Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Tables)

Fair Value Measurements (Tables)
9 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
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):
September 30, 2023 December 31, 2022
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Short-term investments, excluding Viking(1)
$ 5,555  $ 140,970  $ 22  $ 146,547  $ 3,992  $ 99,615  $ 135  $ 103,742 
Investment in Viking common stock 24,680  —  —  24,680  63,122  —  —  63,122 
Derivative assets(3)
—  —  3,281  3,281  —  —  —  — 
     Total assets $ 30,235  $ 140,970  $ 3,303  $ 174,508  $ 67,114  $ 99,615  $ 135  $ 166,864 
CyDex contingent liabilities $ —  $ —  $ 164  $ 164  $ —  $ —  $ 84  $ 84 
Metabasis contingent liabilities(2)
—  3,431  —  3,431  —  3,429  —  3,429 
Amounts owed to former licensor —  —  —  —  44  —  —  44 
     Total liabilities $ —  $ 3,431  $ 164  $ 3,595  $ 44  $ 3,429  $ 84  $ 3,557 
1.Excluding our investment in Viking, 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 have investment in warrants resulting from Seelos Therapeutics Inc. milestone payments that were settled in shares during the first quarter of 2019 and are at level 3 of the fair value hierarchy, based on Black-Scholes value estimated by management on the last day of the period.
2.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 $375.0 million of development, regulatory and commercial milestones and tiered royalties on potential future sales including a $10.0 million payment upon initiation of a Phase 3 clinical trial. During the three and nine months ended September 30, 2023, we adjusted the balance of the Metabasis CVR liability by decreasing $0.1 million and increasing $0.002 million to mark to market, respectively.
3.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.
Schedule of Reconciliation of Level 3 Financial Instruments
A reconciliation of the level 3 liabilities as of September 30, 2023 is as follows (in thousands):
Fair value of level 3 financial instruments as of December 31, 2022
$ 84 
Payments to CVR holders and other contingent payments (50)
Fair value adjustments to contingent liabilities 130 
Fair value of level 3 financial instruments as of September 30, 2023
$ 164