Fair Value Measurements

6 Months Ended

Jun. 30, 2022

3. Fair Value Measurements

The following table presents the Company’s fair value hierarchy for its assets and liabilities items that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021, by level within the fair value hierarchy (in thousands):


	Fair Value Measurement at June 30, 2022 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents (money market)	$	67,969	$	—	$	—	$	67,969
Restricted cash (non-current)		927	$	—	$	—	$	927
	$	68,896	$	—	$	—	$	68,896


	Fair Value Measurement at December 31, 2021 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents (money market)	$	67,942	$	—	$	—	$	67,942
Restricted cash (non-current)		927	$	—	$	—	$	927
	$	68,869	$	—	$	—	$	68,869

The Company evaluates transfers between levels at the end of each reporting period. There were no transfers between Level 1, Level 2 or Level 3 for the six months ended June 30, 2022 and for the year ended December 31, 2021, respectively.

Related Party Antidilution Obligation

The Company was obligated to issue Series A convertible preferred stock with an antidilution provision as part of a license agreement with Amgen (see Note 11). The Related Party Antidilution Obligation was included within the Level 3 fair value hierarchy. The Related Party Antidilution Obligation was valued using a probability-weighted expected return method. The valuation model required a variety of inputs, including the probability of occurrence of events that would trigger the issuance of additional shares, the expected timing of such events, the expected value of the contingently issuable equity upon occurrence of a triggering event and a discount rate. The Related Party Antidilution Obligation was remeasured on May 1, 2021, and December 31, 2020, with changes in fair value recognized within changes in fair value of the Related Party Antidilution Obligation in the consolidated statements of operations and comprehensive loss.

At December 31, 2020, the Company had a $4.2 million liability related to the Related Party Antidilution Obligation. During the four months prior to settlement on May 1, 2021, the Company recorded a $0.8 million increase in fair value of the Related Party Antidilution Obligation. On May 28, 2021, the Company completed the second closing pursuant to the Series A Convertible Preferred Stock Purchase Agreement which resulted in the Company raising net cash proceeds from financing activities in excess of the $45.0 million Related Party Antidilution Obligation cap. The second closing triggered the settlement of the remaining Related Party Antidilution Obligation, resulting in the issuance of 1,963,093 shares of Series A convertible preferred stock to Amgen with a fair value of $5.1 million.

Series A Preferred Stock Tranche Obligation

The Series A Preferred Stock Tranche Obligation was valued using a probability-weighted present value model. The valuation model considered the probability of closing the tranche, the estimated future value of the Series A convertible preferred stock to be issued at each closing and the investment required at each closing. Future values were converted to present value using a discount rate appropriate for probability-adjusted cash flows.

The Related Party Antidilution Obligation and Series A Preferred Stock Tranche Obligation were settled in May 2021 (see Note 7).

The following table sets forth a rollforward of changes in the fair value of financial liabilities classified as Level 3 in the fair valued hierarchy (in thousands):


	Related Party Antidilution Obligation			Series A Preferred Stock Tranche Obligation			Total
Ending balance at December 31, 2020	$	4,247		$	303		$	4,550
Change in fair value		252			21			273
Issuance of Series A preferred shares in partial settlement of related party antidilution obligation		—			—			—
Ending balance at March 31, 2021	$	4,499		$	324		$	4,823
Change in fair value through the settlement date		584			7			591
Reclassification of Series A preferred stock tranche obligation and related party antidilution obligation upon settlement		(5,083	)		(331	)		(5,414	)
Ending balance at May 1, 2021	$	—		$	—		$	—

- 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.

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