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Fair Value of Financial Assets and Liabilities

9 Months Ended

Sep. 30, 2023

Fair Value of Financial Assets and Liabilities

Fair Value of Financial Assets and Liabilities

3. Fair Value of Financial Assets and Liabilities

The following tables present information about the fair value measurements of the Company’s financial assets and liabilities which are measured at fair value on a recurring and non-recurring basis, and indicate the level of the fair value hierarchy utilized to determine such fair values:


		September 30, 2023
(In thousands)		Level 1			Level 2			Level 3			Total
Assets:
Cash equivalents		$	35,593		$	—		$	—		$	35,593
Marketable securities			—			147,956			—			147,956
Total assets		$	35,593		$	147,956		$	—		$	183,549


Liabilities:
Contingent consideration		$	—		$	—		$	32,500		$	32,500
Total liabilities		$	—		$	—		$	32,500		$	32,500


		December 31, 2022
(In thousands)		Level 1			Level 2			Level 3			Total
Assets:
Cash equivalents		$	38,516		$	—		$	—		$	38,516
Marketable securities			—			184,536			—			184,536
Total assets		$	38,516		$	184,536		$	—		$	223,052


Liabilities:
Contingent consideration		$	—		$	—		$	33,100		$	33,100
Total liabilities		$	—		$	—		$	33,100		$	33,100

As of September 30, 2023, the Company’s cash equivalents consisted of a money market fund and treasury bills, which were valued based upon Level 1 inputs. As of December 31, 2022, the Company’s cash equivalents consisted of a money market fund, which was valued based upon Level 1 inputs. The Company’s marketable securities as of September 30, 2023 consisted of commercial paper, treasury bills, and corporate debt, asset-backed debt, foreign government agency debt and U.S. government and government agency debt securities, which were all valued based upon Level 2 inputs. The Company’s marketable securities as of December 31, 2022 consisted of commercial paper and corporate debt, asset-backed debt and U.S. government and government agency debt securities, which were all valued based upon Level 2 inputs.

In determining the fair value of its Level 2 investments, the Company relies on quoted prices for identical securities in markets that are not active. These quoted prices are obtained by the Company with the assistance of a third-party pricing service based on available trade, bid and other observable market data for identical securities. During the three and nine months ended September 30, 2023 and 2022, there were no transfers into or out of Level 3.

The overall $0.6 million decrease in the fair value of the contingent consideration liability during the nine months ended September 30, 2023 was primarily due to the removal of estimated sales levels from zunsemetinib (ATI-450) for moderate to severe hidradenitis suppurativa following the Company’s decision to cease pursuing this indication, as well as higher discount rates resulting from higher risk-free rates and changes in credit spreads being applied to potential payments relative to prior periods. This decrease was partially offset by an increase in the probability of success of ATI-2138, as well as the passage of time.

As of September 30, 2023 and December 31, 2022, the fair value of the Company’s available-for-sale marketable securities by type of security was as follows:


		September 30, 2023
					Gross			Gross
		Book			Unrealized			Unrealized			Fair
(In thousands)		Value			Gain			Loss			Value
Marketable securities:
Corporate debt securities⁽¹⁾		$	52,169		$	—		$	(463)		$	51,706
Commercial paper			14,663			—			(31)			14,632
Treasury bills			4,936			1			—			4,937
Asset-backed debt securities⁽²⁾			11,349			8			(21)			11,336
Foreign government agency debt securities⁽³⁾			4,659			—			(18)			4,641
U.S. government and government agency debt securities⁽⁴⁾			61,315			—			(611)			60,704
Total marketable securities		$	149,091		$	9		$	(1,144)		$	147,956
⁽¹⁾ Included in Corporate debt securities is $27.5 million with maturity dates between one and two years.
⁽²⁾ Included in Asset-backed debt securities is $11.3 million with maturity dates between two and four years.
⁽³⁾ Included in Foreign government agency debt securities is $4.6 million with a maturity date between one and two years.
⁽⁴⁾ Included in U.S. government and government agency debt securities is $40.5 million with maturity dates between one and two years.

		December 31, 2022
					Gross			Gross
		Book			Unrealized			Unrealized			Fair
(In thousands)		Value			Gain			Loss			Value
Marketable securities:
Corporate debt securities⁽¹⁾		$	40,626		$	—		$	(251)		$	40,375
Commercial paper			79,598			—			—			79,598
Asset-backed debt securities⁽²⁾			14,641			4			(123)			14,522
U.S. government and government agency debt securities⁽³⁾			50,571			—			(530)			50,041
Total marketable securities		$	185,436		$	4		$	(904)		$	184,536
(1) Included in Corporate debt securities is $4.8 million with maturity dates between one and five years.
(2) Included in Asset-backed debt securities is $2.4 million with maturity dates between one and five years.
(3) Included in U.S. government and government agency debt securities is $5.0 million with maturity dates between one and five years.

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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