XML 18 R12.htm IDEA: XBRL DOCUMENT

Fair Value Measurements

6 Months Ended

Jun. 30, 2024

4. Fair Value Measurements

The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and the level of inputs used in such measurements (in thousands):


	June 30, 2024
	Balance		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities
Oramed Note	$	75,370	$	—	$	—	$	75,370
FSF Deposit		11,727		—		—		11,727
Derivative liabilities		30,005		—		—		30,005
Other long-term liabilities		187		—		—		187
Total liabilities measured at fair value	$	117,289	$	—	$	—	$	117,289


	December 31, 2023
	Balance		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities
Oramed Note	$	104,089	$	—	$	—	$	104,089
Convertible Debentures		4,340		—		—		4,340
Derivative liabilities		1,518		—		—		1,518
Other long-term liabilities		179		—		—		179
Total liabilities measured at fair value	$	110,126	$	—	$	—	$	110,126

The Oramed Note

In September 2023, the Company issued a senior secured promissory note to Oramed Pharmaceuticals Inc. (“Oramed”) in the principal amount of $101.9 million (the “Oramed Note”) (see Note 7). The Company elected the fair value option to account for the Oramed Note with any changes in the fair value of the note recorded in the unaudited condensed consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income. The Company uses a discounted cash flow model to determine the fair value of the Oramed Note based on Level 3 inputs. This methodology discounts the interest and principal payments using a risk-adjusted discount rate. The fair value as of June 30, 2024 was determined to be $75.4 million by applying a discount rate of 30.27%. For the three and six months ended June 30, 2024, the Company recorded $4.3 million and $8.1 million in change in fair value of the Oramed Note in the unaudited condensed consolidated statements of operations, respectively. The change in fair value due to instrument-specific credit risk recorded as a component of other comprehensive income was $1.9 million during the three and six months ended June 30, 2024.

FSF Deposit

In June 2024, the Company received the FSF Deposit in the aggregate principal amount of $10.0 million from FSF Lender (see Note 2 and Note 7). The Company elected the fair value option to account for the FSF Deposit with any changes in the fair value of the deposit recorded in the unaudited condensed consolidated statements of operations. The Company uses a probability weighted expected return model coupled with a Monte Carlo simulation and a discounted cash flow analysis to determine the fair value of the FSF Deposit based on Level 3 inputs. The fair value as of June 30, 2024 was determined to be $11.7 million by applying a discount rate of 35.66%. For each of the three and six months ended June 30, 2024, the Company recorded $1.7 million in change in fair value of the FSF Deposit.

Convertible Debentures

In March and April 2023, the Company issued the Convertible Debentures in the principal amount of $25.0 million (see Note 7). The Convertible Debentures were measured at fair value on a recurring basis using Level 3 inputs. The Company used the Binomial Lattice Model valuation technique to measure the fair value of the Convertible Debentures with any changes in the fair value of the Convertible Debentures recorded in the unaudited condensed consolidated statements of operations. Interest expense related to the Convertible Debentures is included in the changes in fair value. The Company fully repaid the Convertible Debentures in March 2024.

Derivative Liabilities

The Company recorded a loss of $15.3 million and $15.7 million for the three and six months ended June 30, 2024, respectively, attributed to warrant liabilities consisting of the Private Warrants, the Firm Warrants and the RDO Common Warrants (each as defined below). The Company recorded a loss of $0.1 million and $5.3 million for the three and six months ended June 30, 2023, respectively, attributed to warrant liability consisting of the Private Warrants. The Company assumed the private placement warrants from Vickers in November 2022 in connection with the Business Combination (“Private Warrants”). The Company issued the Firm Warrants in March 2024 as part of the Bought Deal Offering (as defined below) and RDO Common Warrants in April 2024 as part of the Registered Direct Offering (as defined below).

As of June 30, 2024, the following warrants to purchase Common Stock were outstanding: 3,613,383 Private Warrants, 5,832,653 Firm Warrants and 15,000,000 RDO Common Warrants. The fair value of derivative warrant liabilities related to these warrants was $30.0 million.

The following table includes a summary of the derivative liabilities measured at fair value during the six months ended June 30, 2024 (in thousands):


	Fair Value
Ending Balance as of December 31, 2023	$	1,518
Change in fair value measurement		15,741
Issuance of Firm Warrants as part of the Bought Deal Offering and RDO Common Warrants as part of the Registered Direct Offering		12,746
Ending Balance as of June 30, 2024	$	30,005

Warrant Liability Measurement

The derivative warrant liability was valued using the Black-Scholes option pricing model, which is considered to be a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the warrant is the expected volatility of the Common Stock. The expected volatility assumption is based on historical volatilities of comparable companies whose share prices are publicly available as well as the implied volatility of the Public Warrants (as defined below), described in Note 9 of the Notes to consolidated financial statements in the Annual Report on Form 10-K. A summary of the inputs used in valuing the derivative warrant liabilities is as follows:


	Private Warrants			Firm Warrants			RDO Common Warrants
	June 30,			June 30,			June 30,
	2024			2024			2024
Equity value	$	1.93		$	1.93		$	1.93
Exercise price	$	11.50		$	1.70		$	1.10
Term, in years		3.36			4.68			4.82
Volatility		99.0	%		66.0	%		73.0	%
Risk-free rate		4.44	%		4.31	%		4.30	%
Dividend yield		0.0	%		0.0	%		0.0	%
Call option value	$	0.62		$	1.16		$	1.40


	Private Warrants
	December 31,
	2023
Equity value	$	1.59
Exercise price	$	11.50
Term, in years		3.61
Volatility		90.0	%
Risk-free rate		4.30	%
Dividend yield		0.0	%
Call option value	$	0.39

Contingent Consideration Related to SP-104 Acquisition

The Development Milestone Payment related to the SP-104 Assets represents an obligation to potentially settle a fixed value in a variable number of shares of Common Stock and requires remeasurement at fair value through settlement.

Upon the achievement of FDA approval for a new drug application for SP-104, the Company will transfer $3.0 million in cash or shares of Common Stock, at the discretion of the Company. The fair value of the contingent consideration liability associated with the Development Milestone Payment was estimated using a probability-weighted discounted cash flow method. Significant unobservable inputs assumptions included the likelihood of receiving FDA approval for SP-104, expected timing for receipt of FDA approval for SP-104, and a discount rate of 10.8%. As of June 30, 2024 and December 31, 2023, the fair value of contingent consideration related to the Development Milestone Payment was $0.2 million.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details