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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2016
Fair Value Disclosures [Abstract] |
Fair Value Measurements | 3. Fair Value Measurements Financial assets and liabilities are recorded at fair value. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows: Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2—Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. In determining fair value, the Company utilizes quoted market prices, broker or dealer quotation, or valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. The following table presents the fair value of the Company’s financial assets and liabilities determined using the inputs defined above (amounts in thousands).
|  | September 30, 2016 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 95,122 |  |  | $ | — |  |  | $ | — |  |  | $ | 95,122 |
Corporate bonds |  |  | — |  |  |  | 600 |  |  |  | — |  |  |  | 600 |
Commercial paper |  |  | — |  |  |  | 1,899 |  |  |  | — |  |  |  | 1,899 |
Total financial assets |  | $ | 95,122 |  |  | $ | 2,499 |  |  | $ | — |  |  | $ | 97,621 |
|  | December 31, 2015 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 2,136 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,136 |
Corporate bonds |  |  | — |  |  |  | 7,368 |  |  |  | — |  |  |  | 7,368 |
Commercial paper |  |  | — |  |  |  | 500 |  |  |  | — |  |  |  | 500 |
Total financial assets |  | $ | 2,136 |  |  | $ | 7,868 |  |  | $ | — |  |  | $ | 10,004 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Redeemable convertible preferred stock tranche liability |  | $ | — |  |  | $ | — |  |  | $ | 1,643 |  |  | $ | 1,643 |
Redeemable convertible preferred stock warrant liability |  |  | — |  |  |  | — |  |  |  | 480 |  |  |  | 480 |
Total financial liabilities |  | $ | — |  |  | $ | — |  |  | $ | 2,123 |  |  | $ | 2,123 |
The corporate bonds and commercial paper are classified as Level 2 as they were valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Level 3 instruments are valued based on unobservable inputs that are supported by little or no market activity and reflect the Company’s assumptions in measuring fair value. The fair value measurements of the redeemable convertible preferred stock tranche liability and the redeemable convertible preferred stock warrant liability were based on significant inputs not observed in the market and thus represent a Level 3 measurement. The redeemable convertible preferred stock tranche liability stems from the initial sale of the Company’s Series C redeemable convertible preferred stock wherein the Company was obligated to sell additional shares in subsequent closings contingent upon a majority of the stockholders of the outstanding redeemable convertible preferred stock and/or the achievement of certain development milestones. The subsequent closings were deemed to be freestanding financial instruments that were at the option of the holders. The Company estimated the fair value of this liability using a one-step binomial lattice model in combination with the Option Pricing Model. The change in fair value was recognized as a gain or loss in the condensed consolidated statements of operations. See Note 10 for further discussion on the redeemable convertible preferred stock tranche liability and related valuations. The determination of the fair value of the redeemable convertible preferred stock warrant liability is discussed in Note 8. Generally, increases or decreases in the fair value of the underlying redeemable convertible preferred stock would result in a directionally similar impact in the fair value measurement of the warrant liability. The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial instruments as follows (in thousands):
Redeemable Convertible Preferred Stock Tranche Liability: |  |  |  |
Balance at December 31, 2015 |  | $ | 1,643 |
Change in fair value upon revaluation |  |  | 4,194 |
Settlement of redeemable convertible preferred stock tranche liability due to the issuance of Series C redeemable convertible preferred stock |  |  | (5,837 | )
Balance at September 30, 2016 |  | $ | — |
Redeemable Convertible Preferred Stock Warrant Liability: |  |  |  |
Balance at December 31, 2015 |  | $ | 480 |
Change in fair value upon revaluation |  |  | 525 |
Reclassification of redeemable convertible preferred stock warrant liability to redeemable convertible preferred stock |  |  | (1,005 | )
Balance at September 30, 2016 |  | $ | — |

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- 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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13433-108611 + Details
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