Savara Inc Fair Value Disclosure

8. Fair Value Measurements

The Company measures and reports certain financial instruments at fair value on a recurring basis and evaluates its financial instruments subject to fair value measurements on a recurring and nonrecurring basis to determine the appropriate level in which to classify them in each reporting period.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company categorizes its financial assets and liabilities measured and reported at fair value in the financial statements on a recurring basis based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity associated with the inputs used to determine the fair value of financial assets and liabilities, are as follows:

Each major category of financial assets and liabilities measured at fair value on a recurring basis is categorized based upon the lowest level of significant input to the valuations. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company determined that certain investments in debt securities classified as available-for-sale securities were Level 1 financial instruments.

Additional investments in corporate debt securities, commercial paper, and asset-backed securities are considered Level 2 financial instruments because the Company has access to quoted prices but does not have visibility to the volume and frequency of trading for all of these investments. For the Company’s investments, a market approach is used for recurring fair value measurements and the valuation techniques use inputs that are observable, or can be corroborated by observable data, in an active marketplace.

The Company did not transfer any assets measured at fair value on a recurring basis to or from Level 1, Level 2, and Level 3 during the years ended December 31, 2025 and 2024.

Royalty Purchase and Sale Agreement Derivative Liability

The derivative liability arose from the royalty purchase and sale agreement entered on October 29, 2025, as further described in Note 10. Commitments, under which the seller has the option to prepay the buyer and the buyer may require the seller to remunerate proceeds of $4.0 million upon a change of control, as further defined, prior to approval of MOLBREEVI by the FDA on or before March 31, 2027. The fair value of the derivative liability is estimated utilizing a probability-adjusted discounted cash flow approach and is performed quarterly with gains and losses included within change in fair value of the derivative liability in the consolidated statements of comprehensive loss. This obligation would be settled in cash. As of October 29, 2025 and December 31, 2025, the Company assessed a 20% probability that a change of control would occur prior to the closing date of the royalty purchase and sale agreement and a 50% probability that the purchaser would exercise its right to the prepayment, which would terminate the royalty purchase and sale agreement. After taking into consideration the probability of repayment, the time value of money, and the counterparty credit risk, the estimated fair value of the put option derivative liability as $363 thousand and $362 thousand as of the October 29, 2025 and December 31, 2025 measurement dates, respectively.

The derivative liability has been classified as a Level 3 recurring liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market. If different assumptions were used for the inputs to the valuation approach, the estimated fair value could be significantly different than the fair value the Company determined. The derivative liability is expected to either be settled or absolved within twelve months and is therefore classified as a current liability in the consolidated balance sheet.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments annually or whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. These assets and liabilities can include acquired IPR&D and other long-lived assets that are written down to fair value if they are impaired.

As of December 31, 2025 and 2024, the Company had IPR&D of approximately $11.6 million and $10.3 million, respectively. For the years ended December 31, 2025 and 2024, the Company experienced an increase of approximately $1.3 million and an decrease of approximately $0.6 million, respectively, in the carrying value of IPR&D, which was due to foreign currency translation.