v3.26.1
Fair Value of Financial Instruments
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments Fair Value of Financial Instruments
The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs, when available, and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows:
•Level 1: Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;
•Level 2: Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and
•Level 3: Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.
The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts and other receivables, and accounts payable and accrued expenses approximate their respective fair values due to the short-term nature of such instruments.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made. The following table summarizes the conclusions reached regarding fair value measurements as of March 31, 2026, and December 31, 2025 (in thousands):
Balance as of March 31, 2026Quoted Prices in Active
Markets for Identical Assets
(Level 1)		Significant Other Observable
Inputs (Level 2)		Significant Unobservable
Inputs (Level 3)
Warrant liabilities$6,797 $— $— $6,797 
CVR liability1,360 — — 1,360 
Embedded derivative— — — — 
Total liabilities$8,157 $— $— $8,157 
Securities:
U.S. Treasury securities$71,976 $71,976 $— $— 
Corporate bonds69,190 — 69,190 — 
Total assets$141,166 $71,976 $69,190 $— 
Balance as of December 31, 2025Quoted Prices in Active
Markets for Identical Assets
(Level 1)		Significant Other Observable
Inputs (Level 2)		Significant Unobservable
Inputs (Level 3)
Warrant liabilities$9,575 $— $— $9,575 
CVR liability1,540 — — 1,540 
Embedded derivative— — — — 
Total liabilities$11,115 $— $— $11,115 
Securities:
U.S. Treasury securities$97,132 $97,132 $— $— 
Corporate bonds79,352 — 79,352 — 
Total assets$176,484 $97,132 $79,352 $— 
Warrants
The common stock warrant liabilities were recorded at fair value using the BSM option pricing model. The following assumptions were used in determining the fair value of the warrant liabilities valued using the BSM option pricing model as of March 31, 2026, and December 31, 2025:
March 31, 2026December 31, 2025
Risk-free interest rate
3.63% - 3.73%
3.42% - 3.67%
Volatility
58.94% - 63.63%
57.28% - 66.70%
Dividend yield— %— %
Expected term (years)
0.75 - 2.65
0.02 - 2.89
Weighted average fair value$2.69 $2.38 
The following table is a reconciliation for the common stock warrant liabilities measured at fair value using Level 3 unobservable inputs (in thousands):
Balance as of December 31, 2025$9,575 
Change in fair value measurement of warrant liabilities(788)
Warrants exercised(1,990)
Balance as of March 31, 2026$6,797 
For the three months ended March 31, 2026, the changes in fair value of the warrant liabilities primarily resulted from changes in the discount rate and volatility.
Contingent Consideration
Contingent consideration liabilities relate to the Company's liabilities arising in connection with the CVRs. The contingent consideration is classified as Level 3 in the fair value hierarchy. The fair value is measured based on a Monte Carlo simulation or a scenario-based method, depending on the earn-out achievement objectives, utilizing projections about future performance. Significant inputs include volatility and projected financial information, including projections representative of a market participant's view of the expected cash payments associated with the agreed upon regulatory milestones based on probabilities of technical success, timing of the potential milestone events for the compounds, and estimated discount rates.
The following table provides a reconciliation of the beginning and ending balances related to the contingent consideration liabilities for the CVRs (in thousands):
Balance as of December 31, 2025$1,540 
Change in fair value measurement of contingent consideration liabilities(180)
Balance as of March 31, 2026$1,360 
For the three months ended March 31, 2026, the changes in fair value of contingent consideration primarily resulted from changes in market data and revenue projections.
Embedded Derivative
The fair value of the embedded derivative is classified as Level 3 in the fair value hierarchy and had no value at March 31, 2026 and December 31, 2025. The liability associated with the embedded derivative represented the fair value of the mandatory redemption provision in the Credit Agreement. During the three months ended March 31, 2026, all outstanding obligations under the Credit Agreement were paid off which represented a triggering event. The embedded derivative was then re-valued, and extinguished together with the debt (see Note E).
The fair value was determined using a Black-Derman-Toy (“BDT”) binomial lattice model in conjunction with a discounted cash flow methodology. The valuation incorporates a discount rate derived from the risk-free rate, based on the US Treasury Daily Treasury Par Yield Curve. The quantitative information about the significant unobservable inputs used in the Level 3 fair value measurement for the embedded derivative includes a credit spread of 5.53%.
The following table provides a reconciliation of the beginning and ending balances related to the embedded derivative (in thousands):
Balance as of December 31, 2025$— 
Change in fair value measurement of embedded derivative7,216 
Extinguishments(7,216)
Balance as of March 31, 2026$— 
For the three months ended March 31, 2026, the changes in fair value of the embedded derivative resulted from a change in probability of a triggering event occurring.