Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Fair Value Measurements

Fair Value Measurements

Note 14. 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 cash equivalents, accounts receivable, net, and accounts payable approximate fair value due to the short-term nature of these instruments. As of September 30, 2023 and December 31, 2022, the Company had $83,717 and $191,022, respectively, primarily in money market funds that hold U.S. government cash equivalent instruments (included in cash and cash equivalents) which were valued based on Level 1 inputs. There were no transfers between levels within the hierarchy during the nine months ended September 30, 2023 and the year ended December 31, 2022.

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

	Nine months ended
	September 30, 2023
	Fair Value		Level 1		Level 2		Level 3		Total
Derivative liability - Equity Investment Right	$	1,181	$	—	$	—	$	1,181	$	1,181
Derivative liability - OnkosXcel Warrants		846		—		—		846		846
Total derivative liabilities	$	2,027	$	—	$	—	$	2,027	$	2,027

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 nine months ended September 30, 2023. 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, 2022	$	2,343
Change in fair value		(316)
Balance - September 30, 2023	$	2,027

The change in fair value of the derivative liabilities was reported in the Condensed Consolidated Statements of Operations as Other income, net, for the three and nine months ended September 30, 2023.

Inputs used to calculate the estimated fair value of the Equity Investment Right at September 30, 2023 were as follows:

	Equity Investment Right
Strike price relative to volume weighted 30-day average	110.0	%
Volatility (annual)	97.9	%
Probability of exercise	89.1	%
Time period	3.6	years
Estimated premium to 30-day average	24.5	%
Discount rate	5.1	%

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), and the timing and probability of the relevant capital transactions occurring.

The estimated fair value of the Credit Agreement and RIFA as of September 30, 2023, were $56,151 and $28,547, respectively. 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 BTI warrants issued in 2022, which is a non-recurring fair value, were 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’ (deficit) equity in Additional-paid-in-capital in the Condensed 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 Level 3. 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%.