6. Investments and Fair Value Measurements

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Available-for-Sale Securities

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The estimated fair value of marketable securities is based on quoted market prices for these or similar investments obtained from a commercial pricing service. The fair market value of marketable securities classified within Level 1 is based on quoted prices for identical instruments in active markets. The fair value of marketable securities classified within Level 2 is based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; or model-driven valuations whose inputs are observable or whose significant value drivers are observable. Observable inputs may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications.

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Available-for-sale securities are summarized below:

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As of March 31, 2025, all of the Company’s available-for-sale securities had contractual maturities within three months, and the weighted-average maturity of marketable securities was less than one month. There were no transfers between Level 1 and Level 2 during the periods presented, and there have been no material changes to the Company’s valuation techniques during the three months ended March 31, 2025.

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Available-for-sale debt securities with unrealized losses as of March 31, 2025 are summarized below:

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Available-for-sale debt securities with unrealized losses as of December 31, 2024 are summarized below:

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The Company invests primarily in high credit quality and short-term maturity debt securities with the intent to hold such securities until maturity at par value. The Company does not intend to sell the investments that are currently in an unrealized loss position, and it is unlikely that it will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity. The Company reviewed its available-for-sale debt securities and determined that there were no credit-related losses to be recognized as of March 31, 2025, and there were no individual securities that were in a significant unrealized loss position as of March 31, 2025.

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For the three months ended March 31, 2025 and 2024, the Company did not sell any marketable securities.

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Contingent Consideration Asset

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The Company recognized future contingent milestone and royalty assets related to the sale of its equity interests in Theravance Respiratory Company, LLC (“TRC”) to Royalty Pharma Investments 2019 ICAV, an Irish collective asset-management vehicle (“Royalty Pharma”), in July 2022 (the “TRC Transaction”). The future contingent milestone and royalty assets represents the fair value of potential future milestone payments and royalties (collectively, “Contingent Consideration”) related to worldwide net sales of GSK plc’s (“GSK”) TRELEGY^® ELLIPTA (“TRELEGY”) as described below.

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From and after January 1, 2023, for any calendar year starting with the year ended December 31, 2023 and ending with the year ending December 31, 2026, upon certain milestone minimum royalty amounts for TRELEGY being met, Royalty Pharma is obligated to make certain cash payments to the Company, which are not to exceed $250.0 million in aggregate (the “Milestone Payments”). Additionally, the Company will receive from Royalty Pharma 85% of the royalty payments on TRELEGY payable (a) for sales or other activities occurring on and after January 1, 2031 related to TRELEGY in the US, and (b) for sales or other activities occurring on and after July 1, 2029 related to TRELEGY outside of the US (the “Royalties”).

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The Contingent Consideration was initially measured at fair value utilizing a Monte Carlo simulation model to calculate the present value of the risk-adjusted cash flows estimated to be received from the Contingent Consideration.

The fair value model involved significant unobservable inputs derived using management’s estimates. Management’s estimates were based in part on external data and reflected management’s judgements and forecasts. The primary significant unobservable input was the estimate of forecasted TRELEGY net sales which is considered a Level 3 fair value input. In July 2022, the Company estimated the fair value of the Contingent Consideration to be $194.2 million which was presented on the consolidated balance sheets as “Future contingent milestone and royalty assets”, and the discount rate utilized in the valuation model was 7.83%. While the $194.2 million was comprised of two components: (i) Milestone Payments and (ii) Royalties, the Company accounted for the Contingent Consideration as a combined single unit of account. As a result, the Company will not recognize any income associated with any potential future Contingent Consideration payments until the cumulative payments received exceed the original $194.2 million fair value.

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In February 2025, the Company received a $50.0 million milestone payment from Royalty Pharma, which was the maximum that the Company could have received, upon achieving certain TRELEGY global net sales thresholds that were met related to 2024 TRELEGY global net sales. As of March 31, 2025, the remaining aggregate Milestone Payments available to the Company totaled $150.0 million, and the Company is still eligible to receive future Royalties.

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As of March 31, 2025, the Contingent Consideration had a carrying value of $144.2 million and is presented on the condensed consolidated balance sheets as “Future contingent milestone and royalty assets”. The Company reassesses

the carrying value of the Contingent Consideration when (i) indicators of impairment are identified or (ii) when Milestone Payments and Royalties are received. The Company determined that no indicators of impairment were present as of March 31, 2025.

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The Contingent Consideration is subject to counterparty credit risk, and the carrying value of the Contingent Consideration represents the maximum amount of potential loss due to credit risk. To date, the Company has not recorded any credit losses related to the Contingent Consideration.

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Ampreloxetine Funding

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The Company recognizes a contingent liability related to funding received from Royalty Pharma in exchange for certain future royalty rights to ampreloxetine. The contingent liability consists of an upfront $25.0 million received in July 2022 and management’s estimate of (i) a risk-adjusted future contingent $15.0 million milestone; and (ii) the amount and timing of royalties to be paid to Royalty Pharma and then discounted over the life of the arrangement using an imputed rate of interest. The excess of future estimated royalty payments over the amount of cash funding received is recognized as interest expense using the effective interest method. The balance associated with the contingent liability was initially recorded as $25.0 million, net of allocated transaction costs, in July 2022 and is reported on the condensed consolidated balance sheets as “Future royalty payment contingency”.

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The Company periodically reassesses the amount and timing of estimated royalty payments. To the extent such payments are materially greater or less than the Company’s previous estimates, the Company will prospectively adjust the amortization of the contingent liability and the effective interest rate. The imputed effective rate of interest on the unamortized portion of the contingent liability was approximately 8.3% as of March 31, 2025.

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There are a number of factors that could materially affect the amount and timing of the contingent $15.0 million milestone and royalty payments, some of which are not within the Company’s control. Such factors include, but are not limited to, changes in the projected market size, the introduction of competing products, patent protection matters, and regulatory product approval for ampreloxetine. The contingent liability was recognized using significant unobservable inputs. These inputs were derived using internal management estimates and reflect management’s judgements and forecasts. The significant unobservable inputs include the forecasted revenues, the probability and timing of the regulatory milestone, and the expected term of the royalty stream, as well as the overall probability of ampreloxetine’s success. These estimates are considered Level 3 fair value inputs. A significant change in unobservable inputs could result in a material increase or decrease to the effective interest rate of the contingent liability. If ampreloxetine regulatory approval is not achieved or if ampreloxetine sales are never recognized, the contingent liability recognized would be extinguished as the Company would not be obligated to repay any of the funding amounts received from Royalty Pharma.

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Changes to the contingent liability were as follows for the three months ended March 31, 2025:

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Contract Derivative

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On December 27, 2024, the Company purchased a contract derivative to manage its exposure to financial risk and to mitigate potential tax liability. The Company determined that the contract derivative met the definition of a derivative under ASC Topic 815, Derivatives and Hedging.

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The contract derivative is measured at fair value using the discounted cash flow method and includes unobservable inputs derived from management’s estimates and assumptions. Management’s estimates and assumptions are based in part on external data and internal data and involve a significant degree of judgment. The primary unobservable inputs, classified as Level 3 under the fair value hierarchy, include the remote possibility of a future payout of taxes. The discount rate utilized in the fair value model was 5.5%, as of December 27, 2024.

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The contract derivative was recognized within non-current other assets on the condensed consolidated balance sheets and changes to the contract derivative fair value were as follows for the three months ended March 31, 2025:

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For the three months ended March 31, 2025, the increase in the contract derivative’s fair value was driven by a decrease in the estimated discount rate to 5.3% as of March 31, 2025, and the unrealized gain was recognized within interest and other income, net on the condensed consolidated statements of operations.