v3.25.2
Fair Value Measurements
 6 Months Ended
Jun. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements

4. Fair Value Measurements

The carrying values of the Company’s prepaid expenses and other current assets, accounts payable, and accrued expenses and other current liabilities approximate their fair value due to their short-term nature. The carrying value of the Company’s term loan as of June 30, 2025 (see Note 11) approximated fair value based on interest rates currently available to the Company.

The tables below present information about the Company’s assets and liabilities that are regularly measured and carried at fair value on a recurring basis at June 30, 2025 and December 31, 2024 and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value, which is described further within Note 2, Summary of Significant Accounting Policies.

Financial assets measured at fair value on a recurring basis as of June 30, 2025 are summarized as follows (in thousands):

 

Description

 

Balance as
of June 30,
2025

 

 

Quoted
Prices in
Active
Markets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Other
Unobservable
Inputs
(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

53,275

 

 

$

53,275

 

 

$

—

 

 

$

—

 

Total cash equivalents

 

$

53,275

 

 

$

53,275

 

 

$

—

 

 

$

—

 

Total financial assets

 

$

53,275

 

 

$

53,275

 

 

$

—

 

 

$

—

 

Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 are summarized as follows (in thousands):

 

Description

 

Balance as
of December 31,
2024

 

 

Quoted
Prices in
Active
Markets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Other
Unobservable
Inputs
(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

76,089

 

 

$

76,089

 

 

$

—

 

 

$

—

 

Total cash equivalents

 

$

76,089

 

 

$

76,089

 

 

$

—

 

 

$

—

 

Total financial assets

 

$

76,089

 

 

$

76,089

 

 

$

—

 

 

$

—

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

CVR liability

 

$

2,900

 

 

$

—

 

 

$

—

 

 

$

2,900

 

Total financial liabilities

 

$

2,900

 

 

$

—

 

 

$

—

 

 

$

2,900

 

 

 

Money market funds

Money market funds were valued by the Company using quoted prices in active markets for identical securities, which represent a Level 1 measurement within the fair value hierarchy.

CVR liability

As discussed in Notes 1 and 3, at the effective time of the Merger, each person who as of immediately prior to the effective time of the Merger was a stockholder of record of Homology or had the right to receive Homology’s common stock received a CVR, issued by Homology subject to and in accordance with the terms and conditions of a CVR Agreement, representing the contractual right to receive cash payments from the combined company upon the receipt of certain proceeds from a disposition of Homology’s pre-merger assets, calculated in accordance with the CVR Agreement. The Company concluded that the CVR liability was a derivative liability accounted for at fair value. The fair value of the CVR liability was based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. For the portion of the CVR liability that was related to Homology's equity interest in OXB (US) LLC, the Company utilized a monte carlo simulation model, also known as a probability simulation, to estimate the fair value of the CVR liability at December 31, 2024. This model requires the use of estimates and assumptions including estimated future revenues and discount rates. Upon Oxford Biomedica (US), Inc.'s exercise of its option to cause the Company to sell and transfer to Oxford Biomedica (US), Inc. all of the Company’s equity ownership interest in OXB (US) LLC in June 2025, the Company received proceeds from Oxford Biomedica (US), Inc. and then remitted those proceeds to the CVR holders, and subsequently removed the associated CVR liability and recorded $0.4 million for the change in estimated fair value during the six months ended June 30, 2025 in other income (expense), net.

For the portion of the CVR liability related to Homology's HMI-103, HMI-204, capsids and AAVHSC platform, the Company's fair value assessment includes judgments around the probability of progressing the in-process research and development assets. As of June 30, 2025, the Company's assessment resulted in a CVR liability of zero.

Convertible Notes

Legacy Q32 issued convertible notes (the “Convertible Notes”) totaling $30.0 million during the year ended December 31, 2022. Legacy Q32 concluded that the Convertible Notes and its related features are within the scope of FASB Accounting Standards Codification (“ASC”) Topic 825, Financial Instruments (“ASC 825”), as a combined financial instrument, and Legacy Q32 elected the fair value option where changes in fair value of the Convertible Notes are measured through the accompanying condensed consolidated statement of operations until settlement. The Convertible Notes liability represents a Level 3 measurement within the fair value hierarchy as it was valued using certain unobservable inputs.

Upon closing of the Merger, Legacy Q32 converted the outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. As the Convertible Notes are recorded at fair value, a gain of $15.9 million on the change in the fair value prior to the conversion of convertible notes is reflected in the unaudited condensed consolidated statement of operations for the six months ended June 30, 2024 (see Note 11).

During the three and six months ended June 30, 2025 and 2024, there were no transfers between Level 1, Level 2 and Level 3 measurements. There have been no impairments of the Company’s assets measured and carried at fair value during the three and six months ended June 30, 2025 and 2024.