Biohaven Ltd.BHVN
Biohaven Ltd. Fair Value Disclosure
Fair Value of Financial Assets and Liabilities
The preparation of the Company’s consolidated financial statements in accordance with GAAP requires certain assets and liabilities to be reflected at their fair value and others to be reflected on another basis, such as an adjusted historical cost basis. In this note, the Company provides details on the fair value of financial assets and liabilities and how it determines those fair values.
Financial Instruments Measured at Fair Value on the Consolidated Balance Sheets
Certain of the Company’s financial instruments are measured at fair value on the consolidated balance sheets on a recurring basis. The fair values of these instruments are based on valuations that include inputs that can be classified within one of three levels of a hierarchy established by GAAP. See Fair Value Measurements in Note 2, "Summary of Significant Accounting Policies," for a brief description of the type of valuation information (“valuation inputs”) that qualifies a financial asset or liability for each level.
Financial assets and liabilities measured at fair value on a recurring basis on the consolidated balance sheets at December 31, 2025 and December 31, 2024 were as follows:
| Fair Value Measurement Using: | ||||||||||||||||||||||||||||||||
| Balance Sheet Classification | Type of Instrument | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | Money market funds | $ | 195,265 | $ | — | $ | — | $ | 195,265 | |||||||||||||||||||||||
Cash and cash equivalents | U.S. treasury bills | — | 24,990 | — | 24,990 | |||||||||||||||||||||||||||
| Marketable securities | U.S. treasury bills | — | 89,180 | — | 89,180 | |||||||||||||||||||||||||||
Other current assets | Money market funds | 250 | — | — | 250 | |||||||||||||||||||||||||||
Other non-current assets | Money market funds | 3,017 | — | — | 3,017 | |||||||||||||||||||||||||||
| Total assets | $ | 198,532 | $ | 114,170 | $ | — | $ | 312,702 | ||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
Notes payable | Notes payable, non-current | $ | — | $ | — | $ | 238,900 | $ | 238,900 | |||||||||||||||||||||||
Total liabilities | $ | — | $ | — | $ | 238,900 | $ | 238,900 | ||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | Money market funds | $ | 38,967 | $ | — | $ | — | $ | 38,967 | |||||||||||||||||||||||
| Marketable securities | U.S. treasury bills | 29,707 | 282,590 | — | 312,297 | |||||||||||||||||||||||||||
| Marketable securities | U.S. treasury bonds | — | 74,560 | — | 74,560 | |||||||||||||||||||||||||||
| Other non-current assets | Money market funds | 3,133 | — | — | 3,133 | |||||||||||||||||||||||||||
| Total assets | $ | 71,807 | $ | 357,150 | $ | — | $ | 428,957 | ||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
Forward contract liability, current | $ | — | $ | — | $ | 71,500 | $ | 71,500 | ||||||||||||||||||||||||
Derivative liability, current | — | — | 13,210 | 13,210 | ||||||||||||||||||||||||||||
| Total liabilities | $ | — | $ | — | $ | 84,710 | $ | 84,710 | ||||||||||||||||||||||||
There were no securities transferred between Level 1, 2, and 3 during the years ended December 31, 2025 or December 31, 2024.
The following is a description, including valuation methodology, of the financial assets and liabilities measured at fair value on a recurring basis:
Cash and Cash Equivalents, Other Current Assets, and Other Non-Current Assets
Financial assets measured at fair value on a recurring basis classified within cash and cash equivalents, other current assets, and other non-current assets at December 31, 2025 and 2024 consisted of cash invested in U.S. treasury bills with original maturities of three months or less at time of purchase and short-term money market funds that are readily convertible to known amounts of cash and redeemable daily at the election of the Company. The carrying value for these financial assets approximates fair value due to the near term maturities of the U.S. treasury bills and money market fund's underlying security holdings resulting in an insignificant change in value because of changes in interest rates. When quoted prices are available in an active market, these assets are classified in Level 1 of the fair value hierarchy and consisted of short-term money market funds.
Marketable Securities
At December 31, 2025 and 2024, the fair value of the Company's Level 2 debt securities are obtained from quoted market prices of debt securities with similar characteristics, quoted prices from identical assets in inactive markets, or discounted cash flows to estimate fair value. The Company's Level 2 marketable securities consisted of off-the-run U.S. treasury bills and treasury bonds.
Forward Contract and Derivative Liability
In connection with the amendment, dated as of May 1, 2024 (the "Knopp Amendment"), to the Membership Interest Purchase Agreement, dated as of February 24, 2022 (as amended, the "Knopp Agreement"), entered into with Knopp Biosciences, LLC ("Knopp"), Knopp requested the one-time cash true-up payment from the Company in December 2025, as defined in the Knopp Agreement (the "2025 Additional Consideration True-Up"). See Note 11, "License, Acquisitions and Other Agreements," for further details.
The following table provides a roll forward of the fair value of the Company's forward contract and derivative liability related to the 2025 Additional Consideration (as defined in Note 11) and the 2025 Additional Consideration True-Up, respectively, for which fair value is determined by Level 3 inputs from December 31, 2024 to December 31, 2025:
Carrying Value | ||||||||
Fair value at December 31, 2024 | $ | 84,710 | ||||||
Loss on change in fair value of forward contract and derivative liability in other income, net | 3,610 | |||||||
Fair value at March, 31 2025 | 88,320 | |||||||
Gain on change in fair value of forward contract and derivative liability in other income, net | (10,924) | |||||||
| Settlement of 2025 Additional Consideration at fair value | (51,426) | |||||||
Fair value at June 30, 2025 | 25,970 | |||||||
Gain on change in fair value of derivative liability in other income, net | (3,960) | |||||||
Fair value at September 30, 2025 | 22,010 | |||||||
Loss on change in fair value of derivative liability in other income, net | $ | 20,700 | ||||||
Settlement of 2025 Additional Consideration True-up at fair value to other current liabilities | (42,710) | |||||||
Fair value at December 31, 2025 | $ | — | ||||||
The fair value of the 2025 Additional Consideration and 2025 Additional Consideration True-up recognized in connection with the Knopp Amendment was determined based on significant inputs not observable in the market, and therefore represented a Level 3 measurement within the fair value hierarchy. The valuation was based on a Monte Carlo simulation of Biohaven's share price, which required judgment and assumptions regarding the volatility of Biohaven's share price, discounted to present value using a risk-free rate plus Biohaven-specific subordinate unsecured credit risk since potentially payable in cash. Both the 2025 Additional Consideration and 2025 Additional Consideration True-up were settled during 2025.
Note Purchase Agreement
On April 28, 2025, the Company entered into an NPA as described in further detail in Note 6, "Notes Payable." The Company elected to account for the NPA under the fair value option as permitted by ASC 825, "Financial Instruments."
The Company determined the fair value of the First Notes (as defined in Note 6) on April 28, 2025 was $255,880. The difference between the fair value at execution and the principal of $250,000 was due to a purchased loan commitment for the Second Notes (as defined in Note 6). The purchased loan commitment resulted in a $5,880 offsetting asset recorded at its fair value within other current assets on the consolidated balance sheet. At December 31, 2025, the asset related to the purchased loan commitment was determined to be impaired and the Company recorded a $5,880 expense to other
income, net on the consolidated statement of operations. The following table provides a roll forward of the fair value of the First Notes for which fair value is determined by Level 3 inputs from April 28, 2025 to December 31, 2025:
Carrying Value | ||||||||
Fair value at April 28, 2025 | $ | 255,880 | ||||||
Loss on change in fair value reported in other income, net | 1,190 | |||||||
Fair value at June 30, 2025 | $ | 257,070 | ||||||
Loss on change in fair value reported in other income, net | 11,200 | |||||||
Fair value at September 30,2025 | $ | 268,270 | ||||||
Gain on change in fair value reported in other income, net | (21,090) | |||||||
Gain on change in fair value reported in other comprehensive income | (8,280) | |||||||
Fair value at December 31,2025 | $ | 238,900 | ||||||
The fair value of the First Notes represents the present value of estimated future payments under the NPA for the First Notes. The fair value of the First Notes is calculated using a scenario-based discounted cash flow model. The fair value measurement is based on significant Level 3 unobservable inputs such as management's assumptions on the probability and timing of regulatory approvals for troriluzole and other product candidates, probability and timing of an early redemption of all obligations under the NPA for the First Notes, and discount rate using a risk-free rate plus Biohaven-specific senior secured credit risk.
Actual probability and timing of regulatory approvals, future revenue for troriluzole, probability and timing of an early redemption event at the reporting date, and Biohaven-specific senior secured credit risk could be materially different than our assumptions, and if so, would mean the estimated fair value could be significantly higher or lower than the fair value determined. An increase in the liability related to the First Notes between the reporting date and settlement date of the liability would have a material adverse effect on the Company's financial performance.
At December 31, 2025, the difference between the aggregate fair value and the aggregate unpaid principal balance of the First Notes was a discount of $11,100.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 23, 2023 | |
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.