Fair Value Measurements

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

	Fair Value Measurements as of December 31, 2022:
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Cash equivalents:
Money market funds	$	118,446	$	—	$	—	$	118,446
U.S. treasury bills		—		9,950		—		9,950
Total cash equivalents		118,446		9,950		—		128,396
Investments:
U.S. treasury bills		—		466,603		—		466,603
U.S. agency securities		—		380,520		—		380,520
Total investments		—		847,123		—		847,123
Total assets	$	118,446	$	857,073	$	—	$	975,519
Liabilities
Contingent Milestone Payments	$	—	$	—	$	27,378	$	27,378
Total liabilities	$	—	$	—	$	27,378	$	27,378

	Fair Value Measurements as of December 31, 2021:
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Cash equivalents:
Money market funds	$	251,891	$	—	$	—	$	251,891
Total cash equivalents		251,891		—		—		251,891
Investments:
U.S. treasury bills		—		469,386		—		469,386
U.S. agency securities		—		208,568		—		208,568
Total investments		—		677,954		—		677,954
Total assets	$	251,891	$	677,954	$	—	$	929,845
Liabilities
Contingent Milestone Payments	$	—	$	—	$	45,258	$	45,258
Total liabilities	$	—	$	—	$	45,258	$	45,258

In determining the fair value of its investments at each date presented above, the Company relied on quoted prices for similar securities in active markets or using other inputs that are observable or can be corroborated by observable market data.

Fair Value of Contingent Consideration

In April 2021, the Company acquired ZebiAI, as detailed further in Note 10, Acquisition of ZebiAI.

The Company’s Level 3 contingent consideration liability is related to $85.0 million of platform and program milestones (“Contingent Milestone Payments”) payable to ZebiAI’s former equity holders upon achievement. The contingent consideration liability for the Contingent Milestone Payments is measured at fair value at each reporting date pursuant to FASB ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”). The Company determines the fair value of the Contingent Milestone Payments based on the probability of achieving the milestones, the related timing, and, to a lesser extent, an appropriate discount rate. Significant judgment is used in determining the underlying assumptions. Due to the uncertainties associated with the development of platforms and drug candidates in the pharmaceutical industry and the effects of changes in assumptions,

including probability of success and related timing, the Company expects its estimates regarding the fair value of Contingent Milestone Payments to continue to change in the future, resulting in adjustments to the fair value of the Company’s Contingent Milestone Payments. The effect of any such adjustments could be material.

The Company also has a contingent consideration liability related to the fair value of $100.0 million in earnout payments (“Contingent Earnout Payments”). Because the Contingent Earnout Payments were not accounted for as derivatives under FASB ASC Topic 815, Derivatives and Hedging ("ASC 815"), they were only measured at fair value as of the acquisition date and are not re-assessed at fair value at each reporting period. The Contingent Earnout Payments will be adjusted when the contingency is resolved and the consideration is paid or becomes payable.

The following table reconciles the change in the contingent consideration liability:

	Year Ended December 31,
	2022			2021		2020
	(in thousands)
Balance at beginning of period	$	50,258		$	—	$	—
Fair value of contingent consideration upon acquisition		—			47,422		—
Change in fair value of Contingent Milestone Payments		(11,677	)		2,836		—
Common stock issued upon milestone achievement		(6,203	)		—		—
	$	32,378		$	50,258	$	—

The "Fair value of contingent consideration upon acquisition" in the table above represents the fair value of the Contingent Milestone Payments and Contingent Earnout Payments upon acquisition of ZebiAI in 2021.

The “Change in fair value of Contingent Milestone Payments” in the table above was attributable to changes in the assumptions noted above during the periods specified.

The “Common stock issued upon milestone achievement” in the table above was attributable to 301,939 shares of common stock issued to ZebiAI's former equity holders upon achievement of one of the platform milestones during the year ended December 31, 2022.

The outstanding Contingent Milestone Payments are payable in shares of common stock based on a fixed amount assigned to each milestone and the average closing price of the Company’s common stock for the 5-day period prior to the milestone achievement. Accordingly, the number of shares of common stock to be issued upon a milestone achievement vary dependent on the Company’s common stock price. If the outstanding milestones were achieved in full on December 31, 2022, the number of shares of common stock to be issued would be 4,954,739 based on an average closing price of the Company's common stock of $14.58 for the 5-day period prior to December 31, 2022.