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Marketable Securities and Fair Value of Financial Assets and Liabilities
6 Months Ended
Jun. 30, 2023
Fair Value Disclosures [Abstract]  
Marketable Securities and Fair Value of Financial Assets and Liabilities

3. Marketable Securities and Fair Value of Financial Assets and Liabilities

The following table summarizes the Company’s marketable securities (in thousands):

 

 

 

June 30, 2023

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

U.S. Treasury bills and notes (due within one year)

 

$

115,135

 

 

$

8

 

 

$

(61

)

 

$

115,082

 

U.S. Treasury bills and notes (due after one through five years)

 

 

21,556

 

 

 

 

 

 

(44

)

 

 

21,512

 

 

$

136,691

 

 

$

8

 

 

$

(105

)

 

$

136,594

 

 

 

 

December 31, 2022

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

U.S. Treasury bills and notes (due within one year)

 

$

119,494

 

 

$

 

 

$

(104

)

 

$

119,390

 

 

 

$

119,494

 

 

$

 

 

$

(104

)

 

$

119,390

 

As of June 30, 2023, the Company held twenty-seven securities that were in an unrealized loss position. The aggregate fair value of securities held by the Company in an unrealized loss position for less than twelve months as of June 30, 2023 was $92.1 million and there were no securities held by the Company in an unrealized loss position for more than twelve months. As of December 31, 2022, the Company held seven securities that were in an unrealized loss position. The aggregate fair value of securities held by the Company in an unrealized loss position for less than twelve months as of December 31, 2022 was $99.5 million and there were no securities held by the Company in an unrealized loss position for more than twelve months. The Company has the intent and ability to hold such securities until recovery. As a result, the Company did not record any charges for impairments for its marketable debt securities for the three and six months ended June 30, 2023 and for the year ended December 31, 2022.

The following tables present the Company’s fair value hierarchy for its financial assets and liabilities, which are measured at fair value on a recurring basis (in thousands):

 

 

 

Fair Value Measurements at June 30, 2023 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

171,485

 

 

$

 

 

$

 

 

$

171,485

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury bills and notes

 

$

 

 

$

136,594

 

 

$

 

 

$

136,594

 

Total assets

 

$

171,485

 

 

$

136,594

 

 

$

 

 

$

308,079

 

 

 

 

Fair Value Measurements at December 31, 2022 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

108,829

 

 

$

 

 

$

 

 

$

108,829

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury bills and notes

 

$

 

 

$

119,390

 

 

$

 

 

$

119,390

 

Total assets

 

$

108,829

 

 

$

119,390

 

 

$

 

 

$

228,219

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

CVR liability

 

$

 

 

$

 

 

$

1,700

 

 

$

1,700

 

Total liabilities

 

$

 

 

$

 

 

$

1,700

 

 

$

1,700

 

 

Money market funds were valued using quoted prices in active markets, which represent a Level 1 measurement in the fair value hierarchy. U.S. Treasury bills and notes were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy.

On July 6, 2020, the Company issued a non-transferrable contingent value right (“CVR”), which was distributed to stockholders of record as of the close of business on July 6, 2020, and prior to the issuance of any shares to acquire Kiq Bio LLC (“Kiq”) (the “Kiq Acquisition”) or sold to the Private Investment in Public Equity (“PIPE”) investors. Holders of the CVR are entitled to receive common shares and/or cash payments from proceeds received by the Company, if any, related to the disposition of its legacy cell therapy assets for a period of three years from July 2020. In accordance with the terms of the CVR agreement, the payment to CVR holders will be made in shares or cash, depending on the timing of the receipt of the sales proceeds by the Company. For sales proceeds received by the Company prior to December 31, 2020, CVR holders were entitled to receive payment in the form of common shares of the Company. For sales proceeds received by the Company after December 31, 2020 and prior to July 2023, CVR holders are entitled to receive payment in cash.

The Company classifies the CVR as a liability on its condensed consolidated balance sheet. The fair value of the CVR liability was determined using the probability weighted discounted cash flow method to estimate future cash flows associated with the sale of the legacy cell therapy assets, including the Bolt-on Chimeric Receptor (“BOXR”) technology and Autologous Cell Therapy Industrial Automation technology (collectively, the “BOXR Platform”), Antibody-Coupled T cell Receptor technology and other fixed assets based on assumptions at the date of the CVR issuance and each subsequent quarterly period end, less certain permitted deductions. For sales proceeds received by the Company prior to December 31, 2020, the number of common shares to be received by CVR holders was determined by dividing the proceeds received by the Company by the closing price of the Company’s common stock on July 6, 2020 of $8.80. The closing price of the Company’s common stock at each measurement date through February 2021 was used to determine the fair value of the share payments included in the CVR liability. The liability measured at the date of CVR issuance was recorded as a common stock dividend, returning capital to the legacy stockholders of record as of the close of business on July 6, 2020. Changes in fair value of the liability are recognized as a component of other income (expense) in the condensed consolidated statement of operations and comprehensive loss. The CVR liability was valued based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

On August 28, 2020, the Company sold its assets, rights and interests relating to its BOXR Platform, to Sotio. Pursuant to the BOXR Platform Purchase Agreement, Sotio has agreed to pay the Company total cash consideration of up to $11.5 million, consisting of an upfront payment of $8.1 million and potential milestone payments of up to $3.4 million in the aggregate upon the achievement of certain milestones related to the issuance of Specified Claims (as described in the BOXR Platform Purchase Agreement) by the U.S. Patent and Trademark Office and the European Patent Office. The upfront payment was received in 2020. In 2020, the Company also sold additional fixed assets used in the legacy business. Both transactions triggered payment to the CVR holders. In November 2020, the Company issued 707,938 shares of common stock in partial settlement of the CVR liability. In February 2021, the Company issued an additional 212,429 shares of common stock and paid $0.1 million in partial settlement of the CVR liability. Any settlement of the remaining CVR liability will be a cash settlement.

In the fourth quarter of 2022, the Company updated the probability weighted discounted cash flow assumptions to reflect the then current probability of receiving the milestone payments from Sotio prior to the expiration of the CVR. Based on the Company’s assessment of the available information, this update resulted in a decrease in the probability of receiving the milestone payment prior to the expiration of the CVR and a corresponding decrease in the CVR liability of $1.4 million was recognized as a component of other income (expense) in 2022. Based on the Company’s assessment of the information available through the issuance date of the financial statements, the Company recorded an additional decrease in fair value of the liability of $1.7 million in the first quarter of 2023, reducing the liability to zero as the probability of additional CVR payments occurring prior to the expiration of CVR term is remote. The CVRs expired on August 6, 2023 and no further payments will be made to CVR holders.

The following table sets forth a summary of the changes in the fair value of the Company’s CVR liability (in thousands):

Balance at December 31, 2021

 

$

3,060

 

Change in fair value

 

 

(1,360

)

Balance at December 31, 2022

 

$

1,700

 

Change in fair value

 

 

(1,700

)

Balance at June 30, 2023

 

$

 

 

During the three and six months ended June 30, 2023 and 2022, there were no transfers between Level 1, Level 2 and Level 3.