losses from the sale of marketable securities. The cost of securities sold is based on the specific identification method. The Company evaluates investments with unrealized losses to determine if the losses are other than temporary. At December 31, 2014, the Company held securities with an unrealized loss position that were not considered to be other-than-temporarily impaired as the Company has the ability to hold such investments until recovery of their fair value. In addition, the Company considered the financial condition, credit ratings and near-term prospects of the issuers, and the magnitude of the losses as compared to the cost and the length of time the investments have been in an unrealized loss position when determining if the losses are other than temporary.

Marketable securities on the balance sheet at December 31, 2014 mature as follows:

	December 31, 2014
	Less Than 12 Months		More Than 12 Months
U.S. corporate debt securities	$	157,758	$	72,273
Government Obligations		6,003		29,459

Total Marketable securities	$	163,761	$	101,732

Marketable securities on the balance sheet at December 31, 2013 matured as follows:

	December 31, 2013
	Less Than 12 Months		More Than 12 Months
Commercial paper	$	14,998	$	—
U.S. corporate debt securities		54,159		57,896

Total Marketable securities	$	69,157	$	57,896

Level 3 valuation

The warrant liability is classified in Other long-term liabilities on the Company's balance sheet. The warrant liability is marked-to-market each reporting period with the change in fair value recorded as a gain or loss within Other income/(expense) on the Company's statement of operations until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument. The fair value of the warrant liability is determined at each reporting period by utilizing the Black-Scholes option pricing model.

The table presented below is a summary of changes in the fair value of the Company's Level 3 valuation for warrant liability for the years ended December 31, 2014 and 2013:

	Level 3 assets
Beginning balance January 1, 2013	$	96
Change in fair value of warrant liability		(38	)

Ending balance as of December 31, 2013	$	58
Change in fair value of warrant liability		130

Ending balance as of December 31, 2014	$	188

Fair value of the warrant liability is estimated using an option-pricing model, which includes variables such as the expected volatility based on guideline public companies, the preferred stock value, and the estimated time to a liquidity event. The significant assumptions used in preparing the option pricing model for valuing the Company's warrants as of December 31, 2014 include (i) volatility (68-70%), (ii) risk free interest rate (0.89%-1.65%), (iii) strike price ($128.00-$2,520.00), (iv) fair value of common stock ($51.77) and (v) expected life (2.5-4.7 years).The significant assumptions used in preparing the option pricing model for valuing the Company's warrants as of December 31, 2013 include (i) volatility (61-89%), (ii) risk free interest rate (0.07%-2.1%), (iii) strike price ($128.00-$2,520.00), (iv) fair value of common stock($16.97) and (v) expected life (0.3-5.7 years).

- 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.

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