3. Fair Value Measurements

Where applicable, the Company uses quoted market prices in active markets for identical assets to determine fair value. This pricing methodology applies to Level 1 investments, which are comprised of money market funds, U.S. government securities and the Vaxcyte common stock shares held by the Company.

If quoted prices in active markets for identical assets are not available, then the Company uses quoted prices for similar assets or inputs other than quoted prices that are observable, either directly or indirectly. These investments are included in Level 2 and consist of commercial paper, corporate debt securities, asset-backed securities, U.S. agency securities and supranational debt securities. These assets are valued using market prices when available, adjusting for accretion of the purchase price to face value at maturity.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

In certain cases where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3 within the valuation hierarchy. As of September 30, 2022 and December 31, 2021, the Company did not hold any securities that were classified as Level 3 within the valuation hierarchy.

Investments in Equity Securities

As of September 30, 2022 and December 31, 2021, the Company held 1,537,879 shares and 1,562,879 shares, respectively, of Vaxcyte common stock with an estimated fair value of $36.9 million and $37.2 million, respectively. Related to Vaxcyte common stock, the Company recognized an unrealized gain of $3.5 million and $4.5 million for the three months ended September 30, 2022 and 2021, respectively, and unrealized gain of $0.3 million and unrealized loss of $1.9 million for the nine months ended September 30, 2022 and 2021, respectively.

The Company sold 25,000 shares and no shares of Vaxcyte common stock at their fair market value during the three and nine months ended September 30, 2022 and 2021, respectively. The Company recognized a gain of $30,000 and zero on the Vaxcyte common stock sold during the three and nine months ended September 30, 2022 and 2021, respectively. See “Note 12. Subsequent Events” for additional information on the Company's sale of Vaxcyte common stock.