2. FAIR VALUE MEASUREMENTS

Cash Equivalents and Marketable Securities

Cash equivalents, restricted cash and marketable securities by security type at December 31, 2017 were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
(In thousands)	Cost		Gains		Losses			Fair Value
Included in cash and cash equivalents:
Money market funds	$	11,030	$	—	$	—		$	11,030
Commercial paper		2,242		—		—			2,242
Corporate notes		1,750		—		(1	)		1,749
	$	15,022	$	—	$	(1	)	$	15,021
Restricted cash:
Certificate of deposit	$	268	$	—	$	—		$	268
Marketable securities:
Government-sponsored enterprise securities (due in less than one year)	$	12,500	$	—	$	(40	)	$	12,460
Commercial paper (due in less than one year)		10,928		4		(1	)		10,931
Corporate notes (due in less than one year)		55,067		—		(107	)		54,960
Corporate notes (due in one to two years)		14,303		—		(62	)		14,241
	$	92,798	$	4	$	(210	)	$	92,592

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

			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
(In thousands)	Cost		Gains		Losses			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

2. FAIR VALUE MEASUREMENTS (Continued)

Cash equivalents and marketable securities with unrealized losses at December 31, 2017 and 2016 were as follows:

	Less Than 12 Months					12 Months or Greater					Total
			Gross					Gross					Gross
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
(In thousands)	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
As of December 31, 2017:
Government-sponsored enterprise securities (due in less than one year)	$	—	$	—		$	12,460	$	(40	)	$	12,460	$	(40	)
Commercial paper (due in less than one year)		7,717		(1	)		—		—			7,717		(1	)
Corporate notes (due in less than one year)		55,210		(106	)		1,499		(2	)		56,709		(108	)
Corporate notes (due in one to two years)		14,241		(62	)		—		—			14,241		(62	)
	$	77,168	$	(169	)	$	13,959	$	(42	)	$	91,127	$	(211	)
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	)

The gross unrealized losses related to government‑sponsored enterprise securities, commercial paper and corporate notes as of December 31, 2017 and 2016 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, 2017 and 2016 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

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.

2. FAIR VALUE MEASUREMENTS (Continued)

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.

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.

The following table presents information about our financial instruments that are measured at fair value on a recurring basis as of December 31, 2017 and 2016 and indicates the fair value category assigned.

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
As of December 31, 2017:
Money market funds⁽¹⁾	$	11,030	$	—	$	—	$	11,030
Government-sponsored enterprise securities⁽²⁾		—		12,460		—		12,460
Commercial paper⁽¹⁾⁽²⁾		—		13,173		—		13,173
Corporate notes⁽^1)(2)(3)		—		70,950		—		70,950
Total	$	11,030	$	96,583	$	—	$	107,613
As of December 31, 2016:
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

(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.

Cost Method Investment

In December 2007, we granted a license to our hTERT technology for use in human diagnostics to Sienna Cancer Diagnostics Limited, or Sienna, which was a privately held company in Australia. In connection with the license, we received 13,842,625 ordinary shares in Sienna which we recorded at a zero cost basis under the cost method of accounting. On August 3, 2017, Sienna became a publicly traded company on the Australian Securities Exchange Limited, or ASX, under the ticker symbol SDX. Since our shares are subject to a 24-month trading restriction from the effective date of Sienna’s listing on the ASX, we account for our investment in Sienna under the cost method of accounting since there is no readily determinable fair value for our shares, and such shares do not meet the definition of a marketable security. With the adoption of ASU 2016-01 and ASU 2018-03 in 2018, the method in which we account for our shares of Sienna will change. For additional information on ASU 2016-01 and ASU 2018-03, see the section entitled “Recent Accounting Pronouncements Not Yet Effective” in Note 1 on Organization and Summary of Significant Accounting Policies.

2. FAIR VALUE MEASUREMENTS (Continued)

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.