4D Molecular Therapeutics, Inc. Fair Value Disclosure
3. Fair Value Measurements
The following tables represent the Company’s fair value hierarchy for financial assets and financial liabilities measured at fair value on a recurring basis as of December 31, 2024 and 2023 (in thousands):
|
|
Basis for Fair Value Measurements |
|
|
Fair Value as of |
|
||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
December 31, 2024 |
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Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
142,621 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
142,621 |
|
Certificates of deposit |
|
|
— |
|
|
|
47,647 |
|
|
|
— |
|
|
|
47,647 |
|
Commercial paper |
|
|
— |
|
|
|
60,202 |
|
|
|
— |
|
|
|
60,202 |
|
Corporate bonds |
|
|
— |
|
|
|
216,165 |
|
|
|
— |
|
|
|
216,165 |
|
U.S.Treasuries |
|
|
— |
|
|
|
32,110 |
|
|
|
|
|
|
32,110 |
|
|
Total |
|
$ |
142,621 |
|
|
$ |
356,124 |
|
|
$ |
— |
|
|
$ |
498,745 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liability |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
410 |
|
|
$ |
410 |
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
410 |
|
|
$ |
410 |
|
|
|
Basis for Fair Value Measurements |
|
|
Fair Value as of |
|
||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
December 31, 2023 |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
217,644 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
217,644 |
|
Commercial paper |
|
|
— |
|
|
|
18,243 |
|
|
|
— |
|
|
|
18,243 |
|
Corporate bonds |
|
|
— |
|
|
|
28,939 |
|
|
|
— |
|
|
|
28,939 |
|
U.S. government sponsored |
|
|
— |
|
|
|
2,896 |
|
|
|
— |
|
|
|
2,896 |
|
Total |
|
$ |
217,644 |
|
|
$ |
50,078 |
|
|
$ |
— |
|
|
$ |
267,722 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liability |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
369 |
|
|
$ |
369 |
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
369 |
|
|
$ |
369 |
|
Level 3 Inputs
The fair value of the derivative liability is based on significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy. The fair value of the derivative liability was determined using a present value analysis with multiple scenarios. In determining the fair value of the derivative liability, the inputs impacting fair value include the change of control payment to Cystic Fibrosis Foundation, the probability of a change of control event, the product status at time of a change of control event and the discount rate. See Note 15 for further discussion on the embedded derivative.
There were no transfers between Level 1, 2 and 3 during the periods presented.
The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 derivative liability (in thousands):
Balance as of December 31, 2022 |
|
$ |
212 |
|
in other income (expense), net |
|
|
157 |
|
Balance as of December 31, 2023 |
|
|
369 |
|
Change in fair value included in other income (expense), net |
|
|
41 |
|
Balance as of December 31, 2024 |
|
$ |
410 |
|
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.