XML 31 R9.htm IDEA: XBRL DOCUMENT

FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2020

2. FAIR VALUE MEASUREMENTS

Cash Equivalents and Marketable Securities

Cash equivalents, restricted cash and marketable securities by security type at March 31, 2020 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	$	18,370	$	—	$	—		$	18,370

Restricted cash:
Certificate of deposit	$	270	$	—	$	—		$	270
Marketable securities:
Government-sponsored enterprise securities (due in less than one year)	$	11,504	$	16	$	—		$	11,520
Commercial paper (due in less than one year)		29,028		37		—			29,065
Corporate notes (due in less than one year)		71,422		44		(229	)		71,237
Corporate notes (due in one to two years)		1,021		8		—			1,029
	$	112,975	$	105	$	(229	)	$	112,851

Cash equivalents, restricted cash and marketable securities by security type at December 31, 2019 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	$	6,671	$	—	$	—		$	6,671
Commercial paper		3,990		—		—			3,990
	$	10,661	$	—	$	—		$	10,661
Restricted cash:
Certificate of deposit	$	270	$	—	$	—		$	270
Marketable securities:
Government-sponsored enterprise securities (due in less than one year)	$	6,506	$	6	$	—		$	6,512
Government-sponsored enterprise securities (due in one to two years)		6,999		1		—			7,000
Commercial paper (due in less than one year)		40,110		33		(3	)		40,140
Corporate notes (due in less than one year)		78,926		116		(13	)		79,029
Corporate notes (due in one to two years)		12,659		1		(9	)		12,651
	$	145,200	$	157	$	(25	)	$	145,332

Cash equivalents and marketable securities with unrealized losses that have been in a continuous unrealized loss position for less than 12 months and 12 months or longer at March 31, 2020 and December 31, 2019 were as follows:

	Less Than 12 Months					12 Months or Longer				Total
			Gross					Gross				Gross
	Estimated		Unrealized			Estimated		Unrealized		Estimated		Unrealized
(In thousands)	Fair Value		Losses			Fair Value		Losses		Fair Value		Losses
As of March 31, 2020:
Corporate notes (due in less than one year)	$	49,835	$	(229	)	$	—	$	—	$	49,835	$	(229	)
As of December 31, 2019:
Commercial paper (due in less than one year)	$	8,571	$	(3	)	$	—	$	—	$	8,571	$	(3	)
Corporate notes (due in less than one year)		26,082		(13	)		—		—		26,082		(13	)
Corporate notes (due in one to two years)		11,624		(9	)		—		—		11,624		(9	)
	$	46,277	$	(25	)	$	—	$	—	$	46,277	$	(25	)

The gross unrealized losses related to government-sponsored enterprise securities, commercial paper and corporate notes as of March 31, 2020 and December 31, 2019 were due to changes in interest rates and not credit risk. We determined that the gross unrealized losses on our marketable securities as of March 31, 2020 and December 31, 2019 were temporary in nature. Our exposure to unrealized losses may increase in the future due to the economic pressures or uncertainties associated with local or global economic recessions as a result of the current COVID-19 pandemic. We review our investments quarterly to identify and evaluate whether any investments have indications of possible other-than-temporary 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 amortized 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 condensed 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 an 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 condensed 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. Commercial paper, government-sponsored enterprise securities, corporate notes and equity investments 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 March 31, 2020 and December 31, 2019 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 March 31, 2020:
Money market funds⁽¹⁾	$	18,370	$	—	$	—	$	18,370
Government-sponsored enterprise securities⁽²⁾		—		11,520		—		11,520
Commercial paper⁽²⁾		—		29,065		—		29,065
Corporate notes⁽²⁾⁽³⁾		—		72,266		—		72,266
Equity investment⁽⁴⁾		—		169		—		169
Total	$	18,370	$	113,020	$	—	$	131,390
As of December 31, 2019:
Money market funds⁽¹⁾	$	6,671	$	—	$	—	$	6,671
Government-sponsored enterprise securities ⁽²⁾⁽³⁾		—		13,512		—		13,512
Commercial paper⁽¹⁾⁽²⁾		—		44,130		—		44,130
Corporate notes⁽²⁾⁽³⁾		—		91,680		—		91,680
Equity investment⁽⁴⁾		—		389		—		389
Total	$	6,671	$	149,711	$	—	$	156,382

(1)	Included in cash and cash equivalents on our condensed balance sheets.

(2)	Included in current portion of marketable securities on our condensed balance sheets.

(3)	Included in noncurrent portion of marketable securities on our condensed balance sheets.

(4)	Included in deposits and other assets on our condensed balance sheets. See “Equity Investment” in this Note 2 for further discussion of this equity investment.

Equity Investment

In December 2007, we received 13,842,625 ordinary shares in Sienna Cancer Diagnostics Limited, or Sienna, in connection with a license we granted to Sienna for our human telomerase reverse transcriptase, or hTERT, technology for use in human diagnostics. The shares, which represented less than 20% ownership, were recorded at a zero cost basis under the cost method of accounting, upon receipt. With the adoption of ASU 2016-01 on January 1, 2018, we reassess the fair value of our equity investment in Sienna at each reporting date and any resulting change in fair value is recognized on our condensed statements of operations. As of March 31, 2020, the fair value of our shares in Sienna was $169,000. For the three months ended March 31, 2020 and 2019, we recognized a decrease in fair value of equity investment of $195,000 and an increase in fair value of $98,000, respectively, related to observable price changes on our condensed statements of operations. For the three months ended March 31, 2020 and 2019, we also recognized a loss of $25,000 and a gain of $5,000, respectively, related to foreign currency translation, which have been included in other expense on our condensed statements of operations.

- 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 + Details