Fair Value Measurements

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The carrying amounts of the Company’s financial instruments, including cash, cash equivalents and restricted cash, classified within the Level 1 designation discussed in Note 2, prepaid expenses and other current assets, accounts

payable, and accrued liabilities, approximate fair value due to their short maturities. The estimated fair value of the Company’s long-term debt approximated the carrying amount given its floating interest rate basis. Warrant liabilities and convertible promissory notes were recorded at fair value on a recurring basis until they converted to equity in connection with the Company's IPO which closed in May 2022.

The following tables present information about the Company's liabilities measured at fair value on a recurring basis as of December 31, 2022 and December 31, 2021 (in thousands):

			Fair Value Measurements at Reporting Date Using:
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs     (Level 2)		Significant Unobservable Inputs (Level 3)
As of December 31, 2022:
Warrant liabilities	$	—	$	—	$	—	$	—
Convertible promissory notes		—		—		—		—
Total	$	—	$	—	$	—	$	—
As of December 31, 2021:
Warrant liabilities	$	56,445	$	—	$	—	$	56,445
Convertible promissory notes		158,276		—		—		158,276
Total	$	214,721	$	—	$	—	$	214,721

The Company has no financial assets measured at fair value on a recurring basis. None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.

The warrant liabilities consisted of an issued and outstanding common stock warrant (the “Takeda Warrant”) and a right to receive an additional common stock warrant (the “Takeda Warrant Right”, and together with the Takeda Warrant, the “Takeda Warrants”) issued to Takeda Vaccines, Inc. (“Takeda”) in connection with a July 2021 license agreement. The Takeda Warrants were accounted for as liabilities at fair value as they did not meet all the conditions for equity classification due to (i) insufficient authorized shares for the Takeda Warrant and (ii) the Takeda Warrant Right is not indexed to the Company’s own stock. As a result of the Company increasing its authorized shares of common stock (see Note 9) in the second quarter of 2022, the Takeda Warrant met the requirements to be equity classified, and the Company reclassified the fair value of the Takeda Warrant to stockholders' equity. The Takeda Warrant was exercised in November 2022 for the purchase of 5,883,500 shares of the Company's common stock at an exercise price of $0.0000595 per share. The Takeda Warrant Right expired upon the closing of the Company's IPO without effect to the financial statements since no fair value was allocated to it at that time. Prior to the reclassification to stockholders' equity, the fair value of the Takeda Warrants was derived from the model used to estimate the fair value of the Company’s common stock and, upon reclassification, the fair value was based on the Company's IPO price.

The Company issued convertible promissory notes to Frazier (the “Frazier Notes”) from April 2019 to July 2021 and issued unsecured convertible promissory notes in August 2021 (the “August 2021 Notes”) to investors including Frazier. The Company elected the fair value option for each of its convertible promissory note issuances due to certain embedded features within the notes. Prior to conversion, the fair value of the Frazier Notes and the August 2021 Notes was estimated using a scenario-based analysis that estimated the fair value of the convertible promissory notes based on the probability-weighted present value of expected future investment returns, considering possible outcomes available to the noteholders, including various IPO, settlement, equity financing, corporate transactions and dissolution scenarios. The Frazier Notes were exchanged for August 2021 Notes in August 2021. The principal and accrued interest of the August 2021 Notes automatically converted into shares of the Company's common stock immediately prior to the completion of the IPO (see Note 8). The conversion date fair value of the August 2021 Notes was reclassified to stockholders' equity and was estimated using the Company's publicly traded closing price on the date the notes were converted to common stock.

Prior to their reclassification to stockholders' equity in connection with the IPO, the Company adjusted the carrying value of its warrant liabilities and convertible promissory notes to their estimated fair value at each reporting date, with any related increases or decreases in the fair value recorded as change in fair value of warrant liabilities and as change in fair value of convertible promissory notes, respectively, in the consolidated statements of operations.

The following table summarizes information about the significant unobservable inputs used in the fair value measurements for the Takeda Warrants and the August 2021 Notes as of December 31, 2021:

Liability	Key Unobservable Inputs	Range
Takeda Warrants	Transaction prices per share	$11.83 - $12.54
	Estimated time to liquidity	0.20 - 1.75 years
	Discount rate	20%
August 2021 Notes	Estimated time to liquidity	0.20 - 1.75 years
	Volatility	80% - 100%
	Discount rate	19% - 20%
	Risk-free interest rate	0.1% - 0.7%

There are significant judgments, assumptions and estimates inherent in the determination of the fair value of each of the instruments described above. These include determination of a valuation method and selection of the possible outcomes available to the Company, including the determination of timing and expected future investment returns for such scenarios. The related judgments, assumptions and estimates are highly interrelated and changes in any one assumption could necessitate changes in another. In particular, any changes in the probability of a particular outcome would require a related change to the probability of another outcome.

The following table provides a reconciliation of all liabilities measured at fair value using Level 3 significant unobservable inputs (in thousands):

	Warrant Liabilities			Convertible Promissory Notes
Balance at December 31, 2021	$	56,445		$	158,276
Change in fair value		43,575			51,469
Reclass Takeda Warrant into equity		(100,020	)		—
Conversion of August 2021 Notes into common shares upon IPO (excluding accrued interest of $5,619)		—			(209,745	)
Balance at December 31, 2022	$	—		$	—