Fair Value Measurements

9 Months Ended

Sep. 30, 2023

For a description of the fair value hierarchy and the Company’s fair value methodology, see “Part II - Item 8 - Financial Statements and Supplementary Data - Note 3 – Summary of Significant Accounting Policies” in the Company’s Annual Report. There were no significant changes in these methodologies during the nine months ended September 30, 2023.

The following tables present the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds(1)	$	2,228	$	—	$	—	$	2,228
Long-term receivable from GCBP		—		—		4,664		4,664
Total financial assets	$	2,228	$	—	$	4,664	$	6,892

Financial liabilities:
CVR derivative liability, noncurrent	$	—	$	—	$	4,664	$	4,664
Total financial liabilities	$	—	$	—	$	4,664	$	4,664


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds(1)	$	21,666	$	—	$	—	$	21,666
Total financial assets	$	21,666	$	—	$	—	$	21,666

Financial liabilities:
CVR derivative liability	$	—	$	—	$	5,000	$	5,000
Total financial liabilities	$	—	$	—	$	5,000	$	5,000

(1)

Included in cash and cash equivalents on the accompanying condensed consolidated balance sheets.

The carrying amounts of accounts and other receivables, other receivables from GNI, accounts payable, and accrued liabilities approximate their fair values due to the short-term maturity of these instruments.

Derivative Liabilities and Long-term Receivables

The CVR derivative liability relates to the CVR Agreement executed in connection with the Business Combination Agreement. The fair value of this derivative liability is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The estimated fair value of the CVR liability was determined based on the anticipated amount and timing of projected cash flows to be received from Vertex pursuant to the Vertex asset purchase agreement. The CVR liability was initially recorded at $5.0 million at issuance on December 26, 2022 and in May 2023, the Company received a $5.0 million hold-back payment from Vertex, which was distributed, net of expenses and a reserve for potential tax liabilities, to the CVR Holders. There was no change in the estimated fair value of the CVR liability prior to the distribution.

The long-term receivable and the corresponding CVR derivative liability, noncurrent relate to the asset purchase agreement with GCBP. The fair value of this long-term receivable and derivative liability is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The estimated fair value of the long-term receivable and CVR derivative liability, noncurrent was determined based on the anticipated amount and timing of projected cash flows to be received from GCBP pursuant to the GCBP asset purchase agreement discounted to their present values using an estimated discount rate of 5.05%. As of September 30, 2023, the Company expects to receive a $5.0 million hold-back payment from GCBP in the first quarter of 2025, which will be distributed, net of expenses, to the CVR Holders. The change in fair value of the long-term receivable from GCBP and the corresponding CVR derivative liability, noncurrent was recorded in interest and other income, net on the condensed consolidated statement of operations and comprehensive income (loss).

The following table sets forth the changes in the estimated fair value of the Company’s Level 3 financial assets and liabilities (in thousands):


	Long-term receivable		CVR derivative
	from GCBP		liability, noncurrent
Balance at December 31, 2022	$	—	$	—
Additions in the period		4,530		4,530
Changes in fair value		134		134
Balance at September 30, 2023	$	4,664	$	4,664

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details