Fair Value Measurements and Marketable Securities

12 Months Ended

Dec. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements and Marketable Securities

3. Fair Value Measurements and Marketable Securities

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis (in thousands):

	Fair Value Measurements at December 31, 2021 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	—	$	109,316	$	—	$	109,316
Corporate bonds		—		2,701		—		2,701
Total cash equivalents		—		112,017		—		112,017
Marketable securities:
Corporate bonds		—		11,479		—		11,479
Commercial paper		—		22,339		—		22,339
Total marketable securities		—		33,818		—		33,818
Total cash equivalents and marketable securities	$	—	$	145,835	$	—	$	145,835
Liabilities:
Derivative liability	$	—	$	—	$	802	$	802
	$	—	$	—	$	802	$	802

	Fair Value Measurements at December 31, 2020 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	—	$	73,488	$	—	$	73,488
Commercial paper				5,998		—		5,998
Corporate bonds				3,006		—		3,006
Total cash equivalents		—		82,492		—		82,492
Marketable securities:
Corporate bonds		—		13,221		—		13,221
Commercial paper		—		28,476		—		28,476
Total marketable securities		—		41,697		—		41,697
Total cash equivalents and marketable securities	$	—	$	124,189	$	—	$	124,189

Excluded from the tables above is cash of $0.6 million and $2.7 million as of December 31, 2021 and 2020, respectively. During the years ended December 31, 2021 and 2020, there were no transfers between Level 1, Level 2 and Level 3 categories.

Marketable Securities

The Company’s marketable securities are classified as Level 2 assets under the fair value hierarchy as these assets were primarily determined from independent pricing sources, which generally derive security prices from recently reported trades for identical or similar securities. The Company evaluated debt securities with unrealized losses for any expected credit losses and

determined unrealized losses on these securities were related to non-credit factors. Additionally, the Company currently does not intend to and is not required to sell these investments prior to an anticipated recovery in value.

The following table summarizes the gross unrealized gains and losses of the Company’s marketable securities as of December 31, 2021 and 2020 (in thousands):

	December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Assets:
Corporate bonds		11,481		—		(2	)		11,479
Commercial paper		22,339		—		—			22,339
	$	33,820	$	—	$	(2	)	$	33,818

	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Assets:
Corporate bonds		13,227		—		(6	)		13,221
Commercial paper		28,476		—		—			28,476
	$	41,703	$	—	$	(6	)	$	41,697

As of December 31, 2021 and 2020, all of the Company’s marketable securities had remaining contractual maturity dates of one year or less from the respective consolidated balance sheet date.

Embedded Derivative

In connection with the liability related to the sale of future royalties (see Note 10), the Company classified $1.0 million at inception of its Revenue Interest Financing Agreement as a derivative liability on its consolidated balance sheet because there were embedded instruments that represent a conditional obligation to pay HCR the final payment, which is 250% of the Investment Amount, upon an event of default or change of control. The Company will remeasure the derivative liability to fair value at each reporting date, and recognize changes in the fair value of the derivative liability as a component of other income (expense) in the consolidated statement of operations and comprehensive loss. The Company valued the Change of Control Provision using a Monte Carlo Simulation Method, assuming a lognormal distribution for revenue. The assumptions used in the valuation model include (1) our estimates of the probability and timing of related events (2) our estimates of future revenues subject to the Revenue Interest Financing Agreement (3) volatility (4) the risk-adjusted discount rate and (5) the probability of a change in control occurring during the term of the instrument.

The fair value of the derivative liability upon issuance in October 2021 was $1.0 million, and is classified as Level 3 liability under the fair value hierarchy.

As of December 31, 2021 the fair value of the derivative liability decreased by $0.2 million to $0.8 million, primarily due to the passage of time and changes in the market volatility and underlying credit risk inputs.

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