Fair Value Measurements

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

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Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

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Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or

liability, either directly or indirectly, for substantially the full term of the asset or liability.

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Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

On a recurring basis, the Company measures certain financial assets and liabilities at fair value. The following tables summarize the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):


		December 31, 2024
	Valuation Hierarchy	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Aggregate Fair Value
Assets:
Cash equivalents:
Money market funds	Level 1	$	31,680	$	—	$	—		$	31,680
Government bonds	Level 2		15,167		—		—			15,167
Total cash equivalents			46,847		—		—			46,847
Short-term investments:
Government bonds	Level 2		262,424		98		(3	)		262,519
Total short-term investments			262,424		98		(3	)		262,519
		$	309,271	$	98	$	(3	)	$	309,366


		December 31, 2023
	Valuation Hierarchy	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Aggregate Fair Value
Assets:
Cash equivalents:
Money market funds	Level 1	$	143,933	$	—	$	—	$	143,933
Government bonds	Level 2		72,689		—		—		72,689
Total cash equivalents			216,622		—		—		216,622
Short-term investments:
Government bonds	Level 2		34,596		10		—		34,606
Total short-term investments			34,596		10		—		34,606
		$	251,218	$	10	$	—	$	251,228

All of the investments held as of December 31, 2024 had original maturities of less than two years. As of December 31, 2024, all of the investments are scheduled to mature in 12 months. During the year ended December 31, 2024, the Company did not recognize any credit losses. The Company determined that the decline in fair value of debt securities was not due to credit-related factors, and no allowance for expected credit losses was recorded as of December 31, 2024. There were nominal unrealized losses as of December 31, 2024, and no unrealized losses have been in the loss position for more than 12 months. However, the Company is planning to hold these securities until maturity and expects to recover the amortized cost basis.

For the years ended December 31, 2024 and 2023, the Company recognized no material realized gains or losses on financial instruments.

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Annexon, Inc. Fair Value Disclosure

About Fair Value Disclosures

Other Available Disclosures