Fair Value Measurements

3 Months Ended

Mar. 31, 2016

4. Fair Value Measurements

Financial assets and liabilities are measured and recorded at fair value. The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The fair value hierarchy prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs:

Level 1—Quoted prices in active markets for identical assets or liabilities

Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3—Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability

There have been no transfers of assets and liabilities between levels of hierarchy.

The following tables present information as of March 31, 2016 and December 31, 2015 about the Company’s assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy the Company utilized to determine such fair values (in thousands):

	March 31, 2016
	Fair Value Measured Using						Total
	(Level 1)		(Level 2)		(Level 3)		Balance
Assets
Cash equivalents	$	2,658	$	—	$	—	$	2,658
Marketable securities	148,235		—		—		148,235

	$	150,893	$	—	$	—	$	150,893

	December 31, 2015
	Fair Value Measured Using						Total
	(Level 1)		(Level 2)		(Level 3)		Balance
Assets
Cash equivalents	$	3,245	$	—	$	—	$	3,245
Marketable securities	90,281		—		—		90,281

	$	93,526	$	—	$	—	$	93,526

The Company’s marketable securities are invested in direct obligations of the United States government for all periods.

As of March 31, 2016, marketable securities had a maximum remaining maturity of nine months and consisted of U.S. Treasury securities.

The following table presents the issuances, changes in fair value, exercise and reclassification of the Company’s Level 3 financial instrument which is measured at fair value on a recurring basis (in thousands):

	Convertible Preferred Stock Call Option Liability

Balance as of December 31, 2014	$	2,600
Change in fair value of convertible preferred stock liability through March 31, 2015	(300		)

Balance as of March 31, 2015	2,300
Change in fair value of convertible preferred stock liability through date of Series A second tranche issuance	17,900
Recognition of fair value upon issuance of second tranche Series A convertible preferred stock	(20,200		)

Balance as of June 30, 2015	$	—

As of March 31, 2016, the fair value of available for sale marketable securities by type of security were as follows (in thousands):

	March 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

U.S. Treasury securities	$	148,206	$	30	$	(1	)	$	148,235

	December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

U.S. Treasury securities	$	90,326	$	—	$	(45	)	$	90,281

- 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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