4. fair value of financial instruments

The Company’s financial instruments that are measured at fair value on a recurring basis consist of cash equivalents, marketable securities, corporate equity securities of Verve Therapeutics, Inc., or Verve, and Prime Medicine, Inc., or Prime, contingent consideration liabilities related to acquisitions, success payment derivative liabilities pursuant to the license agreement, or the Harvard License Agreement, between President and Fellows of Harvard University, or Harvard, and the Company, the license agreement, or the Broad License Agreement, between The Broad Institute, Inc., or Broad Institute, and the Company, and settlement payment derivative liabilities associated with a settlement agreement between the Company and a research institution.

Cash equivalents – Money market funds included within cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. Commercial paper and corporate notes are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies.

Marketable securities – Marketable securities, excluding corporate equity securities (held in Verve and Prime), are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined using models or other valuation methodologies.

The Company holds an investment in Verve consisting of shares of Verve’s common stock. As of June 30, 2025, the Company owned 546,970 shares of Verve's common stock valued at $6.1 million, which is included in marketable securities in the condensed consolidated balance sheet.

The Company also holds an investment in Prime consisting of 1,608,337 shares of Prime's common stock. As of June 30, 2025, the Company's investment in Prime's common stock was valued at $4.0 million, which is included in marketable securities in the condensed consolidated balance sheet.

Pursuant to ASC 825, Financial instruments, the Company records changes in the fair value of its investments in equity securities to other income (expense), in the Company’s condensed consolidated statements of operations.

Success payment liabilities – As discussed further in Note 7, License agreements, the Company is required to make payments to Harvard and Broad Institute based upon the achievement of specified multiples of the market value of the Company's common stock, at specified valuation dates. The Company’s liability for the share-based success payments under the Harvard License Agreement and the Broad License Agreement is carried at fair value. To determine the estimated fair value of the success payment liability, the Company uses a Monte Carlo simulation methodology, which models the future movement of stock prices based on several key variables.

The computation of expected volatility was estimated using available information about the historical volatility of stocks of similar publicly traded companies in addition to the Company's own data for a period matching the expected term assumption. In addition, the Company incorporated the estimated number, timing, and probability of valuation measurement dates in the calculation of the success payment liability.

Derivative settlement liability – On July 19, 2024, the Company entered into a settlement agreement with a research institution pursuant to which, in exchange for a release of claims in its favor, the Company agreed, among other things, to pay the research institution an upfront payment of $15.0 million and to make additional payments contingent upon the development and commercialization of BEAM-102 and BEAM-302. These contingent payments consist of certain development, regulatory, and sales-based milestone payments, as well as 1% royalty through 2038. Any amounts due must be settled in cash. The maximum amount of development and regulatory milestone payments under the settlement agreement is $15.0 million, and the maximum amount of sales milestone payments is $35.0 million, per program. The Company paid the $15.0 million upfront payment during the year ended December 31, 2024.

The contingent settlement payments are accounted for as a derivative under Accounting Standards Codification 815, Derivatives and Hedging, as the potential payments meet the definition of a derivative and are not subject to any scope exceptions. The derivative liability is recorded at fair value on the Company's balance sheet with changes in value recognized in interest and other income (expense) in the consolidated statement of operations and other comprehensive loss. To determine the estimated fair value of the liability, the Company applied a probability-based model, which utilized inputs based on the potential achievement and related timing of certain development, regulatory and sales-based milestones that were unobservable in the market. This derivative liability is classified within Level 3 of the fair value hierarchy above.

Contingent consideration liabilities – As a result of acquisitions completed, the Company may owe additional milestone payments for the achievement of certain technology and product milestones. The maximum amount of technology and product milestone payments is $320.0 million. Milestone payments are payable in the Company’s common stock valued using a volume-weighted average price of the Company’s stock. As these milestones are payable with a variable number of shares of the Company’s common stock, the milestone payments result in liability classification under ASC 480, Distinguishing Liabilities from Equity. These contingent consideration liabilities are carried at fair value which was estimated by applying a probability-based model, which utilized inputs based on timing of achievement that were unobservable in the market. These contingent consideration liabilities are classified within Level 3 of the fair value hierarchy.