Zentalis Pharmaceuticals, Inc.ZNTL
Zentalis Pharmaceuticals, Inc. Fair Value Disclosure
Fair Value Measurement
Available-for-sale marketable debt securities consisted of the following (in thousands):
| December 31, 2024 | |||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||
| Corporate debt securities | $ | 233,291 | $ | 731 | $ | (81) | $ | 233,941 | |||||||||||||||
| US Treasury securities | 84,160 | 43 | (135) | 84,068 | |||||||||||||||||||
| $ | 317,451 | $ | 774 | $ | (216) | $ | 318,009 | ||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||
| Commercial paper | $ | 75,227 | $ | 60 | $ | (15) | $ | 75,272 | |||||||||||||||
| Corporate debt securities | 229,896 | 2,036 | — | 231,932 | |||||||||||||||||||
| US government agencies | 83,025 | 100 | (78) | 83,047 | |||||||||||||||||||
| US Treasury securities | 64,538 | 103 | (11) | 64,630 | |||||||||||||||||||
| $ | 452,686 | $ | 2,299 | $ | (104) | $ | 454,881 | ||||||||||||||||
As of December 31, 2024, six of our available-for-sale debt securities with a fair market value of $58.8 million were in a gross unrealized loss position of $0.2 million. When evaluating an investment for impairment, we review factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, our intent to sell or the likelihood that we would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. Based on our review of these marketable securities, we believe none of the unrealized loss is as a result of a credit loss as of December 31, 2024, because we do not intend to sell these securities, and it is not more-likely-than-not that we will be required to sell these securities before the recovery of their amortized cost basis.
Contractual maturities of available-for-sale debt securities are as follows (in thousands):
| December 31, 2024 | December 31, 2023 | |||||||
| Estimated Fair Value | ||||||||
| Due within one year | $ | 249,308 | $ | 267,336 | ||||
| After one but within five years | 68,701 | 187,545 | ||||||
| $ | 318,009 | $ | 454,881 | |||||
Equity investment gains (losses) for the year ended December 31, 2024 are summarized as follows (in thousands):
| December 31, 2024 | |||||
Change in unrealized investment gains (losses) during the year on securities held at the end of the year | $ | (2,690) | |||
Investment gains (losses) during the year on securities sold | 7,918 | ||||
Net gains (losses) recognized on equity securities | $ | 5,228 | |||
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. The Company determines the fair value of financial assets and liabilities using three levels of inputs as follows:
Level 1—Inputs which include quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2—Inputs (other than quoted market prices included in Level 1) that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the instrument’s anticipated life.
Level 3—Unobservable inputs for assets or liabilities and include little or no market activity.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company had $0.5 million in contingent consideration liabilities as of December 31, 2024 related to the agreement to terminate its Collaboration and License Agreements with Zentera. The contingent consideration balance is limited to one potential milestone payment measured at fair value (See Note 3 - Significant Transactions for additional information). The fair value of the contingent consideration is estimated based on the monetary value of the milestone discounted for the probability of achieving the milestone and a present value factor based on the timing of when the milestone is expected to be achieved. The value for the contingent consideration balance is based on significant inputs not observable in the market which represents Level 3 measurement within the fair value hierarchy. This liability existed as of December 31, 2023.
The following table summarizes, by major security type, our cash equivalents and available-for-sale marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):
| December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total estimated fair value | ||||||||||||||||||||||||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||||||||||||||||||||||||||
| Money market funds | $ | 13,723 | $ | — | $ | — | $ | 13,723 | |||||||||||||||||||||||||||||||||||||||
| Total cash equivalents: | 13,723 | — | — | 13,723 | |||||||||||||||||||||||||||||||||||||||||||
| Available-for-sale marketable securities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial paper | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | — | 233,941 | — | 233,941 | |||||||||||||||||||||||||||||||||||||||||||
| US government agencies | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| US Treasury securities | — | 84,068 | — | 84,068 | |||||||||||||||||||||||||||||||||||||||||||
| Total available-for-sale marketable securities: | — | 318,009 | — | 318,009 | |||||||||||||||||||||||||||||||||||||||||||
| Immunome marketable equity securities | 19,174 | — | — | 19,174 | |||||||||||||||||||||||||||||||||||||||||||
| Total assets measured at fair value | $ | 32,897 | $ | 318,009 | $ | — | $ | 350,906 | |||||||||||||||||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Contingent consideration | — | — | $ | 500 | $ | 500 | |||||||||||||||||||||||||||||||||||||||||
| Total financial liabilities | $ | — | $ | — | $ | 500 | $ | 500 | |||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total estimated fair value | ||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | 4,755 | $ | — | $ | — | $ | 4,755 | |||||||||||||||
| Total cash equivalents: | 4,755 | — | — | 4,755 | |||||||||||||||||||
| Available-for-sale marketable securities: | |||||||||||||||||||||||
| Commercial paper | — | 75,272 | — | 75,272 | |||||||||||||||||||
| Corporate debt securities | — | 231,932 | — | 231,932 | |||||||||||||||||||
| US government agencies | — | 83,047 | — | 83,047 | |||||||||||||||||||
| US Treasury securities | — | 64,630 | — | 64,630 | |||||||||||||||||||
| Total available-for-sale marketable securities: | — | 454,881 | — | 454,881 | |||||||||||||||||||
| Total assets measured at fair value | $ | 4,755 | $ | 454,881 | $ | — | $ | 459,636 | |||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| Contingent consideration | — | — | 500 | 500 | |||||||||||||||||||
| Total financial liabilities | $ | — | $ | — | $ | 500 | $ | 500 | |||||||||||||||
The following significant unobservable inputs were used in the valuation of the contingent consideration payable to Zentera pursuant to the Termination Agreement at December 31, 2024:
| Contingent Consideration Liability | Fair Value as of December 31, 2024 | Valuation Technique | Unobservable Input | Range | ||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Milestone payment | $ | 500 | Discounted cash flow | Likelihood of occurrence | 1.0%- 2.4% | |||||||||||||||||||||
| Discount rate | 40% | |||||||||||||||||||||||||
| Expected term | Perpetuity | |||||||||||||||||||||||||
The following table reflects the activity for the Company’s contingent consideration, measured at fair value using Level 3 inputs (in thousands):
Contingent consideration at December 31, 2023 | $ | 500 | |||
| Changes in the fair value of contingent consideration | — | ||||
Contingent consideration at December 31, 2024 | $ | 500 | |||
There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the year ended December 31, 2024. We had one instrument that was classified within Level 3 as of December 31, 2024 and one instrument classified as Level 3 as of December 31, 2023. As of December 31, 2024 and December 31, 2023, no material fair value adjustments were required for non-financial assets and liabilities.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 26, 2025 | Showing above |
| 2021 | Feb 24, 2022 | |
| 2020 | Mar 25, 2021 | |
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.