Fair Value Measurements

12 Months Ended

Dec. 31, 2022

Fair Value Measurements

Fair Value Measurements

3. Fair Value Measurement

The Company records cash equivalents, short-term investments and contingent consideration liability at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants based on assumptions that market participants would use in pricing an asset or liability.

The Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 consisted of the following (in thousands):

	Fair Value Measurement at December 31, 2022
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents - money market funds	$	105,794	$	105,794	$	—	$	—
Short-term investments		73,783		—		73,783		—
Total	$	179,577	$	105,794	$	73,783	$	—

The Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 consisted of the following (in thousands):

	Fair Value Measurement at December 31, 2021
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents - money market funds	$	65,634	$	65,634	$	—	$	—
Total	$	65,634	$	65,634	$	—	$	—
Liabilities:
Contingent consideration liability (see Note 8)	$	6,090	$	—	$	—	$	6,090
Total	$	6,090	$	—	$	—	$	6,090

As described in Note 8 the remaining milestone payment underlying the contingent consideration liability was fully settled during 2022 in shares of the Company’s common stock. As of December 31, 2022, the Company had no contingent consideration liability.

Short-term investments have been initially valued at the transaction price and subsequently valued at the end of each reporting period utilizing third party pricing services or other market observable data (Level 2). The pricing services utilize industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value.

Short-term investments with quoted prices at December 31, 2022 as shown below (in thousands):

	December 31, 2022
	Amortized Cost		Unrealized (Loss) Gain		Market Value
United States treasury securities	$	15,868	$	(86)	$	15,782
Commercial paper and corporate debt securities		50,747		(71)		50,676
Asset backed securities		5,427		(35)		5,392
Agency debt securities		1,928		5		1,933
Total	$	73,970	$	(187)	$	73,783

As of December 31, 2021, the fair value of contingent payments classified as a liability was based on the regulatory milestones described in Note 8 and was estimated using the Monte Carlo simulation valuation model with Level 3 inputs.

The assumptions used to estimate the fair value of contingent payments that were classified as a liability at December 31, 2021 include the following significant unobservable inputs:

Unobservable input	Value or Range	Weighted-Average
Expected volatility	80.1%	80.1%
Risk-free interest rate	0.26%	0.26%
Cost of capital	30%	30%
Discount for lack of marketability	8%‑13%	11%
Probability of payment	88%	88%
Projected year of payment	2022	2022

Separate disclosure is required for assets and liabilities measured at fair value on a recurring basis from those measured at fair value on a non-recurring basis. Assets recorded at fair value on a non-recurring basis, such as property and equipment and intangible assets are recognized at fair value when they are impaired. During the year ended December 31, 2022, the Company had no significant assets or liabilities that were measured at fair value on a non-recurring basis. During the year ended December 31, 2021, the Company recorded non-cash impairment charges to property and equipment, net on a non-recurring basis (see below).

Lonza Manufacturing Agreement

In March 2021, the Company expanded its manufacturing collaboration with Lonza Houston, Inc. (“Lonza”) for the manufacture of AdCOVID or other adenovirus-based vaccines. Under the expanded agreement, the Company had committed approximately $23.0 million to Lonza to procure long-lead equipment and construct a dedicated manufacturing suite for clinical and commercial production of adenovirus-based vaccines. In June 2021, the Company announced the discontinuation of further development of AdCOVID following the Company’s review of findings from its Phase 1 clinical trial. Construction continued at Lonza, and the Company assessed its strategic options with respect to the suite. This work was completed during the fourth quarter of 2021. The Company capitalized a total of $11.4 million as construction-in-progress (“CIP”) during the nine months ended September 30, 2021 under this expanded agreement.

In connection with the discontinuation of further development of AdCOVID, the Company recorded a non-cash impairment charge of $8.1 million in the unaudited consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2021 to write-down the CIP associated with the construction of the Lonza facility to its fair value of $3.3 million as of September 30, 2021. As of September 30, 2021, the fair value of the CIP related assets was primarily determined utilizing the cost approach, which reflected the replacement cost of the asset being appraised, adjusted for contractual restrictions on the assets, the probability of satisfying the contractual restrictions, physical deterioration, functional obsolescence and economic obsolescence. The fair value measurement was considered a Level 3 measurement within the valuation hierarchy.

Furthermore, the remaining $3.3 million CIP was fully charged to impairment during the three months ended December 31, 2021 upon termination of the agreement.