Fair Value of Financial Assets and Liabilities

3 Months Ended

Mar. 31, 2024

Fair Value of Financial Assets and Liabilities

Fair Value of Financial Assets and Liabilities

6. Fair Value of Financial Assets and Liabilities

As of March 31, 2024 and December 31, 2023, the carrying amount of cash and cash equivalents and short-term investments was $201,199 and $275,846 respectively, which approximates fair value. Cash and cash equivalents and

short-term investments includes investments in U.S. treasury securities and money market funds that invest in U.S. government securities that are valued using quoted market prices. Accordingly, money market funds and government funds are categorized as Level 1.  The financial assets valued based on Level 2 inputs consist of corporate debt securities and commercial paper, which consist of investments in highly-rated investment-grade corporations.

The following tables present information about the Company's financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair value:

	Fair Value Measurements as of
	March 31, 2024 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	43,028	$	—	$	—	$	43,028
Marketable securities:
Corporate debt securities and commercial paper		—		147,771		—		147,771
Total	$	43,028	$	147,771	$	—	$	190,799
Liabilities:
Derivative liability	$	—	$	—	$	660	$	660
Total	$	—	$	—	$	660	$	660

	Fair Value Measurements as of
	December 31, 2023 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Commercial paper	$	—	$	—	$	—	$	—
Money market funds		40,868		4,979		—		45,847
Marketable securities:
Corporate debt securities and commercial paper		—		215,765		—		215,765
Total	$	40,868	$	220,744	$	—	$	261,612
Liabilities:
Derivative liability	$	—	$	—	$	1,150	$	1,150
Total	$	—	$	—	$	1,150	$	1,150

The estimated fair value of the derivative liability related to our Royalty Interest Financing Agreement (RIFA) with HealthCare Royalty Partners was determined using Level 3 inputs. The fair value measurement of the derivative liability is sensitive to changes in the unobservable inputs used to value the financial instrument. Changes in the inputs could result in changes to the fair value of each financial instrument.

The embedded derivative liability associated with our deferred royalty obligation, as discussed further in Note 12, “Long-Term Obligations”, is measured at fair value using an option pricing Monte Carlo simulation model and is included as a component of the deferred royalty obligation on the condensed consolidated balance sheets. The embedded derivative liability is subject to remeasurement at the end of each reporting period, with changes in fair value recognized as a component of other (expense) income, net. The assumptions used in the option pricing Monte Carlo simulation model include: (1) our estimates of the probability and timing of related events; (2) the probability-weighted net sales of IMCIVREE, including worldwide net product sales, upfront payments, milestones and royalties; (3) our risk-adjusted discount rate that includes a company specific risk premium; (4) our cost of debt; (5) volatility; and (6) the probability of a change in control occurring during the term of the instrument.

	Three months ended
	March 31,
	2024		2023
Beginning aggregate estimated fair value of Level 3 liabilities	$	1,150	$	1,340
Initial recording of embedded derivative		—		—
Change in fair value of embedded derivative		(490)		(50)
Ending aggregate estimated fair value of Level 3 liabilities	$	660	$	1,290

Marketable Securities

The following tables summarize the Company's marketable securities:

	March 31, 2024
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	147,742	$	51	$	(22)	$	147,771
	$	147,742	$	51	$	(22)	$	147,771

	December 31, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	215,490	$	282	$	(7)	$	215,765
	$	215,490	$	282	$	(7)	$	215,765