UroGen Pharma Ltd. Fair Value Disclosure
NOTE 6 – FAIR VALUE MEASUREMENTS
The Company follows authoritative accounting guidance, which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.
As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
The carrying amounts of the Company’s cash, restricted cash, other current assets, accounts payable and accrued liabilities are generally considered to be representative of their fair value because of the short-term nature of these assets and liabilities.
The carrying value of the prepaid forward obligation (See Note 9 - Prepaid Forward Obligation) approximates its fair value. The Company estimated the fair value of the prepaid forward obligation using Level 3 inputs, including internally developed financial forecasts and management's estimate of probability of success related to product candidates, and determined that the effective interest rate in the obligation approximates market rates for loans with similar terms and risk characteristics.
The Company estimated the fair value of long-term debt (see Note 10 - Long-Term Debt) using the income approach with Level 3 inputs. The Company estimated future floating rate interest payments using a forward curve of a three-month benchmark rate, and estimated fair value based on publicly available data reported in the financial statements of publicly traded venture lending companies. Based on a reasonable range of yields for debt instruments of similar tenor in a similar industry, the Company determined that the carrying value of the long-term debt on the Company's balance sheet approximates its fair value.
No transfers between levels have occurred during the periods presented.
Assets measured at fair value on a recurring basis based on Level 1 and Level 2 fair value measurement criteria as of December 31, 2024 are as follows (in thousands):
| Fair Value Measurements Using | ||||||||||||
| Quoted Prices | Significant | |||||||||||
| in Active | Other | |||||||||||
| Balance as of | Markets for | Observable | ||||||||||
| December 31, | Identical Assets | Inputs | ||||||||||
| 2024 | (Level 1) | (Level 2) | ||||||||||
| Assets: | ||||||||||||
| Cash equivalents | ||||||||||||
| Money market funds | $ | 41,008 | $ | 41,008 | $ | — | ||||||
| Marketable securities | ||||||||||||
| U.S. government | $ | 26,053 | $ | 26,053 | $ | — | ||||||
| Corporate bonds | 14,980 | — | 14,980 | |||||||||
| Commercial paper | 26,622 | — | 26,622 | |||||||||
| Certificates of deposit | 2,065 | — | 2,065 | |||||||||
| Total marketable securities | $ | 69,720 | $ | 26,053 | $ | 43,667 | ||||||
| Total assets at fair value | $ | 110,728 | $ | 67,061 | $ | 43,667 | ||||||
Assets measured at fair value on a recurring basis based on Level 1 and Level 2 fair value measurement criteria as of December 31, 2023 are as follows (in thousands):
| Fair Value Measurements Using | ||||||||||||
| Quoted Prices | Significant | |||||||||||
| in Active | Other | |||||||||||
| Balance as of | Markets for | Observable | ||||||||||
| December 31, | Identical Assets | Inputs | ||||||||||
| 2023 | (Level 1) | (Level 2) | ||||||||||
| Assets: | ||||||||||||
| Cash equivalents | ||||||||||||
| Money market funds | $ | 9,704 | $ | 9,704 | $ | — | ||||||
| Marketable securities | ||||||||||||
| U.S. government | $ | 28,634 | $ | 28,634 | $ | — | ||||||
| Corporate bonds | 6,738 | — | 6,738 | |||||||||
| Commercial paper | 7,101 | — | 7,101 | |||||||||
| Certificates of deposit | 3,995 | — | 3,995 | |||||||||
| Total marketable securities | $ | 46,468 | $ | 28,634 | $ | 17,834 | ||||||
| Total assets at fair value | $ | 56,172 | $ | 38,338 | $ | 17,834 | ||||||
The Company’s investments in U.S. government bonds and money market funds are measured based on publicly available quoted market prices for identical securities as of December 31, 2024 and 2023. The Company's investments in corporate bonds, commercial paper and certificates of deposits are measured based on quotes from market makers for similar items in active markets.
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.