XML 16 R9.htm IDEA: XBRL DOCUMENT v3.2.0.727
Fair value of financial instruments and marketable securities
 6 Months Ended
Jun. 30, 2015
Fair value of financial instruments and marketable securities  
Fair value of financial instruments and marketable securities

 

3.Fair value of financial instruments and marketable securities

 

The Company follows the fair value measurement rules, which provides guidance on the use of fair value in accounting and disclosure for assets and liabilities when such accounting and disclosure is called for by other accounting literature. These rules establish a fair value hierarchy for inputs to be used to measure fair value of financial assets and liabilities. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels: Level 1 (highest priority), Level 2, and Level 3 (lowest priority).

 

·

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the balance sheet date.

 

·

Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

·

Level 3—Inputs are unobservable and reflect the Company’s assumptions as to what market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available.

 

Cash equivalents are reflected in the accompanying financial statements at fair value. The carrying amount of grant and collaboration receivables, accounts payable and accrued expenses, and debt approximates fair value due to the short-term nature of those instruments.

 

Fair value of certain marketable securities is based upon market prices using quoted prices in active markets for identical assets quoted on the last day of the period. 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 above for the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014:

 

 

 

June 30, 2015

 

 

 

Total

 

Quoted prices
in active
markets for
identical assets
(level 1)

 

Significant
other
observable
inputs
(level 2)

 

Significant
unobservable
inputs
(level 3)

 

Marketable securities

 

$
225,999 

 

$

—

 

$
225,999 

 

$

—

 

Warrant liability

 
116 

 

—

 

—

 
116 

 

 

 

 

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 

 

 

The following is a summary of marketable securities accounted for as available-for-sale securities at June 30, 2015 and December 31, 2014:

 

 

 

June 30, 2015

 

 

 

Amortized

 

Gross Unrealized

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

Commercial paper

 

$
19,093

 

$
7

 

$

—

 

$
19,100

 

Corporate debt securities

 
171,867

 
17

 
(492

)
171,392

 

Government obligations

 
35,525

 
18

 
(36

)
35,507

 

 

 

 

 

 

 

 

 

 

 

 

 

$
226,485

 

$
42

 

$
(528

)

$
225,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

Amortized

 

Gross Unrealized

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

Corporate debt securities

 

$
230,379

 

$
80

 

$
(428

)

$
230,031

 

Government obligations

 
35,501

 
7

 
(46

)
35,462

 

 

 

 

 

 

 

 

 

 

 

 

 

$
265,880

 

$
87

 

$
(474

)

$
265,493

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At June 30, 2015 and 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.

 

Marketable securities on the balance sheet at June 30, 2015 and December 31, 2014 mature as follows:

 

 

 

June 30, 2015

 

 

 

Less Than
12 Months

 

More Than
12 Months

 

Commercial paper

 

$
19,100 

 

$

—

 

Corporate debt securities

 
129,763 

 
41,629 

 

Government obligations

 
17,884 

 
17,623 

 

 

 

 

 

 

 

Total Marketable securities

 

$
166,747 

 

$
59,252 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

Less Than
12 Months

 

More Than
12 Months

 

Corporate debt securities

 

$
157,758 

 

$
72,273 

 

Government obligations

 
6,003 

 
29,459 

 

 

 

 

 

 

 

Total Marketable securities

 

$
163,761 

 

$
101,732 

 

 

 

 

 

 

 

 

 

 

The Company classifies all of its securities as current as they are all available for sale and are available for current operations.

 

Level 3 valuation

 

The warrant liability is classified in Other long-term liabilities on the Company’s consolidated balance sheets. 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), net on the Company’s consolidated statements 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 period ended June 30, 2015:

 

 

 

Level 3 assets

 

Beginning balance as of December 31, 2014

 

$
188

 

Change in fair value of warrant liability

 
(72

)

 

 

 

 

Ending balance as of June 30, 2015

 

$
116

 

 

 

 

 

 

 

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 stock fair 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 June 30, 2015 include (i) volatility (69%—72%), (ii) risk free interest rate (0.64%—1.32%), (iii) strike price ($128.00-$2,520.00), (iv) fair value of common stock ($48.13), and (v) expected life (1.96—4.23 years). 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 (2.50—4.70 years). See Note 6 for a description of the warrants issued in connection with the convertible notes.