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Fair Value Measurements
 6 Months Ended
Jun. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements
3.
Fair Value Measurements

Assets and liabilities recorded at fair value on a recurring basis in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1 — Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 — Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment we exercise in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying amounts reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, marketable securities, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their fair values, due to their short-term nature.

The following table presents information about our financial assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation:

 

 

 

June 30, 2025

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

331,772

 

 

$

331,772

 

 

$

—

 

 

$

—

 

Treasury bills

 

 

31,366

 

 

 

—

 

 

 

31,366

 

 

 

—

 

Agency discount notes

 

 

14,969

 

 

 

—

 

 

 

14,969

 

 

 

—

 

Total cash equivalents

 

 

378,107

 

 

 

331,772

 

 

 

46,335

 

 

 

—

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

Treasury bills

 

 

7,939

 

 

 

—

 

 

 

7,939

 

 

 

—

 

Total marketable securities

 

 

7,939

 

 

 

—

 

 

 

7,939

 

 

 

—

 

Total financial assets

 

$

386,046

 

 

$

331,772

 

 

$

54,274

 

 

$

—

 

Liability

 

 

 

 

 

 

 

 

 

 

 

 

Embedded derivative (included in
   “Deferred royalty obligations, net”)

 

$

35,592

 

 

$

—

 

 

$

—

 

 

$

35,592

 

 

 

 

December 31, 2024

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

294,872

 

 

$

294,872

 

 

$

—

 

 

$

—

 

Treasury bills

 

 

20,714

 

 

 

—

 

 

 

20,714

 

 

 

—

 

Agency discount notes

 

 

44,205

 

 

 

—

 

 

 

44,205

 

 

 

—

 

Total cash equivalents

 

 

359,791

 

 

 

294,872

 

 

 

64,919

 

 

 

—

 

Total financial assets

 

$

359,791

 

 

$

294,872

 

 

$

64,919

 

 

$

—

 

Liability

 

 

 

 

 

 

 

 

 

 

 

 

Embedded derivative (included in
   “Deferred royalty obligations, net”)

 

$

41,091

 

 

$

—

 

 

$

—

 

 

$

41,091

 

 

There were no transfers between Level 1, Level 2 or Level 3 during the periods presented.

There are uncertainties on the fair value measurement of the instruments classified under Level 3 due to the use of unobservable inputs and interrelationships between these unobservable inputs, which could result in higher or lower fair value measurements.

Marketable Securities

The fair value of our marketable securities classified within Level 2 is based upon observable inputs that may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications.

Notes

The fair values of our 1.75% convertible senior notes due 2031 (the “2031 Notes”), 2.25% convertible senior notes due 2029 (the “2029 Notes”) and our 2.50% convertible senior notes due 2027 (the “2027 Notes”) (collectively, the “Notes”, refer to Note 9), which differ from their respective carrying values, are determined by prices for the Notes observed in market trading. The market for trading of the Notes is not considered to be an active market and therefore the estimate of fair value is based on Level 2 inputs.

The following table presents the aggregate face values and the fair values of the Notes, based on their market prices on the last trading day for the periods presented:

 

 

 

June 30, 2025

 

 

December 31, 2024

 

 

 

Aggregate Face Values

 

 

Estimated Fair Values

 

 

Aggregate Face Values

 

 

Estimated Fair Values

 

 

 

(in thousands)

 

 

(in thousands)

 

2031 Convertible Notes

 

$

575,000

 

 

$

670,090

 

 

$

—

 

 

$

—

 

2029 Convertible Notes

 

 

747,500

 

 

 

700,505

 

 

 

747,500

 

 

 

640,708

 

2027 Convertible Notes

 

 

550,000

 

 

 

684,024

 

 

 

550,000

 

 

 

578,087

 

Term Loan

The fair value of our outstanding term loan under the Amended Financing Agreement (as defined and discussed in Note 9) as of December 31, 2024 was estimated using the net present value of the payments, discounted at an interest rate that is consistent with a market interest rate, which is a Level 2 input. The estimated fair value of our outstanding term loan as of December 31, 2024 was $461.8 million. The Company fully repaid the term loan under the Amended Financing Agreement in February 2025.

Deferred royalty obligations and embedded derivative liability

The embedded derivative liability associated with our deferred royalty obligation under the Funding Agreement, as defined and discussed further in Note 10, is measured at fair value using an option pricing Monte Carlo simulation model and is included as a component of the deferred royalty obligations, net on the condensed consolidated balance sheets. The embedded derivative liability is subject to remeasurement at the end of each reporting period, with changes in fair value recognized as a component of “Other income (expense), net”. The assumptions used in the option pricing Monte Carlo simulation model incorporates certain Level 3 inputs including: (1) our estimates of the probability and timing of related events; (2) the probability-weighted global net product revenue of Attruby, (3) our risk-adjusted discount rate; (4) volatility; and (5) the probability of a change in control occurring during the term of the instrument.

Under the Monte Carlo simulation model discussed above, the deferred royalty obligation under the Funding Agreement, net of the bifurcated embedded derivative liability, had an estimated fair value of $466.3 million and $446.0 million as of June 30, 2025 and December 31, 2024, respectively. For the three and six months ended June 30, 2025, we recognized a $1.5 million and $5.5 million gain, respectively, for the change in fair value of the embedded derivative liability in “Other income (expense), net” on our condensed consolidated statements of operations.

The carrying value of the deferred royalty obligations, net under the Royalty Purchase Agreement, as defined and discussed further in Note 10, approximates its fair value as of June 30, 2025 and is based on our current estimate of future royalties expected to be paid to the Company by Bayer over the term of the Royalty Purchase Agreement.