Fair value measurements

6 Months Ended

Jun. 30, 2024

Fair Value Disclosures [Abstract]

Fair value measurements

Fair value measurements

Fair value is 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. Fair value measurements are classified and disclosed in one of the following categories:

Level 1: Measured using unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Measured using quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity).

Fair value measurements are classified based on the lowest level of input that is significant to the measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values stated below considers the market for the financial assets and liabilities, the associated credit risk and other factors as required. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

The following tables present the Company's fair value hierarchy for those assets and liabilities measured at fair value as of June 30, 2024 and December 31, 2023 (in thousands):

	Total as of June 30, 2024		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Cash and money market funds	$	57,604	$	57,604	$	—	$	—
Investments:
U.S. government securities	$	19,964	$	19,964	$	—	$	—
Other assets:
Restricted cash	$	4,225	$	4,225	$	—	$	—
Liabilities
Contingent value rights - current	$	420	$	—	$	—	$	420
Warrant liabilities	$	1	$	—	$	—	$	1

	Total as of December 31, 2023		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Cash and money market funds	$	67,449	$	67,449	$	—	$	—
Investments:
U.S. government securities	$	5,002	$	5,002	$	—	$	—
Other assets:
Restricted cash	$	4,225	$	4,225	$	—	$	—
Liabilities
Current portion of contingent value rights	$	19,109	$	—	$	—	$	19,109
Non-current contingent value rights	$	1,379	$	—	$	—	$	1,379
Warrant liabilities	$	8	$	—	$	—	$	8

Contingent Value Rights

As part of the 2021 acquisition of Strongbridge, the Company issued contingent value rights ("CVRs") representing additional contingent consideration of up to $1.00 for each CVR upon the achievement of the following:

•Keveyis Milestone: $0.25 per CVR, upon the earlier of the first listing of any patent in the FDA's Orange Book for Keveyis by the end of 2023 or the first achievement of at least $40 million in net revenue of Keveyis in 2023;

•2023 Recorlev Milestone: $0.25 per CVR, upon the first achievement of at least $40 million in net revenue of Recorlev in 2023; and

•2024 Recorlev Milestone: $0.50 per CVR, upon the first achievement of at least $80 million in net revenue of Recorlev in 2024.

As of June 30, 2024, there were approximately 74.4 million CVRs outstanding. Up to 8.1 million CVRs may be issued to holders of Strongbridge rollover options and assumed warrants upon the exercise thereof. CVRs are settleable in cash, common stock, or a combination of cash and common stock, at the Company's sole election.

Contingent consideration obligations are recorded at their estimated fair values and these obligations are revalued at each reporting period until the related contingencies are resolved. The CVRs are adjusted to fair value using the methods described above at the end of each reporting period. Significant changes which increase or decrease the probabilities of achieving the related milestones or shorten or lengthen the time required to achieve such events would result in corresponding increases or decreases in the fair values of these obligations.

The 2023 Keveyis milestone was achieved, triggering a milestone payment to CVR holders. In settlement of the milestone payment obligation, the Company issued 7,525,048 shares of common stock. The 2023 Recorlev Milestone was not achieved. A gain of $3.0 million from the remeasurement of the CVR liability was recorded in the first quarter of 2024 in the condensed consolidated statements of operations and comprehensive loss as a result of changes in the Company's stock price prior to the issuance of the common stock in settlement of the CVR.

The Company has determined that the CVR liabilities' fair values are Level 3 items within the fair value hierarchy. The following table presents the change in the CVR liabilities (in thousands):

Balance at December 31, 2023	$	20,488
CVR settlement	(16,100)
Change in fair value of CVRs	(3,968)
Balance at June 30, 2024	$	420