Investments and Fair Value Measurement

Investments

The Company classifies its marketable securities as available-for-sale and records its investments at fair value. Available-for-sale securities are carried at estimated fair value based on quoted market prices or observable market inputs of almost identical assets, with the unrealized holding gains and losses included in accumulated other comprehensive income. Marketable securities which have maturities beyond

one

year as of the end of the reporting period are classified as non-current.

The table below summarizes the Company’s cash, cash equivalents and investments (in thousands):

	As of June 30 , 201 9
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Cash and cash equivalents:
Cash	$	3,018	$	—	$	—	$	3,018
Money market funds		286		—		—		286
Commercial paper		61,767		—		—		61,767
Total cash and cash equivalents		65,071		—		—		65,071

Short-term investments:
Commercial paper	$	26,475	$	—	$	—	$	26,475
Total cash, cash equivalents and investments	$	91,546	$	—	$	—	$	91,546

	As of December 31 , 201 8
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Cash and cash equivalents:
Cash	$	2,037	$	—	$	—	$	2,037
Money market funds		1,436		—		—		1,436
U.S. government agency securities		10,181		—		—		10,181
Commercial paper		74,321		—		—		74,321
Total cash and cash equivalents		87,975		—		—		87,975

Short-term investments:
U.S. government agency securities	$	1,497	$	—	$	—	$	1,497
Commercial paper		16,243		—		—		16,243
Total marketable securities and commercial paper		17,740		—		—		17,740

Total cash, cash equivalents and investments	$	105,715	$	—	$	—	$	105,715

As of

June 30, 2019

and

December

31,

2018,

none

of the available-for-sale securities held by the Company had material unrealized losses. There were

other-than-temporary impairments for these securities at

June 30, 2019

December

31,

2018.

gross realized gains or losses were recognized on the available-for-sale securities and, accordingly, there were

amounts reclassified out of accumulated other comprehensive income to earnings during the

three

and

six

months ended

June 30, 2019

and

June 30, 2018.

As of

June 30, 2019

and

December

31,

2018,

the contractual maturity of all investments held was less than

one

year.

Fair Value Measurement

The Company’s financial instruments consist of Level I and II assets and Level III liabilities. Money market funds are highly liquid investments and are actively traded. The pricing information on these investment instruments are readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level

of the fair value hierarchy. For Level II instruments, the Company estimates fair value by utilizing

third

party pricing services in developing fair value measurements where fair value is based on valuation methodologies such as models using observable market inputs, including benchmark yields, reported trades, broker/dealer quotes, bids, offers and other reference data. Such Level II instruments typically include U.S. treasury, U.S. government agency securities and commercial paper. As of

June 30, 2019,

the Company held, in addition to Level II assets, a contingent put option liability associated with the Loan and Security Agreement, or the Loan Agreement, with Oxford Finance LLC, or Oxford. Similarly, as of

December 31, 2018,

the Company held a contingent put option liability associated with the Amended and Restated Loan and Security Agreement, or the Amended Loan Agreement, or Prior Agreement, with Hercules Capital Funding Trust

2014

and Hercules Technology II, L.P., together, Hercules. See Note

“Long-Term Debt” for further description. The Company’s estimate of fair value of each of the contingent put option liabilities was determined by using a risk-neutral valuation model, wherein the fair value of the underlying debt facility is estimated both with and without the presence of the default provisions, holding all other assumptions constant. The resulting difference between the

two

estimated fair values is the estimated fair value of the default provisions, or the contingent put option. Changes to the estimated fair value of these liabilities are recorded in interest income and other income, net in the condensed consolidated statements of comprehensive loss. The fair value of the underlying debt facility is estimated by calculating the expected cash flows in consideration of an estimated probability of default and expected recovery rate in default and discounting such cash flows back to the reporting date using a risk-free rate.

The following table sets forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy (in thousands):

	As of June 30 , 2019
	Fair Value		Level I		Level II		Level III
Assets
Money market funds	$	286	$	286	$	—	$	—
Commercial paper		88,242		—		88,242		—

Total assets measured at fair value	$	88,528	$	286	$	88,242	$	—

Liabilities
Contingent put option liability	$	657	$	—	$	—	$	657

Total liabilities measured at fair value	$	657	$	—	$	—	$	657

	As of December 31 , 201 8
	Fair Value		Level I		Level II		Level III
Assets
Money market funds	$	1,436	$	1,436	$	—	$	—
U.S. government agency securities		11,678		—		11,678		—
Commercial paper		90,564		—		90,564		—

Total assets measured at fair value	$	103,678	$	1,436	$	102,242	$	—

Liabilities
Contingent put option liability	$	121	$	—	$	—	$	121

Total liabilities measured at fair value	$	121	$	—	$	—	$	121

The following tables set forth a summary of the changes in the fair value of the Company’s Level III financial liabilities for the

three

and

six

months ended

June 30, 2019

and

June 30, 2018 (

in thousands):

	Three Months Ended June 30, 201 9			Six Months Ended June 30, 201 9
Fair value—beginning of period	$	98		$	121
Fair value of contingent put option associated with the Loan Agreement		657			657
Change in fair value of contingent put option associated with the Prior Agreement		(98	)		(121	)
Fair value—end of period	$	657		$	657

	Three Months Ended June 30, 201 8			Six Months Ended June 30, 201 8
Fair value—beginning of period	$	186		$	207
Change in fair value of contingent put option associated with the Prior Agreement		(20	)		(41	)
Fair value—end of period	$	166		$	166