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Fair Value of Financial Instruments
12 Months Ended
Dec. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability of fair value measurements, financial instruments are categorized based on a hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 — Unobservable inputs that reflect a Company’s estimates about the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.
The Company’s financial assets and liabilities measured at fair value on a recurring basis consist of money market funds, interest rate swaps, a contingent receivable and contingent consideration liabilities. The Company invests excess cash from its operating cash accounts in overnight investments and reflects these amounts in cash and cash equivalents in the consolidated balance sheets at fair value using quoted prices in active markets for identical assets. The fair value of the interest rate swaps is determined based on observable market-based inputs, including interest rate curves and reflects the contractual terms of these instruments, including the period to maturity. Please refer to Note 14, “Derivative Instruments”, for further details on the interest rate swaps. The Company recorded a contingent receivable and the contingent consideration liabilities resulting from the Progenics Acquisition at fair value based on inputs that are not observable in the market. Please refer to Note 8, “Business Combinations”, for further details on the acquisition.
The tables below present information about the Company’s assets and liabilities measured at fair value on a recurring basis:

 December 31, 2022
(in thousands)Total Fair
Value
Level 1Level 2Level 3
Assets:
Money market$342,646 $342,646 $— $— 
Total assets$342,646 $342,646 $— $— 
Liabilities:
Contingent consideration liabilities$111,600 $— $— $111,600 
Total liabilities$111,600 $— $— $111,600 
 December 31, 2021
(in thousands)Total Fair
Value
Level 1Level 2Level 3
Assets:
Money market$40,140 $40,140 $— $— 
Interest rate swaps357 — 357 — 
Contingent receivable9,300 — — 9,300 
Total assets$49,797 $40,140 $357 $9,300 
Liabilities:
Contingent consideration liabilities86,200 — — 86,200 
Total liabilities$86,200 $— $— $86,200 

During the years ended December 31, 2022 and 2021, there were no transfers into or out of Level 3. On December 2, 2022, the Company voluntarily terminated the interest rate swap contracts in connection with the refinancing of debt.
As part of the Progenics Acquisition, the Company acquired the right to receive certain future milestone and royalty payments due to Progenics from CytoDyn Inc. (“CytoDyn”) related to a prior sale of certain intellectual property. The Company has the right to receive $5.0 million upon regulatory approval and a 5% royalty on net sales of approved products. The Company considers the contingent receivable a Level 3 instrument (one with significant unobservable inputs) in the fair value hierarchy. The estimated fair value was determined based on probability adjusted discounted cash flows that included significant estimates and assumptions pertaining to regulatory events and sales targets. During the fourth quarter of 2022, the Company reduced the probability to zero as CytoDyn withdrew their regulatory application. The most significant unobservable inputs are the probabilities of achieving regulatory approval of the development projects and subsequent commercial success.
As part of the Progenics Acquisition, the Company issued CVRs and recorded the fair value as part of consideration transferred. Each CVR will entitle its holder to receive a pro rata share of aggregate cash payments equal to 40% of U.S. net sales generated by PYLARIFY in 2022 and 2023 in excess of $100.0 million and $150.0 million, respectively, subject to a maximum cap. Refer to Note 1, “Description of Business” for further details on the CVRs. The Company considers the contingent consideration liabilities relating to the CVRs a Level 3 instrument (one with significant unobservable inputs) in the fair value hierarchy. The estimated fair value of these had been determined based on Monte Carlo simulation models that included significant estimates and assumptions pertaining to commercialization events and sales targets. Based on the U.S. net sales generated by PYLARIFY in 2022, the Company currently expects to pay out the full amount of the CVRs from available cash in the first half of 2023.
The Company also assumed contingent consideration liabilities related to a previous acquisition completed by Progenics in 2013 (“2013 Acquisition”). These contingent consideration liabilities include potential payments of up to $70.0 million if the Company attains certain net sales targets primarily for AZEDRA and 1095 and a $5.0 million 1095 commercialization milestone. Additionally, there is a potential payment of up to $10.0 million related to a 1404 commercialization milestone. The Company’s total potential payments related to the 2013 Acquisition are approximately $85.0 million. The Company considers the contingent consideration liabilities relating to the 2013 Acquisition each a Level 3 instrument (one with significant unobservable inputs) in the fair value hierarchy. The estimated fair value of these was determined based on probability adjusted discounted cash flows and Monte Carlo simulation models that included significant estimates and assumptions pertaining to commercialization events and sales targets. The most significant unobservable inputs with respect to 1095 and 1404 are the probabilities of achieving regulatory approval of those development projects and subsequent commercial success.
Significant changes in any of the probabilities of success, the probabilities as to the periods in which sales targets and milestones will be achieved, discount rates or underlying revenue forecasts would result in a significantly higher or lower fair value measurement. The Company records the contingent consideration liability at fair value with changes in estimated fair values recorded in general and administrative expenses in the consolidated statements of operations. The Company can give no assurance that the actual amounts paid, if any, in connection with the contingent consideration liabilities, including the CVRs, will be consistent with any recurring fair value estimate of such contingent consideration liabilities.
The following tables summarize quantitative information and assumptions pertaining to the fair value measurement of assets and liabilities using Level 3 inputs as of December 31, 2022.

Fair Value as ofAssumptions
(in thousands)December 31, 2022December 31, 2021Valuation TechniqueUnobservable InputDecember 31, 2022December 31, 2021
Contingent receivable:
Regulatory milestone$— $2,500 Probability adjusted discounted cash flow modelPeriod of expected milestone achievementN/A2022
Probability of success0%70 %
Discount rateN/A17 %
Royalties— 6,800 Probability adjusted discounted cash flow model
Probability of success0%
10% - 60%
Discount rateN/A17 %
Total$— $9,300 
Fair Value as ofAssumptions
(in thousands)December 31, 2022December 31, 2021Valuation TechniqueUnobservable InputDecember 31, 2022December 31, 2021
Contingent consideration liability:
Net sales targets - PYLARIFY (CVRs)$99,700 $73,200 Probability adjusted discounted cash flow model (as of 12/31/2022)

Monte Carlo simulation
(as of 12/31/2021)
Period of expected milestone achievement and sales targets2022 - 20232022 - 2023
Probability of success100 %N/A
Discount rateN/A17 %
1095 commercialization milestone1,700 1,900 Probability adjusted discounted cash flow model
Period of expected milestone achievement20262026
Probability of success40 %40 %
Discount rate3.8 %1.3 %
Net sales targets - AZEDRA and 109510,200 11,100 Monte Carlo simulation
Probability of success and sales targets
20% - 100%
40% - 100%
Discount rate
16% - 17%
16% - 17%
Total$111,600 $86,200 
For those financial instruments with significant Level 3 inputs, the following table summarizes the activities for the periods indicated:

Financial AssetsFinancial Liabilities
(in thousands)Years Ended December 31,Years Ended December 31,
2022202120222021
Fair value, beginning of period$9,300 $11,300 $86,200 $15,800 
Changes in fair value included in net income (loss)(9,300)(2,000)25,400 70,400 
Fair value, end of period$— $9,300 $111,600 $86,200 
The change in fair value of the contingent financial asset and contingent financial liabilities, including the CVRs, resulted in a general and administrative expense of $34.7 million for the year ended December 31, 2022 and was primarily due to changes in revenue forecasts, changes in market conditions, an increase in discount rates (excluding the CVRs) and the passage of time. The Company expects to make all applicable cash payments related to the CVRs in the first half of 2023. As of December 31, 2022, the Company had $99.7 million in current liabilities to account for the expected payments related to the CVRs.