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Fair Value Measurements

3 Months Ended

Mar. 31, 2020

(3)	Fair Value Measurements

Various inputs are used in determining the fair value of the Company’s financial assets and liabilities. These inputs are summarized into the following three broad categories:

Level 1 – quoted prices in active markets for identical securities

Level 2 – other significant observable inputs, including quoted prices for similar securities, interest rates, credit risk, etc.

Level 3 – significant unobservable inputs, including the Company’s own assumptions in determining fair value

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Marketable securities, which consist primarily of corporate and U.S. government agency bonds, are classified as available for sale and fair value does not differ significantly from carrying value as of March 31, 2020 and December 31, 2019. The following table presents information about the Company’s assets and liabilities measured at fair value as of March 31, 2020:

	Level 1		Level 2		Level 3		Total
Assets:
Marketable securities	$	—	$	143,505	$	—	$	143,505
Equity investments		12,257		—		1,969		14,226
Total	$	12,257	$	143,505	$	1,969	$	157,731

The following table presents information about the Company’s assets and liabilities measured at fair value as of December 31, 2019:

	Level 1		Level 2		Level 3		Total
Assets:
Marketable securities	$	—	$	59,844	$	—	$	59,844
Equity investments		14,328		—		108		14,436
Total	$	14,328	$	59,844	$	108	$	74,280

Fair value of the Company’s investment in Morphic, classified as Level 1 in the fair value hierarchy, was determined using the market price of Morphic’s common stock as of the close of trading on March 31, 2020.

Fair value of the Company’s investment in Nimbus, classified as Level 3 in the fair value hierarchy, was determined under the HLBV method, as further described in Note 2, Significant Accounting Policies. Significant unobservable inputs used under the HLBV method include Nimbus’ annual financial statements and the Company’s respective liquidation priority. The following table sets forth changes in fair value of the Company’s Level 3 investments:

	Amount
As of December 31, 2018	$	4,288
Unrealized loss		(626	)
As of March 31, 2019		3,662
Unrealized loss		(3,662	)
As of June 30, 2019		—
Unrealized loss		—
As of September 30, 2019		—
Unrealized gain		108
As of December 31, 2019		108
Cash contributions		2,869
Unrealized loss		(1,008	)
As of March 31, 2020	$	1,969

Unrealized gains and losses arising from changes in fair value of the Company’s equity investments are classified within change in fair value in the condensed consolidated statements of operations. During the three months ended March 31, 2020 and the year ended December 31, 2019 there were no transfers between Level 1, Level 2 and Level 3 investments. See Note 9, Equity Investments, for further information.

- 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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