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

Note 4. Fair Value of Financial Instruments

The carrying value of the Company’s cash, cash equivalents and accounts payable, approximate fair value due to the short-term nature of these items.

Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

•
Level I — Unadjusted quoted prices in active markets for identical assets or liabilities;
•
Level II — Inputs other than quoted prices included within Level I that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
•
Level III — Unobservable inputs that are supported by little or no market activity for the related assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The fair value of marketable securities, which are Level 2 financial instruments, is based upon market prices quoted on the last day of the fiscal period or other observable market inputs. The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker/dealer quotes, bids and/or offers. Marketable securities, all of which are classified as available-for-sale securities, consisted of the following at June 30, 2025 (in thousands):

 

 

 

June 30, 2025

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Estimated Fair Value

 

U.S. Treasury securities

 

$

129,691

 

 

$

76

 

 

$

(35

)

 

$

129,732

 

Corporate debt securities and commercial paper

 

 

87,585

 

 

 

37

 

 

 

(8

)

 

 

87,614

 

Total

 

$

217,276

 

 

$

113

 

 

$

(43

)

 

$

217,346

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

 

 

 

Fair Value Measurements at June 30, 2025

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

69,792

 

 

$

69,792

 

 

$

—

 

 

$

—

 

Total cash equivalents

 

$

69,792

 

 

$

69,792

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

129,732

 

 

$

—

 

 

$

129,732

 

 

$

—

 

Corporate debt securities and commercial paper

 

 

87,614

 

 

 

—

 

 

 

87,614

 

 

 

—

 

Total marketable securities

 

$

217,346

 

 

$

—

 

 

$

217,346

 

 

$

—

 

Total assets

 

$

287,138

 

 

$

69,792

 

 

$

217,346

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Essentialis purchase price contingency liability

 

$

18,859

 

 

$

—

 

 

$

—

 

 

$

18,859

 

Total liabilities

 

$

18,859

 

 

$

—

 

 

$

—

 

 

$

18,859

 

 

 

 

 

Fair Value Measurements at December 31, 2024

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

59,885

 

 

$

59,885

 

 

$

—

 

 

$

—

 

Total cash equivalents

 

$

59,885

 

 

$

59,885

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury securities

 

$

198,065

 

 

$

—

 

 

$

198,065

 

 

$

—

 

Corporate debt securities and commercial paper

 

 

32,655

 

 

 

—

 

 

 

32,655

 

 

 

—

 

Total marketable securities

 

$

230,720

 

 

$

—

 

 

$

230,720

 

 

$

—

 

Total assets

 

$

290,605

 

 

$

59,885

 

 

$

230,720

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Essentialis purchase price contingency liability

 

$

14,791

 

 

$

—

 

 

$

—

 

 

$

14,791

 

Total liabilities

 

$

14,791

 

 

$

—

 

 

$

—

 

 

$

14,791

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Based on the terms of the Company’s completed merger with Essentialis on March 7, 2017, the Company is obligated to make cash earnout payments of up to a maximum of $21.2 million to the former Essentialis stockholders. The fair value of the Essentialis purchase price contingent liability has historically been estimated using scenario-based methods based upon the Company’s analysis of the likelihood of obtaining specified approvals from the FDA as well as achieving two commercial sales milestones of $100 million and $200 million in cumulative revenue. The Level 3 estimates are based, in part, on subjective assumptions. As of June 30, 2025, following the receipt of FDA approval for VYKAT XR, the Company no longer considers FDA approval as a variable and determined a 100% probability of achieving the remaining two milestones. Prior to receiving FDA approval, management relied on published research relating to clinical development success rates to determine the likelihood of FDA approval occurring. Based on this assessment, an 88% probability of achieving all three milestones was determined to be reasonable as of December 31, 2024. During the periods presented, other than as discussed above regarding the receipt of FDA approval for VYKAT XR, the Company has not changed the manner in which it values its Essentialis purchase price contingent liability.

The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers between levels within the hierarchy during the periods presented.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 liabilities for the six months ended June 30, 2025 and 2024 (in thousands):

 

 

 

Purchase Price

 

 

 

Contingent
Liability

 

Balance at January 1, 2025

 

$

14,791

 

Change in value of contingent liability

 

 

4,068

 

Balance at June 30, 2025

 

$

18,859

 

 

 

 

 

 

 

Purchase Price

 

 

 

Contingent
Liability

 

Balance at January 1, 2024

 

$

11,549

 

Change in value of contingent liability

 

 

2,038

 

Balance at June 30, 2024

 

$

13,587