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Fair Value of Financial Instruments | 3 Months Ended
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Mar. 31, 2024
Fair Value of Financial Instruments |
Fair Value of Financial Instruments | 5. Fair Value of Financial Instruments Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is determined based upon assumptions that market participants would use in pricing an asset or liability. Fair value measurements are classified on a three-tier hierarchy as follows:
| ● | Level 1 inputs: Quoted prices (unadjusted) for identical assets or liabilities in active markets;
| ● | Level 2 inputs: Inputs, other than quoted prices, that are observable either directly or indirectly; and
| ● | Level 3 inputs: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.
In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy described above. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. The carrying amounts of the Company’s short-term financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities, approximate fair value due to the relatively short period to maturity for these level 1 instruments. As a result of the acquisition of VCN the Company acquired interest-free or below-market interest rate loans extended by Spanish government. The carrying value of the loans payable approximate fair value and are classified under level 2. In connection with the Acquisition of VCN, the Company is required to pay up to $70.2 million in additional consideration upon the achievement of certain milestones, including regulatory filings completed. In August 2023, the Company initiated patient dosing in the U.S. in its Phase 2 clinical trial of VCN-01 in PDAC. As a result, payment was made in the fourth quarter 2023 in the amount of $3.25 million. The discounted cash flow method used to value this contingent consideration includes inputs of not readily observable market data, which are Level 3 inputs. The fair value of the contingent consideration was $6.5 million as of March 31, 2024 and is all reflected as non-current contingent consideration liability. During the three months ended March 31, 2024 and 2023, the Company recognized in operating expense a $202,000 and $135,000, respectfully, fair value adjustment increase to contingent consideration. There were no transfers in or out of the level 3 liabilities during the three months ended March 31, 2024 and 2023. The following table summarizes the change in the fair value as determined by Level 3 inputs for the contingent consideration liabilities as of March 31, 2024: ​
​ | ​ | ​ | ​
​ |  | (in thousands)
Balance at December 31, 2022 | ​ | $ | 10,184
Payment of contingent consideration | ​ | ​ | (3,250)
Change in fair value | ​ |  | (660)
Balance at December 31, 2023 | ​ | $ | 6,274
​ | ​ | ​ | ​
Contingent consideration, current portion | ​ | $ | —
Contingent consideration, net of current portion | ​ |  | 6,274
Balance at December 31, 2023 | ​ | $ | 6,274
​ 5. Fair Value of Financial Instruments – (continued) ​
​ | ​ | ​ | ​
​ |  | (in thousands)
Balance at December 31, 2023 | ​ | $ | 6,274
Change in fair value | ​ |  | 202
Balance at March 31, 2024 | ​ | $ | 6,476
​ | ​ | ​ | ​
Contingent consideration, current portion | ​ | $ | —
Contingent consideration, net of current portion | ​ |  | 6,476
Balance at March 31, 2024 | ​ | $ | 6,476
​ The fair value of financial instruments measured on a recurring basis is as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | As of March 31, 2024
Description |  | Total |  | Level 1 |  | Level 2 |  | Level 3
Liabilities: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Contingent consideration | ​ | $ | 6,476 |  | $ | — |  | $ | — | ​ | $ | 6,476
Total liabilities | ​ | $ | 6,476 |  | $ | — |  | $ | — | ​ | $ | 6,476
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | As of December 31, 2023
Description |  | Total |  | Level 1 |  | Level 2 |  | Level 3
Liabilities: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Contingent consideration | ​ | $ | 6,274 |  | $ | — |  | $ | — | ​ | $ | 6,274
Total liabilities | ​ | $ | 6,274 |  | $ | — |  | $ | — | ​ | $ | 6,274
​ The recurring Level 3 fair value measurements of contingent consideration for which a liability is recorded include the following significant unobservable inputs: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of March 31, 2024
​ | ​ | Valuation | ​ | Significant | ​ | Weighted Average
​ |  | Methodology |  | Unobservable Input |  | (range, if applicable)
Contingent Consideration |  | Discounted Cash Flows |  | Milestone dates |  | 2025-2028
​ |  | ​ | ​ | ​ | ​ | ​
​ |  |  |  | Discount rate |  | 12.8% to 13.5%
​ |  |  |  | Weighted Average Discount rate |  | 13.13%
​ |  |  |  | Probability of Occurrence (periodic for each Milestone) |  | 11.7% to 92.0%
​ |  |  |  | Probability of occurrence (cumulative through each Milestone) |  | 5.3% to 48.8%
​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | As of December 31, 2023
​ | ​ | Valuation | ​ | Significant | ​ | Weighted Average
​ |  | Methodology |  | Unobservable Input |  | (range, if applicable)
Contingent Consideration |  | Discounted Cash Flows |  | Milestone dates |  | 2025-2028
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |  | Discount rate | ​ | 12.9% to 13.6%
​ | ​ | ​ | ​ | Weighted Average Discount rate | ​ | 13.16%
​ | ​ | ​ | ​ | Probability of Occurrence (periodic for each Milestone) | ​ | 11.7% to 92.0%
​ |  | ​ |  | Probability of occurrence (cumulative through each Milestone) | ​ | 5.3% to 48.8%
​

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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