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Fair Value
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value

6. FAIR VALUE

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy and the valuation techniques that the Company utilized to determine such fair value:

 

 

 

June 30,

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

2026

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

15,672

 

 

$

15,672

 

 

$

—

 

 

$

—

 

U.S. government and agency debt securities

 

 

80,543

 

 

 

79,541

 

 

 

1,002

 

 

 

—

 

Corporate debt securities

 

 

99,414

 

 

 

—

 

 

 

99,414

 

 

 

—

 

Total

 

$

195,629

 

 

$

95,213

 

 

$

100,416

 

 

$

—

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

136,304

 

 

 

—

 

 

 

—

 

 

 

136,304

 

Total

 

$

136,304

 

 

$

—

 

 

$

—

 

 

$

136,304

 

 

 

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

 

2025

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

18,583

 

 

$

18,583

 

 

$

—

 

 

$

—

 

U.S. government and agency debt securities

 

 

101,371

 

 

 

94,246

 

 

 

7,125

 

 

 

—

 

Corporate debt securities

 

 

98,274

 

 

 

—

 

 

 

97,774

 

 

 

500

 

Total

 

$

218,228

 

 

$

112,829

 

 

$

104,899

 

 

$

500

 

 

The Company transfers its financial assets and liabilities, measured at fair value on a recurring basis, between the fair value hierarchies at the end of each reporting period. There were no transfers of any securities between levels during the six months ended June 30, 2026.

The Company’s investments classified as Level 2 within the fair value hierarchy were initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing market-observable data. The market-observable data included reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validated the prices developed using the market-observable data by obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active.

At June 30, 2026, the fair value of the contingent consideration resulting from the Avadel Acquisition was $136.3 million and was recorded within “Contingent consideration” in the accompanying condensed consolidated balance sheets. The contingent consideration was valued as a contingent liability utilizing Level 3 inputs as its fair value is based on significant inputs not observable in the market.

During the three months ended June 30, 2026, the fair value of the contingent consideration increased by $26.8 million and was determined as follows:

•
Following receipt of positive topline results from the REVITALYZ phase 3 clinical study of LUMRYZ in IH announced in May 2026, the Company increased the probability of success of achieving the CVR Milestone from 75% to 90%; and
•
The fair value of the contingent consideration was estimated by applying a discount factor, calculated based on the likelihood of achievement of the CVR Milestone, from the expected time the milestone occurs to the end of the reporting period, to the estimated probability of success. The Company expects achievement of the CVR Milestone to be determined by the end of 2027 and used a discount rate of 6.18%.

The change in fair value of contingent consideration during each of the three and six months ended June 30, 2026 was $26.8 million, of which the Company recorded $26.4 million related to consideration transferred within “Change in fair value of contingent consideration” and recognized share-based compensation expense of $0.4 million related to the acceleration of unvested share-based compensation awards attributable to post-combination service in the accompanying condensed consolidated statements of operations and comprehensive (loss) income.

The following table is a rollforward of the fair value of the Company’s assets with fair values that were determined using Level 3 inputs at June 30, 2026:

 

 

 

Fair Value

 

(In thousands)

 

Assets

 

 

Liabilities

 

Balance, January 1, 2026

 

$

500

 

 

$

—

 

Addition of contingent consideration attributable to consideration transferred

 

 

—

 

 

 

107,713

 

Change in fair value of contingent consideration attributable to consideration transferred

 

 

—

 

 

 

26,414

 

Addition of contingent consideration attributable to post-combination expense

 

 

—

 

 

 

1,781

 

Change in fair value of contingent consideration attributable to post-combination expense

 

 

—

 

 

 

396

 

Impairment of corporate debt security

 

 

(500

)

 

 

—

 

Balance, June 30, 2026

 

$

—

 

 

$

136,304

 

The carrying amounts reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, contract assets, other current assets, accounts payable and accrued expenses, sales discounts, allowances and reserves approximate fair value due to their short-term nature.

The estimated fair value of the Company’s long-term debt under its Facilities (as defined in Note 12, Long-Term Debt in these “Notes to Condensed Consolidated Financial Statements”), which was based on quoted market price indications (Level 2 in the fair value hierarchy) and which may not be representative of actual values that could have been, or will be, realized in the future, was $1,532.4 million at June 30, 2026.