Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Fair Value Measurements

Fair Value Measurements

Note 12. Fair Value Measurements

The Company groups its assets and liabilities measured at fair value in three levels based on the nature of the inputs and assumptions used to determine fair value. Refer to Note 3, Summary of Significant Accounting Policies, for additional information on the accounting policies related to fair value.

The carrying amounts of cash and accounts payable approximate fair value due to the short-term nature of these instruments. As of June 30, 2022 and December 31, 2021, the Company had $188,798 and $228,584, respectively, primarily in U.S. government cash equivalent instruments (included in cash and cash equivalents) which was valued based on Level 1 inputs. There were no transfers between levels within the hierarchy during the six months ended June 30, 2022 and the year ended December 31, 2021.

Derivative liabilities measured at fair value on a recurring basis are summarized below.

	Six months ended
	June 30, 2022
	Fair Value		Level 1		Level 2		Level 3		Total
Derivative liability - Equity Investment Right	$	1,340	$	—	$	—	$	1,340	$	1,340
Derivative liability - OnkosXcel Warrants		614		—		—		614		614
Total derivative liabilities	$	1,954	$	—	$	—	$	1,954	$	1,954

Derivative liabilities are comprised of the OnkosXcel Warrants and Equity Investment Right held by the Lenders. The fair value of the derivative liabilities was determined using Monte Carlo simulation models for the Equity Investment Right, and Binomial Option Pricing and Distribution models for the OnkosXcel Warrants.

The following table presents changes in Level 3 liabilities measured at fair value for the six months ended June 30, 2022. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category.

	Derivative liabilities
Balance - December 31, 2021	$	—
Addition of derivative liabilities		1,954
Change in fair value		—
Balance - June 30, 2022	$	1,954

The Level 3 balances comprised derivative liabilities related to the OnkosXcel Warrants and Equity Investment Right. BTI executed the Credit Agreement with the Lenders on April 19, 2022. The day one fair value of the derivative liabilities approximates their fair value at June 30, 2022. Consequently, no change in fair value was reported in the Consolidated Balance Sheets or Consolidated Statements of Operations as of and for the six months ended June 30, 2022, respectively.

Inputs to the Level 3 estimated fair value for the Equity Investment Right are as follows:

	Equity Investment Right
Strike price relative to volume weighted 30-day average	110	%
Volatility (annual)	95	%
Probability of exercise	95	%
Time period	7	years

In estimating the fair value of the derivative liability related to the OnkosXcel Warrants, inputs included third-party fair value estimates of OnkosXcel limited liability company units along with the volatility of those units (which was set at 100% based on the historical volatility of the Company’s stock, along with a peer group of comparable publicly traded companies), and the timing and probability of the relevant capital transactions occurring.

The estimated fair value of long-term debt as of June 30, 2022 was $62,604. Both observable and unobservable inputs were used to determine the fair value of long-term debt, which was classified within the Level 3 category. The fair value of the long-term debt was determined using the Black-Derman Toy Model, Binomial Option Pricing and present value calculations, with inputs related to market spot interest rates, a calibrated discount rate of 13.2% and historical volatility of the five year U.S. Treasury note plus a spread adjustment for credit worthiness.

The fair value of the BTI warrants, which is a non-recuring fair value, was determined as of the date of issuance using a Black-Scholes pricing model and the fair value of $3,245 was recorded as a component of stockholders’ equity in additional-paid-in-capital in the Consolidated Balance Sheets, with the offset recorded as a discount on the amounts funded under the OFA Facilities. This non-recurring measurement is classified as a Level 3 within the fair value hierarchy since it is based on external valuation models whose inputs include market interest rates, present value calculations and stock price volatilities; the inputs used were a strike price of $20.04, the Company’s stock price of $14.93, volatility of 95%, term of 7 years and risk-free rate of 2.95%.