v3.25.4
Fair Value Measurements and Financial Instruments
 12 Months Ended
Dec. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements and Financial Instruments Fair Value Measurements and Financial Instruments
Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

As of December 31, 2025As of December 31, 2024
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:
Money market funds(1)
$383,568 $— $— $383,568 $568,317 $— $— $568,317 
Available for sale debt securities(2)
— — 18,800 18,800 — — 58,200 58,200 
Total current assets$383,568 $— $18,800 $402,368 $568,317 $— $58,200 $626,517 
Equity securities(3)
171,312 — — 171,312 184,719 — 2,241 186,960 
Available for sale debt securities(2)
— — 419,000 419,000 — — 693,500 693,500 
Cytokinetics R&D Funding Derivative(4)
— — — — — — 12,000 12,000 
Royalty at fair value(3)
— — — — — — 5,323 5,323 
Total non-current assets$171,312 $— $419,000 $590,312 $184,719 $— $713,064 $897,783 
Liabilities:
Cytokinetics Funding Commitments
— — (9,100)(9,100)— — (12,080)(12,080)
Total non-current liabilities$— $— $(9,100)$(9,100)$— $— $(12,080)$(12,080)
(1)Recorded within Cash and cash equivalents on the consolidated balance sheets.
(2)Related to the funded Cytokinetics Funding Arrangements as of respective balance sheet dates. As of December 31, 2024, amount also included the MorphoSys Development Funding Bonds, which were sold in January 2025.
(3)The amounts reflected within Level 3 as of December 31, 2024 relate to equity securities and a revenue participation right, recorded within Other assets on the consolidated balance sheet, that we acquired from ApiJect Holdings, Inc. (“ApiJect”), a private company. We elected the fair value option to account for our investments in ApiJect because it is more reflective of current values for such investments. We estimated the fair values related to both instruments using a discounted cash flow with Level 3 inputs, including forecasted cash flows and the weighted average cost of capital. In 2025, we wrote off the related balances. No amounts were due from or to ApiJect as of December 31, 2025 and 2024.
(4)Recorded within Other assets on the consolidated balance sheet as of December 31, 2024. Upon adoption of ASU 2025-07 in 2025, the Cytokinetics R&D Funding Derivative qualified for the derivative scope exception and the related derivative asset was derecognized as of January 1, 2025. See Note 2-Summary of Significant Accounting Policies for additional discussion.

For 2025, 2024 and 2023, we recognized losses of $39.6 million and $8.6 million and gains of $55.6 million, respectively, on equity securities still held as of December 31, 2025.
The tables presented below summarize the change in the combined fair value (current and non-current) of Level 3 financial instruments (in thousands):

Year Ended December 31, 2025
Equity SecuritiesDebt SecuritiesFunding CommitmentsDerivative InstrumentRoyalty at Fair Value
Balance at the beginning of the period$2,241 $751,700 $(12,080)$12,000 $5,323 
Purchases— 175,000 — — — 
Changes in fair value(1)
(2,241)42,679 3,180 — (5,323)
Sales(2)
— (510,553)— — — 
Settlement of options and forward(3)
— 200 (200)— — 
Redemptions(4)
— (21,226)— — — 
ASU 2025-07 adoption impact(5)
— — — (12,000)— 
Balance at the end of the period$— $437,800 $(9,100)$— $— 
(1)Changes in fair value of the financial instruments are recorded within their respective financial statement line items in the Other (income)/expense section of the consolidated statements of operations.
(2)The MorphoSys Development Funding Bonds were sold in January 2025.
(3)Amount reflects the fair value attributable to the draws under tranche four and five of the Cytokinetics Commercial Launch Funding that were settled upon funding.
(4)Amount relates to the quarterly repayments on the MorphoSys Development Funding Bonds prior to the sale and on the Cytokinetics Commercial Launch Funding.
(5)Upon adoption of ASU 2025-07 in 2025, the Cytokinetics R&D Funding Derivative qualified for the derivative scope exception and the related derivative asset was derecognized as of January 1, 2025. See Note 2-Summary of Significant Accounting Policies for additional discussion.

Year Ended December 31, 2024
Equity SecuritiesDebt SecuritiesFunding CommitmentsDerivative InstrumentRoyalty at Fair Value
Balance at the beginning of the period$297 $455,400 $(900)$— $1,778 
Purchases46,500 150,000 — 18,000 — 
Gains/(losses) on initial recognition(1)
— 5,000 (5,000)— — 
Changes in fair value(2)
1,562 161,086 (6,180)(6,000)3,545 
Transfer out of Level 3(3)
(46,118)— — — — 
Redemptions(4)
— (19,786)— — — 
Balance at the end of the period$2,241 $751,700 $(12,080)$12,000 $5,323 
(1)Represents purchase price allocation to arrive at the appropriate fair value on initial recognition.
(2)Changes in fair value of the financial instruments are recorded within their respective financial statement line items in the Other (income)/expense section of the consolidated statement of operations.
(3)Related to the expiration of the transfer restriction on Cytokinetics common stock.
(4)Amount relates to quarterly repayments on tranche one of the Cytokinetics Commercial Launch Funding and the MorphoSys Development Funding Bonds.

Valuation Inputs for Recurring Fair Value Measurements

Below is a discussion of the valuation inputs used for financial instruments classified as Level 3 measurement as of December 31, 2025 and 2024 in the fair value hierarchy. As of December 31, 2025 and 2024, we did not have any financial instruments recorded at fair value using Level 2 inputs.
Cytokinetics Research & Development (“R&D”) Funding Derivative

In May 2024, we funded $50 million upfront in exchange for a royalty on CK-586. We have an option to fund up to an additional $150 million for which we would be eligible to receive milestone payments of up to $150 million upon regulatory approvals and an incremental royalty on CK-586. Upon a change of control event, we have the option to cause Cytokinetics to pay us 1.5 times the initial and additional funding amounts in a lump sum to terminate our rights to receive royalties and milestone payments. This funding arrangement was accounted for as a derivative instrument and recorded at fair value (“Cytokinetics R&D Funding Derivative”) as of December 31, 2024. We adopted ASU 2025-07 in 2025, effective January 1, 2025 and concluded that the Cytokinetics R&D Funding Derivative qualifies for the derivative scope exception. Accordingly, we recorded a $12.0 million cumulative-effect adjustment to the opening balance of retained earnings as of January 1, 2025 to derecognize the derivative asset and reflect the CK-586 funding arrangement as R&D expense. See Note 2-Summary of Significant Accounting Policies for additional discussion.

We estimated the fair value of the Cytokinetics R&D Funding Derivative as of December 31, 2024 by utilizing probability-adjusted discounted cash flow calculations using Level 3 inputs, including the probabilities of us exercising the additional funding option, regulatory approvals and the occurrence of a change of control event during the duration of the arrangement. We also assumed a risk-adjusted discount rate of 11.1% as of December 31, 2024. Our estimate of expectation of timing and probabilities of us exercising the additional funding option, regulatory approvals and a change of control event, the risk-adjusted discount rate and the interest rate volatility could reasonably be different than the assumptions selected by a market participant, which would mean that the estimated fair value could be significantly higher or lower.

Cytokinetics Funding Arrangements and Cytokinetics Funding Commitments

We estimated the fair values of the funded Cytokinetics Funding Arrangements as of December 31, 2025 and 2024 by utilizing probability-adjusted discounted cash flow calculations using Level 3 inputs, including an estimated risk-adjusted discount rate and the probability that there will be a change of control event, which would result in accelerated payments. Developing a risk-adjusted discount rate and assessing the probability that there will be a change of control event over the duration of the Cytokinetics Funding Arrangements require significant judgment. Our estimate of the risk-adjusted discount rate could reasonably be different than the discount rate selected by a market participant, which would mean that the estimated fair value could be significantly higher or lower. Our expectation of the probability and timing of the occurrence of a change of control event could reasonably be different than the timing of an actual change of control event, and if so, would mean that the estimated fair value could be significantly higher or lower than the fair value determined by management at any particular date.

We estimated the fair value of the Cytokinetics Funding Commitments as of December 31, 2025 and 2024 using a Monte Carlo simulation methodology that includes simulating the interest rate movements using a Geometric Brownian Motion-based pricing model. This methodology simulates the likelihood of future discount rates exceeding the counterparty’s assumed cost of debt, which would impact Cytokinetics’ decision to exercise its option to draw on each respective tranche. As of December 31, 2025 and 2024 this methodology incorporates Level 3 inputs, including the probability of a change of control event occurring during the investment term, an assumed interest rate volatility of 42.5% and 40.0%, respectively, and an assumed risk-adjusted discount rate of 10.9% and 11.1%, respectively. We also assumed probabilities for the occurrence of each regulatory or clinical milestone, which impacts the availability of each future tranche of funding. Our estimate of expectation of the probability and timing of the occurrence of a change of control event, the risk-adjusted discount rate, the interest rate volatility and the probabilities of each underlying milestone could reasonably be different than the assumptions selected by a market participant, which would mean that the estimated fair value could be significantly higher or lower.

MorphoSys Development Funding Bonds

We estimated the fair value of the MorphoSys Development Funding Bonds as of December 31, 2024 based on a discounted cash flow calculation using estimated risk-adjusted discount rates, which are Level 3 inputs. Our estimate of the risk adjusted discount rates could reasonably be different than the discount rates selected by a market participant, which would mean that the estimated fair value could be significantly higher or lower. The MorphoSys Development Funding Bonds were sold in January 2025.
Fair Value Disclosure of Financial Assets Not Measured at Fair Value

Financial royalty assets are not measured at fair value. Instead, they are measured and carried at amortized cost using the effective interest method on the consolidated balance sheets. Financial royalty assets do not include our entire portfolio of investments and specifically exclude the following:

1.development-stage product candidates where the funding was (i) expensed as upfront R&D upon acquisition (e.g., Trodelvy and Nurtec ODT) or (ii) expensed as ongoing R&D (e.g., our funding arrangement for litifilimab with Biogen); and
2.contractual funding arrangements (e.g., the MorphoSys Development Funding Bonds and the Cytokinetics Funding Arrangements), which are accounted for as available for sale debt securities.

We used a Monte Carlo simulation under the option pricing framework to calculate the fair value of our portfolio of financial royalty assets for disclosure given the complexity of our royalty investments, which may include features such as milestone payments, royalty tiers, caps, and floors that could alter the cash flows based on future commercial, clinical or regulatory outcomes. The Monte Carlo model allows us to simulate a range of different outcomes based on various inputs, primarily the underlying projected product sales of each royalty bearing product, to project the cash flows, including royalty receipts and milestone payments, based on each of the simulated sales scenarios. The Monte Carlo methodology also takes volatility at the sales level into consideration. The fair value of financial royalty assets disclosed herein is classified as Level 3 within the fair value hierarchy since it is determined based on inputs that are both significant and unobservable.

As of December 31, 2025, the estimated fair values of the current and non-current portions of financial royalty assets were $0.9 billion and $23.4 billion, respectively. As of December 31, 2025, approximately 7% of the current portion and 7% of the non-current portion of the financial royalty assets was attributable to the legacy non-controlling interests.

As of December 31, 2024, the estimated fair values of the current and non-current portions of financial royalty assets were $0.8 billion and $21.4 billion, respectively. As of December 31, 2024, approximately 9% of the current portion and 8% of the non-current portion of the financial royalty assets was attributable to the legacy non-controlling interests.