Fair Value Measurements

12 Months Ended

Dec. 31, 2023

The Company’s financial instruments measured at fair value on a recurring basis consist of Level 1, Level 2, and Level 3 financial instruments. Usually, short-term marketable securities are considered Level 2 when their fair values are determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, Level 2 financial instruments are valued using comparisons to like-kind financial instruments and models that use readily observable market data as their basis. Corporate debt obligations, commercial paper, government agency obligations and asset-backed securities are valued primarily using market prices of comparable securities, bid/ask quotes, interest rate yields and prepayment spreads and are included in Level 2.

Financial assets and liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable.

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):


	Fair Value Measurements as of December 31, 2023
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds (included in cash and cash equivalents)	$	23,205	$	23,205	$	—	$	—
U.S. Treasury obligations ($146,497 included in cash and cash equivalents)	525,353		—		525,353		—
Corporate debt obligations ($23,313 included in cash and cash equivalents)	135,284		—		135,284		—
Federal agency obligations ($15,344 included in cash and cash equivalents)	27,746		—		27,746		—
Total fair value of assets	$	711,588	$	23,205	$	688,383	$	—


	Fair Value Measurements as of December 31, 2022
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds (included in cash and cash equivalents)	$	238,223	$	238,223	$	—	$	—
U.S. Government bonds	25,459		—		25,459		—
U.S. Treasury bills	11,404		11,404		—		—
Corporate debt obligations	2,141		—		2,141		—
Federal agency obligations	8,506		—		8,506		—
Total fair value of assets	$	285,733	$	249,627	$	36,106	$	—
Liabilities:
Derivative tranche liability	$	10,291	$	—	$	—	$	10,291
Total fair value of liabilities	$	10,291	$	—	$	—	$	10,291


Classified as:	December 31, 2023		December 31, 2022
Cash and cash equivalents	$	208,359	$	238,223
Short-term marketable securities	503,229		47,510
Total cash equivalents and marketable securities	$	711,588	$	285,733

The following table sets forth the changes in the fair value of Level 3 liabilities (in thousands):


Derivative Tranche Liability	2023		2022
Balance as of January 1st	$	10,291	$	—
Fair value of derivative tranche liability upon issuance	—		10,778
Change in fair value	(10,291)		(487)
Balance as of December 31st	$	—	$	10,291

The derivative tranche liability was issued on September 9, 2022 with a fair value of $10.8 million. The fair value of the derivative tranche liability has been estimated using a probability weighted model. Upon the closing of the IPO, on May 9, 2023, the derivative tranche liability was remeasured at fair value based on its intrinsic value and it was terminated. Intrinsic value was calculated as a difference between the IPO price of $18.00 per share and $12.2661, the Series C second tranche closing per share purchase price. The fair value of the derivative tranche liability upon the closing of the IPO was determined to be zero and the Series C Second Tranche Closing was terminated.

The following significant assumptions were used to estimate fair value of the derivative tranche liability as of December 31, 2022:


Probability of achieving specified conditions	80		%
Fair value of Series C preferred stock share	$	12.2661
Discount rate	25		%

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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