Century Therapeutics, Inc. Fair Value Disclosure
Note 4—Financial instruments and fair value measurements
The following table sets forth the Company’s assets that were measured at fair value as of December 31, 2024, by level within the fair value hierarchy:
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||
Assets: | ||||||||||||
Cash equivalents | $ | 50,884 | — | — | $ | 50,884 | ||||||
U.S. Treasury |
| — |
| 29,994 |
| — |
| 29,994 | ||||
Corporate bonds |
| — |
| 131,675 |
| — |
| 131,675 | ||||
Total | $ | 50,884 | $ | 161,669 | $ | — | $ | 212,553 | ||||
Liabilities: | ||||||||||||
Contingent consideration | — | — | 8,738 | 8,738 | ||||||||
Total | $ | — | $ | — | $ | 8,738 | $ | 8,738 | ||||
The following table sets forth the Company’s assets that were measured at fair value as of December 31, 2023, by level within the fair value hierarchy:
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||
Cash equivalents | $ | 42,263 | — | — | $ | 42,263 | ||||||
U.S. Treasury |
| — |
| 26,114 |
| — |
| 26,114 | ||||
Corporate bonds |
| — |
| 188,396 |
| — |
| 188,396 | ||||
Total | $ | 42,263 | $ | 214,510 | $ | — | $ | 256,773 | ||||
There were no transfers between levels during the years ended December 31, 2024 and 2023. The Company uses the services of its investment manager, which uses widely accepted models for assumptions in valuing securities with inputs from major third-party data providers.
The Company classifies all of its investments in fixed maturity debt securities as available-for-sale and, accordingly, are carried at estimated fair value.
The amortized cost, gross unrealized gains and losses, and fair value of investments in fixed maturity securities are as follows as of December 31, 2024:
|
| Gross |
| Gross |
| |||||||
Unrealized | Unrealized | |||||||||||
Amortized Cost | Gains | Losses | Fair Value | |||||||||
U.S. Treasury | $ | 29,898 | $ | 97 | $ | (1) | $ | 29,994 | ||||
Corporate bonds |
| 131,395 |
| 316 |
| (36) |
| 131,675 | ||||
Total | $ | 161,293 | $ | 413 | $ | (37) | $ | 161,669 | ||||
The amortized cost, gross unrealized gains and losses, and fair value of investments in fixed maturity securities are as follows as of December 31, 2023:
| Gross |
| Gross |
| ||||||||
Unrealized | Unrealized | |||||||||||
| Amortized Cost | Gains | Losses | Fair Value | ||||||||
U.S. Treasury | $ | 26,070 | $ | 44 | $ | — | $ | 26,114 | ||||
Corporate bonds |
| 188,219 |
| 399 |
| (222) |
| 188,396 | ||||
Total | $ | 214,289 | $ | 443 | $ | (222) | $ | 214,510 | ||||
The following table provides the maturities of the Company’s fixed maturity available-for-sale securities:
| December 31, 2024 |
| December 31, 2023 | |||
Less than one year | $ | 130,851 | $ | 125,414 | ||
One to five years |
| 30,818 |
| 89,096 | ||
$ | 161,669 | $ | 214,510 | |||
The Company has evaluated the unrealized losses on the fixed maturity securities and determined that they are not attributable to credit risk factors. For fixed maturity securities, losses in fair value are viewed as temporary if the fixed maturity security can be held to maturity and it is reasonable to assume that the issuer will be able to service the debt, both as to principal and interest.
As of December 31, 2024 and December 31, 2023, the Company had 27 and 25 available-for-sale investment debt securities in an unrealized loss position without an allowance for credit losses, respectively. Unrealized losses on corporate debt have not been recognized into income because the issuers’ bonds are of high credit quality (rated BBB+ or higher) and the decline is fair value is largely due to market conditions and or changes in interest rates. Management does not intend to sell and it is likely that management will not be required to sell the securities prior to the anticipated recovery of their amortized cost basis. The issuers continue to make timely payments on the bonds. The fair value is expected to recover as the bond approaches maturity.
As of December 31, 2024 and December 31, 2023, accrued interest on available-for-sale investment debt securities totaling $1,254 and $1,570, respectively, is excluded from the estimate of credit losses and is included in prepaid expenses and other current assets.
The following is a rollforward of the components of the Company’s contingent liability (see Note 10 – Commitments and contingencies):
Gadeta | Holdback Shares | Milestone | Total | |||||||||
Balance as of April 11, 2024 | $ | 372 | $ | 2,588 | $ | 7,134 | $ | 10,094 | ||||
Changes in fair value | 41 | (1,963) | 566 | (1,356) | ||||||||
Balance as of December 31, 2024 | $ | 413 | $ | 625 | $ | 7,700 | $ | 8,738 |
The following table includes quantitative information about the significant unobservable inputs for the components of the Company’s contingent consideration liability as of the April 11, 2024 acquisition date and December 31, 2024.
April 11, 2024 | December 31, 2024 | |||||
Gadeta Earnout: | ||||||
Probability adjusted value of payment | $ | 1,060 | $ | 1,060 | ||
Discount rate | 12.6% | 12.4% | ||||
Discount period (years) | 8.8 | 8.1 | ||||
Holdback Shares | ||||||
Closing stock price on valuation date | $ | 4.05 | $ | 1.01 | ||
Discount for lack of marketability | $ | (0.79) | $ | (0.22) | ||
Clade Milestone: | ||||||
Probability adjusted value of payments | $ | 9,000 | $ | 9,000 | ||
Discount rate | 10.6% | 10.3% | ||||
Discount period (years) | 2.3 | 1.6 |
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.