X4 Pharmaceuticals, IncXFOR
X4 Pharmaceuticals, Inc Fair Value Disclosure
Fair Value of Financial Assets and Liabilities
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values:
| Fair Value Measurements as of December 31, 2025 Using: | |||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents—money market funds | $ | 123,838 | $ | — | $ | — | $ | 123,838 | |||||||||||||||
| Marketable securities— U.S. Treasury notes, U.S. Treasury bills, and federal government agency notes | — | 35,949 | — | 35,949 | |||||||||||||||||||
| $ | 123,838 | $ | 35,949 | $ | — | $ | 159,787 | ||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Embedded derivative liability | $ | — | $ | — | $ | 10 | $ | 10 | |||||||||||||||
| Class C warrant liability | — | — | 977 | 977 | |||||||||||||||||||
| $ | — | $ | — | $ | 987 | $ | 987 | ||||||||||||||||
| Fair Value Measurements as of December 31, 2024 Using: | |||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents—money market funds | $ | 40,983 | $ | — | $ | — | $ | 40,983 | |||||||||||||||
| Marketable securities—U.S. Treasury notes, U.S. Treasury bills, and federal government agency notes | — | 46,361 | — | 46,361 | |||||||||||||||||||
| $ | 40,983 | $ | 46,361 | $ | — | $ | 87,344 | ||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Embedded derivative liability | $ | — | $ | — | $ | 10 | $ | 10 | |||||||||||||||
| Class C warrant liability | — | — | 13,755 | 13,755 | |||||||||||||||||||
| $ | — | $ | — | $ | 13,765 | $ | 13,765 | ||||||||||||||||
All marketable securities are classified as short-term investments as all are due within one year and include investments in U.S. Treasury notes, U.S. Treasury bills and federal government agency notes. The amortized cost of each investment, individually and in aggregate, approximated fair value. The Company evaluated each marketable security for impairment that is other-than-temporary and concluded that no marketable security was impaired as of December 31, 2025 and December 31, 2024.
The Company’s cash equivalents consisted of money market funds invested in U.S. Treasury securities. The money market funds were valued based on quoted prices in active markets for identical assets, which represents a Level 1 measurement.
The following table provides amortized cost, unrealized gains and losses and the carrying amount of available-for-sale debt marketable securities as of December 31, 2025:
| (in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| U.S. Treasury securities | $ | 7,959 | $ | 3 | $ | — | $ | 7,962 | |||||||||||||||
| Federal Government Agency securities | 27,980 | 11 | 4 | 27,987 | |||||||||||||||||||
| Total available-for-sale debt securities | $ | 35,939 | $ | 14 | $ | 4 | $ | 35,949 | |||||||||||||||
The following table provides amortized cost, unrealized gains and losses and the carrying amount of available-for-sale debt marketable securities as of December 31, 2024:
| (in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| U.S. Treasury securities | $ | 18,928 | $ | 5 | $ | 3 | $ | 18,930 | |||||||||||||||
| Federal Government Agency securities | 27,436 | 9 | 14 | 27,431 | |||||||||||||||||||
| Total available-for-sale debt securities | $ | 46,364 | $ | 14 | $ | 17 | $ | 46,361 | |||||||||||||||
The following table provides a roll-forward for the three years ended December 31, 2025, of the aggregate fair values financial instruments for which fair values are determined using Level 3 inputs:
| (in thousands) | Embedded Derivative Liability | Class C Warrant Liability | Total | ||||||||||||||
| Balance as of December 31, 2022 | $ | 10 | $ | 23,131 | $ | 23,141 | |||||||||||
| Reclassification to permanent equity upon exercise | — | (374) | (374) | ||||||||||||||
| Change in fair value | — | (7,074) | (7,074) | ||||||||||||||
| Balance as of December 31, 2023 | 10 | 15,683 | 15,693 | ||||||||||||||
| Change in fair value | — | (1,928) | (1,928) | ||||||||||||||
| Balance as of December 31, 2024 | 10 | 13,755 | 13,765 | ||||||||||||||
| — | (12,778) | (12,778) | |||||||||||||||
Balance as of December 31, 2025 | $ | 10 | $ | 977 | $ | 987 | |||||||||||
Valuation of Embedded Derivative Liability— The fair value of the embedded derivative liability recognized in connection with the Company’s Hercules Loan Agreement, which is associated with additional fees due to Hercules upon non-credit related events of default, was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of this embedded derivative liability, which is reported within other non-current liabilities on the consolidated balance sheets, is estimated by the Company at each reporting date based, in part, on the results of third-party valuations, which were prepared based on a discounted cash flow model that considered the timing and probability of occurrence of a redemption upon an event of default, the potential amount of prepayment fees or contingent interest upon an event of default and the Company’s risk-adjusted discount rate of 17%.
Class C Warrant Liability— In December 2022, the Company issued Class C Warrants for the purchase of shares of its common stock in a public offering. The Class C Warrants are accounted for as a liability on the consolidated balance sheet and are adjusted to fair value at period end through “change in fair value of warrant liability” on the consolidated statements of operations and comprehensive loss.
The Company calculated the fair value of the Class C Warrants using the Black-Scholes option pricing model, with the following inputs:
| Class C Warrants | ||||||||||||||||||||
December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||||||
| Common stock price | $4.00 | $21.90 | $25.20 | |||||||||||||||||
| Risk-free interest rate | 3.5 | % | 4.2 | % | 3.9 | % | ||||||||||||||
| Expected term (in years) | 1.9 | 2.9 | 3.9 | |||||||||||||||||
| Expected volatility | 136.0 | % | 117.5 | % | 96.2 | % | ||||||||||||||
| Expected dividend yield | — | % | — | % | — | % | ||||||||||||||
Impairment of Goodwill
Goodwill is tested quantitatively for impairment at the reporting unit level annually in the fourth quarter, or more frequently when events or changes in circumstances indicate that the asset might be impaired. The Company tested goodwill for
impairment as of December 31, 2025, 2024 and 2023 and concluded that goodwill was not further impaired. Should the market value of the Company’s common stock decline, impairment charges may be recorded in the future.
The following table provides a rollforward of the Company’s goodwill and accumulated impairment losses.
| (in thousands) | Goodwill, Gross | Accumulated Impairment Loss | Goodwill | |||||||||||||||||
| Goodwill at December 31, 2023 | $ | 27,109 | $ | (9,758) | $ | 17,351 | ||||||||||||||
| Goodwill at December 31, 2024 | 27,109 | (9,758) | 17,351 | |||||||||||||||||
| Goodwill at December 31, 2025 | $ | 27,109 | $ | (9,758) | $ | 17,351 | ||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 17, 2026 | Showing above |
| 2024 | Mar 26, 2025 | |
| 2023 | Mar 21, 2024 | |
| 2022 | Mar 21, 2023 | |
| 2021 | Mar 17, 2022 | |
| 2020 | Mar 19, 2021 | |
| 2019 | Mar 12, 2020 | |
| 2018 | Mar 11, 2019 | |
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.