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Investments and Fair Value Measurements | 9 Months Ended
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Sep. 30, 2023
Fair Value Disclosures [Abstract] |
Investments and Fair Value Measurements | Investments and Fair Value MeasurementsThe Company holds investment securities that consist of highly liquid, investment grade debt securities. The Company determines the fair value of its investment securities based upon one or more valuations reported by its investment accounting and reporting service provider. The investment service provider values the securities using a hierarchical security pricing model that relies primarily on valuations provided by an industry-recognized valuation service. Such valuations may be based on trade prices in active markets for identical assets or liabilities (Level 1 inputs) or valuation models using inputs that are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets or liabilities, yield curves, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, and broker and dealer quotes, as well as other relevant economic measures. The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022:
| September 30, 2023
| Total Fair Value and Carrying Value on Balance Sheet |  | Fair Value Measurement Category
|  | Level 1 |  | Level 2 |  | Level 3
Assets: |  |  |  |  |  |  |
Commercial paper | $ | 3,488,000 |  |  | $ | — |  |  | $ | 3,488,000 |  |  | $ | — |
Corporate notes/bonds | 23,533,000 |  |  |  |  | 23,533,000 |  |  | — |
Securities of government sponsored entities | 1,993,000 |  |  | — |  |  | 1,993,000 |  |  | — |
Total investments: | $ | 29,014,000 |  |  | $ | — |  |  | $ | 29,014,000 |  |  | $ | — |
Money market funds | $ | 31,151,000 |  |  | $ | 31,151,000 |  |  | $ | — |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Contingent consideration | $ | 24,880,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 24,880,000 |
| December 31, 2022
| Total Fair Value and Carrying Value on Balance Sheet |  | Fair Value Measurement Category
|  | Level 1 |  | Level 2 |  | Level 3
Assets: |  |  |  |  |  |  |
Commercial paper | $ | 20,020,000 |  |  | $ | — |  |  | $ | 20,020,000 |  |  | $ | — |
Corporate notes/bonds | 86,094,000 |  |  | — |  |  | 86,094,000 |  |  | — |
Securities of government sponsored entities | 1,981,000 |  |  |  |  | 1,981,000 |  |  |
Total investments: | $ | 108,095,000 |  |  | $ | — |  |  | $ | 108,095,000 |  |  | $ | — |
Money market funds | $ | 1,868,000 |  |  | $ | 1,868,000 |  |  | $ | — |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Contingent consideration | $ | 22,352,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 22,352,000 |
Money Market Funds are classified as cash equivalents on the unaudited condensed consolidated balance sheet. Contingent Consideration Contingent consideration relates to the acquisitions of BioDiscovery and Purigen. The outcome of the milestone consideration for all contingent consideration liabilities is binary, meaning the milestones are either achieved or not achieved, and the only other variable factor is the timing of when the milestones are achieved. The fair value measurement of the contingent consideration liabilities is based on significant inputs not observed in the market (Level 3 inputs). These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect the Company’s assumptions in measuring fair value. The fair value of the BioDiscovery contingent consideration liability is reassessed on a quarterly basis using a probability weighted model. Assumptions used to estimate the acquisition date fair value of the contingent consideration related to the acquisition of BioDiscovery include the probability of achieving, or changes in timing, of certain milestones, and a discount rate. On October 2, 2023, the $10.0 million milestone consideration was paid in full which approximated the fair value recorded as of September 30, 2023. Contingent consideration liabilities related to the Purigen milestones are related to the achievement of two independent milestones with aggregate possible milestone payments totaling $32.0 million. The fair value of the Purigen milestones are reassessed on a quarterly basis using a probability weighted model and a Monte Carlo Simulation. Assumptions used to estimate the acquisition date fair value of the milestones using a probability weighted model include the probability of achieving, or changes in timing, of independent milestones, and a discount rate of 14%. The Company determined the fair value of this milestone consideration using a scenario-based technique, as the trigger for payment is event driven. The Company determined the likelihood of each independent milestone and used probability factors ranging from 20% to 80% which were applied to the individual payments. A Monte Carlo Simulation was performed to determine the likelihood that the milestone will be achieved and was applied to the milestone consideration payment. The change in fair value of the contingent consideration during the nine months ended September 30, 2023 was $2.5 million. Changes in estimated fair value of contingent consideration liability in the nine months ended September 30, 2023 is as follows:
| Contingent Consideration Liability (Level 3 Measurement)
Balance as of January 1, 2023 | $ | 22,352,000 |
Liability recorded as a result of current period acquisition | — |
Change in estimated fair value, recorded in selling, general and administrative expenses | 2,528,000 |
Cash payments | — |
Balance as of September 30, 2023 | $ | 24,880,000 |
Changes in estimated fair value of contingent consideration liability in the nine months ended September 30, 2022 is as follows:
| Contingent Consideration Liability (Level 3 Measurement)
Balance as of January 1, 2022 | $ | 9,066,000 |
Liability recorded as a result of current period acquisition | — |
Change in estimated fair value, recorded in selling, general and administrative expenses | 237,000 |
Cash payments | — |
Balance as of September 30, 2022 | $ | 9,303,000 |
Available for Sale Investments The Company invests its excess cash in U.S. Treasury and agency securities, corporate debt securities, and commercial paper, which are classified as available-for-sale investments. These investments are carried at fair value and are included in the tables below. The Company records an allowance for credit losses when unrealized losses are due to credit-related factors. At each reporting date, the Company evaluates securities with unrealized losses to determine whether such losses, if any, are due to credit-related factors. The Company evaluates, among others, whether the Company has the intention to sell any of these investments and whether it is not more likely than not that the Company will be required to sell any of them before recovery of the amortized cost basis. Neither of these criteria were met in any period presented. The credit ratings of the securities held remain of the highest quality. Moreover, the Company continues to receive payments of interest and principal as they become due, and our expectation is that those payments will continue to be received timely. Based on this evaluation, as of September 30, 2023 and December 31, 2022, the Company determined that unrealized losses of the below securities were primarily attributable to changes in interest rates and non-credit related factors. As such, no allowances for credit losses were recorded during these periods. As of September 30, 2023 and December 31, 2022, the Company held 6 and 16 securities, respectively, which have been in an unrealized loss position for a period of less than 12 months. As of September 30, 2023 and December 31, 2022, the Company held 6 and 24 securities, respectively, which have been in an unrealized loss position for a period of greater than 12 months. Realized gains and losses are calculated using the specific identification method and recorded in other income (expense) in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss. The Company has the ability, if necessary, to liquidate any of its cash equivalents and marketable securities to meet its liquidity needs in the next 12 months. Interest receivable as of September 30, 2023 and December 31, 2022 was $0.3 million and $0.5 million, respectively, and is recorded as a component of prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets. As of September 30, 2023, the following table summarizes the amortized cost and the unrealized gains/losses of the available for sale securities:
| Remaining Contractual Maturity (in years) |  | Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Aggregate Estimated Fair Value
Commercial paper | Less than 1 |  | $ | 3,490,000 |  |  | $ | — |  |  | $ | (2,000) |  |  | $ | 3,488,000 |
Corporate notes/bonds | Less than 1 |  | 23,598,000 |  |  | — |  |  | (65,000) |  |  | 23,533,000 |
Securities of government sponsored entities | Less than 1 |  | 1,999,000 |  |  | — |  |  | (6,000) |  |  | 1,993,000 |
Total maturity less than 1 year |  |  | $ | 29,087,000 |  |  | $ | — |  |  | $ | (73,000) |  |  | $ | 29,014,000 |
Corporate notes/bonds | 1 to 5 |  | — |  |  | — |  |  | — |  |  | — |
Total |  |  | $ | 29,087,000 |  |  | $ | — |  |  | $ | (73,000) |  |  | $ | 29,014,000 |
As of December 31, 2022, the following table summarizes the amortized cost and the unrealized gains/losses of the available for sale securities:
| Remaining Contractual Maturity (in years) |  | Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Aggregate Estimated Fair Value
Commercial paper | Less than 1 |  | $ | 20,093,000 |  |  | $ | — |  |  | $ | (73,000) |  |  | $ | 20,020,000 |
Corporate notes/bonds | Less than 1 |  | 72,823,000 |  |  | 1,000 |  |  | (911,000) |  |  | 71,913,000 |
Securities of government sponsored entities | Less than 1 |  | 1,998,000 |  |  | — |  |  | (16,000) |  |  | 1,982,000 |
Total maturity less than 1 year |  |  | $ | 94,914,000 |  |  | $ | 1,000 |  |  | $ | (1,000,000) |  |  | $ | 93,915,000 |
Corporate notes/bonds | 1 to 5 |  | 14,268,000 |  |  | — |  |  | (88,000) |  |  | 14,180,000 |
Total |  |  | $ | 109,182,000 |  |  | $ | 1,000 |  |  | $ | (1,088,000) |  |  | $ | 108,095,000 |
As of September 30, 2023, the following table summarizes available-for-sale securities in an unrealized loss position with no credit losses reported:
| Less Than 12 Months |  | 12 Months or Greater |  | Total
| Fair Value |  | Gross Unrealized Loss |  | Fair Value |  | Gross Unrealized Loss |  | Fair Value |  | Gross Unrealized Loss
Commercial paper | $ | 3,488,000 |  |  | $ | (2,000) |  |  | $ | — |  |  | $ | — |  |  | $ | 3,488,000 |  |  | $ | (2,000) |
Corporate Notes/Bonds | 5,315,000 |  |  | (17,000) |  |  | 18,218,000 |  |  | (48,000) |  |  | 23,533,000 |  |  | (65,000) |
Securities of Government Sponsored Entities | — |  |  | — |  |  | 1,993,000 |  |  | (6,000) |  |  | 1,993,000 |  |  | (6,000) |
Total | $ | 8,803,000 |  |  | $ | (19,000) |  |  | $ | 20,211,000 |  |  | $ | (54,000) |  |  | $ | 29,014,000 |  |  | $ | (73,000) |
As of December 31, 2022, the following table summarizes available-for-sale securities in an unrealized loss position with no credit losses reported:
| Less Than 12 Months |  | 12 Months or Greater |  | Total
| Fair Value |  | Gross Unrealized Loss |  | Fair Value |  | Gross Unrealized Loss |  | Fair Value |  | Gross Unrealized Loss
Commercial paper | $ | 20,020,000 |  |  | $ | (73,000) |  |  | $ | — |  |  | $ | — |  |  | $ | 20,020,000 |  |  | $ | (73,000) |
Corporate Notes/Bonds | 9,661,000 |  |  | (27,000) |  |  | 74,452,000 |  |  | (972,000) |  |  | 84,113,000 |  |  | (999,000) |
Securities of Government Sponsored Entities | 1,981,000 |  |  | (16,000) |  |  | — |  |  | — |  |  | 1,981,000 |  |  | (16,000) |
Total | $ | 31,662,000 |  |  | $ | (116,000) |  |  | $ | 74,452,000 |  |  | $ | (972,000) |  |  | $ | 106,114,000 |  |  | $ | (1,088,000) |

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- 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 Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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