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EQUITY AND LONG-TERM INVESTMENTS AND FAIR VALUE MEASUREMENTS | 12 Months Ended
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Dec. 31, 2022
Fair Value Disclosures [Abstract] |
EQUITY AND LONG-TERM INVESTMENTS AND FAIR VALUE MEASUREMENTS | 6. EQUITY AND LONG-TERM INVESTMENTS AND FAIR VALUE MEASUREMENTS Equity Method Investment in Armata During the first quarter of 2020, Innoviva acquired 8,710,800 shares of common stock as well as warrants to purchase 8,710,800 additional shares of common stock of Armata Pharmaceuticals, Inc. (“Armata”) for approximately $25.0 million in cash. Armata is a clinical stage biotechnology company focused on precisely targeted bacteriophage therapeutics for antibiotic-resistant infections. During the first quarter of 2021, ISO entered into a securities purchase agreement with Armata to acquire 6,153,847 shares of Armata common stock and warrants to purchase 6,153,847 additional shares of Armata common stock for approximately $20.0 million. Armata also entered into a voting agreement with the Company and ISO, pursuant to which the Company and ISO agreed not to vote or take any action by written consent with respect to any common shares held by the Company and ISO that represent, in the aggregate, more than 49.5% of the total number of shares of Armata’s common stock for voting on the matters related to election or removal of Armata’s board members. The voting agreement will expire the earlier of the second anniversary of the agreement effective date and approval by the FDA of any of Armata’s product candidates for marketing and commercial distribution. During the fourth quarter of 2021, ISO also purchased an additional 1,212,122 shares of Armata common stock for approximately $4.0 million. On February 9, 2022, ISO entered into a securities purchase agreement with Armata to acquire 9,000,000 shares of Armata common stock and warrants to purchase 4,500,000 additional shares of common stock with an exercise price of $5.00 per share for $45.0 million. The investment closed in two tranches on February 9, 2022 and March 31, 2022. The investment is intended to aid Armata in advancing its clinical pipeline and strengthening its bacteriophage platform. On February 9, 2022, Armata also entered a second amended and restated voting agreement with the Company and ISO, pursuant to which the Company and ISO agreed not to vote or take any action by written consent with respect to any common shares held by the Company and ISO that represent, in the aggregate, more than 49.5% of the total number of shares of Armata’s common stock for voting on the matters related to election or removal of Armata’s board members or amend the bylaws of Armata to reduce the maximum number of directors or set the number of directors who may serve on the board of Armata. The voting agreement will expire the earlier of the second anniversary of the agreement effective date and approval by the FDA of any of Armata’s product candidates for marketing and commercial distribution. In addition, as of February 9, 2022, Armata entered into an amended and restated investor rights agreement with the Company and ISO, pursuant to which for as long as the Company and ISO hold at least 12.5% of the outstanding shares of Armata’s common stock on a fully-diluted, the Company and ISO shall have the right to designate two directors to Armata’s board of directors, and for so long as the Company and ISO hold at least 8%, but less than 12.5%, of the outstanding shares of Armata’s common stock on a fully-diluted basis, the Company and ISO shall have the right to designate one director to Armata’s board of directors, subject to certain conditions and qualifications set forth in the amended and restated investor rights agreement. As of December 31, 2022, three of the eight members of Armata’s board of directors are also members of the board of directors of Innoviva. As of December 31, 2022 and 2021, we owned approximately 69.4% an d 59.3%, respectively, of Armata’s common stock. The investments in Armata provide Innoviva and ISO the ability to have significant influence, but not control over Armata’s operations. Armata’s business and affairs are managed under the direction of its board of directors, which Innoviva and ISO do not control. Based on our evaluation, we determined that Armata is a VIE, but Innoviva and ISO are not the primary beneficiary of the VIE. We have not provided financial or other support that we were not previously contractually required to provide during the periods presented. Our maximum exposure to loss is equal to the amount we invested in the entity. We account for both Armata’s common stock and warrants under the equity method using the fair value option. The fair value of Armata’s common stock is measured based on its closing market price. The warrants purchased in 2020, 2021 and 2022 have an exercise price of $2.87, $3.25 and $5.00 per share, respectively. All warrants are exercisable immediately within five years from the issuance date of the warrants and include a cashless exercise option. We use the Black-Scholes-Merton pricing model to estimate the fair value of these warrants with the following input assumptions: Armata’s closing market price on the valuation date, the risk-free interest rate computed based on the U.S. Treasury yield, the remaining contractual term as the expected term, and the expected stock price volatility calculated based on the historical volatility of the common stock of Armata and its peer companies. As of Dece mber 31, 2022, the fair values of our holdings of Armata common stock and warrants were estimated at $31.1 million and $8.1 million, respectively. As of December 31, 2021, the fair values of our holdings of Armata common stock and warrants were estimated at $88.1 million and $58.6 million, respectively. The total fair value of both financial instruments in the amount of $39.2 million and $146.7 million was recorded as equity and long-term investments on the consolidated balance sheets as of December 31, 2022 and 2021, respectively. We recorded $152.5 million unrealized losses and $78.7 million unrealized gains as changes in fair values of equity method investments, net, on the consolidated statements of income for the years ended December 31, 2022 and 2021, respectively. The summarized financial information, including the portion we do not own, is presented for Armata on a one quarter lag regardless of the date of our investments as follows: Balance Sheet Information
|  | September 30, |
(In thousands) |  | 2022 |  |  | 2021 |
Current assets |  | $ | 33,245 |  |  | $ | 14,178 |
Noncurrent assets |  | $ | 59,636 |  |  | $ | 28,493 |
Current liabilities |  | $ | 7,004 |  |  | $ | 5,254 |
Noncurrent liabilities |  | $ | 40,300 |  |  | $ | 13,662 |
Income Statement Information
|  | Twelve Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(In thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
Revenue |  | $ | 5,446 |  |  | $ | 3,989 |  |  | $ | 319 |
Loss from operations |  | $ | (32,666 | ) |  | $ | (24,227 | ) |  | $ | (15,134 | )
Net loss |  | $ | (32,650 | ) |  | $ | (23,732 | ) |  | $ | (15,557 | )
Equity Method Investment in Entasis Prior to the consolidation of Entasis’ financial position and results of operations in February 2022, we accounted for Entasis as an equity method investment. Refer to Note 5, “Consolidated Entities and Acquisitions”, for more information. The summarized financial information, including the portion we did not own, is presented for Entasis on a one quarter lag regardless of the date of our investments as follows: Balance Sheet Information
(In thousands) |  | September 30, 2021 |
Current assets |  | $ | 49,746 |
Noncurrent assets |  | $ | 1,020 |
Current liabilities |  | $ | 9,348 |
Noncurrent liabilities |  | $ | 183 |
Income Statement Information
|  | Twelve Months Ended September 30, |  |  | Six Months Ended September 30, |
(In thousands) |  | 2021 |  |  | 2020 |
Loss from operations |  | $ | (52,323 | ) |  | $ | (26,080 | )
Net loss |  | $ | (125,413 | ) |  | $ | (24,529 | )
Equity Investment in InCarda During the third quarter of 2020, TRC purchased 20,469,432 shares of Series C preferred stock and a warrant to purchase 5,117,358 additional shares of Series C preferred stock of InCarda Therapeutics, Inc. (“InCarda”) (the “InCarda 2020 Warrant”) for $15.8 million, which included $0.8 million of transaction costs. InCarda is a privately held biopharmaceutical company focused on developing inhaled therapies for cardiovascular diseases. The investment is intended to fund the ongoing clinical development of InRhythmTM (flecainide for inhalation), InCarda’s lead program, for the treatment of a recent-onset episode of paroxysmal atrial fibrillation. On July 20, 2022, under the terms of the TRC Equity Purchase Agreement, TRC transferred to ITH all of TRC’s ownership interests and investments in InCarda. ITH has the right to designate one member to InCarda’s board of directors. As of December 31, 2022, one of InCarda’s eight board members was designated by ITH. The InCarda 2020 Warrant is exercisable immediately with an exercise price of $0.7328 per share. In September 2021, TRC and InCarda entered into an amendment to extend the expiration date of the InCarda 2020 Warrant from October 6, 2021 to March 31, 2022. On March 9, 2022, TRC and InCarda entered into an amendment to further extend the expiration date of the InCarda 2020 Warrant from March 31, 2022 to March 31, 2023. The InCarda 2020 Warrant is recorded at fair value and subject to remeasurement at each balance sheet date. On March 9, 2022, TRC entered into a Note and Warrant Purchase Agreement (the “InCarda Agreement”) with InCarda to acquire a convertible promissory note (the “InCarda Convertible Note”) and warrants (the “InCarda 2022 Warrant”) for $0.7 million. The InCarda Convertible Note bears an annual interest rate of 6% and will convert into Series D preferred stock upon a qualified financing, non-qualified financing, or maturity conversion. A qualified financing is defined as the first issuance or series of related issuances by InCarda of its equity securities following March 9, 2022 from which InCarda receives immediately available gross proceeds of at least $10.0 million (excluding the aggregate amount of any notes converted into equity securities pursuant to the conversion of notes or any other debt securities converted into equity securities) (the “Qualified Financing Amount”). A non-qualified financing is defined as the first issuance or series of related issuances by InCarda of its equity securities following March 9, 2022 from which InCarda receives immediately available gross proceeds of less than the Qualified Financing Amount. The InCarda 2022 Warrant entitles TRC to purchase a number of shares of equity securities equal to 100% of the principal amount of the InCarda Convertible Note divided by the number of shares issued in InCarda’s next equity financing, which is defined as the earliest to occur of specific financing events, including capital raises through public offerings. The InCarda 2022 Warrant expires on March 9, 2027. The InCarda Convertible Note and InCarda 2022 Warrant are measured at fair value. On June 15, 2022, the principal amount and the accrued interest of the InCarda Convertible Note were converted into equity securities. In addition, TRC participated in InCarda’s Series D preferred stock financing by investing $2.3 million. In connection with the new round of financing, InCarda recapitalized its equity structure resulting in TRC owning 4,093,886 shares of InCarda’s common stock, 37,350 shares of its Series A-1 preferred stock, 20,469,432 shares of its Series C preferred stock, 8,771,780 shares of its Series D-1 preferred stock, 3,369,802 shares of its Series D-2 preferred stock, a warrant to purchase 5,117,358 shares of its Series C preferred stock at $0.73 per share and a warrant to purchase 2,490,033 shares of its Series D-1 preferred stock at $0.20 per share. As of December 31, 2022 and 2021, we held 9.0% and 13.0% of InCarda equity ownership, respectively. Our investment in InCarda does not provide us with the ability to control or have significant influence over InCarda’s operations. Based on our evaluation, we determined that InCarda is a VIE, but we are not the primary beneficiary of the VIE. We have not provided financial or other support that we were not previously contractually required to provide during the periods presented. Our maximum exposure to loss is equal to the amount we invested in the entity. We account for our investments in InCarda under the measurement alternative. Under the measurement alternative, the equity investment is initially recorded at its allocated cost, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the same issuer. Due to InCarda’s equity recapitalization in the second quarter of 2022, TRC reassessed the value of its investments in InCarda using the Option Pricing Model Backsolve valuation methodology. Key assumptions used in the valuation model include an expected holding period of two years, a risk free interest rate of 3.2%, a dividend yield of 0.0% and an estimated volatility of 122.0%. The estimated volatility is calculated based on the historical volatility of a selected peer group of public companies comparable to InCarda. We recognized an impairment charge of $9.0 million as a result of the valuation. There was no impairment or other change to the value of our investments in InCarda as of December 31, 2021. As of December 31, 2022, we recorded $6.8 million in fair value of InCarda’s Series C preferred stock and $0.6 million in fair value of Series C warrants and Series D warrants (the “InCarda Preferred Stock Warrants”). As of December 31, 2022, we recognized $3.2 million for InCarda’s Series D-1 preferred stock, Series D-2 preferred stock, and common stock using the measurement alternative. As of December 31, 2021, we recorded $0.4 million in fair value of the InCarda 2020 Warrant. As of December 31, 2021, we recognized $15.8 million for the investment in InCarda’s Series C preferred stock using the measurement alternative. We recorded $8.7 million and $0.7 million unrealized loss as changes in fair values of other equity and long-term investments, net, on the consolidated statements of income for the years ended December 31, 2022 and 2021, respectively. Equity Investment in ImaginAb On March 18, 2021, TRC entered into a securities purchase agreement with ImaginAb, Inc. (“ImaginAb”) to purchase 4,051,724 shares of ImaginAb Series C preferred stock for $4.7 million. On the same day, TRC also entered into a securities purchase agreement with one of ImaginAb’s common stockholders to purchase 4,097,157 shares of ImaginAb common stock for $1.3 million. ImaginAb is a privately held biotechnology company focused on clinically managing cancer and autoimmune diseases via molecular imaging. $0.4 million was incurred for investment due diligence costs and execution and recorded as part of the equity and long-term investment on the consolidated balance sheets. On July 20, 2022, under the terms of the TRC Equity Purchase Agreement, TRC transferred to ITH all of TRC’s ownership interests and investments in ImaginAb. As of December 31, 2022, one of ImaginAb’s six board members is designated by ITH, and ITH held 12.7% of ImaginAb’s equity ownership. As of December 31, 2021, TRC held 14.5% of ImaginAb equity ownership. Our investment in ImaginAb does not provide us with the ability to control or have significant influence over ImaginAb’s operations. Based on our evaluation, we determined that ImaginAb is a VIE, but we are not the primary beneficiary of the VIE. We have not provided financial or other support that we were not previously contractually required to provide during the periods presented. Our maximum exposure to loss is equal to the amount we invested in the entity. Because ImaginAb’s equity securities are not publicly traded and do not have a readily determinable fair value, we account for our investment in ImaginAb’s Series C preferred stock and common stock using the measurement alternative. Under the measurement alternative, the equity investment is initially recorded at its allocated cost, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the same issuer. As of December 31, 2022 and 2021, $6.4 million was recorded as equity and long-term investments on the consolidated balance sheets and there was no change to the fair value of our investment in ImaginAb. Convertible Promissory Note in Gate Neurosciences On November 24, 2021, TRC entered into a Convertible Promissory Note Purchase Agreement with Gate Neurosciences, Inc. (“Gate”) to acquire a convertible promissory note (the “Convertible Note”) with a principal amount of $15.0 million. Gate is a privately held biopharmaceutical company focused on developing the next generation of targeted nervous system therapies, leveraging precision medicine approaches to develop breakthrough drugs for psychiatric and neurologic diseases. The investment is intended to fund its ongoing development and research. The Convertible Note bears an annual interest rate of 8% and will convert into common stock shares upon a qualified event or into shares of shadow preferred stock (“Shadow Preferred”) upon a qualified financing. A qualifying event can be a qualified initial price offering, a qualified merger, or a merger with a special-purpose acquisition company (“SPAC”). Shadow Preferred means preferred stock having identical rights, preferences and restrictions as the preferred stock that would be issued in a qualified financing. The number of common stock shares to be issued in a qualified event shall be equal to the amount due on the conversion date divided by the lesser of a capped conversion price (the “Capped Conversion Price”) and the qualified event price (the “Qualified Event Price”). The Capped Conversion Price is calculated as $50.0 million divided by the number of common stock outstanding at such time on a fully diluted basis. The Qualified Event Price is the price per share determined by the qualified event. A qualified financing is a sale or series of sales of preferred stock where (i) at least 50 percent of counterparties are not existing shareholders, (ii) net proceeds to Gate are at least $35.0 million, and (iii) the stated or implied equity valuation of Gate is at least $80.0 million. On July 20, 2022, under the terms of the TRC Equity Purchase Agreement, TRC transferred to ITH its debt investment in Gate. We have accounted for the Gate Convertible Note as a trading security, measured at fair value using a Monte Carlo simulation model with the probability of certain qualified events and the assumptions of equity value of Gate, risk-free rate, expected stock price, volatility of its peer companies, and the time until a financing is raised. As of December 31, 2022 and 2021, the fair value of the Gate Convertible Note was estimated at $15.7 million and $15.1 million, respectively, and recorded as equity and long-term investments on the consolidated balance sheets. We recorded $0.6 million of unrealized gain and $0.8 million of unrealized loss as changes in fair values of other equity and long-term investments, net, on the consolidated statements of income for the years ended December 31, 2022 and 2021, respectively. Equity Investment in Nanolive On February 18, 2022, TRC entered into an investment and shareholders agreement with Nanolive SA (“Nanolive”) to purchase 18,750,000 shares of Nanolive Series C preferred stock for $9.8 million (equivalent to 9.0 million CHF). Nanolive SA is a Swiss privately held life sciences company focused on developing breakthrough imaging solutions that accelerate research in growth industries such as drug discovery and cell therapy. $0.7 million was incurred for investment due diligence costs and execution and recorded as part of the equity and long-term investment on the consolidated balance sheets. On July 20, 2022, under the terms of the TRC Equity Purchase Agreement, TRC transferred to ITH all of TRC’s ownership interests and investments in Nanolive. ITH has the right to designate one member to Nanolive’s board. ITH also has the right to designate another member, who will be mutually acceptable to ITH and another majority common stockholder, to Nanolive’s board. As of December 31, 2022, one of Innoviva designees is serving on Nanolive’s seven-member board. As of December 31, 2022, we held 15.5% of Nanolive equity ownership. Our investment in Nanolive does not provide us with the ability to control or have significant influence over Nanolive’s operations. Based on our evaluation, we determined that Nanolive is a VIE, but we are not the primary beneficiary of the VIE. We have not provided financial or other support that we were not previously contractually required to provide during the periods presented. Our maximum exposure to loss is equal to the amount we invested in the entity. Because Nanolive’s equity securities are not publicly traded and do not have a readily determinable fair value, we account for our investment in Nanolive’s Series C preferred stock using the measurement alternative. As of December 31, 2022, $10.6 million was recorded as equity and long-term investments on the consolidated balance sheets and there was no change to the fair value of our investment. Available-for-Sale Securities The estimated fair value of available-for-sale securities is based on quoted market prices for these or similar investments that were based on prices obtained from a commercial pricing service. Available-for-sale securities are summarized below:
|  | December 31, 2022 |
|  |  |  |  | Gross |  |  | Gross |  |  |  |
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Estimated |
(In thousands) |  | Cost |  |  | Gains |  |  | Losses |  |  | Fair Value |
Money market funds(1) |  | $ | 263,469 |  |  | $ | — |  |  | $ | — |  |  | $ | 263,469 |
Total |  | $ | 263,469 |  |  | $ | — |  |  | $ | — |  |  | $ | 263,469 |
(1) Money market funds are included in cash and cash equivalents on the consolidated balance sheets.
|  | December 31, 2021 |
|  |  |  |  | Gross |  |  | Gross |  |  |  |
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Estimated |
(In thousands) |  | Cost |  |  | Gains |  |  | Losses |  |  | Fair Value |
Money market funds(1) |  | $ | 145,132 |  |  | $ | — |  |  | $ | — |  |  | $ | 145,132 |
Total |  | $ | 145,132 |  |  | $ | — |  |  | $ | — |  |  | $ | 145,132 |
(1) Money market funds are included in cash and cash equivalents on the consolidated balance sheets. As of December 31, 2022, all investments were money market funds, and there was no credit loss recognized. Fair Value Measurements Our available-for-sale securities, equity and long-term investments are measured at fair value on a recurring basis and our debt is carried at amortized cost basis. The estimated fair values were as follows:
|  | Estimated Fair Value Measurements as of December 31, 2022 Using: |
|  | Quoted Price in Active Markets for |  |  | Significant Other |  |  | Significant |  |  |  |
|  | Identical |  |  | Observable |  |  | Unobservable |  |  |  |
Types of Instruments |  | Assets |  |  | Inputs |  |  | Inputs |  |  |  |
(In thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 263,469 |  |  | $ | — |  |  | $ | — |  |  | $ | 263,469 |
Investments held by ISP Fund LP (1) |  |  | 265,982 |  |  |  | — |  |  |  | 54,578 |  |  |  | 320,560 |
Equity investment - Armata Common Stock |  |  | 31,095 |  |  |  | — |  |  |  | — |  |  |  | 31,095 |
Equity investment - Armata Warrants |  |  | — |  |  |  | 8,059 |  |  |  | — |  |  |  | 8,059 |
Equity investment - InCarda Warrants |  |  | — |  |  |  | — |  |  |  | 605 |  |  |  | 605 |
Convertible debt investment - Gate Note |  |  | — |  |  |  | — |  |  |  | 15,700 |  |  |  | 15,700 |
Total assets measured at estimated fair value |  | $ | 560,546 |  |  | $ | 8,059 |  |  | $ | 70,883 |  |  | $ | 639,488 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Debt |  |  |  |  |  |  |  |  |  |  |  |
2023 Notes |  | $ | — |  |  | $ | 96,089 |  |  | $ | — |  |  | $ | 96,089 |
2025 Notes |  |  | — |  |  |  | 197,807 |  |  |  | — |  |  |  | 197,807 |
2028 Notes |  |  | — |  |  |  | 211,768 |  |  |  | — |  |  |  | 211,768 |
Total fair value of debt |  | $ | — |  |  | $ | 505,664 |  |  | $ | — |  |  | $ | 505,664 |
Contingent value rights |  |  | — |  |  |  | — |  |  |  | 595 |  |  |  | 595 |
Total liabilities at estimated fair value |  | $ | — |  |  | $ | 505,664 |  |  | $ | 595 |  |  | $ | 506,259 |
(1) The investments held by ISP Fund LP, consisted of $295.4 million in equity investments, which included private placement positions and convertible notes of $54.6 million, and $25.1 million in money market funds. Our total capital contribution of $300.0 million is subject to a 36-month lock-up period from the date of such capital contributions.
|  | Estimated Fair Value Measurements as of December 31, 2021 Using: |
|  | Quoted Price |  |  |  |  |  |  |  |  |  |
|  | in Active |  |  | Significant |  |  |  |  |  |  |
|  | Markets for |  |  | Other |  |  | Significant |  |  |  |
|  | Identical |  |  | Observable |  |  | Unobservable |  |  |  |
Types of Instruments |  | Assets |  |  | Inputs |  |  | Inputs |  |  |  |
(In thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 145,132 |  |  | $ | — |  |  | $ | — |  |  | $ | 145,132 |
Investments held by ISP Fund LP (1) |  |  | 193,677 |  |  |  | — |  |  |  | 2,068 |  |  |  | 195,745 |
Equity investment - Armata Common Stock |  |  | 88,101 |  |  |  | — |  |  |  | — |  |  |  | 88,101 |
Equity investment - Armata Warrants |  |  | — |  |  |  | 58,595 |  |  |  | — |  |  |  | 58,595 |
Equity investment - Entasis Common Stock |  |  | 62,794 |  |  |  | — |  |  |  | — |  |  |  | 62,794 |
Equity investment - Entasis Warrants |  |  | — |  |  |  | 40,914 |  |  |  | — |  |  |  | 40,914 |
Equity investment - InCarda Warrants |  |  | — |  |  |  | — |  |  |  | 411 |  |  |  | 411 |
Convertible debt investment - Gate Note |  |  | — |  |  |  | — |  |  |  | 15,100 |  |  |  | 15,100 |
Total assets measured at estimated fair value |  | $ | 489,704 |  |  | $ | 99,509 |  |  | $ | 17,579 |  |  | $ | 606,792 |
Debt |  |  |  |  |  |  |  |  |  |  |  |
2023 Notes |  | $ | — |  |  | $ | 261,769 |  |  | $ | — |  |  | $ | 261,769 |
2025 Notes |  |  | — |  |  |  | 234,498 |  |  |  | — |  |  |  | 234,498 |
Total fair value of debt |  | $ | — |  |  | $ | 496,267 |  |  | $ | — |  |  | $ | 496,267 |
(1) The investments held by ISP Fund LP, consisted of $192.2 million equity investments and $3.5 million money market funds, are subject to a 36-month lock-up period from our initial contribution date, December 11, 2020. The fair values of our equity investments in Armata’s and Entasis’s common stock and public traded investments held by ISP Fund LP are based on the quoted prices in active markets and are classified as Level 1 financial instruments. The fair values of the warrants of Armata and Entasis classified within Level 2 are based upon observable inputs that may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications. InCarda’s equity securities, Gate's convertible note, private placement positions and convertible notes held by ISP Fund LP, and contingent value rights are classified as Level 3 financial instruments as these securities are not publicly traded and the assumptions used in the valuation model for valuing these securities are based on significant unobservable and observable inputs including those of publicly traded peer companies. The fair values of our 2023 Notes, 2025 Notes and 2028 Notes are based on recent trading prices of the respective instruments.

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