v3.26.1
Fair Value Measurements
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
The following tables present the Company’s assets and liabilities that are measured and recorded at fair value on a recurring basis as of June 30, 2026 and December 31, 2025 (in thousands):
June 30, 2026
TotalLevel 1Level 2Level 3
Assets:
Money market funds (included in cash equivalents)
$146,630 $146,630 $— $— 
Total assets$146,630 $146,630 $— $— 
Liabilities:
Warrant liability
$165 $— $— $165 
Embedded derivative11,940 — — 11,940 
Contingent value rights liability356,700 — — 356,700 
Total liabilities$368,805 $— $— $368,805 
December 31, 2025
TotalLevel 1Level 2Level 3
Assets:
Money market funds (included in cash equivalents)
$122,724 $122,724 $— $— 
Total assets$122,724 $122,724 $— $— 
Liabilities:
Warrant liability
$141 $— $— $141 
Contingent value rights liability392,100 — — 392,100 
Total liabilities$392,241 $— $— $392,241 
There were no transfers within the fair value hierarchy during the six months ended June 30, 2026 or the year ended December 31, 2025.
Cash, Cash Equivalents, and Restricted Cash
As of June 30, 2026 and December 31, 2025, money market funds were classified as cash and cash equivalents on the accompanying consolidated balance sheets as they mature within 90 days from the date of purchase.
As of June 30, 2026, the Company had restricted cash balances relating to secured letters of credit in connection with its real estate leases. The Company’s consolidated statements of cash flows include the following as of June 30, 2026 and 2025 (in thousands):
June 30,
20262025
Cash and cash equivalents$147,606 $160,324 
Long-term restricted cash1,735 1,735 
Total cash, cash equivalents, and restricted cash$149,341 $162,059 
Warrants to Purchase Common Stock
In April 2022, the Company issued warrants in connection with an underwritten offering, or the 2022 Warrants. Pursuant to the terms of the 2022 Warrants, the Company could be required to settle the 2022 Warrants in cash in the event of an acquisition of the Company under certain circumstances and, as a result, the 2022 Warrants are required to be measured at fair value and reported as a liability on the balance sheet.
The Company recorded the fair value of the 2022 Warrants upon issuance using the Black-Scholes valuation model and is required to revalue the 2022 Warrants at each reporting date, with any changes in fair value recorded in the statements of operations and comprehensive income (loss). The valuation of the 2022 Warrants is classified as Level 3 of the fair value
hierarchy due to the need to use assumptions in the valuation that are both significant to the fair value measurement and unobservable, including the stock price volatility and the expected life of the 2022 Warrants. Generally, increases (decreases) in the fair value of the underlying stock and estimated term would result in a directionally similar impact to the fair value measurement.
The estimated fair value of the 2022 Warrants was determined using the following inputs to the Black-Scholes simulation valuation:
•Estimated fair value of the underlying stock. The Company estimates the fair value of the common stock based on the closing stock price at the end of each reporting period.
•Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury at the valuation date commensurate with the expected remaining life assumption.
•Dividend rate. The dividend rate is based on the historical rate, which the Company anticipates will remain at zero.
•Expected life. The expected life of the 2022 Warrants is assumed to be equivalent to their remaining contractual term which expires on April 11, 2027.
•Volatility. The Company estimates stock price volatility based on the Company’s historical volatility for a period of time commensurate with the expected remaining life of the 2022 Warrants.
A summary of the Black-Scholes pricing model assumptions used to record the fair value of the 2022 Warrants liability is as follows:
June 30, 2026December 31, 2025
Risk-free interest rate4.01%3.48%
Dividend yield— — 
Expected life (in years)0.781.28
Expected volatility92.40%87.36%
The following table reflects a roll-forward of fair value for the Company’s Level 3 warrant liabilities (see Note 10, “Equity” to these unaudited consolidated financial statements) for the six months ended June 30, 2026 (in thousands):
Warrant liability
Fair value as of December 31, 2025
$141 
Change in fair value
24 
Fair value as of June 30, 2026
$165 
Embedded Derivative
The Company evaluated the Loan Agreement (as defined below) for embedded features that require separate accounting as derivatives. The Company identified the Conversion Option (as defined below) and certain default, acceleration, indemnification and contingent payment features as embedded derivatives that require bifurcation, collectively referred to as the Compound Derivative. Other features, including prepayment rights, the variable interest rate with a floor, rights to invest in a future qualified financing and beneficial ownership limits, did not require bifurcation because they were either not applicable, clearly and closely related to the debt host, or qualified for a scope exception.
The Company assessed the fair value of the Compound Derivative based on the probability, timing and magnitude of potential cash flows associated with each bifurcated feature. Based on the contingent nature of the triggering events, the absence of known triggering events as of the Closing Date (as defined below) and June 30, 2026, and the Company’s compliance with the terms of the Loan Agreement, the Company determined that the fair value of the Compound Derivative liability was primarily attributable to the Conversion Option. The fair value of the remaining bifurcated features was not material as of the Closing Date or June 30, 2026.
The Company estimated the fair value of the Conversion Option using a Black-Scholes model. The valuation is classified as Level 3 in the fair value hierarchy because it uses significant unobservable inputs, including the Company’s stock price, expected term and volatility. Variations in the inputs included below may result in materially different fair value measurements depending on the conditions or assumptions applied. Increases or decreases in the underlying stock price, expected term and expected volatility generally result in corresponding changes in the estimated fair value.
The estimated fair value of the Conversion Option was determined using the following inputs to the Black-Scholes model:
•Estimated fair value of the underlying common stock. The Company estimates the fair value of the common stock based on the closing stock price as of the applicable valuation date.
•Strike price. The Company uses the most favorable conversion price associated with the Conversion Option.
•Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury at the valuation date commensurate with the expected remaining life assumption.
•Dividend rate. The dividend rate is based on the historical rate, which the Company anticipates will remain at zero.
•Expected life. The Company estimated an expected life of the Conversion Option which primarily considers the contractual remaining life of the Term Loan Facility, but also considers stock price trends and if the Conversion Option is in or out of the money.
•Expected Volatility. The Company estimates stock price volatility based on the Company’s historical volatility for a period of time commensurate with the expected remaining life of the Conversion Option.
The following table sets forth the inputs to the Black-Scholes models that were used to value the Conversion Option as of the Closing Date and June 30, 2026:
June 30, 2026May 22, 2026
Stock price$10.42$6.75
Strike price$8.2526$8.2526
Risk-free interest rate4.14%4.21%
Dividend yield— — 
Expected life (in years)2.53.69
Expected volatility97.26%89.94%
The Compound Derivative is not designated as a hedging instrument and is accounted for separately from the host debt instrument. The Compound Derivative is remeasured at each reporting date, with changes in fair value recognized in the consolidated statements of operations and comprehensive income (loss). The fair value of the Compound Derivative is included within “Long-term debt” in the consolidated balance sheet as of June 30, 2026.
In connection with the Loan Agreement and as a result of the Compound Derivative, the Company recognized a debt discount and a corresponding derivative liability for the Compound Derivative, based on an initial estimated fair value of approximately $7.4 million. The discount will be amortized to interest expense over the term of the Loan Agreement using the effective interest method.
The following table reflects a roll-forward of fair value for the Company’s Level 3 Compound Derivative for the six months ended June 30, 2026 (in thousands):
Compound Derivative
Fair value as of December 31, 2025
$— 
Initial recognition on the Closing Date7,405 
Change in fair value4,535 
Fair value as of June 30, 2026
$11,940 
Contingent Value Rights
In December 2023, the Company entered into a contingent value rights agreement, or the CVR Agreement, pursuant to which each holder of common stock or a 2022 Warrant in December 2023 was distributed a CVR by the Company. Each CVR entitles its holder to distributions of milestone and royalty payments under the Sobi License, net of deductions. See Note 6, “Fair Value Measurements” to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 for further discussion of the terms related to the CVR Agreement.
The CVRs represent financial instruments that are accounted for under the fair value option election in ASC 825, Financial Instruments. Under the fair value option election, the CVRs are initially measured at the aggregate estimated fair value of the
CVRs and will be subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The estimated fair value of the CVR liability was determined using a Monte Carlo simulation model to estimate future cash flows associated with the legacy assets, including the expected milestone and royalty payments under the Sobi License, net of deductions. Changes in fair value of the CVR liability are presented in the consolidated statements of operations and comprehensive income (loss). The liability value is based on significant inputs not observable in the market such as estimated cash flows, estimated probabilities of success, and expected volatility of future revenues, which represent a Level 3 measurement within the fair value hierarchy. The significant inputs used to estimate the fair value of the CVR liability, which represented a financial instrument being accounted for under the fair value option, were as follows:
June 30, 2026December 31, 2025
Estimated cash flow dates2027 - 20382026 - 2037
Estimated probability of success
95.0% - 100.0%
95.0% - 100.0%
Expected volatility of future revenues23.0%23.0%
The following table reflects a roll-forward of fair value for the Company’s Level 3 CVR liability for the six months ended June 30, 2026 (in thousands):
CVR liability
Fair value as of December 31, 2025
$392,100 
Change in fair value
(35,400)
Fair value as of June 30, 2026
$356,700 
Assets and Liabilities Not Recorded at Fair Value
The Company's Term Loan Facility (as defined below) is carried at amortized cost. The fair value of the Term Loan Facility, including the Compound Derivative, was estimated to be $54.2 million as of June 30, 2026. The fair value was determined using a combination of a discounted cash flow analysis for the Term Loan Facility’s’ contractual payments, combined with the fair value of the Compound Derivative, See Note 9 “Debt” to these unaudited consolidated financial statements for more information. The Company classifies the fair value of the Term Loan Facility within Level 3 of the fair value hierarchy because the fair value is derived using significant unobservable inputs.