Terns Pharmaceuticals, Inc. Fair Value Disclosure
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels of inputs that may be used to measure fair value are defined below:
The carrying values of the Company’s other assets, accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities.
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis:
|
|
Fair Value at December 31, 2025 |
|
|||||||||||||
(in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash in bank balances |
|
$ |
23,958 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
23,958 |
|
Money market funds |
|
|
500,789 |
|
|
|
— |
|
|
|
— |
|
|
|
500,789 |
|
Total cash and cash equivalents |
|
$ |
524,747 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
524,747 |
|
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
$ |
— |
|
|
$ |
494,235 |
|
|
$ |
— |
|
|
$ |
494,235 |
|
Total marketable securities |
|
$ |
— |
|
|
$ |
494,235 |
|
|
$ |
— |
|
|
$ |
494,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Fair Value at December 31, 2024 |
|
|||||||||||||
(in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash in bank balances |
|
$ |
13,873 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
13,873 |
|
Money market funds |
|
|
147,566 |
|
|
|
— |
|
|
|
— |
|
|
|
147,566 |
|
Total cash and cash equivalents |
|
$ |
161,439 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
161,439 |
|
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
$ |
— |
|
|
$ |
196,725 |
|
|
$ |
— |
|
|
$ |
196,725 |
|
Total marketable securities |
|
$ |
— |
|
|
$ |
196,725 |
|
|
$ |
— |
|
|
$ |
196,725 |
|
The aggregate amortized cost and fair value of marketable securities as of December 31, 2025, by contractual maturity, are as follows:
(in thousands) |
|
Amortized Cost |
|
|
Fair Value |
|
||
Due in one year or less |
|
$ |
253,389 |
|
|
$ |
253,674 |
|
Due after one year through five years |
|
|
240,342 |
|
|
|
240,561 |
|
Total marketable securities |
|
$ |
493,731 |
|
|
$ |
494,235 |
|
During the years ended December 31, 2025 and 2024, there were no transfers between Level 1, Level 2 and Level 3.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 30, 2026 | Showing above |
| 2024 | Mar 20, 2025 | |
| 2023 | Mar 14, 2024 | |
| 2022 | Mar 27, 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.