Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2024

Schedule of Assets and Liabilities Measured at Fair Value

The following table presents the hierarchy for our assets and liabilities measured at fair value (in thousands):


	March 31, 2024								December 31, 2023
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Short-term investments, excluding Viking(1)	$	15,663	$	162,837	$	—	$	178,500	$	7,291	$	107,879	$	—	$	115,170
Investment in Viking common stock	82,000		—		—		82,000		32,185		—		—		32,185
Derivative assets(2)	—		—		3,727		3,727		—		—		3,531		3,531
Total assets	$	97,663	$	162,837	$	3,727	$	264,227	$	39,476	$	107,879	$	3,531	$	150,886
Liabilities:
Contingent liabilities - CyDex	$	—	$	—	$	218	$	218	$	—	$	—	$	320	$	320
Contingent liabilities - Metabasis(3)	—		2,797		—		2,797		—		2,878		—		2,878
Total liabilities	$	—	$	2,797	$	218	$	3,015	$	—	$	2,878	$	320	$	3,198

(1) Excluding our investment in Viking, corporate equity securities, and US government securities, our short-term investments in marketable debt and equity securities are classified as available-for-sale securities based on management's intentions and are at level 2 of the fair value hierarchy, as these investment securities are valued based upon quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Short-term investments in bond funds are valued at their net asset value (NAV) on the last day of the period. We have classified marketable securities with original maturities of greater than one year as short-term investments based upon our ability and intent to use any and all of those marketable securities to satisfy the liquidity needs of our current operations. In addition, we had investment in warrants resulting from Seelos Therapeutics Inc. milestone payments that were settled in shares during the first quarter of 2019 and were at level 3 of the fair value hierarchy, based on Black-Scholes value estimated by management on the last day of the period. This investment in warrants expired in January 2024.

(2) In connection with the Purchase and Sale Agreement with Primrose Bio, we will receive 50.0% of potential development milestones and certain commercial milestones from two contracts previously entered into by Primordial Genetics. The considerations were recognized as derivative assets included under other long-term asset in our condensed consolidated balance sheet. They are recognized as derivative assets under ASC 815, Derivatives and Hedging, as they have two underlyings (development and commercial milestones) and (i) the commercial milestones are dependent on the development milestones and (ii) the commercial milestone underlying is not determined to be predominate. The fair value of the derivative assets was determined using a discounted cash flow approach using a discount rate inline with the stages of the underlying contracts.

(3) In connection with our acquisition of Metabasis in January 2010, we issued Metabasis stockholders four tradable CVRs, one CVR from each of four respective series of CVR, for each Metabasis share. The CVRs entitle Metabasis stockholders to cash payments as frequently as every six months as cash is received by us from proceeds from the sale or partnering of any of the Metabasis drug development programs, among other triggering events. The liability for the CVRs is determined using quoted prices in a market that is not active for the underlying CVR. The carrying amount of the liability may fluctuate significantly based upon quoted market prices and actual amounts paid under the agreements may be materially different than the carrying amount of the liability. Several of the Metabasis drug development programs have been outlicensed to Viking, including VK2809. VK2809 is a novel selective TR-β agonist with potential in multiple indications, including hypercholesterolemia, dyslipidemia, NASH, and X-ALD. Under the terms of the agreement with Viking, we may be entitled to up to $375 million of development, regulatory and commercial milestones and tiered royalties on potential future sales including a $10 million payment upon initiation of a Phase 3 clinical trial. During the three months ended March 31, 2024, we adjusted the balance of the Metabasis CVR liability by decreasing $0.1 million to mark to market.

Schedule of Reconciliation of Level 3 Financial Instruments

A reconciliation of the level 3 financial instruments as of March 31, 2024 is as follows (in thousands):


Assets
Fair value of level 3 financial instruments as of December 31, 2023	$	3,531
Fair value adjustments to derivative assets	196
Fair value of level 3 financial instruments as of March 31, 2024	$	3,727

Liabilities
Fair value of level 3 financial instruments as of December 31, 2023	$	320
Payments to CVR holders and other contingent payments	(150)
Fair value adjustments to contingent liabilities	48
Fair value of level 3 financial instruments as of March 31, 2024	$	218