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Fair Value of Financial Instruments
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

4. fair value of financial instruments

The Company’s financial instruments that are measured at fair value on a recurring basis consist of cash equivalents, marketable securities, equity securities of Verve Therapeutics, Inc., or Verve, and Prime Medicine, Inc., or Prime, contingent consideration liabilities related to the Agreement and Plan of Merger, dated February 23, 2021, between the Company and Guide, or the Guide Merger Agreement, success payment derivative liabilities pursuant to the Harvard and Broad License Agreements and settlement payment derivative liabilities associated with a settlement agreement with a research institution.

The following tables set forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy at December 31, 2024 (in thousands):

 

 

Carrying
amount

 

 

Fair
value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

281,786

 

 

$

281,786

 

 

$

281,786

 

 

$

—

 

 

$

—

 

Commercial paper

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

181,296

 

 

 

181,296

 

 

 

—

 

 

 

181,296

 

 

 

—

 

Corporate notes

 

 

100,165

 

 

 

100,165

 

 

 

—

 

 

 

100,165

 

 

 

—

 

U.S. Treasury securities

 

 

164,770

 

 

 

164,770

 

 

 

—

 

 

 

164,770

 

 

 

—

 

U.S. Government securities

 

 

114,761

 

 

 

114,761

 

 

 

—

 

 

 

114,761

 

 

 

—

 

Corporate equity securities

 

 

7,781

 

 

 

7,781

 

 

 

7,781

 

 

 

—

 

 

 

—

 

Total assets

 

$

850,559

 

 

$

850,559

 

 

$

289,567

 

 

$

560,992

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Success payment liability – Harvard

 

$

3,900

 

 

$

3,900

 

 

$

—

 

 

$

—

 

 

$

3,900

 

Success payment liability – Broad Institute

 

 

4,500

 

 

 

4,500

 

 

 

—

 

 

 

—

 

 

 

4,500

 

Derivative settlement liability

 

 

5,404

 

 

 

5,404

 

 

 

—

 

 

 

—

 

 

 

5,404

 

Contingent consideration liability – Technology

 

 

496

 

 

 

496

 

 

 

—

 

 

 

—

 

 

 

496

 

Contingent consideration liability – Product

 

 

635

 

 

 

635

 

 

 

—

 

 

 

—

 

 

 

635

 

Total liabilities

 

$

14,935

 

 

$

14,935

 

 

$

—

 

 

$

—

 

 

$

14,935

 

 

 

The following tables set forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy at December 31, 2023 (in thousands):

 

 

Carrying
amount

 

 

Fair
value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

435,689

 

 

$

435,689

 

 

$

435,689

 

 

$

—

 

 

$

—

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

285,289

 

 

 

285,289

 

 

 

—

 

 

 

285,289

 

 

 

—

 

Corporate notes

 

 

23,525

 

 

 

23,525

 

 

 

—

 

 

 

23,525

 

 

 

—

 

U.S. Treasury securities

 

 

152,147

 

 

 

152,147

 

 

 

—

 

 

 

152,147

 

 

 

—

 

U.S. Government securities

 

 

271,145

 

 

 

271,145

 

 

 

—

 

 

 

271,145

 

 

 

—

 

Corporate equity securities

 

 

21,875

 

 

 

21,875

 

 

 

21,875

 

 

 

—

 

 

 

—

 

Total assets

 

$

1,189,670

 

 

$

1,189,670

 

 

$

457,564

 

 

$

732,106

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Success payment liability – Harvard

 

$

5,200

 

 

$

5,200

 

 

$

—

 

 

$

—

 

 

$

5,200

 

Success payment liability – Broad Institute

 

 

5,600

 

 

 

5,600

 

 

 

—

 

 

 

—

 

 

 

5,600

 

Contingent consideration liability – Technology

 

 

1,371

 

 

 

1,371

 

 

 

—

 

 

 

—

 

 

 

1,371

 

Contingent consideration liability – Product

 

 

1,352

 

 

 

1,352

 

 

 

—

 

 

 

—

 

 

 

1,352

 

Total liabilities

 

$

13,523

 

 

$

13,523

 

 

$

—

 

 

$

—

 

 

$

13,523

 

Cash equivalents – Money market funds included within cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. Commercial paper and corporate notes are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through using models or other valuation methodologies.

Marketable securities – Marketable securities, excluding corporate equity securities, are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined using models or other valuation methodologies.

During the years ended December 31, 2024 and 2023, the Company held an investment in Verve consisting of shares of Verve’s common stock. As of December 31, 2024, the Company owned 546,970 shares of Verve's common stock, the value of which is included in marketable securities in the consolidated balance sheet. The Company recorded the investment at fair value of $3.1 million and $7.6 million as of December 31, 2024 and 2023, respectively. The Company recognized $4.5 million and $3.0 million of other expense during the years ended December 31, 2024 and 2023, respectively, associated with changes in the fair value of Verve's common stock.

In October 2022, Prime completed an initial public offering of its common stock. As of December 31, 2024 and 2023, the Company owned 1,608,337 shares of Prime's common stock valued at $4.7 million and $14.2 million, respectively. The Company recognized $9.6 million and $15.6 million of other expense during the years ended December 31, 2024 and 2023, respectively, associated with changes in the fair value of Prime's common stock.

The following table summarizes other income (expense) incurred due to changes in the fair value of corporate equity securities held (in thousands):

 

 

Years Ended December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

Other income (expense)

 

$

(14,093

)

 

$

(18,592

)

 

$

20,200

 

Success Payment Liability – As discussed further in Note 9, the Company is required to make payments to Harvard and Broad Institute based upon the achievement of specified multiples of the initial weighted average value of the Company’s Series A Preferred or, subsequent to the IPO, the market value of the Company's common stock, at specified valuation dates. The Company’s liability for the share-based success payments under the Harvard and Broad License Agreements are carried at fair value. To determine the estimated fair value of the success payment liability, the Company uses a Monte Carlo simulation methodology, which models the future movement of stock prices based on several key variables.

The following variables were incorporated in the calculation of the estimated fair value of the Harvard and Broad Institute success payment liabilities:

 

 

Harvard

 

 

Broad Institute

 

 

 

December 31,
2024

 

 

December 31,
2023

 

 

December 31,
2024

 

 

December 31,
2023

 

Fair value of common stock (per share)

 

$

24.80

 

 

$

27.22

 

 

$

24.80

 

 

$

27.22

 

Expected volatility

 

 

78

%

 

 

80

%

 

 

81

%

 

 

79

%

Expected term (years)

 

0.03-4.49

 

 

0.06-5.49

 

 

0.03-5.36

 

 

0.06-6.36

 

The computation of expected volatility was estimated using the Company's historical volatility along with available information about the historical volatility of stocks of similar publicly traded companies for a period matching the expected term assumption. In addition, the Company incorporated the estimated number, timing, and probability of valuation measurement dates in the calculation of the success payment liability.

The following table reconciles the change in the fair value of success payment liabilities based on Level 3 inputs (in thousands):

 

 

Year Ended December 31, 2024

 

 

 

Harvard

 

 

Broad Institute

 

 

Total

 

Balance at December 31, 2022

 

$

9,000

 

 

$

9,300

 

 

$

18,300

 

Change in fair value

 

 

(3,800

)

 

 

(3,700

)

 

 

(7,500

)

Balance at December 31, 2023

 

$

5,200

 

 

$

5,600

 

 

$

10,800

 

Change in fair value

 

 

(1,300

)

 

 

(1,100

)

 

 

(2,400

)

Balance at December 31, 2024

 

$

3,900

 

 

$

4,500

 

 

$

8,400

 

Contingent consideration liabilities – Under the Guide Merger Agreement, Guide’s former stockholders and optionholders are eligible to receive up to an additional $100.0 million in technology milestone payments and $220.0 million in product milestone payments, payable in the Company’s common stock valued using the volume-weighted average price of the Company’s stock over the ten-day trading period ending two trading days prior to the date on which the applicable milestone is achieved. As these milestones are payable with a variable number of shares of the Company’s common stock, the milestone payments result in liability classification under ASC 480, Distinguishing Liabilities from Equity. These contingent consideration liabilities are carried at fair value which was estimated by applying a probability-based model, which utilized inputs based on timing of achievement that were unobservable in the market. These contingent consideration liabilities are classified within Level 3 of the fair value hierarchy.

The following variables were incorporated in the calculation of the estimated fair value of the contingent consideration liabilities:

 

 

Technology Milestones

 

 

Product Milestones

 

 

 

 

December 31,
2024

 

 

December 31,
2023

 

 

December 31,
2024

 

 

December 31,
2023

 

 

Discount Rate

 

 

10.00

%

 

 

10.00

%

 

 

10.00

%

 

 

10.00

%

 

Probability of Achievement

 

 

2

%

 

2-5%

 

 

1-2%

 

 

1-2%

 

 

Projected Year of Achievement

 

2026

 

 

2025

 

 

2028-2034

 

 

2025-2031

 

 

The following table reconciles the change in fair value of the contingent consideration liabilities based on level 3 inputs (in thousands):

 

 

Year Ended December 31, 2024

 

 

 

Technology Milestones

 

 

Product Milestones

 

 

Total

 

Balance at December 31, 2022

 

$

6,025

 

 

$

6,438

 

 

$

12,463

 

Change in fair value

 

 

(4,654

)

 

 

(5,086

)

 

 

(9,740

)

Balance at December 31, 2023

 

$

1,371

 

 

$

1,352

 

 

$

2,723

 

Change in fair value

 

 

(875

)

 

 

(717

)

 

 

(1,592

)

Balance at December 31, 2024

 

$

496

 

 

$

635

 

 

$

1,131

 

Derivative settlement liability – On July 19, 2024, the Company entered into a settlement agreement with a research institution pursuant to which, in exchange for a release of claims in its favor, the Company agreed, among other things, to pay the research institution an upfront payment of $15.0 million and to make additional payments contingent upon the development and commercialization of BEAM-102 and BEAM-302. These contingent payments consist of certain development, regulatory, and sales-based milestone payments, as well as a 1% royalty through 2038. Any amounts due must be settled in cash. The maximum amount of development and regulatory milestone payments under the settlement agreement is $15.0 million, and the maximum amount of sales milestone payments is $35 million, per program. The Company paid the $15.0 million upfront payment during the 12 months ended December 31, 2024. There was no material charge related to this settlement in the year ended December 31, 2024 as the settlement value was substantially accrued in prior periods.

The contingent settlement payments are accounted for as a derivative under Accounting Standards Codification 815, Derivatives and Hedging, as the potential payments meet the definition of a derivative and are not subject to any scope exceptions. The derivative liability is recorded at fair value on the Company's balance sheet with changes in value recognized in interest and other income (expense) in the consolidated statement of operations and other comprehensive loss. To determine the estimated fair value of the liability, the Company applied a probability-based model, which utilized inputs based on the potential achievement and related timing of certain development, regulatory and sales-based milestones that were unobservable in the market. This derivative liability is classified within Level 3 of the fair value hierarchy above.

The following assumptions were incorporated in the calculation of the fair value of the derivative settlement liability:

 

 

Milestones

 

 

 

December 31,
2024

 

Discount rate

 

 

10.00

%

Probability of achievement of settlement payments

 

3%-44%

 

Projected Year of achievement of settlement payments

 

2027-2038

 

The following table reconciles the change in fair value of the derivative liability based on level 3 inputs (in thousands):

 

 

Year Ended December 31, 2024

 

 

 

Total

 

Balance at December 31, 2023

 

$

—

 

Initial recognition of derivative liability

 

 

5,276

 

Change in fair value

 

 

128

 

Balance at December 31, 2024

 

$

5,404