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

4. fair value of financial instruments

The Company’s financial instruments that are measured at fair value on a recurring basis consist of cash equivalents, marketable securities, corporate equity securities, contingent consideration liabilities related to acquisitions, and success payment derivative

liabilities pursuant to the license agreement, or the Harvard License Agreement, between President and Fellows of Harvard University, or Harvard, and the Company, as well as the license agreement, or the Broad License Agreement, between The Broad Institute, Inc., or Broad Institute, and the Company.

The following tables set forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy at March 31, 2026 (in thousands):

 

 

Carrying
amount

 

 

Fair
value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

258,291

 

 

$

258,291

 

 

$

258,291

 

 

$

—

 

 

$

—

 

U.S. Treasury securities backed repurchase
agreements

 

 

30,000

 

 

 

30,000

 

 

 

—

 

 

 

30,000

 

 

 

—

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

275,114

 

 

 

275,114

 

 

 

—

 

 

 

275,114

 

 

 

—

 

Corporate notes

 

 

91,931

 

 

 

91,931

 

 

 

—

 

 

 

91,931

 

 

 

—

 

U.S. Treasury securities

 

 

512,164

 

 

 

512,164

 

 

 

—

 

 

 

512,164

 

 

 

—

 

U.S. Government securities

 

 

38,555

 

 

 

38,555

 

 

 

—

 

 

 

38,555

 

 

 

—

 

Corporate equity securities

 

 

5,597

 

 

 

5,597

 

 

 

5,597

 

 

 

 

 

 

—

 

Total assets

 

$

1,211,652

 

 

$

1,211,652

 

 

$

263,888

 

 

$

947,764

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Success payment liability – Harvard

 

$

2,200

 

 

$

2,200

 

 

$

—

 

 

$

—

 

 

$

2,200

 

Success payment liability – Broad Institute

 

 

3,000

 

 

 

3,000

 

 

 

—

 

 

 

—

 

 

 

3,000

 

Contingent consideration liability milestones

 

 

8,152

 

 

 

8,152

 

 

 

—

 

 

 

—

 

 

 

8,152

 

Total liabilities

 

$

13,352

 

 

$

13,352

 

 

$

—

 

 

$

—

 

 

$

13,352

 

 

The following tables set forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy at December 31, 2025 (in thousands):

 

 

Carrying
amount

 

 

Fair
value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

274,944

 

 

 

274,944

 

 

$

274,944

 

 

$

—

 

 

$

—

 

U.S. Treasury securities backed repurchase
agreements

 

 

20,000

 

 

 

20,000

 

 

 

—

 

 

 

20,000

 

 

 

—

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

304,959

 

 

 

304,959

 

 

 

—

 

 

 

304,959

 

 

 

—

 

Corporate notes

 

 

150,046

 

 

 

150,046

 

 

 

—

 

 

 

150,046

 

 

 

—

 

U.S. Treasury securities

 

 

462,984

 

 

 

462,984

 

 

 

—

 

 

 

462,984

 

 

 

—

 

U.S. Government securities

 

 

26,696

 

 

 

26,696

 

 

 

—

 

 

 

26,696

 

 

 

—

 

Corporate equity securities

 

 

5,581

 

 

 

5,581

 

 

 

5,581

 

 

 

—

 

 

 

—

 

Total assets

 

$

1,245,210

 

 

$

1,245,210

 

 

$

280,525

 

 

$

964,685

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Success payment liability – Harvard

 

$

3,300

 

 

$

3,300

 

 

$

—

 

 

$

—

 

 

$

3,300

 

Success payment liability – Broad Institute

 

 

4,400

 

 

 

4,400

 

 

 

—

 

 

 

—

 

 

 

4,400

 

Contingent consideration liability milestones

 

 

8,666

 

 

 

8,666

 

 

 

—

 

 

 

—

 

 

 

8,666

 

Total liabilities

 

$

16,366

 

 

$

16,366

 

 

$

—

 

 

$

—

 

 

$

16,366

 

 

Cash equivalents – Money market funds included within cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets and repurchase agreements backed by U.S. Treasury securities that are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through using models or other valuation methodologies.

Marketable securities – Marketable securities, excluding corporate equity securities, are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined using models or other valuation methodologies.

As of March 31, 2026 the Company holds an investment in Prime Medicine, Inc., or Prime, consisting of 1,608,337 shares of Prime's common stock valued at $5.6 million, which is included in marketable securities in the condensed consolidated balance sheet.

Pursuant to ASC 825, Financial instruments, the Company records changes in the fair value of its investments in equity securities to other income (expense), in the Company’s condensed consolidated statements of operations.

The following table summarizes other income (expense) recorded due to changes in the fair value of corporate equity securities held (in thousands):

 

 

Three Months Ended March 31,

 

 

 

2026

 

 

2025

 

Other income (expense)

 

$

16

 

 

$

(2,081

)

Success payment liabilities – As discussed further in Note 7, License and other agreements, the Company is required to make payments to Harvard and Broad Institute based upon the achievement of specified multiples of the market value of the Company's common stock, at specified valuation dates. The Company’s liability for the share-based success payments under the Harvard License Agreement and the Broad License Agreement is carried at fair value. To determine the estimated fair value of the success payment liability, the Company uses a Monte Carlo simulation methodology, which models the future movement of stock prices based on several key variables.

The following variables were incorporated in the calculation of the estimated fair value of the Harvard and Broad Institute success payment liabilities:

 

 

 

Harvard

 

 

Broad Institute

 

 

 

March 31,
2026

 

 

December 31,
2025

 

 

March 31,
2026

 

 

December 31,
2025

 

Fair value of common stock (per share)

 

$

23.83

 

 

$

27.72

 

 

$

23.83

 

 

$

27.72

 

Expected volatility

 

 

71

%

 

 

71

%

 

 

74

%

 

 

75

%

Expected term (years)

 

0.01-3.24

 

 

0.01-3.49

 

 

0.01-4.11

 

 

0.01-4.36

 

 

The computation of expected volatility was estimated using available information about the historical volatility of stocks of similar publicly traded companies in addition to the Company's own data for a period matching the expected term assumption. In addition, the Company incorporated the estimated number, timing, and probability of valuation measurement dates in the calculation of the success payment liability.

The following table reconciles the change in the fair value of success payment liabilities based on Level 3 inputs (in thousands):

 

 

 

Three Months Ended March 31, 2026

 

 

 

Harvard

 

 

Broad Institute

 

 

Total

 

Balance at December 31, 2025

 

$

3,300

 

 

$

4,400

 

 

$

7,700

 

Change in fair value

 

 

(1,100

)

 

 

(1,400

)

 

 

(2,500

)

Balance at March 31, 2026

 

$

2,200

 

 

$

3,000

 

 

$

5,200

 

 

Contingent consideration liabilities – On July 1, 2025, the Company acquired an early-stage life sciences company. The total consideration paid was $14.5 million, which is comprised of an upfront payment of 403,128 shares of the Company’s common stock valued at $6.7 million, contingent consideration payments based on the achievement of certain development, clinical and commercial milestones initially valued at $7.7 million and $0.1 million of seller transaction expenses. The maximum amount of the milestone payments is $89.0 million. The primary asset acquired included in-process research and development valued at $14.5 million upon acquisition. As no alternative future use was identified for the acquired in-process research and development, the Company expensed the full fair value of the asset as research and development expense upon acquisition.

Milestone payments are payable at the Company’s sole discretion in cash or in shares of the Company's common stock (valued using a volume-weighted average price). As these milestones are payable with a variable number of shares of the Company’s common stock, the milestone payments result in liability classification under ASC 480, Distinguishing Liabilities from Equity. These contingent consideration liabilities are carried at fair value which was estimated by applying a probability-based model, which utilized inputs

based on timing of achievement that were unobservable in the market. These contingent consideration liabilities are classified within Level 3 of the fair value hierarchy.

The following variables were incorporated in the calculation of the estimated fair value of the contingent consideration liabilities:

 

 

Contingent consideration liability milestones

 

 

 

March 31,
2026

 

 

December 31,
2025

 

Discount rate

 

 

10.40

%

 

 

8.00

%

Probability of achievement

 

2-32%

 

 

2-32%

 

Projected year of achievement

 

2026-2037

 

 

2026-2037

 

 

The following table reconciles the change in fair value of the contingent consideration liabilities based on level 3 inputs (in thousands):

 

 

Contingent consideration liability milestones

 

Balance at December 31, 2025

 

$

8,666

 

Change in fair value

 

 

(514

)

Balance at March 31, 2026

 

$

8,152