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Fair Value Measurements
 3 Months Ended 12 Months Ended
Mar. 31, 2025
Dec. 31, 2024
Fair Value Disclosures [Abstract]    
Fair Value Measurements
4. Fair Value Measurements
The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and the level of inputs used in such measurements (in thousands):
 
    
March 31, 2025
  
    
Balance
     
Quoted Prices
in Active
Markets
(Level 1)
     
Significant
Other
Observable
Inputs
(Level 2)
     
Significant
Unobservable
Inputs
(Level 3)
  
Liabilities
            
Oramed Note
    $ 14,962      $   —       $   —       $ 14,962  
Tranche B Notes
      24,480        —         —         24,480  
Purchased revenue liability
      7,300        —         —         7,300  
Derivative liabilities
      7,894        —         —         7,894  
Other long-term liabilities
      155        —         —         155  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total liabilities measured at fair value
    $ 54,791      $ —       $ —       $ 54,791  
  
 
 
     
 
 
     
 
 
     
 
 
  
 
    
December 31, 2024
  
    
Balance
     
Quoted Prices
in Active
Markets
(Level 1)
     
Significant
Other
Observable
Inputs
(Level 2)
     
Significant
Unobservable
Inputs
(Level 3)
  
Liabilities
            
Oramed Note
    $ 12,161      $   —       $   —       $ 12,161  
Tranche B Notes
      23,560        —         —         23,560  
Purchased revenue liability
      6,800              6,800  
Derivative liabilities
      18,303        —         —         18,303  
Other long-term liabilities
      155        —         —         155  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total liabilities measured at fair value
    $ 60,979      $ —       $ —       $ 60,979  
  
 
 
     
 
 
     
 
 
     
 
 
  
The Oramed Note
In September 2023, the Company issued a senior secured promissory note to Oramed in the principal amount of $101.9 million (the “Oramed Note”) (see Note 7). The Company elected the fair value option to account for the Oramed Note with any changes in the fair value of the note recorded in the unaudited condensed consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income. The Company uses a discounted cash flow model to determine the fair value of the Oramed Note based on Level 3 inputs. This methodology discounts the interest and principal payments using a risk-adjusted discount rate. The fair value as of March 31, 2025 and December 31, 2024 was determined to be $15.0 million and $12.2 million, respectively, by applying a discount rate of 129.07% and 128.82%, respectively. For the three months ended March 31, 2025 and 2024, the Company recorded a loss of $2.8 million and $3.8 million in change in fair value of the Oramed Note in the unaudited condensed consolidated statements of operations, respectively.
Tranche B Notes
In October 2024, the Company entered into the Tranche B Securities Purchase Agreement to issue and sell the Tranche B Notes in the principal amount of $50.0 million (see Note 7). The Company elected the fair value option to account for the Tranche B Notes with any changes in the fair value of such notes recorded in the unaudited condensed consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income. The
 
Tranche B Notes are measured at fair value on a recurring basis using Level 3 inputs. The Company uses the Binomial Lattice Model valuation technique to measure the fair value of the Tranche B Notes. The fair value as of March 31, 2025 and December 31, 2024, was determined to be $24.5 million and $23.6 million, respectively. For the three months ended March 31, 2025, the Company recorded a loss of $2.5 million in change in fair value of the Tranche B Notes in the unaudited condensed consolidated statement of operations.
Purchased Revenue Liability
In October 2024, the Company entered into a Purchase and Sale Agreement (“ZTlido Royalty Purchase Agreement”) with certain institutional investors (collectively, the “ZTlido Royalty Investors”) and Oramed (see Note 7). In February 2025, the Company also entered into a Purchase and Sale Agreement (“Gloperba-Elyxyb Royalty Purchase Agreement”) with certain institutional investors (collectively, the “Gloperba-Elyxyb Royalty Investors”) and Oramed (see Note 7). The Company elected the fair value option for the purchased revenue liability for both agreements with changes in fair value recorded as change in fair value of debt and liability instruments in the unaudited condensed consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income. The Company uses a Scenario-Based Method valuation technique to measure the fair value of the purchased revenue liability. The aggregate fair value of both agreements as of March 31, 2025 and December 31, 2024, was determined to be $7.3 million and $6.8 million, respectively. For the three months ended March 31, 2025, the Company recorded a loss of $0.8 million in change in fair value of the purchased revenue liability in the unaudited condensed consolidated statement of operations.
Derivative Liabilities
The Company recorded a gain of $10.4 million for the three months ended March 31, 2025, attributed to warrant liabilities consisting of the Private Warrants, the February 2024 BDO Firm Warrants, the April 2024 RDO Common Warrants, Deposit Warrant, the October 2024 Noteholder Warrants, and December 2024 RDO Common Warrants (each as defined below). The Company recorded a loss of $0.5 million for the three months ended March 31, 2024, attributed to warrant liability consisting of the Private Warrants and the February 2024 BDO Firm Warrants. The Company assumed the private placement warrants from Vickers in November 2022 in connection with the Business Combination (the “Private Warrants”).
As of March 31, 2025, the following warrants to purchase Common Stock that are included in derivative liabilities were outstanding: 1,000,000 Private Warrants, which are currently exercisable for an aggregate of up to 28,572 shares of Common Stock, 3,803,447 February 2024 BDO Firm Warrants, which are currently exercisable for an aggregate of up to 108,686 shares of Common Stock, 15,000,000 April 2024 RDO Common Warrants, which are currently exercisable for an aggregate of up to 428,572 shares of Common Stock, 3,250,000 Deposit Warrant, which are currently exercisable for an aggregate of up to 3,250,000 shares of Common Stock, 7,500,000 October 2024 Noteholder Warrants, which are currently exercisable for an aggregate of up to 214,284 shares of Common Stock, and 57,512,958 December 2024 RDO Common Warrants, which are currently exercisable for an aggregate of up to 1,642,871 shares of Common Stock. As of March 31, 2025, the fair value of derivative warrant liabilities related to these warrants was $7.9 million.
The following table includes a summary of the derivative liabilities measured at fair value during the three months ended March 31, 2025 (in thousands):
 
    
Fair Value
  
Ending Balance as of December 31, 2024
    $ 18,303  
Change in fair value measurement
      (10,409 ) 
  
 
 
  
Ending Balance as of March 31, 2025
    $ 7,894  
  
 
 
  
 
Warrant Liability Measurement
The derivative warrant liability was valued using the Black-Scholes option pricing model, which is considered to be a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the warrant is the expected volatility of the Common Stock. The expected volatility assumption is based on the Company’s historical volatility, historical volatilities of comparable companies whose share prices are publicly available as well as the implied volatility of the Public Warrants (as defined below), described in Note 9 of the Notes to Consolidated Financial Statements in the Annual Report on Form
10-K.
A summary of the inputs used in valuing the derivative warrant liabilities as of March 31, 2025 is as follows:
 
   
Private
Warrants
    
February 2024
BDO Firm
Warrants
    
April 2024
RDO Common
Warrants
    
Deposit
Warrant
    
October 2024
Noteholder
Warrants
    
December 2024
RDO Common
Warrants (5yr)
    
December 2024
RDO Common
Warrants (2.5yr)
  
Exercise price
   $ 402.50     $ 59.50     $ 38.50     $ 1.20     $ 36.40     $ 22.72     $ 22.72  
Term, in years
     2.61       3.93       4.07       4.22       4.52       4.70       2.20  
Volatility
     109.0 %      85.0 %      83.0 %      76.0 %      80.0 %      79.0 %      98.0 % 
Risk-free rate
     3.85 %      3.88 %      3.89 %      3.89 %      3.90 %      3.91 %      3.85 % 
Dividend yield
     0.0 %      0.0 %      0.0 %      0.0 %      0.0 %      0.0 %      0.0 % 
A summary of the inputs used in valuing the derivative warrant liabilities as of December 31, 2024 is as follows:
 
   
Private
Warrants
    
February 2024
BDO Firm
Warrants
    
April 2024
RDO Common
Warrants
    
Deposit
Warrant
    
October 2024
Noteholder
Warrants
    
December 2024
RDO Common
Warrants (5yr)
    
December 2024
RDO Common
Warrants (2.5yr)
  
Exercise price
   $ 402.50     $ 59.50     $ 38.50     $ 1.20     $ 36.40     $ 22.72     $ 22.72  
Term, in years
     2.86       4.18       4.32       4.47       4.77       4.95       2.45  
Volatility
     109.0 %      81.0 %      80.0 %      73.0 %      77.0 %      76.0 %      95.0 % 
Risk-free rate
     4.22 %      4.29 %      4.30 %      4.30 %      4.32 %      4.33 %      4.21 % 
Dividend yield
     0.0 %      0.0 %      0.0 %      0.0 %      0.0 %      0.0 %      0.0 % 
Contingent Consideration Related to
SP-104
Acquisition
The Development Milestone Payment related to the
SP-104
Assets represents an obligation to potentially settle a fixed value in a variable number of shares of Common Stock and requires remeasurement at fair value through settlement.
Upon the achievement of FDA approval for a new drug application for
SP-104,
the Company will transfer $3.0 million in cash or shares of Common Stock to Aardvark, at the discretion of the Company. The fair value of the contingent consideration liability associated with the Development Milestone Payment was estimated using a probability-weighted discounted cash flow method. Significant unobservable inputs assumptions included the likelihood of receiving FDA approval for
SP-104,
expected timing for receipt of FDA approval for
SP-104,
and a discount rate of 9.6%. As of each of March 31, 2025 and December 31, 2024, the fair value of contingent consideration related to the Development Milestone Payment was $0.2 million.
4. Fair Value Measurements
The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and the level of inputs used in such measurements (in thousands):
 
    
December 31, 2024
  
    
Balance
     
Quoted Prices
in Active
Markets
(Level 1)
     
Significant
Other
Observable
Inputs (Level 2)
     
Significant
Unobservable
Inputs (Level 3)
  
Liabilities
            
Oramed Note
    $ 12,161      $ —       $ —       $ 12,161  
Tranche B Notes
      23,560        —         —         23,560  
Purchased Revenue Liability
      6,800        —         —         6,800  
Derivative liabilities
      18,303        —         —         18,303  
Other long-term liabilities
      155        —         —         155  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total liabilities measured at fair value
    $ 60,979      $ —       $ —       $ 60,979  
  
 
 
     
 
 
     
 
 
     
 
 
  
 
    
December 31, 2023
  
    
Balance
     
Quoted Prices
in Active
Markets
(Level 1)
     
Significant
Other
Observable
Inputs (Level 2)
     
Significant
Unobservable
Inputs (Level 3)
  
Liabilities
            
Oramed Note
    $ 104,089      $ —       $ —       $ 104,089  
Convertible Debentures
      4,340        —         —         4,340  
Derivative liabilities
      1,518        —         —         1,518  
Other long-term liabilities
      179        —         —         179  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total liabilities measured at fair value
    $ 110,126      $ —       $ —       $ 110,126  
  
 
 
     
 
 
     
 
 
     
 
 
  
The Oramed Note
In September 2023, the Company issued a senior secured promissory note to Oramed in the principal amount of $101.9 million (the “Oramed Note”) (see Note 7). The Company elected the fair value option to account for the Oramed Note with any changes in the fair value of such note recorded in the consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income. The Company uses a discounted cash flow model to determine the fair value of the Oramed Note based on Level 3 inputs. This methodology discounts the interest and principal payments using a risk-adjusted discount rate. The fair value as of December 31, 2024 and 2023 was determined to be $12.2 million and $104.1 million, respectively, by applying a discount rate of 128.82% and 13.05%, respectively. For the years ended December 31, 2024 and 2023, the Company recorded a loss of $3.6 million and $2.8 million in change in fair value of the Oramed Note, respectively. For the years ended December 31, 2024 and 2023, the change in fair value due to instrument-specific credit risk recorded as a component of other comprehensive income was $6.3 million and nil, respectively. During the year ended December 31, 2024 the Company reclassified $5.0 million from accumulated other comprehensive income to the consolidated statement of operations. This reclassification was related to the principal payments and partial conversion of the Oramed Note balance into the Tranche B Notes (see Note 7).
 
FSF Deposit
In June 2024, the Company received the FSF Deposit in the aggregate principal amount of $10.0 million from FSF Lender (see Note 2 and Note 7). The Company elected the fair value option to account for the FSF Deposit with any changes in the fair value of the deposit recorded in the consolidated statements of operations and comprehensive loss. For the year ended December 31, 2024, the Company recorded a loss of $4.7 million in change in fair value of the FSF Deposit in the consolidated statement of operations. In November 2024, the Company delivered the Additional Product to Endeavor and fully satisfied the remaining obligations in respect of the FSF Deposit. Upon the satisfaction of the FSF Deposit, the Deposit Warrant became a freestanding instrument under ASC 480 and was included in derivative liabilities on the Company’s consolidated balance sheet.
Tranche B Notes
In October 2024, the Company entered into the Tranche B Securities Purchase Agreement to issue and sell the Tranche B Notes in the principal amount of $50.0 million (see Note 7). The Company elected the fair value option to account for the Tranche B Notes with any changes in the fair value of such notes recorded in the consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income. The Tranche B Notes are measured at fair value on a recurring basis using the Level 3 inputs. The Company uses the Binomial Lattice Model valuation technique to measure the fair value of the Tranche B Notes. The fair value as of December 31, 2024, was determined to be $23.6 million. For the year ended December 31, 2024, the Company recorded a gain of $6.6 million in change in fair value of the Tranche B Notes in the consolidated statement of operations.
Purchased Revenue Liability
In October 2024, the Company entered into the ZTlido Royalty Purchase Agreement with certain institutional investors (collectively, the “ZTlido Royalty Investors”) and Oramed (see Note 7). The Company elected the fair value option for the purchased revenue liability with changes in fair value recorded as change in fair value of debt and liability instruments in the consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income. The Company uses a Scenario-Based Method valuation technique to measure the fair value of the purchased revenue liability. The fair value as of December 31, 2024, was determined to be $6.8 million. For the year ended December 31, 2024, the Company recorded a loss of $0.9 million in change in fair value of the purchased revenue liability in the consolidated statement of operations.
Convertible Debentures
In March and April 2023, the Company issued the Convertible Debentures in the principal amount of $25.0 million (see Note 7). The Convertible Debentures were measured at fair value on a recurring basis using Level 3 inputs. The Company used the Binomial Lattice Model valuation technique to measure the fair value of the Convertible Debentures with any changes in the fair value of the Convertible Debentures recorded in the consolidated statements of operations and comprehensive loss. Interest expense related to the Convertible Debentures is included in the changes in fair value. For the years ended December 31, 2024 and 2023, the Company recorded a loss of $35.0 thousand and a loss of $4.4 million in change in fair value of the Convertible Debentures, respectively. The Company fully repaid the Convertible Debentures in March 2024.
Derivative Liabilities
The Company recorded a gain of $17.4 million for the year ended December 31, 2024, attributed to warrant liabilities consisting of the Private Warrants, the February 2024 BDO Firm Warrants, the April 2024 RDO Common Warrants, the October 2024 Noteholder Warrants, and December 2024 RDO Common Warrants (each
 
as defined below). The Company recorded a loss of $
0.5
 million for the year ended December 31, 2023, on derivative liabilities which was attributed to the Private Warrants that the Company assumed from Vickers in November 2022 in connection with the Business Combination (“Private Warrants”)
.
 
As
of December 31, 2024, the following warrants to purchase Common Stock that are included in derivative liabilities were outstanding: 1,000,000 Private Warrants,
 
which are currently exercisable for an aggregate of up to 28,572 shares of Common Stock,
 
3,803,447 February 2024 BDO Firm Warrants,
 
which are currently exercisable for an aggregate of up to 108,686 shares of Common Stock,
 
15,000,000 April 2024 RDO Common Warrants,
 
which are currently exercisable for an aggregate of up to 428,572 shares of Common Stock,
3,250,000 Deposit Warrant,
 
which are currently exercisable for an aggregate of up to
3,250,000 
shares of Common Stock, 7,500,000
October 2024 Noteholder Warrants
, which are currently exercisable for an aggregate of up to 214,284 shares of Common Stock,
 
and 57,512,958 December 2024 RDO Common Warrants
, which are currently exercisable for an aggregate of up to 1,642,871 shares of Common Stock
. As of December 31, 2024, the fair value of derivative warrant liabilities related to these warrants was $18.3 million.
The following table includes a summary of the derivative liabilities measured at fair value during the years ended December 31, 2024 and 2023 (in thousands):
 
 
  
Fair Value
 
Ending Balance as of December 31, 2022
    $ 1,231  
Change in fair value measurement
      512  
Forfeiture of Private Warrants
      (225 ) 
  
 
 
  
Ending Balance as of December 31, 2023
      1,518  
Issuance of February 2024 BDO Firm Warrants as part of February 2024 BDO, April 2024 RDO Common Warrants as part of April 2024 RDO, October 2024 Noteholder Warrants as part of Tranche B Notes, December 2024 RDO Common Warrants as part of December 2024 RDO, and December 2024 RDO
Pre-Funded
Warrants as part of December 2024 RDO
      34,330  
Reclass of Deposit Warrant liability upon satisfaction of FSF Deposit
      1,690  
Cancellation of Private Warrants as part of Oramed Letter Agreement
      (445 ) 
Warrant amendment and exercise as part of December 2024 RDO
      (428 ) 
Settlement of December 2024 RDO
Pre-Funded
Warrants
      (984 ) 
Change in fair value measurement
      (17,378 ) 
  
 
 
  
Ending Balance as of December 31, 2024
    $ 18,303  
  
 
 
  
Warrant Liability Measurement
The derivative warrant liability was valued using the Black-Scholes option pricing model, which is considered to be Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the warrant is the expected volatility of the Common Stock. The expected volatility assumption is based on the Company’s historical volatility, historical volatilities of comparable companies whose share prices are publicly available as well as the implied volatility of the Public Warrants (see Note 9). A summary of the inputs used in valuing the derivative warrant liabilities is as follows:
 
 
  
Private
Warrants
 
 
February
2024 BDO
Firm
Warrants
 
 
April 2024
RDO
Common
Warrants
 
 
Deposit
Warrant
 
 
October
2024
Noteholder
Warrants
 
 
December
2024 RDO
Common
Warrants
(5yr)
 
 
December
2024 RDO
Common
Warrants
(2.5yr)
 
 
  
December 31, 2024
 
Exercise price
    $ 402.50     $ 59.50     $ 38.50     $ 1.20     $ 36.40     $ 22.72     $ 22.72  
Term, in years
      2.86       4.18       4.32       4.47       4.77       4.95       2.45  
Volatility
      109.0 %      81.0 %      80.0 %      73.0 %      77.0 %      76.0 %      95.0 % 
Risk-free rate
      4.22 %      4.29 %      4.30 %      4.30 %      4.32 %      4.33 %      4.21 % 
Dividend yield
      0.0 %      0.0 %      0.0 %      0.0 %      0.0 %      0.0 %      0.0 % 
 
 
  
Private
Warrants
 
 
  
December 31, 2023
 
Exercise price
    $ 402.50  
Term, in years
      3.86  
Volatility
      76.0 % 
Risk-free rate
      3.90 % 
Dividend yield
      0.0 % 
Contingent Consideration Related to
SP-104
Acquisition
The Development Milestone Payment related to the
SP-104
Assets represents an obligation to potentially settle a fixed value in a variable number of shares of Common Stock and requires remeasurement at fair value through settlement.
Upon the achievement of FDA approval for a new drug application for
SP-104,
the Company will transfer $3.0 million in cash or shares of Common Stock, at the discretion of the Company. The fair value of the contingent consideration liability associated with the Development Milestone Payment was estimated using a probability-weighted discounted cash flow method. Significant unobservable inputs assumptions included the likelihood of receiving FDA approval for
SP-104,
expected timing for receipt of FDA approval for
SP-104,
and a discount rate of 10.0%. As of December 31, 2024 and 2023, the fair value of contingent consideration related to the Development Milestone Payment was $0.2 million.
There were no transfers between fair value measurement levels during the years ended December 31, 2024 and 2023.