Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments The following fair value hierarchy table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis (amounts in thousands):
The fair value of the Note Purchase Agreement represents the present value of estimated future payments, including interest, principal as well as estimated payments that are contingent upon the achievement of specified milestones. The fair value of the notes is based on the cumulative probability of the various estimated payments. The fair value measurement is based on significant Level 3 unobservable inputs such as the probability of achieving the milestones, anticipated timelines, probability and timing of an early redemption of all obligations under the agreement and discount rate. Any changes in the fair value of the liability are recognized in the consolidated statement of operations and comprehensive loss until it is settled. For the twelve months ended December 31, 2022 and the period beginning on January 30, 2021 through December 31, 2021, the Company recorded an unrealized gain of $5.9 million and an unrealized loss of $0.7 million, respectively, for the estimated change in fair value of the Note Purchase Agreement, which were recorded in Other Income (Expense), net in the consolidated statement of operations and comprehensive loss. The unrealized gain in 2022 was largely driven by a higher discount rate due to a higher risk free rate and an increase in credit spreads in 2022. The acquisition-date fair value of the contingent valuation rights liability represented the estimated future payments that are contingent upon the achievement of a specified development for Palladio’s product candidate. The fair value of the contingent value rights was based on the cumulative probability of achieving the specified milestone, which was expected by the first quarter of 2022. The fair value measurement at December 31, 2021 was based on significant Level 3 unobservable inputs such as the probability of achieving the milestone, anticipated timelines, and discount rate. Changes in the fair value of the liability were recognized in the statement of operations and comprehensive loss until it was settled in the first quarter of 2022. The Centessa Predecessor Group evaluated a redemption feature within the convertible term notes and determined bifurcation of the redemption feature was required. The redemption feature was classified as a liability on the combined balance sheets prior to settlement upon completion of the acquisition of the Centessa Subsidiaries in January 2021. The derivative liability was considered a Level 3 liability because its fair value measurement was based, in part, on significant inputs not observed in the market. The fair value of the derivative was estimated primarily on the probability of the next fund raising occurring and the timing of such event. The reconciliation of the redemption feature measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows (amounts in thousands):
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