Fair Value Measurements |
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| Fair Value Measurements | 3. Fair Value Measurements The fair values of financial instruments are classified into one of the following categories based upon the lowest level of input that is significant to the fair value measurement:
The fair values of cash equivalents approximate their carrying values due to the short-term nature of such financial instruments. Unrealized gains and losses on available-for-sale debt securities are reported as a component of accumulated comprehensive income (loss), with the exception of unrealized losses believed to be related to credit losses, if any, which are recognized in earnings in the period the impairment occurs. Impairment assessments are made at the individual security level each reporting period. When the fair value of an available-for-sale debt investment is less than its cost at the balance sheet date, a determination is made as to whether the impairment is related to a credit loss and, if it is, the portion of the impairment relating to credit loss is recorded as an allowance through net income. Realized gains and losses, if any, on available-for-sale securities are included in other income (expense), net, in the condensed consolidated statements of operations based on the specific identification method. In connection with the acquisition of Surface Oncology, Inc. (“Surface”) on September 8, 2023 (the “Surface Acquisition”), the Company recorded contingent consideration liabilities related to CVRs. The fair value of the CVR liabilities were determined using a Monte Carlo simulation-based model discounted to present value and represents a Level 3 measurement within the fair value hierarchy. Assumptions used in this calculation include estimated revenue, discount rate and various probability factors. In connection with the Revenue Purchase and Sale Agreement (see Note 8. Financial Liabilities), on May 8, 2024, the Company recorded the initial estimated fair value of the Royalty Fee Derivative Liability of $9.2 million in accrued and other current liabilities on the condensed consolidated balance sheets. To estimate the fair value, the Company uses Monte Carlo simulation models that require the use of Level 3 unobservable inputs, primarily the amount and timing of our expected future revenue, the estimated volatility of these revenues, the discount rate corresponding to the risk of revenue, and the probability of certain events. The Company estimated the total fair value of the Royalty Fee Derivative Liability at March 31, 2025 and December 31, 2024, to be $26.2 million and $13.6 million, respectively. Financial liabilities related to long-term debt obligations are summarized in Note 8. Financial Liabilities. Other financial assets and liabilities from continuing operations measured at fair value on a recurring basis are summarized as follows:
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