Jade Biosciences, Inc. Fair Value Disclosure
5. Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2025 and December 31, 2024 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine the fair value (in thousands):
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|
December 31, 2025 |
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|
Level 1 |
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|
Level 2 |
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|
Level 3 |
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Total |
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Cash equivalents: |
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|
|
|
|
|
|
|
|
|
|
|
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Money market funds |
|
$ |
87,989 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
87,989 |
|
Current investments: |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
U.S. treasury securities |
|
|
— |
|
|
|
54,927 |
|
|
|
— |
|
|
|
54,927 |
|
U.S. government-sponsored agency securities |
|
|
14,024 |
|
|
|
47,290 |
|
|
|
— |
|
|
|
61,314 |
|
Commercial paper |
|
|
— |
|
|
|
8,907 |
|
|
|
— |
|
|
|
8,907 |
|
Corporate debt securities |
|
|
109,075 |
|
|
|
13,497 |
|
|
|
— |
|
|
|
122,572 |
|
Total |
|
$ |
211,088 |
|
|
$ |
124,621 |
|
|
$ |
— |
|
|
$ |
335,709 |
|
|
|
December 31, 2024 |
|
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|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
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Assets |
|
|
|
|
|
|
|
|
|
|
|
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Money market fund |
|
$ |
65,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
65,000 |
|
Total assets |
|
$ |
65,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
65,000 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
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Convertible notes payable, noncurrent |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
107,600 |
|
|
$ |
107,600 |
|
Total liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
107,600 |
|
|
$ |
107,600 |
|
As of December 31, 2025, cash equivalents consist of money market funds, which were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy.
Additionally, the Company has current investments including corporate debt securities, and certain U.S. government-sponsored agency securities, which represent a Level 1 measurement within the fair value hierarchy. Furthermore, the Company has commercial paper, U.S. treasury securities, corporate debt securities and certain U.S. government-sponsored agency securities which were valued by the Company based on observable inputs, which represent a Level 2 measurement within the fair value hierarchy.
As of December 31, 2024, the Company had money market funds, which were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. Additionally, the Company had Convertible Notes payable, which were revalued at each remeasurement-date, prior to the conversion of the Convertible Notes into Pre-Merger Jade common stock and Pre-Merger Jade pre-funded warrants upon the Closing, using inputs that are generally unobservable and reflect management’s estimates of assumptions that market participants would use in pricing the liability, which represent a Level 3 measurement within the fair value hierarchy.
For the year ended December 31, 2025 the only transfer of liabilities out of Level 3 was the conversion of the Convertible Notes payable. For the period from June 18, 2024 (inception) to December 31, 2024, there were no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy.
The following table presents the changes in the fair value of the Level 3 Convertible Notes payable (in thousands):
|
|
Amounts |
|
|
Balance as of June 18, 2024 |
|
$ |
— |
|
Convertible Notes payable issuance |
|
|
95,000 |
|
Change in fair value of Convertible Notes payable |
|
|
12,600 |
|
Balance as of December 31, 2024 |
|
|
107,600 |
|
Change in fair value of Convertible Notes payable |
|
|
21,584 |
|
Conversion of convertible notes into common stock and pre-funded warrants upon the Closing |
|
|
(129,184 |
) |
Balance as of December 31, 2025 |
|
$ |
— |
|
The Convertible Notes payable in the table above consists of the fair value of an aggregate principal amount of $95.0 million, and a fair value adjustment of $34.2 million, which includes accrued interest of $8.3 million, in Convertible Notes which the Company issued and sold to certain investors. Each holder of Convertible Notes was expected to contribute the principal amount and all accrued interest under the applicable Convertible Note in exchange for the Company’s common stock or non-voting preferred stock in connection with a financing event under the Convertible Notes (see Note 7). As of December 31, 2024 the fair value of Convertible Notes was $107.6 million. The Convertible Notes were remeasured immediately prior to the Closing with a fair value of $129.2 million. The Company’s valuation of the Convertible Notes payable utilized a scenario-based valuation analysis, which incorporated assumptions and estimates to value the Convertible Notes and a probability assessment of the achievement of the Next Equity Financing (as defined in the Convertible Notes). The Company assessed these assumptions and estimates on a quarterly basis as additional information impacting the assumptions was obtained. Immediately prior to the effective time of the Merger, shares of Pre-Merger Jade common stock and pre-funded warrants were issued pursuant to the conversion of the Convertible Notes (including accrued interest), which automatically converted into 9,433,831 shares of Jade Common Stock and 4,289,744 Jade pre-funded warrants at the effective time of the Merger.
The Convertible Notes were issued on July 24, 2024 and September 30, 2024. The following table presents the significant assumptions related to the change in fair value for the year ended December 31, 2024:
Time from Convertible Notes issuance to Next Equity Financing (in years) |
|
0.58 - 0.77 |
|
|
Probability of Next Equity Financing |
|
|
90.0 |
% |
Time from Convertible Notes issuance to Next Equity Financing / prior to trade sale (in years) |
|
0.75 - 0.93 |
|
|
Probability of Next Equity Financing / prior to trade sale |
|
|
10.0 |
% |
Interest rate |
|
|
12.0 |
% |
Discount rate |
|
|
67.0 |
% |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 6, 2026 | Showing above |
| 2024 | Mar 27, 2025 | |
| 2023 | Mar 25, 2024 | |
| 2022 | Mar 29, 2023 | |
| 2021 | Mar 30, 2022 | |
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.