2. FAIR VALUE MEASUREMENTS

We categorize financial instruments recorded at fair value on our balance sheets based upon the level of judgment associated with inputs used to measure their fair value. The categories are as follows:

		Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
		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.

A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Below is a description of the valuation methodologies used for financial instruments measured at fair value on our balance sheets, including the category for such financial instruments.

Cash Equivalents and Marketable Securities Available-for-Sale

Certificates of deposit and money market funds are categorized as Level 1 within the fair value hierarchy as their fair values are based on quoted prices available in active markets. U.S. government-sponsored enterprise securities, commercial paper and corporate notes are categorized as Level 2 within the fair value hierarchy as their fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.

Cash equivalents, restricted cash and marketable securities by security type at December 31, 2016 were as follows:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Included in cash and cash equivalents:
Money market funds	$	11,193	$	—	$	—		$	11,193


Restricted cash:
Certificate of deposit	$	268	$	—	$	—		$	268


Marketable securities:
Government-sponsored enterprise securities (due in less than one year)	$	5,000	$	—	$	(3	)	$	4,997
Government-sponsored enterprise securities (due in one to two years)		12,500		—		(42	)		12,458
Commercial paper (due in less than one year)		31,024		50		(5	)		31,069
Corporate notes (due in less than one year)		66,012		4		(47	)		65,969
Corporate notes (due in one to two years)		1,506		—		(10	)		1,496

	$	116,042	$	54	$	(107	)	$	115,989

Cash equivalents, restricted cash and marketable securities by security type at December 31, 2015 were as follows:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Included in cash and cash equivalents:
Money market funds	$	4,577	$	—	$	—		$	4,577
Government-sponsored enterprise securities		1,999		—		—			1,999
Commercial paper		7,599		—		—			7,599
Corporate notes		5,002		—		(1	)		5,001

	$	19,177	$	—	$	(1	)	$	19,176


Restricted cash:
Certificate of deposit	$	267	$	—	$	—		$	267


Marketable securities:
Government-sponsored enterprise securities (due in one to two years)	$	10,007	$	—	$	(57	)	$	9,950
Commercial paper (due in less than one year)		27,661		49		(2	)		27,708
Corporate notes (due in less than one year)		64,892		1		(77	)		64,816
Corporate notes (due in one to two years)		22,837		—		(126	)		22,711

	$	125,397	$	50	$	(262	)	$	125,185

Cash equivalents and marketable securities with unrealized losses at December 31, 2016 and 2015 were as follows:

	Less Than 12 Months					12 Months or Greater					Total
(In thousands)	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
As of December 31, 2016:
Government-sponsored enterprise securities (due in less than one year)	$	4,997	$	(3	)	$	—	$	—		$	4,997	$	(3	)
Government-sponsored enterprise securities (due in one to two years)		12,458		(42	)		—		—			12,458		(42	)
Commercial paper (due in less than one year)		8,365		(5	)		—		—			8,365		(5	)
Corporate notes (due in less than one year)		39,218		(37	)		6,944		(10	)		46,162		(47	)
Corporate notes (due in one to two years)		1,496		(10	)		—		—			1,496		(10	)

	$	66,534	$	(97	)	$	6,944	$	(10	)	$	73,478	$	(107	)


As of December 31, 2015:
Government-sponsored enterprise securities (due in one to two years)	$	9,950	$	(57	)	$	—	$	—		$	9,950	$	(57	)
Commercial paper (due in less than one year)		7,834		(2	)		—		—			7,834		(2	)
Corporate notes (due in less than one year)		61,006		(71	)		6,301		(7	)		67,307		(78	)
Corporate notes (due in one to two years)		22,711		(126	)		—		—			22,711		(126	)

	$	101,501	$	(256	)	$	6,301	$	(7	)	$	107,802	$	(263	)

The gross unrealized losses related to government-sponsored enterprise securities, commercial paper and corporate notes as of December 31, 2016 and 2015 were due to changes in interest rates. We determined that the gross unrealized losses on our cash equivalents and marketable securities as of December 31, 2016 and 2015 were temporary in nature. We review our investments quarterly to identify and evaluate whether any investments have indications of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which the fair value has been less than the cost basis and whether we intend to sell the security or whether it is more likely than not that we would be required to sell the security before recovery of the amortized cost basis. We currently do not intend to sell these securities before recovery of their amortized cost bases.

Fair Value on a Recurring Basis

The following table presents information about our financial instruments that are measured at fair value on a recurring basis as of December 31, 2016 and indicates the fair value category assigned.

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market funds(1)	$	11,193	$	—	$	—	$	11,193
Government-sponsored enterprise securities(2)(3)		—		17,455		—		17,455
Commercial paper(2)		—		31,069		—		31,069
Corporate notes(2)(3)		—		67,465		—		67,465

Total	$	11,193	$	115,989	$	—	$	127,182

The following table presents information about our financial instruments that are measured at fair value on a recurring basis as of December 31, 2015 and indicates the fair value category assigned.

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market funds(1)	$	4,577	$	—	$	—	$	4,577
Government-sponsored enterprise securities(1)(3)		—		11,949		—		11,949
Commercial paper(1)(2)		—		35,307		—		35,307
Corporate notes(1)(2)(3)		—		92,528		—		92,528

Total	$	4,577	$	139,784	$	—	$	144,361


(1)	Included in cash and cash equivalents on our balance sheets.
(2)	Included in current portion of marketable securities on our balance sheets.
(3)	Included in noncurrent portion of marketable securities on our balance sheets.

Credit Risk

We currently place our cash, restricted cash, cash equivalents and marketable securities with four financial institutions in the United States. Generally, these deposits may be redeemed upon demand and therefore, bear minimal risk. Deposits with banks may exceed the amount of insurance provided on such deposits. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents and marketable securities. Cash equivalents and marketable securities currently consist of money market funds, U.S. government-sponsored enterprise securities, commercial paper and corporate notes. Our investment policy, approved by the audit committee of our board of directors, limits the amount we may invest in any one type of investment issuer, thereby reducing credit risk concentrations.