Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2024

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

4. Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability of fair value measurements, financial instruments are categorized based on a hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

•Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

•Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

•Level 3 — Unobservable inputs that reflect a Company’s estimates about the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.

The Company’s financial assets and liabilities measured at fair value on a recurring basis consist of money market funds, contingent consideration liabilities, and equity investments. The Company invests excess cash from its operating cash accounts in overnight investments and reflects these amounts in cash and cash equivalents in the consolidated balance sheets at fair value using quoted prices in active markets for identical assets. The Company recorded the investment securities resulting from the Perspective strategic agreements at fair value and are adjusted for price changes observable in the market. The Company recorded the contingent consideration liabilities resulting from the Progenics Acquisition at fair value based on inputs that are not observable in the market.

The tables below present information about the Company’s assets and liabilities measured at fair value on a recurring basis:

	June 30, 2024
(in thousands)	Total Fair Value		Level 1		Level 2		Level 3
Assets:
Money market funds	$	575,974	$	575,974	$	—	$	—
Investment securities	116,423		116,423		—		—
Total assets	$	692,397	$	692,397	$	—	$	—
Liabilities:
Contingent consideration liabilities	$	2,800	$	—	$	—	$	2,800
Total liabilities	$	2,800	$	—	$	—	$	2,800

    

	December 31, 2023
(in thousands)	Total Fair Value		Level 1		Level 2		Level 3
Assets:
Money market funds	$	574,131	$	574,131	$	—	$	—
Total assets	$	574,131	$	574,131	$	—	$	—
Liabilities:
Contingent consideration liabilities	$	2,700	$	—	$	—	$	2,700
Total liabilities	$	2,700	$	—	$	—	$	2,700

During the three and six months ended June 30, 2024, there were no transfers into or out of Level 3.

The Company assumed contingent consideration liabilities related to a previous acquisition completed by Progenics in 2013 (“2013 Acquisition”). These contingent consideration liabilities include potential payments of up to $70.0 million if the Company attains certain net sales targets primarily for AZEDRA and 1095 (also known as 131 I-MIP-1095) and a $5.0 million 1095

commercialization milestone. Additionally, there is a potential payment of up to $10.0 million commercialization milestone related to a prostate cancer product candidate the Company refers to as “1404” that was outlicensed to ROTOP Pharmaka GmbH. The Company’s total potential payments related to the 2013 Acquisition are approximately $85.0 million. The Company considers the contingent consideration liabilities relating to the 2013 Acquisition each a Level 3 instrument (one with significant unobservable inputs) in the fair value hierarchy. The estimated fair value of these was determined based on probability adjusted discounted cash flows and Monte Carlo simulation models that included significant estimates and assumptions pertaining to commercialization events and sales targets. The most significant unobservable inputs with respect to 1095 and 1404 are the probabilities of achieving regulatory approval of those development projects and subsequent commercial success.

Significant changes in any of the probabilities of success, the probabilities as to the periods in which sales targets and milestones will be achieved, discount rates or underlying revenue forecasts would result in a significantly higher or lower fair value measurement. The Company records the contingent consideration liability at fair value with changes in estimated fair values recorded in general and administrative expenses in the condensed consolidated statements of operations. The Company can give no assurance that the actual amounts paid, if any, in connection with the contingent consideration liabilities, will be consistent with any recurring fair value estimate of such contingent consideration liabilities.

The following tables summarize quantitative information and assumptions pertaining to the fair value measurement of liabilities using Level 3 inputs at June 30, 2024.

	Fair Value at						Assumptions
(in thousands)	June 30, 2024		December 31, 2023		Valuation Technique	Unobservable Input	June 30, 2024		December 31, 2023
Contingent consideration liability:
1095 commercialization milestone	1,800		1,800		Probability adjusted discounted cash flow model
						Period of expected milestone achievement	2026		2026
						Probability of success	40	%	40	%
						Discount rate	4.5	%	4.1	%
Net sales targets - AZEDRA and 1095	1,000		900		Monte Carlo simulation
						Probability of success and sales targets	0% - 40%		0% - 40%
						Discount rate	15%		15%
Total	$	2,800	$	2,700

For those financial instruments with significant Level 3 inputs, the following table summarizes the activities for the periods indicated:

	Financial Liabilities
(in thousands)	Six Months Ended June 30,
	2024		2023
Fair value, beginning of period	$	2,700	$	111,600
Changes in fair value included in net income	100		(8,975)
Cash payments	—		(99,625)
Fair value, end of period	$	2,800	$	3,000

The change in fair value of the contingent financial liabilities resulted in an increase of general and administrative expense of $0.1 million for the six months ended June 30, 2024 and was primarily due to the passage of time.

As of June 30, 2024, the carrying value of the Company’s convertible debt was $575.0 million and the fair value of the Company’s convertible debt was estimated to be approximately $715.1 million based on quoted market prices of these instruments and was classified as a Level 1 measurement within the fair value hierarchy.