v3.26.1
Fair Value Measurements
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 3. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

 

 

March 31, 2026

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

206,394

 

 

$

—

 

 

$

—

 

 

$

206,394

 

U.S. Treasury

 

 

—

 

 

 

55,459

 

 

 

—

 

 

 

55,459

 

Total assets measured at fair value

 

$

206,394

 

 

$

55,459

 

 

$

—

 

 

$

261,853

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities – royalty agreement

 

$

—

 

 

$

—

 

 

$

2,157

 

 

$

2,157

 

Total liabilities measured at fair value

 

$

—

 

 

$

—

 

 

$

2,157

 

 

$

2,157

 

 

 

 

December 31, 2025

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

57,982

 

 

$

—

 

 

$

—

 

 

$

57,982

 

Total assets measured at fair value

 

$

57,982

 

 

$

—

 

 

$

—

 

 

$

57,982

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities – royalty agreement

 

$

—

 

 

$

—

 

 

$

2,041

 

 

$

2,041

 

Derivative liabilities – contingent value right liability

 

 

—

 

 

 

—

 

 

 

2,196

 

 

 

2,196

 

Total liabilities measured at fair value

 

$

—

 

 

$

—

 

 

$

4,237

 

 

$

4,237

 

 

Cash and cash equivalents as of March 31, 2026 and December 31, 2025 includes cash and investments in money market funds. Money market funds, which are cash equivalents, are highly liquid investments and are actively traded. The pricing information on the Company’s money market funds is based on quoted prices in active markets for identical securities. This approach results in a classification of these securities as Level 1 of the fair value hierarchy.

There were no transfers between Levels during the period ended March 31, 2026. The Company uses the services of its investment manager, which uses widely accepted models for assumptions in valuing securities with inputs from major third-party data providers.

The Company classifies all of its investments in fixed maturity debt securities as available-for-sale and, accordingly, are carried at estimated fair value.

The amortized cost, gross unrealized gains and losses, and fair value of investments in fixed maturity securities as of March 31, 2026 are as follows:

 

 

March 31, 2026

 

 

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Fair Value

 

U.S. Treasury

 

$

55,455

 

 

$

22

 

 

$

(18

)

 

$

55,459

 

Total assets measured at fair value

 

$

55,455

 

 

$

22

 

 

$

(18

)

 

$

55,459

 

All of the Company’s fixed maturity available-for-sale securities have maturities of less than one year.

The Company has evaluated the unrealized losses on the fixed maturity securities and determined that they are not attributable to credit risk factors. For fixed maturity securities, losses in fair value are viewed as temporary if the fixed maturity security can be held to maturity and it is reasonable to assume that the issuer will be able to service the debt, both as to principal and interest.

As of March 31, 2026, the Company had two available-for-sale investment debt securities in an unrealized loss position without an allowance for credit losses. Unrealized losses on governmental debt securities have not been recognized into income because the issuers’ securities are of high credit quality (rated AA+ or higher) and the decline in fair value is largely due to market conditions and or changes in interest rates. Management does not intend to sell and it is likely that management will not be required to sell the securities prior to the anticipated recovery of their amortized cost basis. The issuers continue to make timely payments on the securities. The fair value is expected to recover as the securities approach maturity.

As of March 31, 2026, accrued interest receivable on available-for-sale investment debt securities totaling $0.3 million is excluded from the estimate of credit losses and is included in prepaid expenses and other current assets.

Assumptions Used in Determining Fair Value of Derivative Liabilities

The key assumptions used to determine the fair value of the derivative liabilities – royalty agreement at March 31, 2026 and December 31, 2025 are as follows:

 

 

March 31,
2026

 

 

December 31,
2025

 

Discount rate

 

 

17.0

%

 

 

18.0

%

Probability rate of achieving FDA approval of a product

 

 

56.6

%

 

 

56.6

%

Expected term to FDA regulatory approval of a product

 

1.25 years

 

 

1.5 years

 

 

Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis

The following table provides a reconciliation of the liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):

Derivative Liabilities – Royalty Agreement

 

 

2026

 

Derivative liabilities - royalty agreement

 

 

 

Balance at January 1

 

$

2,041

 

Fair value adjustments on derivative liabilities

 

 

116

 

Balance at March 31

 

$

2,157

 

 

 

 

2025

 

Derivative liabilities - royalty agreement

 

 

 

Balance at January 1

 

$

1,647

 

Fair value adjustments on derivative liabilities

 

 

394

 

Balance at December 31

 

$

2,041

 

The derivative liabilities – royalty agreement is classified as long term on the Company’s condensed consolidated balance sheets according to the estimated timing of the occurrence of the potential payments.

Derivative Liabilities – Contingent Value Right Liability

 

 

2026

 

Derivative liabilities - contingent value right liability

 

 

 

Balance at January 1

 

$

2,196

 

Settlement of contingent value right

 

 

(1,994

)

Fair value adjustments on derivative liabilities

 

 

(202

)

Balance at March 31

 

$

—

 

 

 

 

2025

 

Derivative liabilities - contingent value right liability

 

 

 

Balance at January 1

 

$

1,978

 

Fair value adjustments on derivative liabilities

 

 

218

 

Balance at December 31

 

$

2,196

 

The derivative liabilities – contingent value rights is classified as short term on the Company’s condensed consolidated balance sheets according to the estimated timing of the occurrence of the potential payments.

The Company applies a scenario-based method and weighs them based on the possible likelihood of certain contingencies triggering payments due under the CVR for the liability recognized. The fair value measurements are based on significant inputs not observable in the market and thus represent a Level 3 measurement as defined in ASC 820, Fair Value Measurement. The estimated value of the CVR is based upon available information and certain assumptions, which the Company's management believes are reasonable under the circumstances. In January 2026, the Company paid out approximately $2.0 million to holders of CVRs in accordance with the CVR Agreement entered into immediately prior to closing of the Merger on December 13, 2024. As of March 31, 2026, the fair value adjustment for the CVR is driven from foreign currency translation. The change in fair value has been recorded in fair value adjustments on derivative liabilities - contingent value right liability on the condensed consolidated statement of operations.