v3.22.2.2
Assets and Liabilities Measured at Fair Value
 9 Months Ended
Sep. 30, 2022
Fair Value Disclosures [Abstract]  
Assets and Liabilities Measured at Fair Value Assets and Liabilities Measured at Fair Value
The Company's financial assets and liabilities are measured at fair value and classified within the fair value hierarchy, which is defined as follows:
Level 1 — Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 — Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly.
Level 3 — Inputs that are unobservable for the asset or liability.
A summary of the fair value of the Company's recurring assets and liabilities aggregated by the level in the fair value hierarchy within which those measurements fall as of September 30, 2022 are identified in the following tables:
(in thousands) Level 2Total
Assets:  
U.S. government agency bonds$39,955 $39,955 
Commercial paper36,753 36,753 
Money market5,352 5,352 
 $82,060 $82,060 
(in thousands) Level 2Level 3Total
Liabilities:   
Contingent consideration payable$— $19,833 $19,833 
Deferred compensation plan liability5,002 — 5,002 
 $5,002 $19,833 $24,835 
A summary of the fair value of the Company's recurring assets and liabilities aggregated by the level in the fair value hierarchy within which those measurements fall as of December 31, 2021 are identified in the following tables:
(in thousands)Level 2Total
Assets:
Commercial paper$174,531 $174,531 
Corporate debt securities32,311 32,311 
Asset-backed securities30,056 30,056 
Money market5,150 5,150 
 $242,048 $242,048 
(in thousands)Level 2Level 3Total
Liabilities:   
Contingent consideration payable$— $20,339 $20,339 
Deferred compensation plan liability4,800 — 4,800 
 $4,800 $20,339 $25,139 
The Company's Senior Secured Term Loan due 2026 falls into the Level 2 category within the fair value level hierarchy and the fair value was determined using quoted prices for similar liabilities in active markets, as well as inputs that are observable for the liability (other than quoted prices), such as interest rates that are observable at commonly quoted intervals. The carrying value of the Senior Secured Term Loan due 2026 approximates the fair value.
The Company did not have any Level 3 assets as of September 30, 2022 or December 31, 2021.
Cash, Money Market Funds, and Marketable Securities
The Company classifies its cash within the fair value hierarchy as Level 1 as these assets are valued using quoted prices in an active market for identical assets at the measurement date. The Company considers its investments in marketable securities as available-for-sale and classifies these assets and the money market funds within the fair value hierarchy as Level 2 primarily utilizing broker quotes in a non-active market for valuation of these securities.
Contingent Consideration Payable
The contingent consideration payable resulted from the acquisition of Callidus Biopharma, Inc. ("Callidus") in November 2013. The most recent valuation was determined using a probability weighted discounted cash flow valuation approach. Gains and losses are included in the Consolidated Statements of Operations.
The contingent consideration payable for Callidus has been classified as a Level 3 recurring liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market. If different assumptions were used for the various inputs to the valuation approach, the estimated fair value could be significantly higher or lower than the fair value the Company determined.
The following significant unobservable inputs were used in the valuation of the contingent consideration payable of Callidus for the ATB200 Pompe disease program:
Contingent Consideration
Liability
Fair Value as of September 30, 2022Valuation TechniqueUnobservable InputRange
(in thousands)
     
  Discount rate8.8%
  
Clinical and regulatory milestones$19,833 Probability weighted discounted cash flowProbability of achievement of milestones
80% - 88%
  
  Projected year of payments
2023
Contingent consideration liabilities are remeasured to fair value each reporting period using discount rates, probabilities of payment, and projected payment dates. Projected contingent payment amounts related to clinical and regulatory based milestones are discounted back to the current period using a discounted cash flow model. Increases in discount rates and the time to payment may result in lower fair value measurements. Increases or decreases in any of those inputs together, or in isolation, may result in a significantly lower or higher fair value measurement. There is no assurance that any of the conditions for the milestone payments will be met.
The following table shows the change in the balance of contingent consideration payable for the three and nine months ended September 30, 2022 and 2021, respectively:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Balance, beginning of the period$19,266 $27,317 $20,339 $25,825 
Changes in fair value during the period, included in the Consolidated Statements of Operations567 3,288 (506)4,780 
Milestone payment payable in cash— (6,000)— (6,000)
Balance, end of the period (1)
$19,833 $24,605 $19,833 $24,605 
______________________________
(1) As certain milestones are expected to be reached within the next twelve months, the September 30, 2022 balance was recorded as a current liability in the Consolidated Balance Sheets.