Quarterly report [Sections 13 or 15(d)]

Fair Value Measurements

v3.25.1
Fair Value Measurements
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 4. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

 

 

March 31, 2025

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

75,626

 

 

$

—

 

 

$

—

 

 

$

75,626

 

Total assets measured at fair value

 

$

75,626

 

 

$

—

 

 

$

—

 

 

$

75,626

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities – royalty agreement

 

$

—

 

 

$

—

 

 

$

1,722

 

 

$

1,722

 

Derivative liabilities – contingent value right liability

 

 

—

 

 

 

—

 

 

 

1,978

 

 

 

1,978

 

Total liabilities measured at fair value

 

$

—

 

 

$

—

 

 

$

3,700

 

 

$

3,700

 

 

 

 

December 31, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

83,602

 

 

$

—

 

 

$

—

 

 

$

83,602

 

Total assets measured at fair value

 

$

83,602

 

 

$

—

 

 

$

—

 

 

$

83,602

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities – royalty agreement

 

$

—

 

 

$

—

 

 

$

1,647

 

 

$

1,647

 

Derivative liabilities – contingent value right liability

 

 

—

 

 

 

—

 

 

 

1,978

 

 

 

1,978

 

Total liabilities measured at fair value

 

$

—

 

 

$

—

 

 

$

3,625

 

 

$

3,625

 

 

Cash and cash equivalents as of March 31, 2025 and December 31, 2024 includes cash and investments in money market funds. Money market funds, which are cash equivalents, are highly liquid investments and are actively traded. The pricing information on the Company’s money market funds is based on quoted prices in active markets for identical securities. This approach results in a classification of these securities as Level 1 of the fair value hierarchy.

Assumptions Used in Determining Fair Value of Derivative Liabilities

The key assumptions used to determine the fair value of the derivative liabilities – royalty agreement at March 31, 2025 and December 31, 2024 are as follows:

 

 

March 31,

 

 

December 31,

 

 

 

2025

 

 

2024

 

Discount rate

 

 

20.0

%

 

 

20.0

%

Probability rate of achieving FDA approval of a product

 

 

56.6

%

 

 

56.6

%

Expected term to FDA regulatory approval of a product

 

2.25 years

 



2.50 years

 

 

Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis

The following table provides a reconciliation of the liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):

Derivative Liabilities – Royalty Agreement

 

 

2025

 

 

2024

 

Derivative liabilities - royalty agreement

 

 

 

 

 

 

Balance at January 1

 

$

1,647

 

 

$

1,014

 

Fair value adjustments on derivative liabilities

 

 

75

 

 

 

58

 

Balance at March 31

 

$

1,722

 

 

$

1,072

 

 

The derivative liabilities – royalty agreement is classified as long term on the Company’s condensed consolidated balance sheets according to the estimated timing of the occurrence of the potential payments.

Derivative Liabilities – Contingent Value Right Liability

 

 

2025

 

 

2024

 

Derivative liabilities - contingent value rights

 

 

 

 

 

 

Balance at January 1

 

$

1,978

 

 

$

—

 

Fair value adjustments on derivative liabilities

 

 

—

 

 

 

—

 

Balance at March 31

 

$

1,978

 

 

$

—

 

The derivative liabilities – contingent value rights is classified as short term on the Company’s condensed consolidated balance sheets according to the estimated timing of the occurrence of the potential payments.

The Company applies a scenario-based method and weighs them based on the possible likelihood of certain contingencies triggering payments due under the CVR for the liability recognized. The fair value measurements are based on significant inputs not observable in the market and thus represent a Level 3 measurement as defined in ASC 820, Fair Value Measurement. The estimated value of the CVR is based upon available information and certain assumptions, which the Company's management believes are reasonable under the circumstances.