Fair Value Measurement

9 Months Ended

Sep. 30, 2022

Available-for-sale marketable securities consisted of the following (in thousands):


	September 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Asset-backed securities	$	—	$	—	$	—	$	—
Corporate debt securities	—		—		—		—
U.S. Treasury securities	120,275		—		(1,850)		118,425
Non-U.S Government securities	—		—		—		—
Commercial paper	—		—		—		—
	$	120,275	$	—	$	(1,850)	$	118,425


	December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Asset-backed securities	$	32,745	$	—	$	(53)	$	32,692
Corporate debt securities	58,885		—		(86)		58,799
U.S. Treasury securities	231,230		—		(469)		230,761
Non-U.S Government securities	17,232		—		(12)		17,220
Commercial paper	282,731		—		—		282,731
	$	622,823	$	—	$	(620)	$	622,203

As of September 30, 2022, six available-for-sale marketable securities with a fair market value of $118.4 million were in a gross unrealized loss position of $1.85 million. Based on our review of these marketable securities, we believe none of the unrealized loss is as a result of a credit loss as of September 30, 2022, because we do not intend to sell these securities and it is not more-likely-than-not that we will be required to sell these securities before the recovery of their amortized cost basis.

The estimated fair value of our contractual maturities of available-for-sale debt securities were as follows (in thousands):


	September 30, 2022		December 31, 2021

Due within one year	$	118,425	$	500,965
After one but within five years	—		121,238
	$	118,425	$	622,203

The following table summarizes, by major security type, our cash equivalents and available-for-sale marketable securities measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):


	September 30, 2022						December 31, 2021
	Level 1		Level 2		Total estimated fair value		Level 1		Level 2		Total estimated fair value
Cash equivalents:
Money market funds	$	117,698	$	—	$	117,698	$	118,707	$	—	$	118,707


Available-for-sale marketable securities:
Asset-backed securities	—		—		—		—		32,692		32,692
Corporate debt securities	—		—		—		—		58,799		58,799
U.S. Treasury securities	118,425		—		118,425		230,761		—		230,761
Non-U.S Government securities	—		—		—		—		17,220		17,220
Commercial paper	—		—		—		—		282,731		282,731
	$	236,123	$	—	$	236,123	$	349,468	$	391,442	$	740,910

We had no available for sale securities that were classified within Level 3 as of September 30, 2022 and December 31, 2021.

A contingent liability with a preliminary value of $129.8 million was assumed related to TLANDO. The acquisition date fair value was measured using the income approach, specifically the probability weighted expected return method for the development milestone payments and the option pricing methodology using the Monte Carlo simulation for commercial milestone payments and royalty payments. We will remeasure the fair value of the contingent liability on a quarterly basis. Estimates and assumptions used in the Monte Carlo simulation include forecasted revenues, cost of debt, risk free rate, weighted average cost of capital, revenue market price risk and revenue volatility. Estimates and assumptions used in the income approach include the probability of achieving certain milestones and a discount rate. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Changes in the fair value subsequent to the acquisition date will be recognized in our condensed consolidated statements of income.

- 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.

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