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Fair Value Measurements
 9 Months Ended
Sep. 30, 2024
Fair Value Measurements  
Fair Value Measurements

3.

Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis. The Company determines fair value based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy. These levels are:

Level 1: Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2: Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3: Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

Financial instruments consist of cash and cash equivalents, prepaid and other current assets, accounts payable and accrued expenses, and private placement warrants. The carrying values of the Company’s cash, prepaid and other current assets, and accounts payable and accrued expenses approximate their fair value due to the short-term maturity of these instruments.

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023, and the fair value hierarchy of the valuation techniques utilized.

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September 30, 2024

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Level 1

    

Level 2

    

Level 3

    

Total

Financial assets:

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​

​

​

​

​

​

​

​

​

​

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Cash equivalents

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$

186,637

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$

—

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$

—

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$

186,637

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December 31, 2023

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Level 1

    

Level 2

    

Level 3

    

Total

Financial assets:

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​

​

​

​

​

​

​

​

​

​

​

Cash equivalents

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$

97,913

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$

—

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$

—

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$

97,913

Financial liabilities:

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​

​

​

​

​

​

​

​

​

​

​

Private placement warrants

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$

—

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$

990

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$

—

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$

990

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There were no transfers into or out of Level 1, Level 2, or Level 3 during the three and nine months ended September 30, 2024. There are no outstanding Private Placement Warrants as of September 30, 2024. See Note 8.

Note payable

On December 8, 2022, the Company received $7.6 million in net proceeds from the issuance of a promissory note (the “Note”) issued to Hydra, LLC (“Hydra”) with a face amount of $8.0 million. The Note was repaid on March 20, 2023, upon the consummation of the Business Combination. The Company elected to account for the Note at fair value. Upon the Closing Date of the Business Combination, the Note was remeasured to the settlement value and subsequently repaid for a total of $10.0 million. The Company recorded a loss on remeasurement of the Note of $2.2 million for the nine months ended September 30, 2023 within change in fair value of note payable in the condensed consolidated statement of operations. The Note was no longer outstanding as of September 30, 2024 and December 31, 2023.

Research and development license consideration

As consideration for the 2022 Lilly License (see Note 5), Lilly agreed to receive either 550,000 Zura Class A Ordinary Shares upon the closing of the Business Combination (subject to certain lock-up provisions) or 4,702,867 shares of Z33 Series Seed Preferred Shares (the subsidiary redeemable preferred shares) if the Business Combination was not consummated. The arrangement was liability classified and remeasured at fair value at each reporting date (the research and development license consideration liability).

Upon the Closing Date of the Business Combination, the liability was remeasured to its settlement value and subsequently settled through the issuance of 550,000 Class A Ordinary Shares of Zura. The aggregate fair value of the Class A Ordinary Shares of Zura issued to Lilly was determined to be $4.5 million, or $8.16 per share. The Company recorded a loss on the remeasurement of the research and development license consideration liability of $1.9 million for the nine months ended September 30, 2023 within research and development in the condensed consolidated statements of operations. The research and development license consideration liability was no longer outstanding as of September 30, 2024 and December 31, 2023.

Private Placement Warrants

In August 2024, pursuant to the Warrant Exchange, the Company exchanged all of the outstanding Private Placement Warrants for Class A Ordinary Shares. See Note 7. The Private Placement Warrants were measured at fair value on a recurring basis. Because the transfer of Private Placement Warrants to non-permitted transferees would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Placement Warrant is consistent with that of a Public Warrant. Accordingly, the Private Placement Warrants are classified as Level 2 financial instruments. Upon completion of the Warrant Exchange, the Private Placement Warrants were remeasured to settlement value which was determined based on the fair value of the Class A Ordinary Shares issued in exchange for the Private Placement Warrants. The following table provides a summary of changes in the estimated fair value of the Private Placement Warrants:

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For the Nine

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Months Ended

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September 30, 2024

Balance as of December 31, 2023

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$

990

Change in fair value

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5,240

Exchange of private placement warrants for Class A Ordinary Shares

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(6,230)

Balance as of September 30, 2024

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$

—

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