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Financial Instruments
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
Financial Instruments Financial Instruments
The following is a summary of our financial instruments measured at fair value on a recurring basis (in thousands):
June 30, 2024Level 1Level 2Level 3Total
Cash equivalents:
Money market funds$24,161 $— $— $24,161 
Certificates of deposit3,960 — — 3,960 
Total assets$28,121 $— $— $28,121 
Long-term liabilities:
Contingent consideration— — (48,210)(48,210)
Total liabilities$— $— $(48,210)$(48,210)
December 31, 2023Level 1Level 2Level 3Total
Cash equivalents:
Money market funds$22,802 $— $— $22,802 
Certificates of deposit3,968 — — 3,968 
Total assets$26,770 $— $— $26,770 
Long-term liabilities:
Contingent consideration— — (63,890)(63,890)
Total liabilities$— $— $(63,890)$(63,890)
We used prices quoted from our investment advisors to determine the Level 1 valuation of our investments in money market funds and certificates of deposit. The estimated market value of all cash equivalents is equal to cost basis as there were no gross realized gains or losses on cash equivalents for the three and six months ended June 30, 2024 and 2023.
On September 2, 2020 we entered into a Securities Purchase Agreement to acquire 100% of the outstanding equity interests of Ascyrus Medical LLC (“Ascyrus”). Ascyrus developed the Ascyrus Medical Dissection Stent (“AMDS”) hybrid prosthesis, the world’s first aortic arch remodeling device for use in the treatment of acute Type A aortic dissections. As part of the acquisition, we may be required to pay additional consideration in cash of up to $100.0 million to the former shareholders of Ascyrus upon the achievement of certain milestones and the sales-based additional earnout.
The contingent consideration represents the estimated fair value of future potential payments. The fair value of the contingent consideration liability was estimated by discounting to present value the contingent payments expected to be made based on a probability-weighted scenario approach. We applied a discount rate based on our unsecured credit spread and the term commensurate risk-free rate to the additional consideration to be paid, and then applied a risk-based estimate of the probability of achieving each scenario to calculate the fair value of the contingent consideration. This fair value measurement was based on unobservable inputs, including management estimates and assumptions about the future achievement of milestones and future estimate of revenues, and is, therefore, classified as Level 3 within the fair value hierarchy. We used a discount rate of approximately 17% and estimated future achievement of milestone dates between 2025 and 2026 to calculate the fair value of contingent consideration as of June 30, 2024. We will remeasure this liability at each reporting date and will record changes in the fair value of the contingent consideration in General, administrative, and marketing expenses on the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. Increases or decreases in the fair value of the contingent consideration liability can result from changes in passage of time, discount rates, the timing and amount of our revenue estimates, and the timing and expectation of regulatory approvals.
We performed an assessment of the fair value of the contingent consideration and recorded a fair value increase of $1.8 million and a fair value reduction of $15.7 million for the three and six months ended June 30, 2024, respectively, as compared to a fair value increase of $10.9 million and $15.7 million for the three and six months ended June 30, 2023, respectively, in General, administrative, and marketing expenses on the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income, as a result of this assessment. The reduction in the fair value for the six months ended June 30, 2024 was primarily due to an increase in the credit risk spread resulting from the change in the inputs related to the newly issued Credit Facilities in the first quarter of 2024, as further discussed in Note 9.
The fair value of the contingent consideration component of the Ascyrus acquisition was updated using Level 3 inputs. Changes in fair value of Level 3 assets and liabilities are listed in the table below (in thousands):
Contingent Consideration
Balance as of December 31, 2023$(63,890)
Change in valuation 15,680 
Balance as of June 30, 2024$(48,210)
The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Although we believe that the recorded fair values of our financial instruments are appropriate, these fair values may not be reflective of future fair values.
The contingent consideration liability of $48.2 million and $63.9 million was included in Long-term liabilities on the Condensed Consolidated Balance Sheets as of June 30, 2024 and the Consolidated Balance Sheets as of December 31, 2023, respectively.