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Financial Instruments and Fair Value Measurements
 9 Months Ended
Sep. 30, 2025
Fair Value Disclosures [Abstract]  
Financial Instruments and Fair Value Measurements
4. Financial Instruments and Fair Value Measurements
Our assets that are required to be measured at fair value on a recurring basis consist of money market funds, classified as cash, cash equivalents and restricted cash and cash equivalents on our condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024.
Our liabilities that are required to be measured at fair value on a recurring basis consist of a derivative liability pursuant to a loan and security agreement (the “K2HV Loan Agreement”) with K2 HealthVentures LLC (“K2HV”) (see Note 6, Term Loan) on our condensed consolidated balance sheet as of September 30, 2025 and December 31, 2024.
The carrying amounts reflected in the condensed consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values, due to their short-term nature.
Assets and liabilities measured at fair value on a recurring basis as of September 30, 2025 were as follows:
Level 1
Level 2
Level 3
Total
(in thousands)
Assets:
Money market funds
$60,195 $— $— $60,195 
Total assets
$60,195 $— $— $60,195 
Liabilities:
Derivative liability
$— $— $2,614 $2,614 
Total liabilities
$— $— $2,614 $2,614 
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 were as follows:
Level 1
Level 2
Level 3
Total
(in thousands)
Assets:
Money market funds
$105,526 $— $— $105,526 
Total assets
$105,526 $— $— $105,526 
Liabilities:
Derivative liability
$— $— $2,829 $2,829 
Total liabilities
$— $— $2,829 $2,829 
There were no changes in valuation techniques used during the three or nine months ended September 30, 2025.
Derivative Liability
In May 2024, we entered into the K2HV Loan Agreement, as further described in Note 6, which provides up to $60.0 million principal in term loans. Pursuant to the terms of the K2HV Loan Agreement, the lenders thereto may elect, prior to the full repayment of the term loans, to convert up to $5.0 million of the outstanding principal of the term loans into shares of our common stock at a conversion price of the lesser of $6.3182 per share (the “Fixed Price Conversion”) and the lowest effective price per share of our first equity financing following the closing of the K2HV Loan Agreement (the “Variable Price Conversion”), subject to customary adjustments and 9.99% and 19.99% beneficial ownership limitations. The Fixed Price Conversion and Variable Price Conversion within the K2HV Loan Agreement are required to be bifurcated as a single compound embedded derivative carried at fair value, with subsequent changes in fair value recognized in the condensed consolidated statements of operations.
The following table reconciles the change in fair value of the derivative liability based on Level 3 inputs:
Nine Months Ended September 30,
20252024
(in thousands)
Balance at beginning of period$2,829 $— 
Fair value of derivative liability at issuance of term loan
— 4,450 
Change in fair value(215)(1,715)
Balance at end of period$2,614 $2,735 
The change in fair value of the derivative liability is included in other income, net in the accompanying condensed consolidated statements of operations. We recognized a nominal gain on the change in fair value of the derivative liability during the three months ended September 30, 2025 and a gain of $0.1 million during the three months ended September 30, 2024. We recognized gains of $0.2 million and $1.7 million related to the change in fair value of the derivative liability during the nine months ended September 30, 2025 and 2024, respectively.
The fair value of the derivative liability in the term loan was estimated using the Monte Carlo model. A summary of the weighted-average significant unobservable inputs (Level 3 inputs) used in measuring the derivative liability in the term loan as of September 30, 2025 and December 31, 2024 is as follows:
September 30,
2025		December 31,
2024
Stock Price$1.97$1.48
Volatility100.0%103.0%
Risk-free rate (continuous)3.6%4.2%
Expected term (in years)0.250.58
Dividend yield (continuous)—%—%