Fair Value Measurements

9 Months Ended

Sep. 30, 2025

Fair Value Measurements

Fair Value Measurements

3. Fair Value Measurements

ASC 820, Fair Value Measurements, defines fair value, establishes a framework for measuring fair value under US GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

•Level 1 – Observable inputs such as quoted prices (unadjusted) for identical instruments in active markets.

•Level 2 – Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-derived valuations whose significant inputs are observable.

•Level 3 – Unobservable inputs that reflect the reporting entity’s assumptions.

The following tables set forth the fair value of the Company’s financial instruments that were measured at fair value on a recurring basis as of September 30, 2025, and December 31, 2024.

	September 30, 2025
	(unaudited)
(in thousands)	Level 1		Level 2		Level 3		Total
Iliad	$	—	$	—	$	1,082	$	1,082
Uptown		—		—		10,771		10,771
Streeterville 2		—		—		8,112		8,112
Streeterville Note		—		—		8,010		8,010
Convertible Notes		—		—		2,448		2,448
Total fair value	$	—	$	—	$	30,423	$	30,423

	December 31, 2024
(in thousands)	Level 1		Level 2		Level 3		Total
Iliad	$	—	$	—	$	5,215	$	5,215
Uptown		—		—		9,615		9,615
Streeterville 2		—		—		8,673		8,673
Streeterville Note		—		—		11,853		11,853
Total fair value	$	—	$	—	$	35,356	$	35,356

The change in the estimated fair value of Level 3 liabilities is summarized below:

	Nine Months Ended
	September 30, 2025
	(unaudited)
(in thousands)	Iliad			Uptown			Streeterville 2			Streeterville Note			Convertible Notes
Beginning fair value of Level 3 liability	$	5,215		$	9,615		$	8,673		$	11,853		$	—
Additions		—			—			—			—			1,833
Exchanges		(5,900	)		(1,210	)		(3,233	)		—			(227	)
Extinguishments		—			—			—			—			(866	)
Settlements		—			—			—			—			(51	)
Changes in fair value		1,767			2,366			2,672			(3,843	)		1,759
Ending fair value of Level 3 liability	$	1,082		$	10,771		$	8,112		$	8,010		$	2,448

	Year Ended
	December 31, 2024
(in thousands)	Iliad			Uptown		Streeterville 2			Streeterville Note		Convertible Notes
Beginning fair value of Level 3 liability	$	6,862		$	7,473	$	6,815		$	9,793	$	—
Additions		—			—		—			—		—
Exchanges		(4,906	)		—		(166	)		—		—
Settlements		—			—		—			—		—
Changes in fair value		3,259			2,142		2,024			2,060		—
Ending fair value of Level 3 liability	$	5,215		$	9,615	$	8,673		$	11,853	$	—

The fair values were based on the weighted average discounted expected future cash flows representing the terms of the notes, discounting them to their present value equivalents. The notes were classified as Level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including the Company’s own credit risk.

The Company determined and performed the valuations with the assistance of an independent valuation service provider. On a quarterly basis, the Company considers the main Level 3 inputs for hybrid instruments used derived as follows:

•Discount rate which was determined using a comparison of various effective yields on bonds as of the valuation date

•Market indications for vouchers, which affect the Return Bonus from the sale of Tropical Disease Priority Review Voucher (“TDPRV”)

•Weighted probability of cash outflows which was estimated based on the entity's knowledge of the business and how the current economic environment is likely to impact the timing of the cash outflows, attributed to the different repayment features of the notes

The following table summarizes the quantitative information about the significant unobservable inputs used in Level 3 fair value measurement for the Streeterville Note:

	Range of inputs
	(probability-weighted average)		Relationship of unobservable inputs
Unobservable inputs	2025	2024	to fair value
Risk adjusted discount rate	8.07% - 27.89% (27.89%)	7.46%-25.53% (25.53%)	If discount rate is adjusted to a total of an additional 100 basis points (bps), fair value would have decreased by $287,000. If discount rate is adjusted to a total deduction of 100 bps, fair value would have increased by $287,000.
Sales proceeds: Amount of comparable TDPRV	$67.5 million to $350.0 million ($100.0 million)	$67.5 million to $350.0 million ($100.0 million)	If expected cash flows by management considered the highest amount of market indications for vouchers, fair value would have decreased by $460,000. If expected cash flows by management considered the lowest amount of market indications for vouchers, fair value would have increased by $2.6 million.
Range of probability for timing of cash flows: Variations of the terms and conditions of the timing of cash flows, including settlement of the note principal, interest, penalties, and acceleration clause	0.00%-85.00%	0.00%-85.00%	If expected cash flows by management considered the scenario with the least amount of indicated value, fair value would have decreased by $270,000. If expected cash flows by management considered the scenario with the most significant amount of indicated value, fair value would have increased by $1.9 million.

The fair value of the Convertible Notes recognized as a Level 3 liability at the date of issuance and as of September 30, 2025, amounted to $2.4 million. The fair value was determined based on the discounted expected future cash flows representing the terms of the notes, including their short-term maturity and conversion features, and was discounted to present value equivalents. The notes were classified as Level 3 within the fair value hierarchy due to the use of unobservable inputs, including the Company’s own credit risk.

The Company determined and performed the valuation with the assistance of an independent valuation service provider. On a quarterly basis, the Company considers the main Level 3 input for these freestanding financial instruments to be the discount rate, which was determined using a comparison of various effective yields on bonds as of the valuation date

The following table summarizes the quantitative information about the significant unobservable inputs used in Level 3 fair value measurement for the Convertible Promissory Notes:

	Range of inputs
	(probability-weighted average)			Relationship of unobservable inputs
Unobservable inputs	2025	2024		to fair value
Risk adjusted discount rate	8.1% - 22.73% (22.73%)		—	If discount rate is adjusted to a total of an additional 100 bps, fair value would have decreased by $8,000. If discount rate is adjusted to a total deduction of 100 bps, fair value would have increased by $8,000.

For the additional notes designated at FVO that are freestanding, the Company considers only the discount rate which was determined using a comparison of various effective yields on bonds as of valuation date.

The following table summarizes the quantitative information about the significant unobservable inputs used in Level 3 fair value measurement for the remaining instruments that are not classified as hybrid instruments:

	Range of inputs
	(probability-weighted average)		Relationship of unobservable inputs
Unobservable inputs	2025	2024	to fair value
Risk adjusted discount rate	8.1% - 26.00% (26.00%)	7.5%-27.53% (27.53%)	If discount rate is adjusted to a total of an additional 100 bps, fair value would have decreased by $174,000. If discount rate is adjusted to a total deduction of 100 bps, fair value would have increased by $176,000,

Fair Value Option

The Company elected to apply the FVO accounting to certain freestanding instruments and to the entire class of hybrid instruments, including structured notes, of which there are assessed embedded derivatives that would be eligible for bifurcation, to align the measurement attributes of those instruments under US GAAP and to simplify the accounting model applied to these financial instruments.

The valuations of these instruments were predominantly driven by the discount rate and the derivative features embedded within the instruments. The Company determined and performed the valuations of the freestanding and hybrid instruments with the assistance of an independent valuation service provider. The valuation methodology utilized is consistent with the income approach for estimating the fair value of the interest-bearing portion of the instruments and the related derivatives. Cash flows of the financial instruments in their entirety, including the embedded derivatives, are discounted at an appropriate rate for the applicable duration of the instrument. Interests on the interest-bearing portion of the instruments held to maturity and mark-to-market adjustments are aggregated in the changes in fair value of freestanding and hybrid financial instruments designated at FVO in the unaudited condensed consolidated statements of operations. As of September 30, 2025, and December 31, 2024, the Company did not note any fair value movement on FVO liabilities attributable to any instrument-specific credit risk, which should be recorded in other comprehensive income (loss).

The following tables summarize the fair value and outstanding balance for items the Company accounts for under FVO:

	Fair value		Unpaid Principal Balance		Accrued Interest		Fair Value Over (Under) Outstanding Balance
(in thousands)	(Unaudited)
At September 30, 2025
Iliad	$	1,082	$	—	$	1,153	$	(71	)
Uptown		10,771		6,899		5,988		(2,116	)
Streeterville 2		8,112		6,953		2,649		(1,490	)
Streeterville Note		8,010		6,000		983		1,027
Convertible Notes		2,448		2,572		41		(165	)

(in thousands)	Fair value		Unpaid Principal Balance		Accrued Interest		Fair Value Over (Under) Outstanding Balance
At December 31, 2024
Iliad	$	5,215	$	2,220	$	4,484	$	(1,489	)
Uptown		9,615		7,994		5,347		(3,726	)
Streeterville 2		8,673		10,094		2,024		(3,445	)
Streeterville Note		11,853		6,000		815		5,038