Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2025

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Note 6. Fair Value of Financial Instruments

In connection with the Acquisition, the Company pays royalty on U.S. net sales of Sunosi to Jazz. The discounted cash flow method used to value this contingent consideration includes inputs of not readily observable market data, which are Level 3 inputs. The fair value of the contingent consideration is reflected as current accrued contingent consideration of $8.6 million and non-current contingent consideration liability of $90.6 million in the consolidated balance sheet as of March 31, 2025.

The fair value of financial instruments measured on a recurring basis is as follows:

	March 31, 2025
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents - money market funds	$	231,582	$	—	$	—	$	231,582
Liabilities:
Contingent consideration	$	—	$	—	$	99,192	$	99,192

	December 31, 2024
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents - money market funds	$	244,097	$	—	$	—	$	244,097
Liabilities:
Contingent consideration	$	—	$	—	$	99,965	$	99,965

Contingent Consideration Liabilities

The fair value of the contingent consideration liabilities is marked-to-market at each reporting period and was remeasured at March 31, 2025. Changes in fair value of the contingent consideration liabilities as of March 31, 2025 are as follows:

	Contingent consideration
Balance at December 31, 2024	$	99,965
Adjustment to fair value		1,512
Payments		(2,285	)
Balance at March 31, 2025 (Level 3)	$	99,192

The recurring Level 3 fair value measurements of contingent consideration for which a liability is recorded include the following significant unobservable inputs:

			As of March 31, 2025	As of December 31, 2024
	Valuation methodology	Significant unobservable input	Weighted average (range, if applicable)	Weighted average (range, if applicable)
Contingent consideration	Probability weighted income approach	Discount rate	12.7%	12.0%
		Revenue discount rate	17.3% - 20.3%	17.6% - 20.6%

The Company’s fair value measurement of contingent consideration liabilities has been classified as Level 3 as its valuation requires substantial judgment and estimation of factors which requires use of unobservable inputs. The fair value of contingent consideration liabilities are estimated by using the probability weighted income approach using significant assumptions including estimated future sales of Sunosi in current and future indications, timing of regulatory and commercial milestone achievements, probability of technical and regulatory success rates, and discount rates. If significant changes are made to one or more of these assumptions, the estimated fair value of contingent consideration liabilities may result in a significantly higher or lower fair value measurement.