Recurring Fair Value Measurements

3 Months Ended

Mar. 31, 2023

10. Recurring Fair Value Measurements

The following tables summarizes the Company's fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis (in thousands):


As of March 31, 2023	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Money market funds included in cash and cash equivalents	$	4,512	$	4,512	$	—	$	—
Liabilities
Embedded derivatives	$	58	$	—	$	—	$	58


As of December 31, 2022	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Money market funds included in cash and cash equivalents	$	18,737	$	18,737	$	—	$	—
Liabilities
Embedded derivatives	$	45	$	—	$	—	$	45

The Company is party to certain funding awards with the Cystic Fibrosis Foundation, which contain embedded derivatives (refer to Note 7). As of the balance sheet date, the Company has determined the fair value of these embedded derivatives using a Monte Carlo simulation of the occurrence of a disposition event. The Company has used observable input assumptions such as the amount of funding, the Royalty Cap, as well as unobservable assumptions such as the time to occurrence of 3 years, as well as the probability of occurrence of a disposition event. The table below provides a summary of the fair value of the embedded derivatives, a Level 3 fair value estimate (in thousands), for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,		Three Months Ended March 31,
	2023		2022
Fair value of embedded derivatives, beginning of period	$	45	$	-
Change in fair value of derivative liabilities		13		270
Fair value of embedded derivatives, end of period	$	58	$	270

- 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.

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