Note 2 - Investments and Fair Value Measurement

9 Months Ended

Sep. 30, 2020

Investments and Fair Value Measurement Disclosure [Text Block]

2. 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 (loss). 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 short-term investments (in thousands):

	As of September 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Cash and cash equivalents:
Cash	$	1,357	$	—	$	—	$	1,357
Money market funds		1,415		—		—		1,415
U.S. government agency securities		5,002		—		—		5,002
Commercial paper		12,199		—		—		12,199
Total cash and cash equivalents		19,973		—		—		19,973

Short-term investments:
U.S. government agency securities		13,853		—		—		13,853
Commercial paper		9,197		—		—		9,197
Total short-term investments		23,050		—		—		23,050
Total cash, cash equivalents and short-term investments	$	43,023	$	—	$	—	$	43,023

	As of December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Cash and cash equivalents:
Cash	$	1,957	$	—	$	—	$	1,957
Money market funds		598		—		—		598
Commercial paper		12,129		—		—		12,129
Total cash and cash equivalents		14,684		—		—		14,684

Short-term investments:
U.S. government agency securities		14,268		—		—		14,268
Commercial paper		27,131		—		—		27,131
Corporate debt securities		10,054		—		—		10,054
Total short-term investments		51,453		—		—		51,453
Total cash, cash equivalents and short-term investments	$	66,137	$	—	$	—	$	66,137

There were no other-than-temporary impairments for these securities at September 30, 2020 or December 31, 2019. No gross realized gains or losses were recognized on the available-for-sale securities and, accordingly, there were no amounts reclassified out of accumulated other comprehensive income (loss) to earnings during the three and nine months ended September 30, 2020 and September 30, 2019.

As of September 30, 2020, and December 31, 2019, 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 1 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 September 30, 2020, and December 31, 2019, the Company held, in addition to Level II assets, a contingent put option liability associated with the Loan Agreement with Oxford. See Note 5 “Long-Term Debt” for further description. The Company’s estimate of fair value of the contingent put option liability 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, which is included under other long-term liabilities on the Condensed Consolidated Balance Sheets. Changes to the estimated fair value of this liability is recorded in interest income and other income (expense), 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 September 30, 2020
	Fair Value		Level I		Level II		Level III
Assets
Money market funds	$	1,415	$	1,415	$	—	$	—
U.S. government agency securities		18,855		—		18,855		—
Commercial paper		21,396		—		21,396		—
Total assets measured at fair value	$	41,666	$	1,415	$	40,251	$	—

Liabilities
Contingent put option liability	$	506	$	—	$	—	$	506
Total liabilities measured at fair value	$	506	$	—	$	—	$	506

	As of December 31, 2019
	Fair Value		Level I		Level II		Level III
Assets
Money market funds	$	598	$	598	$	—	$	—
U.S. government agency securities		14,268		—		14,268		—
Commercial paper		39,260		—		39,260		—
Corporate debt securities		10,054		—		10,054		—
Total assets measured at fair value	$	64,180	$	598	$	63,582	$	—

Liabilities
Contingent put option liability	$	437	$	—	$	—	$	437
Total liabilities measured at fair value	$	437	$	—	$	—	$	437

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 nine months ended September 30, 2020 and September 30, 2019 (in thousands):

	Three Months Ended September 30, 2020			Nine Months Ended September 30, 2020
Fair value—beginning of period	$	591		$	437
Fair value of contingent put option associated with the Loan Agreement		(85	)		69
Fair value—end of period	$	506		$	506

	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Fair value—beginning of period	$	657		$	121
Fair value of contingent put option associated with the Loan Agreement		(143	)		514
Change in fair value of contingent put option associated with the Prior Agreement		—			(121	)
Fair value—end of period	$	514		$	514