Fair Value of Financial Assets and Liabilities

12 Months Ended

Sep. 30, 2023

Fair Value Disclosures [Abstract]

Fair Value of Financial Assets and Liabilities

3. Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s financial assets and liabilities that were subject to fair value measurement on a recurring basis as of September 30, 2023 and 2022 and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value:

	Fair Value Measurements at September 30, 2023 Using:
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Cash equivalents:
Money market funds	$	55,357	$	—	$	—	$	55,357
U.S. Treasury notes		29,755		—		—		29,755
Marketable securities:
U.S. Treasury notes		236,782		—		—		236,782
Corporate bonds		—		26,435		—		26,435
Commercial paper		—		21,305		—		21,305
		321,894		47,740		—		369,634
Liabilities:
Series 1 nonconvertible preferred stock		—		—		1,423		1,423
	$	—	$	—	$	1,423	$	1,423

	Fair Value Measurements at September 30, 2022 Using:
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Cash equivalents:
Money market funds	$	13,905	$	—	$	—	$	13,905
Marketable securities:
U.S. Treasury notes		91,328		—		—		91,328
Corporate bonds		—		76,411		—		76,411
Commercial paper		—		66,784		—		66,784
		105,233		143,195		—		248,428
Liabilities:
Series 1 nonconvertible preferred stock		—		—		1,423		1,423
	$	—	$	—	$	1,423	$	1,423

Cash equivalents at September 30, 2023 and 2022 consist of money market funds and U.S. Treasury notes that are readily convertible to cash and with less than 90 days until maturity.

During the years ended September 30, 2023, 2022, and 2021, there were no transfers between Level 1, Level 2 and Level 3.

The fair value of Level 2 instruments classified as marketable securities were determined through third-party pricing services. The pricing services use many observable market inputs to determine value, including reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, and current spot rates.

The outstanding shares of Series 1 nonconvertible preferred stock as of September 30, 2023 and 2022 are measured at fair value. These outstanding shares are financial instruments that might require a transfer of assets because of the liquidation features in the contract and are therefore recorded as liabilities and measured at fair value. The fair value of the outstanding shares is based on significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy. The Company utilizes a probability-weighted valuation model, which takes into consideration various outcomes that may require the Company to transfer assets upon liquidation. Changes in the fair values of the Series 1 nonconvertible preferred stock are recognized in other income (expense) in the consolidated statements of operations.

The recurring Level 3 fair value measurements of the Company’s outstanding Series 1 nonconvertible preferred stock using probability-weighted discounted cash flow include the following significant unobservable inputs:

Series 1 nonconvertible preferred stock	Range
	September 30,
Unobservable Input	2023	2022
Probabilities of payout	0%-65%	0%-65%
Discount rate	7.25%	7.25%

The following table provides a rollforward of the aggregate fair value of the Company’s outstanding Series 1 nonconvertible preferred stock for which fair value is determined by Level 3 inputs:

	Series 1 Nonconvertible Preferred Stock
	(in thousands)
Balance, September 30, 2020	$	1,479
Change in fair value		27
Balance, September 30, 2021		1,506
Change in fair value		(83	)
Balance, September 30, 2022		1,423
Change in fair value		—
Balance, September 30, 2023	$	1,423

In April 2023, the Company entered into a royalty sale agreement with an affiliate of OMERS, pursuant to which the Company was paid a $200,000 cash purchase price in exchange for 54.5% of future quarterly royalty payments on net sales of MAVYRET/MAVIRET, after June 30, 2023, through June 30, 2032, subject to a cap on aggregate payments equal to 1.42 times the purchase price. The Company accounted for the upfront payment as a liability related to the sale of future royalties. The carrying value of the liability related to the sale of future royalties approximates fair value as of September 30, 2023 and is based on current estimates of future royalties expected to be paid to OMERS over the next 10 years, which are considered Level 3 inputs. See Note 8 for a rollforward of the liability.