Fair Value Measurements

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type are presented in the following table (in thousands):

	March 31, 2021
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market fund	$	89,221	$	—	$	—	$	89,221
U.S. treasury bills		6,000		—		—		6,000
Corporate debt securities		—		6,506		—		6,506
Commercial paper		—		104,892		—		104,892
U.S. government bonds		—		5,038		—		5,038
Total financial assets	$	95,221	$	116,436	$	—	$	211,657
Financial liabilities:
Derivative liability		—		—	$	930	$	930
Total financial liabilities	$	—	$	—	$	930	$	930

	December 31, 2020
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market fund	$	127,783	$	—	$	—	$	127,783
U.S. treasury bills		29,997		—		—		29,997
Corporate debt securities		—		23,201		—		23,201
Commercial paper		—		41,460		—		41,460
U.S. government bonds		—		5,066		—		5,066
Asset-backed securities		—		2,006		—		2,006
Total financial assets	$	157,780	$	71,733	$	—	$	229,513
Financial liabilities:
Derivative liability	$	—	$	—	$	1,264	$	1,264
Total financial liabilities	$	—	$	—	$	1,264	$	1,264

The carrying amounts of certain financial instruments such as cash and cash equivalents, prepaid expenses, other current assets, accounts payable, accrued expenses, and other current liabilities as of March 31, 2021 and December 31, 2020 approximate their related fair values due to the short-term maturities of these instruments. Certain financial instruments classified within Level 2 of the fair value hierarchy include the types of instruments that trade in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The carrying amount of the revenue interest liability as of March 31, 2021 and December 31, 2020 approximates its fair value and is based on the Company’s contractual repayment obligation to the Purchasers (as defined below), based on the current estimates of future revenues, over the life of the Revenue Interest Purchase Agreement (“RIPA”). The derivative liability is considered a Level 3 input based on the three-level hierarchy. Refer to Note 6 “Revenue Interest Purchase Agreement” for further information.

Derivative Liability

The debt pursuant to the RIPA contains embedded derivatives requiring bifurcation as a single compound derivative instrument. The Company estimated the fair value of the derivative liability at March 31, 2021 and December 31, 2020 using a “with-and-without” method. The “with-and-without” methodology involves valuing the whole instrument on an as-is basis and then valuing the instrument without the individual embedded derivative. The difference between the entire instrument with the embedded derivative compared to the instrument without the embedded derivative was the fair value of the derivative liability at March 31, 2021 and December 31, 2020. The estimated probability and timing of underlying events triggering the exercisability of the put options contained within the RIPA, forecasted cash flows and the discount rate are significant unobservable inputs used to determine the estimated fair value of the entire instrument with the embedded derivative. As of March 31, 2021 and December 31, 2020, the discount rate used for valuation of the derivative liability is 15.7% and 15.9%, respectively.

The following table provides a summary of the change in the estimated fair value of the Company’s derivative liability, classified as Level 3 in the fair value hierarchy:

Balance at December 31, 2020	$	1,264
Change in fair value of derivative liability		(334	)
Balance at March 31, 2021	$	930