| Fair Value Measurements | 6. Fair Value Measurements
The carrying amounts of cash and cash equivalents, restricted cash,
accounts payable, and accrued expenses approximated their estimated
fair values due to the short-term nature of these financial
instruments. Fair value is defined as the exchange price that would
be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants
on the measurement date. Valuation techniques used to measure fair
value are performed in a manner to maximize the use of observable
inputs and minimize the use of unobservable inputs. The accounting
standard describes a fair value hierarchy based on three levels of
inputs, of which the first two are considered observable and the
last unobservable, that may be used to measure fair value, which
are the following:
Level 1— Quoted prices in active markets that are
accessible at the market date for identical unrestricted assets or
liabilities.
Level 2— Inputs other than Level 1 that are observable,
either directly or indirectly, such as quoted prices for similar
assets or liabilities; quoted prices in markets that are not
active; or other inputs for which all significant inputs are
observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
Level 3— Unobservable inputs that are supported by
little or no market activity and that are significant to the fair
value of the assets or liabilities.
During the periods presented, the Company has not changed the
manner in which it values assets and liabilities that are measured
at fair value using Level 3 inputs. The Company recognizes
transfers between levels of the fair value hierarchy as of the end
of the reporting period. There were no transfers within the
hierarchy for any of periods presented.
A summary of the assets and liabilities carried at fair value in
accordance with the hierarchy defined above is as follows:
Fair Value Measurements
Using
Quoted
Significant
Prices Other
Significant
Total in
Active
Observable
Unobservable
Carrying Markets Inputs Inputs
Value (Level 1) (Level 2) (Level 3)
(In
thousands)
December 31, 2015
Assets:
Cash equivalents $ 23,154 $ 9,208 $ 13,946 $
—
Short-term investments 63,310
— 63,310
—
Total assets $ 86,464 $ 9,208 $ 77,256 $
—
Liabilities:
Derivative liability $ 133 $
— $
— $ 133
Common stock warrant liability 2,848
—
— 2,848
Total liabilities $ 2,981 $
— $
— $ 2,981
June 30, 2016
Assets:
Cash equivalents $ 13,641 $ 12,938 $ 703 $
—
Short-term investments 111,016
— 111,016
—
Total assets $ 124,657 $ 12,938 $ 111,719 $
—
Cash equivalents of $12.9 million as of June 30, 2016 and
$9.2 million as of December 31, 2015 consisted of money
market funds and are classified within Level 1 of the fair value
hierarchy because they are valued using quoted market prices in
active markets. Cash equivalents of $0.7 million as of
June 30, 2016 and $13.9 million as of December 31,
2015 consisted of highly rated corporate bonds and are classified
within Level 2 of the fair value hierarchy because pricing inputs
are other than quoted prices in active markets, which are either
directly or indirectly observable as of the reporting date, and
fair value is determined through the use of models or other
valuation methodologies.
Short-term investments of $111.0 million as of June 30, 2016
and $63.3 million as of December 31, 2015 consisted of
commercial paper and highly rated corporate bonds and are
classified within Level 2 of the fair value hierarchy because
pricing inputs are other than quoted prices in active markets,
which are either directly or indirectly observable as of the
reporting date, and fair value is determined through the use of
models or other valuation methodologies.
The short-term investments are classified as available-for-sale
securities. As of June 30, 2016, the remaining contractual
maturities of the available-for-sale securities were less than one
year, and the balance in the Company’s accumulated other
comprehensive income was comprised solely of activity related to
the Company’s available-for-sale securities. There were no
realized gains or losses recognized on the sale or maturity of
available-for-sale securities during the three and six months ended
June 30, 2016 and 2015; and as a result, the Company did not
reclassify any amounts out of accumulated other comprehensive
income for the same periods. The Company has a limited number of
available-for-sale securities in insignificant loss positions as of
June 30, 2016, which the Company does not intend to sell and
has concluded it will not be required to sell before recovery of
the amortized cost for the investment at maturity. The following
table summarizes the available-for-sale securities:
Amortized
Unrealized
Unrealized
Cost Gains Losses Fair Value
(In
thousands)
December 31, 2015
Commercial paper $ 28,980 $ 48 $
— $ 29,028
Corporate bonds 34,302
— (20 ) 34,282
$ 63,282 $ 48 $ (20 ) $ 63,310
June 30, 2016
Commercial paper $ 67,987 $ 191 $
— $ 68,178
Corporate bonds 42,837 13 (12 ) 42,838
$ 110,824 $ 204 $ (12 ) $ 111,016
A roll-forward of the recurring fair value measurements of the
common stock warrant liability and the derivative liability
categorized with Level 3 inputs is as follows:
Common Stock Derivative
(In
thousands)
Balance — December 31, 2014 $ 693 $ 126
Change in fair value 478 8
Balance—June 30, 2015 $ 1,171 $ 134
Common Stock Derivative
(In
thousands)
Balance — December 31, 2015 $ 2,848 $ 133
Change in fair value 1,703 17
Reclassification (4,551 ) (150 )
Balance—June 30, 2016 $
— $
—
The common stock warrant liability was recorded at fair value
determined by using the Black-Scholes option-pricing model. This
method of valuation involves using inputs such as the fair value of
the Company’s common stock, stock price volatility, the
contractual term of the warrant, risk-free interest rates, and
dividend yields. Due to the nature of these inputs, the valuation
of the warrants was considered a Level 3 measurement. Upon the
closing of the IPO, the warrant was reclassified to additional
paid-in capital. See Note 5 for further discussion of the
accounting for the Bayer common stock warrant as well as for a
summary of the significant inputs and assumptions used to determine
the fair value of the warrant.
The derivative liability related to the contingent success fee owed
under the term loans. Upon the completion of an IPO or upon the
occurrence of certain change of control or liquidation events, the
Company is required to pay a $0.2 million success fee. The Company
had recorded the success fee as a derivative financial liability.
The initial fair value of the derivative of $0.1 million had been
recorded as a debt discount. The term loans were paid in full in
October 2015; however, the liability for the success fee survived
the repayment of the term loans. Upon completion of the IPO this is
no longer accounted for as a derivative, and the success fee of
$0.2 million that is payable in June 2018 is included in other
long-term liabilities. |
